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“People tend to forget that the world we live in is just a game designed by our governments. Our economic systems are just a game.”

— CCP Chief Executive Officer Hilmar Petursson.

We live in a random world, and randomness seems to make this world more real, not a predictable simulator. At the same time, we are also creating another world through code. This world has predictable and unpredictable parts.

With the gradual development of this world, we seem to have a new way to rethink and understand the real world we live in. Looking back at the development of online games, I can’t help but lament that this “cloud ball” created by our real-world players has gradually been born.

According to Statista estimates, the revenue of the online game segment in 2021 is expected to reach 23.582 billion U.S. dollars, and the market size is expected to reach 31.328 billion U.S. dollars by 2025, and the number of players is expected to rise from 1.097 billion in 2021 to 1.277 billion in 2025. .

The ever-expanding market size, the increasing number of players, and the online time that is gradually greater than the time of life in the real world, claim that this virtual world is gradually developing and improving.

In Statista’s market definition, online games are defined as massively multiplayer online games (MMOG) and casual and social games

In this process, our research and thinking on the virtual world may have a transformative impact on our cognition, similar to the general effect mentioned by Frank White in his book Space Exploration and Human Evolution< span class="text-remarks" label="Remark">(The overview effect), this refers to the recognition that occurs when some astronauts and astronauts are sailing in space, looking at the earth from space or the surface of the moon. The transformation of knowledge.

Now we try to start from the virtual world and view everything that happens in this world from the perspective of economics, and perhaps reconstruct our understanding of the objective world.

Games and Economics

Games and economics, these two seemingly unrelated words, are actually inextricably linked.

In the game world, players enter this virtual world as game characters, showing various microeconomic behaviors: choice, cooperation, and gaming, etc., and this artificially constructed economic system is also full of Various economic principles: scarcity, demand and supply, system design, etc.

Essentially, this is the appearance and law of the real world mapped in the virtual world, but the two are economicallyThe explanation is still different. Virtual and reality are different because they are two worlds.

We perform many rational and irrational behaviors in the real world. Economists, at least classical or neoclassical economists, study individual and market efficiency from a rational perspective, They tried to open the Edgeworth box and find the laws of welfare economics that described the “invisible hands” and the Walrasian equilibrium point in perfect time.

Of course, there are also behavioral economics or other schools that study chaotic, nonlinear, and unpredictable economic systems from the perspective of human irrationality.

However, in the game world, or in the larger virtual world, all these actions are reflected in the process of players trying to find the optimal solution, or recorded in the computer program.

This virtual world has huge data mining capabilities and the ability to accurately track player behaviors. This opens new doors for economists and sociologists to a certain extent.

In addition, the economic exploration of the virtual world also provides us humans with new ideas for a better understanding of ourselves.

This requires rethinking from another perspective. We all know that there are two main ways for humans to understand the world: observation and learning. On this path of learning, we are all actively or passively learning two major scientific fields: social sciences and natural sciences, but what is the difference between the two?

For the discussion of this issue, Felix Martin, an economist who studies monetary theory, mentioned a point that the difference between social sciences and natural sciences is “Fishes do not know water in water”. This point of view is certain To the extent it explains why social disciplines such as sociology, economics, and anthropology are different from natural disciplines such as physics, chemistry, and biology.

In fact, in the field of natural sciences, we study the physical world. We are constantly discovering the underlying laws of the operation of this world, or that the world can be objectively understood.

And Social science is not that simple. We often study ourselves with the goal of individuals, groups, and society. We cannot be separated from society, let alone ourselves, and this makes it very difficult to understand things objectively.

The closer we are to our daily core system or framework, the more difficult it will be to break out of this circle and analyze it. This is why the research on the nature of currency is so controversial for Felix Martin, because it itself is a very important part of our economic life.

So if you want to be a fish out of water and better understand ourselves living in the real world, you need to conduct research in different time and space environments, so that you can get a relatively objective understanding.

From the perspective of the virtual world, it undoubtedly provides us with a new way of thinking to further understand the objective world.

Early exploration of virtual world economics

Edward Castronova is an early scholar who explored the virtual world economy. In Edward’s early paper Virtual Worlds: A First-Hand Account of Market And Society on The Cyberian Frontier(2001), he described a man named Norrath (the virtual world of the game EverQuest) economy.

In the description of the paper, the world seems to be a normal economy with economic activities such as production, labor supply, income, inflation, foreign trade, and foreign exchange. People live there, work there, consume there, and accumulate wealth there, just like what they do on earth.

However, the underlying operating mechanisms of the two worlds are of course different. For example, Edward’s paper On Virtual Economics(2002) The question has been discussed in: Should the government try to control prices?

For this question, most economists in the real world will say no, because the cost of government intervention in prices will be far greater than the benefits generated. In addition, this part of the cost is often borne by the people the policy should help.

These abnormal effects occur because: Any attempt to control prices will eventually lead to oversupply or over demand, which in turn will incur various social costs. For example, excess goods need to be purchased or destroyed, while shortages must be distributed through a mechanism that is often proven to be unfair and expensive.

But what if the government can buy excess goods or destroy it at no cost? Or what if the government can produce any quantity it needs at no cost? If these two actions are possible, then the government’s price control policy is feasible.

In the online world (Cyberspace) or the virtual world, code can easily create or destroy any number of goods, so the price is controlled on the Internet There may be good policies in space, but they are not necessarily in the real world.

In addition, for economists, the essence of human behavior is: a process of making choices under the constraints of not having everything you want. And this “want” is often reflected in preferences, usually we use a utility function to express it, and under our respective constraints, we are looking for a solution that maximizes this function.

If something happens that can release our constraints, for example, the price of our favorite commodity drops, then our utility will rise. At this time, most economists will also assert that we will be happier.

So if we want to make people happier, we should eliminate or release their constraints and restrictions. Then under this reasoning, those less challenging games should be what the market needs.

But we can find that this economic reasoning has a profound conflict with the behavior observed in the game market: In fact, players hate less challenging games.

Therefore, we can know that the player’s utility function in the game world is different from the real world. By linking the difficulty level of the game and the rewards that the player can get in the game, Edward constructed a simple utility function and economic model about the player, and discussed the distribution of game time and real-world wages. It is a very impressive study of virtual world economics.

With the development of the game, in order to improve the player’s utility level in the game world, game developers need to comply more with the economic principles in the game world and design more unique “games” “World Operation Mechanism”, a relatively balanced economic system, and a solution to the Social Planning Problem in line with the game world.

The development process of the virtual world economic system

As mentioned above, in the early virtual world economic research, scholars discovered the similarities and differences between the virtual world and the real world economy. Furthermore, with the deepening of research, Tanla E. Bilir wrote in his paper Real Economics in Virtual Worlds: A Massively Multiplayer Online Game Case Study, RUNESCAPE(2009)< /span>Summarized three important characteristics of virtual world economy:

• Comparability(Comparability): There are obvious similarities between the virtual world economy and the real world economy

• Reality(Reality): The virtual world economy involves a real, well-functioning economic system

• Experimental(Laboratory): The virtual world economy is a place for experimental economic theory and behavior

As for the authenticity of the second point, taking the game virtual world we are most familiar with as an example, we can find that the game economic system is constantly developing and improving, and it is becoming more and more real.

Establishment of economic system

In the early days of home consoles and console games, game economic activities were mostly based on pickup, system distribution or store purchases, such as the classic game “Super Mario” gold coin pickup and “Resident Evil” weapon shop.

Players collect gold coins and materials by consuming labor or time to pass through levels. They can use them themselves, or they can accumulate a certain amount to purchase other materials or unlock new levels. In fact, players obtain gold coins and materials through production and then trade with the system to obtain What you want.

Weapons with higher attributes or levels with greater difficulty often require more gold coins, so players need to invest more “labor”(time, energy , Money, etc.), which shows that high-attribute items are exclusive, that is, only a few players who are willing to pay more labor can obtain items, while those who do not pay the same labor cannot obtain them.

Such a setting divides a simple order of economic levels, stimulating middle and low-level players to invest more in the game world to unlock advanced weapons or difficult levels.

At the same time, stand-alone games without network connection mean that players cannot interact with each other. Each player faces an independent virtual world, which also means These items are non-competitive, namely Player A Possess a certain high-attribute weaponThe device cannot prevent Player B from acquiring the same weapon in his own independent game world. Therefore, as long as most players are willing to pay enough labor and obtain a sufficient amount of gold coins, they can eventually own these high-attribute items.

Based on these two characteristics, it can be seen that the transactions in the early games enhanced the playability and operability of the game, but did not form a complete economic system, unable to conduct spontaneous exchange or trading, and individuals did not affect each other .

The level of production efficiency or purchasing power ranks players in the early stage of the game. However, as the game progresses, the number of players with advanced weapons or levels will continue to increase, the value of the items will be squeezed, and the division of levels will naturally collapse.

In the end, the game will end with the death of the protagonist or the end of the plot. The accumulated gold coins and equipment can only be discarded, and there is no other use value or exchange channel.

Super Mario & Resident Evil

Development of the economic system

At the beginning of the 21st century, with the rise of online games, the interactivity between players has greatly increased, providing new channels for the sale and exchange of items. At this stage, players still obtain money and item rewards through labor (complete system tasks such as collecting resources and defeating NPCs), and consume and purchase in the store .

But unlike before, the division of labor has begun to appear in the game world. For example, in World of Warcraft, there are multiple majors such as mining, forging, leather making, engineering, and alchemy. Different majors have formed Natural supply-demand relationship-players have limited time and energy, and there is a need to trade or exchange excess items.

thisIt reflects the total social production process described by economics, including:

• Production: The main producers of actions are game players, that is, laborers in the game world. Labor here refers to activities that have a certain purpose in the game world, such as gathering, killing monsters, forging, etc.

• Distribution: refers to the distribution of production materials to workers or consumption materials to consumers. This distribution method determines the position of social members in the game world in the production process, and the formulation of this distribution method The person is the game designer

• Exchange: refers to interactive transactions in the game, mainly including transactions between game players and game malls, and between players and players

• Consumption: Mainly refers to the virtual items that players need to consume during the growth process, such as props, skill books, etc.

The total social production process of games

Further on the whole, the online game economic system is composed of supply and player demand. Players obtain supplies through their actions in the game world, and consume these supplies to improve their character performance and development.

Online game economic system supply and demand relationship table

Take the “Stone Age”, known as the originator of domestic online games, as an example. In terms of production and distribution, players obtain money or production materials by collecting, killing monsters, upgrading, and completing tasks; in terms of exchange, they can be divided In order to trade with system NPCs and exchange between players, the former can buy and sell various props in stores with different attributes in the game, and the latter can exchange items with each other through the transaction function keys; and after getting money or props, they can consume or sell items. use.

Different from reality, the items in the virtual world are just a string of codes, not like real items will be consumed. If the props in the game or virtual world appear continuously and randomly, the world will become very crowded, which will cause the props to expand.

This is also one of the culprits that ruin all online gaming experiences. Over time, almost all players will have items that seem scarce in the early game experience, and even novices will not want them in the end.

Therefore, developers have tightened restrictions on virtual items to make them closer to real items.

First of all, give scarcity to high-attribute items. The upgrade and smelting of weapons in “Stone Age” added the possibility of failure, and the ability of captured pets is also quite different, and the probability of appearance of weapons and pets with higher attributes is strictly limited. The acquisition of high-attribute items is no longer the only measure of labor, and luck has also become one of the decisive factors.

Secondly, the consumption rate of materials is limited. For example, the props for restoring health, mana, or improving skills are mostly one-time use, and weapons and equipment will wear out during the fight.

Therefore, the setting of restricting the number of virtual items fundamentally inhibits the material (especially high-attribute materials) in the virtual world Inflation, its value will not depreciate excessively as the game deepens, and it has laid the foundation for the long-term stable existence of the market.

“Stone Age” and “Legend of Blood” inventory page

With the rapid development of online games, Shanda’s (later renamed Shengqu)‘s “Hot Blood Legend” promotes the market economy system in online games Into the mature stage.

The processes and channels from production, distribution to exchange and consumption are quite complete. There is a dedicated market for buying and selling the materials needed, and the transactions between players are guaranteed. In addition, high-attribute items have become more rare, and their high scarcity drives players to repeat the work in the game. Obtaining treasures in the game becomes the direct purpose of the player’s game.

At this time, the market economy in the game becomes mature and orderly, commodities can be freely circulated and exchanged, and surplus materials can also be exchanged for more liquid currency.

Prices are the same as in the real world, fluctuating due to many factors, but overall there will be no major deviations. And this is in line with the basic economic law of commodity production and commodity exchange: “Prices fluctuate around value, and the amount of commodity value depends on the necessary labor time in society, and commodities are exchanged according to the principle of the same value.”

Perfection of the economic system

The biggest difference from the real world is that the emergence of the economic system in the game is essentially to increase gameplay and meet the needs of players for consumption and transactions in the virtual world. Therefore, the designers of the virtual world will more or less restrict and manage the economy of the game world, such as item grading, item wear, trading mechanism, resource production efficiency, closed economic system, etc., in order to build a “perfect” economic system.

It can be said that the game world is a planned economy first, and then gradually open players to trade to form an internal market, and the overall economic system is constantly being adjusted and optimized artificially or spontaneously to achieve the final equilibrium status.

However, since the economic system in the game is created subjectively by the developers, there is a lack of long-term and dynamic considerations to a certain extent, and various problems will erupt after a period of operation. Among them, the most common problemsIt is wealth surplus and inflation.

(1) Wealth surplus

Wealth surplus will cause wealth in virtual games to depreciate in a short period of time, harming the interests of players. There are two main reasons behind this:

First, the production mechanism is unreasonable, the output cannot be controlled, and the player gets too many unnecessary materials during the game;

Second, there is no channel for consumption of materials. If there is too much accumulation, demand will be saturated, and materials will become less and less valuable.

In order to solve this problem, developers usually reduce the dropped materials, or give raw materials for players to build their own finished products, and at the same time set the wear attributes of the items to speed up consumption.

(2) Inflation

When inflation is severe, the price level in the game will continue to increase, and players choose to let go of the currency in exchange for purchases. As a result, the game currency loses the trust of players, causing the collapse of the currency system and even the economic system.

The fundamental reason is that the amount of currency issued is too much, which is far greater than the demand for currency. In this regard, on the one hand, developers need to control the amount of money and reduce the speed of issuance; on the other hand, increase channels for recycling excess money, such as introducing new materials to stimulate players to purchase.

However, because economic problems are difficult to detect intuitively and there are a large number of influencing factors, even if game developers have the power to modify economic settings at will, it is difficult to grasp the equilibrium point of the “perfect” economic system.

Therefore, after entering the era of mobile games, most online mobile games no longer have in-game trading systems. Instead, the in-game mall becomes the only place for game materials to be bought and sold.

Closed management weakens the gameplay and also makes players lose the fun of trading. However, it is undeniable that the economic system of the game will be more stable, largely avoiding large fluctuations.

The mobile game version of “Fantasy Westward Journey” has developed an eclectic economic system: a unified trading platform “Treasure Pavilion” is opened, allowing players to trade freely, but in terms of the transaction price range of items, the acquisition and sale of high-end items And so on have been restricted. This half-open system increases the stability of the economic system, but also restricts free transactions between players.

“Fantasy Westward Journey” official trading platform, Treasure Pavilion

The economic system of the game world is still groping. How to balance the human intervention of developers and the spontaneous adjustment of the market?

Can the game world really reach equilibrium and build a perfect system? Can there be a virtual economic system that is completely free and free from interference?

We don’t know these issues at this stage, but a closed market will not be the end of the game economic system.

The invasion of reality by the virtual world economy

In the previous discussion of the economic system, we mentioned that players mainly obtain virtual currency in the game world by fighting monsters in the game, doing tasks, participating in activities, and buying and selling virtual items.

However, most of the currencies in the game are produced independently, rather than issued according to economic needs, so the currencies in the game are not the general equivalent of the actual value of the goods as currency.

In fact, coins and currency are both tokens. They are used to record the basic system of credit records and implement the basic process of liquidation. However, Currency itself is not currency. Currency is a system composed of credit records and credit settlement. Currency is only a representative of this system.

So the essence of currency is actually the system behind it, which consists of credit records and clearing mechanisms. Currency is not a commodity as a medium of exchange, but a set of social technologies composed of three basic elements:

• First, it is an abstract value unit used to measure the value of money

• The second is the credit record system, which can track and record the credit balance or debt balance of individuals or institutions when they are engaged in trade with others.

• Third, the original creditor can transfer the debtor’s obligations to a third party to settle certain irrelevant debts

So if you want to create a more realistic virtual world economic system, you need to use this set of social technology to open up the currency circulation of the two worlds. For example, Roblox has created a larger world where people can create new games and new content in this world, and then use a currency called “Robux” for consumption and transactions. There is no generator for this kind of currency, and it must be purchased with real-world currencies.

Roblox has undoubtedly created a larger virtual world, giving us more room for imagination and inspiration. In another dimension, blockchain technology has also made a great contribution to the economic system connecting the two worlds.

Confirmation, reuse and transaction of game assets

The effects of the combination of blockchain technology and games are mainly reflected in three aspects: game asset confirmation, reuse and transaction.

1. Confirmation of rights

First, let’s talk about cognition. As the information of the physical world continues to be uploaded and recreated in the digital world, we have uploaded another digital world to a certain extent. At the same time, we are constantly generating new “values ​​for the digital world” “.

However, in fact, we don’t feel the value of this part, mainly because of our unclear ownership of information assets in the digital world.

When describing his theoretical framework, Coase stated that when the transaction cost is zero, no matter who the property right is given at the beginning, this property right will eventually flow to the person who can best play its value, realizing resource allocation. The Pareto is optimal.

Of course, this can help understand from the economics why it is often the giants or monopolists that bring the information we create further into play, but in this process there is anotherThe starting point is the initial confirmation.

Blockchain has undoubtedly materialized some assets in the digital world. As we gradually increase our awareness of asset ownership in the digital world, we will gradually accept this form of technology. And we are gradually accepting the process of applying the blockchain, and it is also a process of gradually enhancing the awareness of digital asset ownership.

When the data assets in the game cannot be truly owned by the player, in addition to copy sales, any other payment method is “rental.” Although the player does invest a lot of time and real money, the player Does not really “own” any virtual assets in the game.

When game developers stop the game for various reasons, all the levels and roles that players have gained by investing hundreds of hours in the game will be lost.

Although game designers will adjust and plan their future development from the perspective of earning more income in the long-term, the game experience that players hope to obtain is often far from what the game developers think. The content of the game is updated. There will be a certain discrepancy with the content that the player wants.

Of course, many people have discussed that some features of the blockchain can solve these problems. For example, a game running on the chain cannot be forcibly closed by anyone. As long as there are players in this game and they are willing to pay the corresponding cost, the game can always exist on the blockchain.

If most players are dissatisfied with the game for some reason, they can vote with their feet to get the content of the game out of the original plan and obtain new developments according to the wishes of these players.

At the same time, the player’s game status and game information are permanently stored on the blockchain. The player’s digital assets such as roles and items in different games can be used across different games, that is to say, any game You can call data in other game worlds.

2. Reuse

Once the player’s game assets are confirmed, we will naturally start to think about the next question: Can players reuse the assets they own and which virtual assets can be reused? In order to answer these questions, we need to classify the virtual assets owned by players.

The first category is the virtual currency used for consumption in the game store for player recharge or game rewards (such as points, diamonds, gold coins)Etc.).

The second category is weapons, equipment, skins, characters, etc. that players get through purchases or rewards.

The third category is the game’s personalized data and records for players.

If players own the first type of assets-virtual currency assets, they naturally have the right to freely control such assets. But at this stage, given that the currency payment systems between games are independent of each other, that is, the currency obtained or recharged by the player in Game A is only allowed to be used or traded in Game A.

This greatly limits the availability and effectiveness of players’ virtual currency assets. Especially when the player is experiencing multiple games, the currency in each game needs to be obtained from scratch. For this reason, the player needs to pay multiple times of labor or money, and the virtual currency of the game that has been acquired before has changed. It becomes “invalid currency” and loses value once it leaves the game itself.

This problem is actually very easy to think of a solution. If the players all use the central account when playing the game, and the virtual currency assets are bound to the central account instead of in a single game, the players can reuse the virtual currency they own in different games.

However, since the consumption and currency conversion rules within each game are not the same, the process of implementing a central account is too cumbersome and complicated, so an independent system can only be used.

The same is true for the second type of virtual assets. Weapons, equipment, skins, characters, etc. are often unable to directly communicate and reuse between games due to different game types or gameplay. Leaving a particular game will also become “invalid assets”.

At this time, we think of blockchain technology. If assets such as currency, weapons, and characters in each game are chained, and NFT is introduced as a medium to transfer on the chain, it seems possible to achieve inter-game Transformation and reuse. As a result, the problem of “invalid assets” can be solved, and players do not have to spend unnecessary time and money.

In addition, some players buy and acquire assets for appreciation and collection. The reuse of this part of the collection of virtual assets can give players a sense of satisfaction, which is not only conducive to increasing player stickiness and gaming experience, but also To a certain extent, it stimulates players to purchase virtual assets.

For the third type of assets, personalized information such as player preferences, abilities, and feelings can be extracted through algorithms and big data. The personal data of each game player comes from the player himself.

However, at the present stage, players have no way to obtain their own personalized data. Player data is centralized in the hands of game manufacturers, which has become a tool for accelerating commercialization and expanding profits.

If you think about the use of blockchain at this time, the information after the chain will become transparent, and manufacturers can collect personal information by paying a certain amount, but at the same time, the information assets are owned by individuals. In this way, the player personalized data generated in the game can be extracted and used repeatedly, for example, the information is synchronized to a new game through artificial intelligence, so as to generate a personalized game difficulty and experience that is most suitable for the player.

3. Transactions

After investing time and money, players will create a very personalized image of the characters in the game. Based on the confirmation of digital assets, these images can be traded by players.

In the non-blockchain game market, the demand for account transactions based on purchase and lease has emerged, but the demand side and supply side of the account will worry about various problems, such as the account in the transaction being tampered with again, the password and the account Game assets will be deleted, changed, moved, secondary transactions, etc.

The player’s demand for digital content in the game is experience, and the transaction needs related to this experience include: getting other accounts through transactions and collecting sensory and psychological satisfaction.

Of course, the above is the account transaction in the game operation stage, which means that users can experience different games with different identities, appearances and states after the transaction. However, when the game is suspended, these digital content will disappear, and no user can continue to experience it.

When the blockchain has won a part of the ownership of digital assets for players, players can not only conduct account transactions more securely during game operation, but also treat them as collectibles, and through continuous investment in the game and the game Foreign operations, let the digital image he owns appreciate.

The cessation of operation of the game will not deprive the player of the right to collect. Players can use a certain way to allow the character to interact and browse through simple actions. If the player has some kind of scarce props or costumes, then this digital character is likely to have a higher collection value.

Players can continue to use this tool, service or platform to appreciate the game characters in the previous game, use it for simple interactions and demonstrate skills, etc., and can also conduct transactions and other content-based operations on it.

write at the end

Whether it is through natural sciences to understand the ontology of the objective world, or through social sciences to understand the self in society, this is a process for human beings to better understand the world and the universe.

And this process must be long and painful. Only when pain occurs can our cognition be improved and evolved.

Starting from the virtual world, it is very difficult to re-understand the operating mechanism of the real world, and to conduct research from the perspective of economics is a very huge thing, because from economic imperialism From the point of view, there are many things in the virtual world worth looking at from the perspective of economics, including player behavior, policy implementation in the game world, and algorithm-driven economic mechanisms, etc., all of which can be It can inspire us to a certain extent.

We believe that pain is only a by-product of human evolution. There will be many unknowns waiting for us to explore on this road to understanding the world, but this is also the reason why we will continue to move forward.

References & Materials

https://www.theneweconomy.com/technology/virtual-worlds-and-broken-models

http://news.17173.com/content/2003-6-18/n509_426109.html

https://wenku.baidu.com/view/05326b0368dc5022aaea998fcc22bcd127ff422a.html

Castronova, Edward. “Virtual worlds: A first-hand account of market and society on the cyberian frontier.” Available at SSRN 294828 (2001)

Castronova, Edward. “On virtual economies.” Available at SSRN 338500 (2002).

Castronova, Edward. “Game development and social science.” Journal of Game Development 1.1 (2004): 91-94.

Bilir, Tanla E. “Real economics in virtual worlds: A massively multiplayer online game case study: Runescape.” Available at SSRN 1655084 (2009). p>

Martin, Felix. The Unauthorised Biography. Bodley Head, 2013.

This article is from WeChat official account:rct studio (ID: gh_1fbdf914e282)< span class = "text-remarks">, author: rct studio