Rethinking the Business Model of Video Games: From Free-to-Play to Compute-as-a-Currency

Christopher Anjos???recent post "I'm sick of battle passes. There has to be something better to take its place" had me thinking about another possible business model for games and one I have been pondering for a long time... "Compute-as-a-Currency"

The video game industry could be at a pivotal juncture, maybe with a groundbreaking shift on the horizon? —a shift towards recognizing computational power as the primary currency for video came consumption, engagement and contribution. Recently inspired by Sam Altman's vision of a future in recent Lex Fridman podcast #419 where compute units emerge as a significant commodity, this new economic paradigm seeks to revolutionize gaming transactions, addressing critical issues like the skyrocketing costs of game development and widespread player dissatisfaction with current monetization methods.

The Impact on Game Development Costs

Developing video games has become an increasingly costly endeavour, especially as expectations for graphical fidelity and game scope continue to rise. Traditional revenue models, such as premium purchases and free-to-play schemes, have struggled to meet these financial demands without leaning into aggressive monetization strategies that often alienate players. However, a business model centered around compute units could offer a sustainable alternative. By leveraging players' or a companies computational resources for tasks like rendering graphics or processing multiplayer environments, developers can significantly reduce the costs associated with game development. This model not only supports developers by providing much-needed resources but also deepens players' involvement in the game's ecosystem, transforming them into integral contributors to the game's success.

Rethinking Engagement: Beyond Microtransactions and Battle Passes

The industry's reliance on microtransactions and battle passes has been criticized for promoting a "daily grind," transforming leisure into labour. In contrast, a compute unit-based model reevaluates player engagement, rewarding players for the computational power they contribute rather than superficial participation. This shift promises to align more closely with players' desires for meaningful engagement and offers a fairer, merit-based system where contributions to the game's ecosystem are directly valued.

The Economic Dynamics: Player-Driven Economies and Fairness

Adopting compute units as currency could significantly impact in-game economies, particularly in MMOs like CCP Games EVE Online , Jagex RuneScape, or Blizzard Entertainment World of Warcraft all of which already have commodity currencies such as the PLEX, Bonds and Tokens. This model introduces a new economic layer where players' computational contributions hold real-world value, facilitating a player-driven economy that mimics real-world economic principles. Such a system promotes equity within the game, moving away from models where financial investment equates to success, towards one where contribution and participation determine progress.

Advantages, Disadvantages, and Future Considerations

While the benefits of a compute unit-based model are considerable—offering a fairer economic system, reducing development costs, and improving player engagement—challenges remain. Questions about the model's scalability, vulnerability to exploitation, and the technical challenges of integrating computational contributions need addressing. Transitioning to this model also demands a significant reevaluation of game design, development, and monetization practices, potentially facing resistance from established industry players.

Despite these hurdles, the compute unit model represents a compelling path forward for the video game industry. It aligns with broader shifts towards valuing individual contributions within digital ecosystems, promising not just to reshape the economic landscape of gaming but also to foster a more inclusive and equitable digital world. As we contemplate the future of video gaming, the idea of compute as currency invites us to imagine a more collaborative, engaging, and fair gaming experience for developers and players alike.

Game developers looking to transition towards this model will need to navigate technical, economic, and community engagement challenges.

Theoretical Foundations: Compute Units as the New Gold

Drawing parallels between traditional economic foundations and the proposed model, compute units could serve as the digital equivalent of labour and material costs, with their value underpinned by computational power and digital assets. This analogy helps bridge the understanding of value creation and exchange in both realms, suggesting a future where digital contributions are as tangible and valued as physical efforts.

There is a conceptual similarity between thinking of compute-as-a-currency in the context of the digital economy and viewing labour and material costs in relation to the dollar and the value of gold in the traditional economy. This analogy helps bridge the understanding of value creation and exchange in both the physical and digital realms. Let's break down this comparison to understand the parallels and their implications:

1. Foundation of Value

• Labour and Material Costs: In the traditional economy, the value of the dollar can be understood in relation to labour (the human effort required to produce goods or services) and materials (the physical inputs needed for production). Historically, gold has served as a standard of value, underpinning currencies with a tangible asset that is universally recognized for its scarcity and durability.
• Compute as Currency: In the digital economy, especially within the proposed video game model, compute units represent a new basis for value. Just like labour and materials in the physical world, computational power (effort) and the digital assets created or supported by this power (materials) provide tangible contributions to digital ecosystems. These contributions can be quantified, traded, and valued, much like traditional economic resources.

2. Measurement of Contribution

• Quantifying Value in Traditional Economy: The value of labour is measured in wages, while material costs are priced based on market demand and supply dynamics. Gold’s value serves as a benchmark for wealth and economic stability, offering a measure against which the purchasing power of currencies can be compared.
• Quantifying Value in Digital Economy: Compute units can be quantified based on the computational power provided by individuals to a network or platform. Like gold, which underpins the value of fiat currencies through its perceived intrinsic value, compute units could underpin digital currencies or in-game economies, providing a measurable standard of contribution and participation.

3. Exchange and Circulation

• Currency and Gold in Traditional Economy: The dollar circulates as a medium of exchange, facilitating the trade of labour and materials. Gold, while not commonly used for daily transactions, serves as a reserve asset that backs or influences the value of currencies.
• Compute Units in Digital Economy: Compute units could circulate within digital or gaming economies as a medium of exchange for digital goods, services, or enhancements. Like gold, compute units have an intrinsic value derived from the computational power they represent, potentially backing the value of digital currencies or assets within the game.

4. Economic Stability and Trust

• Trust in Traditional Economy: The value of the dollar and the backing by gold (historically) or the government's promise, create trust in the currency's value and stability, encouraging its use as a medium of exchange.
• Trust in Digital Economy: In a gaming economy based on compute units, trust is established through the transparent and verifiable contribution of computational power. This trust encourages participants to invest in and use compute units as a reliable currency for transactions within the digital ecosystem.

Implications

This analogy illuminates the potential for compute units to serve as a foundational element of value in digital economies, similar to how labour, material costs, and gold underpin traditional economies. It highlights a shift towards recognizing digital contributions as tangible assets that can be measured, valued, and exchanged. Furthermore, it suggests that as digital and physical economies continue to intersect and evolve, the principles of value creation and exchange remain constant, adapting to new mediums and technologies.

The Synergy Between Compute Units and Cryptocurrencies

There could be a conceptual similarity between thinking of compute as a currency in the context of the digital economy and viewing labour and material costs in relation to the dollar and the value of gold in the traditional economy. This analogy helps bridge the understanding of value creation and exchange in both the physical and digital realms. Let's break down this comparison to understand the parallels and their implications:

• Direct Correlation with Real-world Value: By associating compute units with established cryptocurrencies, each unit of computational power contributed by players gains a direct correlation with real-world value. This connection can make in-game economies more tangible and relatable for players, potentially increasing their investment in the game, both literally and figuratively.
• Enhanced Liquidity of In-game Assets: Linking compute units to cryptocurrencies can enhance the liquidity of in-game assets, allowing players to convert their in-game earnings and assets into other digital currencies or even fiat money. This liquidity can attract a broader audience to the gaming platform, including those interested in digital investments and trading.
• Decentralized Finance (DeFi) Opportunities: The intersection of compute units and cryptocurrencies opens the door to decentralized finance within gaming ecosystems. Players could engage in staking, lending, or borrowing based on their in-game assets and compute contributions, mirroring the financial activities available in the broader crypto space.

Practical Considerations and Implementation

• Volatility Management: Cryptocurrency markets are known for their volatility. Game developers will need to implement mechanisms to mitigate the impact of this volatility on the game’s economy. Pegging compute units to a stablecoin or creating a buffer fund can help stabilize the in-game currency's value.
• Blockchain Integration: To facilitate transactions, ownership verification, and the seamless exchange of compute units with cryptocurrencies, integrating blockchain technology into the gaming infrastructure is essential. This integration ensures transparency, security, and efficiency in transactions, aligning with the decentralized nature of cryptocurrencies.
• Regulatory Compliance and Security: Engaging with cryptocurrencies requires navigating a complex landscape of regulatory compliance, especially concerning anti-money laundering (AML) and know your customer (KYC) regulations. Additionally, robust security measures must be in place to protect transactions and user data from cyber threats.

Economic Dynamics and Player Engagement

• Crypto-Economic Models for Player Contribution: Developing crypto-economic models that reward player contributions with compute units tied to cryptocurrency value can foster a more engaged and financially invested player base. This approach encourages players to contribute computational power, create content, or participate in the community, knowing their efforts have tangible economic benefits.
• Meritocratic Ecosystems: This model promotes a meritocratic ecosystem where players are rewarded based on their contributions to the game’s development and community. It’s a step away from traditional models, where progress often depends on time spent or money invested, towards one that values productive engagement.

Future Implications and Considerations

• Creating a New Standard in Gaming: If successfully implemented, associating compute units with cryptocurrencies could set a new standard for the gaming industry, where games are not just entertainment platforms but part of a larger digital economy.
• Sustainability and Growth: For this model to be sustainable, developers must ensure that the integration of compute units and cryptocurrencies contributes to the game’s growth, enhances player experiences, and does not detract from the core gameplay.

Incorporating compute units as a currency tied to the value of cryptocurrencies like Bitcoin or Ethereum represents a forward-thinking approach to game development and monetization. It not only redefines the value of player contributions but also aligns the gaming industry with the cutting-edge developments in digital finance, creating a vibrant ecosystem where gaming, investment, and technology intersect. As the digital and real-world economies continue to converge, this model offers a glimpse into the future of interactive entertainment, where every player's contribution is recognized and rewarded in a universally valued currency.

Potential Roadmap outlining key considerations...

1. Technical Infrastructure and Integration

• Distributed Computing Framework: Develop or integrate a distributed computing framework that allows players’ devices to contribute computational power safely and efficiently. This involves ensuring data security, managing resource allocation dynamically, and optimizing task distribution to prevent performance degradation on players’ devices.
• Measurement and Compensation System: Implement a system to accurately measure the computational contributions of each player. This system must track the resources provided by players and convert this input into in-game value or currency, adhering to the proposed compute unit model.
• Blockchain and Cryptocurrency Considerations: Explore blockchain technology as a transparent and secure method for tracking compute contributions, transactions, and ownership of in-game assets. Deciding whether the compute unit will be tied to existing cryptocurrencies or a proprietary in-game currency will be crucial. This decision impacts the game’s economic model and its integration with broader digital economies.

2. Game Design and Development

• Designing with Compute in Mind: Games must be designed from the ground up to utilize distributed computational power. This could affect game mechanics, graphics rendering, AI behavior, and multiplayer infrastructure. Developers need to innovate ways in which computational contributions can enhance the gaming experience or enable new features.
• Balancing Player Contributions and Rewards: Establish a fair and motivating system that balances the computational effort players put in and the rewards they receive. This balance is critical to ensuring that the model feels rewarding and sustainable from a player’s perspective.
• Community-Driven Content and Features: Leverage the compute model to empower players to create and contribute content or features, further integrating them into the game’s ecosystem. This approach can enhance engagement and provide a tangible sense of ownership and contribution.

3. Economic Model and Monetization

• Economic Balance: Develop an economic model that supports the compute unit currency, ensuring it has real value within the game while preventing inflation or exploitation. This involves careful design of in-game markets, resource scarcity, and sinks for the currency.
• Legal and Regulatory Compliance: Address legal and regulatory considerations, especially if integrating with real-world cryptocurrencies or creating a proprietary digital currency. Compliance with financial regulations, anti-money laundering (AML) laws, and consumer protection standards is crucial.

4. Community Engagement and Buy-In

• Transparent Communication: Clearly communicate the benefits and workings of the compute unit model to the player base. Transparency about how computational contributions are used and rewarded is essential for community buy-in.
• Early Adopter Incentives: Provide incentives for early adopters to encourage participation and feedback. These could include exclusive content, greater influence in development decisions, or enhanced rewards for computational contributions.
• Ongoing Support and Adaptation: Establish channels for ongoing feedback from the community to refine and adapt the model based on real-world usage and player experiences.

5. Leaps of Faith

• Belief in the Model: The most significant leap of faith is the belief in the compute unit model itself—that players will be willing to contribute computational power and that such contributions can viably support the game’s economy and development costs.
• Cultural Shift in Gaming: Believing that players and developers can shift from viewing games as products to seeing them as collaborative ecosystems where everyone contributes to and benefits from the collective effort.

Taking these steps requires a significant investment in technology, a rethinking of game design principles, and a commitment to nurturing and growing a community engaged in the game’s success. The evolution towards a compute unit-based model is not only a technical challenge but a cultural shift towards more collaborative and participatory gaming experiences.

Conclusion

Compute-as-a-Currency proposes a novel framework for the gaming industry, redefining player contributions and potentially setting a new standard for game development and monetization. By aligning gaming with advancements in digital finance, it offers a vision for a more collaborative, engaging, and equitable future in interactive entertainment. As the industry stands ripe for transformation, embracing compute units as a currency invites us to reimagine the essence of gaming economies and the value of individual contributions within them.