You arrive in a new country and what’s the first thing you do? Exchange your currency, of course. Dollars to Pesos. Euros to Yen. Even when making international purchases from home – a designer Italian handbag or a Samsung TV – a currency exchange has taken place.
Global markets and free flow of capital allow us to take the value we’ve earned in one nation and translate that value to another nation. It’s a beautiful choreography.
So why does a currency exchange not exist for video games?
Video games are growing to the size of small nations. NBA2k can count on 5 million monthly active users. World of Warcraft at 10.1 million monthly active users. Fortnite clocks in at 78.3 million active users . League of Legends at 100 million. Minecraft at 112 million. And at the summit is PUBG with as many as 227 million monthly active players.
Gamers spend a great deal of money on in-game currencies. Whether to advance the gameplay or buy new avatar skins, gamers are projected to surpass more than $32 Billion of in-game spending worldwide in 2020.
Gamers want to move between games. People don’t want to play the same game forever. Although many new games have a continuous format, where monthly updates replace the former 1-3 year game upgrade, there are still social factors causing migration between games.
Yet, if I spend $9.99 on Gems in Clash of Clans, only use $5 worth, the remaining $4.99 cannot be returned nor brought over into a different video game, say Candy Crush.
Every video game exists in its own ecosystem, with its own currency. There’s no way to transfer my investments between games, between nations.
In-Game Currency Exchange
Video games have undergone a huge cultural transformation in the past decade. They’ve routinely shocked us with immense headlines. 11 million attend a virtual Marshmello concert in Fortnite. 200 million tuned into the League of Legends World Championship.
Over the last 18 months, the global gaming industry has seen $9.6 billion in investments and if investments continue at this current pace, the amount of investment generated in 2018-19 will be higher than the eight previous years combined.Omer Kaplan, TechCrunch
I don’t think it’s absurd for a global gaming currency exchange to emerge. Especially considering Andreessen Horowitz believes the next great social network and the next big Marvel-esque franchise will emerge from video games.
At the minimum, I should be able to spend money once and use it across any title from the same company. For instance, if I spend $1 on NBA 2K20, I should be able to take that $1 over to WWE 2K20.
A currency transfer within the same gaming publisher is logical. However, a currency exchange between publishers and games would be practical.
Is there enough of an incentive for gaming companies to cooperate and participate in such an exchange?
Studios and developers know that only 0.15 percent of mobile gamers account for 50 percent of all in-game revenue, so they model the entire in-game economy to capture the 0.15% of players (also called whales).Intelligent Economist
Regardless of an in-game currency exchange, the whales will remain at their current spending habits. However, a video game currency exchange would entice the non-spenders and the little-spenders to increase their spending because of the security knowing they can take their currency with them to any future game. It’s not such a “final” purchase.
Let’s say this became a reality. How would the value be placed on each in-game currency?
Respect the Impossible Trinity
In economics, there’s a strong hypothesis known as the Impossible Trinity. It’s a finding where governments can only take two out of the three following positions with regard to their currency:
- Choose position A (like the Eurozone) and you forego the ability to control your domestic interest rates
- Choose position B (like most countries) and your exchange rate will fluctuate
- Choose position C and you choose to control all capital moving in and out of the country
At first glance, you’d assume that all video games would choose position A because why would a video game currency have to worry about changing their interest rates to protect against inflation? It’s not like video games have to worry about printing too much in-game currency.
But then I start to wonder if a cross-game currency exchange would actually force these video games to mature their currencies – transitioning them away from a means of revenue to an actual symbol of value.
What happens to a currency’s value when the popularity of that game falls?
Would we then have to limit the supplies of each currency? Could a gaming company deflate the value of its currency so that more people come back and play that game?
How would this free-flowing exchange, with varying exchange rates create new political grounds between video games in the battle over users?
And very quickly this idea flies way over my very basic understanding of economics. In no way will I pretend to know the best route for a video game currency exchange to exist.
But in its simplest form, I believe there should be a way for gamers to move the currency they’ve purchased between video games.
Currently, the only bridge between video games is the people. And for a truly globalized and connected gaming ecosystem, there needs to be a connection between the investments people are making on games.
Because I like to give credit where credit is due, the brilliant mind behind this idea of a video game currency exchange is 12-year-old Jalaal Abdullah.
I was hanging out with him and his father – former NFL free safety Husain Abdullah – explaining to Jalaal the concept of the Impossible Trinity (which you can see below). Almost immediately, Jalaal thought up this cross-game currency exchange. Congrats Jalaal, you’re a true future thinker!