Coins, tokens, currency, GP, whatever you want to call them, have occupied the back pockets of protagonists in the pixelated worlds of video games going back since before the days of Mario headbutting those floating, blinging gold coins all the way to the bank. Although video game designers throughout the eras have exhibited limitless imaginations in creating universes rich and lush and beyond our wildest dreams, the somewhat mundane notion of currency — units of value that can be utilized in exchange with elements within that universe — has remained ubiquitous, regardless of if your avatar is a vampire-slaying assassin of the night or a pizza-loving Italian stereotype trying to save his mushroom friend.
But at some point in this timeline — and perhaps far earlier than you would think — the line between video game currency and meatspace currency began to blur. There are many touchpoints in how this came to be, but as game developer Jamie McCormack lays out, the pivotal moment in creating the “greyspace” in between fiat and virtual currencies in the gaming world took place in South Korea in the early 2000s:
“Unlike in the West, where we have high street retail network and a history of buying boxed games, in Korea things were a little different,” McCormack explains. “For various historical reasons, Japanese goods weren’t very popular, so video games consoles weren’t there in large numbers. Instead widespread PC adoption, a culture of gathering in venues with lots of networked computers in-place, and massive investment in broadband by their government enabled new business models to emerge.”
Inherent in the above are the formative elements of the massive competitive gaming culture that’s now taken over the world, but even with strong interest in the emerging gaming market, Korean game developers were struggling to turn a profit. Piracy via torrenting programs was so prevalent that the market became habituated against paying for games at all, so they had to figure out a different model to create a successful business. If that sounds familiar, that’s the same problem that led the music industry towards free-to-play streaming platforms, but that’s a topic for a whole different story…
On April 29th, 2003, Korean game developer Nexon released Maple Story, a playful 2D, side-scrolling (the most classic of all formats) MMORPG, a free-to-play game with micro-purchases — made via digital transactions and online payments — in the game. It was a hit, plugged the deficiencies in the Korean market, and signalled the start of a huge movement all over the world, and went on to reach over 100 million players. 2003 is considered the year that in-app purchases in online games entered the zeitgeist in a really big way, from obscure role-playing games about medieval knights to virtual world Second Life, and even corporate-backed entries like Disney’s ToonTown Online.
There are three letters that kickstart this story and lay the foundation for what we will likely be experiencing now and in the future in regards to virtual currency: WoW. Released in 2004, World of Warcraft is arguably the most successful, massively multiplayer online role-playing game of all time, at its peak it had upwards of ten million users in the game. The in-game currency of WoW, simply titled “Gold,” can be used for anything imaginable, from items to services with increasingly esoteric means, like food that makes your character spit fireballs, or gargantuan spiders that your character can ride as they maraud around the planet of Azeroth.
But when players of the game began trading rare items and meticulously developed avatars on secondary markets outside of the game, things took a whole different turn. This is where the story gets a little weird: In perhaps one of the unholiest and unlikeliest alliances of future evil geniuses ever, Trump-wrangling propagandist Steve Bannon and child-actor-turned-Bitcoin colonialist Brock Pierce once partnered on an ill-fated business venture called IGE: Internet Gaming Entertainment.
Pierce had figured out how to game World of Warcraft for profit, farming rare items and selling them for fiat. Via Wired: “He got so good he could reliably kill the mushroom-headed Myconid Spore King, thus securing a regular supply of enchanted Fungi Tunics, which dropped from its corpse. In MMO-speak, Pierce was now single-handedly “farming” Fungi Tunics — acquiring them as a matter of routine. This coveted piece of armor sold for up to 50,000 Norrathian platinum pieces, an amount of virtual money that took most players a full 150 hours to earn. That much virtual loot could cost $500 on eBay.”
Take this notion, multiply it by a staff of 500 and $60 million in funding from Goldman Sachs (that’s where Bannon came in), and you have IGE. Their hustle grew into an empire, but after drawing the ire of the digital denizen masses of Azeroth and enduring a subsequent class action lawsuit, the company fell apart. It’s a crazy story, and well worth reading all about, but the point here is that by the late 2000s, the line between virtual currency and fiat was one that individuals and enterprises alike were bouncing back and forth over for profit. Value could be digital. Value could be anything. And this was no longer just limited to nerdy kids in dark basemenets. Farmville, popular with kids and parents alike, posted revenues of $235 million in the first quarter in 2010, most of which was from in-game purchases for digital goods.
For a whole generation of young people, gamers, technologists and futurists, the idea that value could only be held in green rectangles of paper — y’know, real money — was outdated. They knew that value could be held digitally, often in bizarre and strange forms, so long as that value was agreed upon by the two parties in the transaction in the world in which they operated. It sounds commonplace to people today, but had you mentioned your $500 Fungi Tunic to someone in the 80s, people would have questioned your sanity.
Today, virtual currencies in digital worlds are commonplace. It’s normal to purchase tools, skins, even meme-tastic dances in games, and for there to exist secondary markets outside of that game where people trade items. Check out this stat: 68.8% percent of Fortnite players — a free to play game — have spent to purchase content, with an average investment of $84.67. Fortnite’s V-Bucks have an entire economy of their own, one that may rival that of small nations. Twitch streamers are regularly tipped and paid in currencies virtual and fiat, and people are starting to realize that value can be held in everything from air miles to mobile minutes. So what comes next…?
The emergence of blockchain technology and decentralized digital currencies presents the opportunity to take things one step further, and perhaps even close the circle on virtual currencies that goes all the way back to Mario. There are lots — and we mean lots — of startups and enterprises trying to find ways to integrate decentralization, blockchain, and digital currencies into game world experiences. All the way back in 2013, the “first title that could legitimately be called a ‘crypto-game’ was Dragon’s Tale, a MMORPG that allowed players to stake actual Bitcoin on the outcome of a variety of minigames,” explains Simon Chandler of CoinTelegraph.
The first wave of games to utilize Ethereum’s capacity to integrate programmable tokens into games and apps, has taken on collectibles, throwbacks to the card games of old, like the CryptoKitties or Spells of Genesis, that are built around non-fungible, one-of-a-kind assets validated in their uniqueness by immutable records on the blockchain (shoutout ERC-721!). Platforms like the Worldwide Asset Exchange are hoping to become a hub where in-game assets for all sorts of titles can be traded for digital currencies, while projects like Enjin are making it easy for game developers to integrate digital tokens.
Goin even further: Some major game developers are working towards establishing their own blockchains, and scalable sidechains — called ‘Dappchains’ — made specifically for gaming projects might just be the next big thing. And whole virtual worlds like Decentraland are built on Ethereum as a currency, where you can buy plots of land and build your own virtual neighborhoods.
Although the integration of blockchain and digital currencies into video games will undoubtedly be a case of trial and error, it’s a sector that’s been progressively primed towards virtual currencies for going on decades now, and in some ways has shared a symbiotic relationship with the development of a digital world that sits atop the tangible, where — for both better and worse — value is detached from the expectations of reality. GP, gold points, credits, zennies, gold, aurum, are all conceptual precursors to tokens, coins, Bitcoin and Ethereum, and that’s one of the reasons why younger generations have proven early adopters of digital currencies and blockchain apps.