ichthyoid

Once in a while, I like the sit back and think about the various ways different spheres and genres collide. I especially like the reminisce about the “old days”, or namely, my childhood, and how it informs on what I do and think about today. I wrote a while ago on How Gamers Save the World as well as the junction between the popular simulation game Rollercoaster Tycoon and what it can teach us about finances.

Today, I want to do a similar thing, but this time with another famous game franchise called Diablo, created by Blizzard Entertainment. It is a game series based around slaying evil monsters and wicked demons, fantastically gothic action-adventure, and most pertinent to our purposes, epic loot.

Specifically, I will be talking more about the 2nd installment in the series, Diablo II, and how it can help inform on how we think about the intersection of games and crypto today.

The Piracy of Killing Demons

I have a nostalgic affection for this franchise. Introduced to me by my brother when I was a young kid, this horror-turned-action game thrilled me the moment I stepped into the world. I never really played the first game, but I still remember with near graphic detail my first forays into the world of Sanctuary in the sequel. I played as the sorceress, whose powers seemed epic in exposition. But once I stepped into the game world, I felt extraordinarily dinky and powerless (yet excited). I quickly began dispatching the horrors awaiting me in the Den of Evil and soon moved on to killing Andariel, Duriel, Mephisto, and eventually, the Lord of Terror himself, Diablo.

The conceit of the Diablo franchise is to package action-oriented role-playing with the acquisition of loot. While the player is often drawn towards the game through the advertised atmosphere and addictive game mechanics, those that stay and keep playing do so because of a desire for rare items one can potentially gain as they kill more and more monsters and bosses. Oftentimes, the rarer the item, the more powerful it is. As such, the game became based around getting great loot, as if the players were pirates (in a meta game way). From armor to weapons to accessories like amulets and rings, these items eventually became everything that the game revolved around after one was done with the story.

As players began to farm the game throughout the years, one unique item became one of the most sought-after for all players. It was a small ring called the Stone of Jordan, and gave benefits to nearly every single class of Diablo II. It was also useful for crafting new items, and gave access to late game boss content, which dropped even cooler and rarer items. Being a ring, it had a small footprint, which was important in terms of conserving player inventory.

Due to the item's size, utility, and rarity, it eventually became a source of currency between players in the game. After all, the in-game gold currency was neither rare nor of much use in the grand scheme of things, so players instead traded Stones of Jordan for various items that they wanted. It became such a standard form of currency, in fact, that hackers would find ways to duplicate (i.e. counterfeit) the rings, and Blizzard had to patch the game multiple times to remove these cheats.

What We Can Learn

There's a lot we can take away from what happened with Diablo II and the Stone of Jordan as it pertains to cryptocurrency. There certainly are immediate parallels, like the idea of playing to obtain the item as currency, which is similar to the probabilistic way 'mining' or Proof of Work blockchains function (which may be an interesting way a developer may want to implement their crypto project in the future). But I want to focus on the bigger picture today.

First is the understanding that value cannot be forced onto people. While new players in Diablo II often find themselves saving gold to buy items from the game's NPC shopkeepers, as they began to level up and find better loot, they'll realize that the game's standard currency is essentially worth nothing. Instead, trading with other players online was a much surer way to obtain valuable items. But what do other players' want, and what is the standard for that?

The Stone of Jordan was never picked by Diablo II's developers as any sort of de facto currency. Instead, it evolved into a form of currency as the players began to play more and more. Thus, rather than a top-down approach to value, the medium of currency is best derived when what people value is also increasingly used.

This brings us to our second lesson: that value is derived from utility as well as rarity. The Stone of Jordan was a useful gadget. It could be used by all 7 classes in the game, and its benefits became the standard by which all other rings in the game could be measured. It was its utility that made it desirable for players.

But, on the other hand, it was also rare, but not rare to the point as to make it unobtainable for the average player. This is actually pretty important. If something is not rare, then the quantity will devalue it until no one would use it as an item to barter with (like what happened when the hackers duplicated the Stone of Jordan into oblivion). However, we also don't want the thing to be so rare, that it's worth more to hold onto than spend.

I think we can see this today. There are many hundreds of different cryptos and coins. But very few of them have become what Bitcoin was originally designed to be—a source of currency that is used to trade for goods and services. Not even Bitcoin is used like this anymore. Instead, most cryptos are hoarded or discarded—two opposite extremes that aren't signs of a healthy economy. With the current trend in DeFi, most coins are held in some kind of service that generates interest or loans, instead of being used to purchase real goods and services outside of DeFi. This is because the current attitude is to speculate on the future value of a coin, hoping that it will increase as Bitcoin did in 2017.

If the ideal is to create a real digital currency, one that is supposed to be used as well as saved, then the utility of the currency must be balanced with its rarity, so that speculation doesn't outweigh the real use-cases it has.

I think the understanding that value is subjective is the most important part of it all. There are still thousands of crypto projects today, and it's predictable that many hundreds and thousands may come and go in the future. But I think a sign of the crypto market maturing will be when people begin to consolidate around a few projects, like what is happening with Ethereum now (where the vast majority of non-new blockchain development is currently). Of course, there's no way Ethereum could host all of the blockchain development in the world (I doubt any single blockchain could), so there's certainly room for more competitors in the space.

So if I were to guess what blockchains will be most valuable in the future, I would actually guess it would be those with the most amount of developers working on different projects within that blockchain's ecosystem, rather than any single blockchain company right now. And that value is going to be coming from the masses who will choose it. In other words, the market will have the final say on which one is the most valuable.

Which leads us to our third lesson: the choosing of a currency by the market will be based on how easy, and even fun, it is to use. Diablo II is a fun game. People like to play it. In the same way, unless cryptocurrency becomes easier and more intuitive to use than the competition (i.e. banks/financial institutions as well as services like PayPal and Venmo), it may actually never be very widely adopted—at least not in its libertarian ideal. Perhaps it could be used as the backend by banks, but the majority of people may never benefit from it.

Final Thoughts

I'm a big believer in video games and their benefits to both our psyche as individuals, as well as society as a whole. In many ways, it could be said that human beings have been endowed by our Creator to play. We can see it in our kids, we can see it in our youth, and it's not very far-fetched to assume most adults yearn for it, to the point where we watch others do it in professional as well as amateur sports.

But there's something about play that also informs us about a variety of other aspects of life. Even in technologically advanced societies such as ours, we can take these simulations to help us learn about ourselves, society, and the world around us. And when we do, we're all the better for it.