Understanding NFTs through the in-game economy

NFTs are all the rage lately.

Every other article online or podcaster has been trying to make a sense of it and its application in the real world by interviewing influencers, economists, executives, etc.

While the concept of NFT is cool and blockchain technology will probably be the future, I see it more as a response to a tendency that has been happening for quite some time and is better understood in the world of gaming.

Let me give you an example.

The world of Tibia

I was into this game called Tibia in the late 90s to early 2000s. It was essentially a fictional medieval 2D world where you explore magical places, hunt creatures, and accumulate treasures as a Knight, Sorcerer, Druid, or Paladin — vocation that you choose in the early stages. The game was pretty popular in many Latin American countries and even had a big Polish presence.

Fast forward to 2021, the game is still very alive and thriving with even more engaged players than it used to have then.

The main reason for it?

A digital asset called Tibia Coin.

The Tibia Coin economy

Tibia coin is a digital currency that you can buy as a player to purchase exclusive items or even access to the game’s exclusive premium access, which includes access to its extended map and extra functionalities.

This is not a mind-blowing concept, right? Every other game that you download online has a similar system.

What makes the Tibia Coin economy so interesting and a major incentive to players is the existence of a whole network of traders who will buy or sell Tibia coins for either in-game gold coins OR real currency.

The scale of such activity is so big that it has even made players millionaires in their respective countries, or even a source of income for players located in countries going through a financial crisis.

It’s all a matter of value

While we are used to the idea of value in physical assets, digital assets represent a different type of value that is not too different.

It’s cool and interesting that in games like Tibia, skilled players manage to make a living out of resources they have found in-game. This, however, is only possible because there are buyers for such digital assets. Buyers find value in such assets because they allow for a certain experience and/or social status.

Some might think that experience and/or social status is stupid of a value proposition. But what is the difference between someone who buys in-game currencies because of its in-game functional or social advantages to someone who buys a t-shirt that probably costs $2 to make for $100 just because of a red square logo in it?

NFTs are not far from this same logic.

I am curious to see how people will use it moving forward and how our system of value will transform over the years.

Who knows? It might even transform the music economy again?

Originally published at http://imarturbai.wordpress.com on March 29, 2021.

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