Why Crypto Videogames Won’t Work

Over the past few years, crypto games like Cryptokitties and Axie Infinity have launched, climbed a steep hype cycle, then collapsed. It’s not that the founders and executives behind these companies are dumb (though that’s certainly possible); rather, they set themselves to an impossible task.

First, cryptocurrency needs to be the way a game monetizes; it cannot be the reason people play the game. There is no way to magically pay people to play your game; people didn’t play Farmville so that they could get rich by selling crops. While gold farmers exist in World of Warcraft, the majority of players pay to play, and never seek to monetize their gameplay. A videogame has to be compelling enough on its own to be a hit, which is the hard part. In theory, a hit videogame should be able to monetize via cryptocurrency.

That’s where the second catch comes in. Virtual economies, like that of World of Warcraft, are notoriously difficult to manage. That’s because real life economies are difficult to manage. And if you take a traditional algorithmic approach to minting and controlling token supply, you are giving up the ability to manage your money supply. At first glance, this might seem like a good thing–no meddlesome central bankers! But competent meddlesome central bankers are generally much better at managing an economy than a simply algorithm. And even if the central bankers of a videogame are focused on their corporate bottom line, the need to make their MMO a sustainable business forces them to think long term in the way a simple algorithm cannot.

The only way for a cryptocurrency to be the best way to manage an economy is for it to take on all the “worst” characteristics of a fiat currency, in which case, it is no longer what we think of as a cryptocurrency.

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