» HADOUKEN « grapes of digital wrath (part 1)
Seeing that my newsletter was transforming into a politically-influenced and constitutionally-minded exploration of current events--namely, of course, COVID--I'm happy to have taken a few weeks off. Not only to prevent Hadouken from sliding off the rails into uncharted waters (in case you were confused, I'm not an epidemiologist, nor do I pretend to play one on the Internet), but to avoid clogging up the airwaves regarding other topics that have percolated to a boil (namely, of course, race relations and police brutality). Indeed, there are more powerful and educated voices covering these topics, and I'm sure you don't need another whisper in your ear. Plus, I think the vast majority of you subscribed to this newsletter for a different purpose. Thus, I think it prudent to stay the course.
That said, what does one even talk about these days? When it comes to fashion, digital collections have been all the rage among "progressive" commentators. So maybe that?
In my last letter, I referenced the Animal Crossing fashion show and pontificated
"...while [this] is certainly interesting if not kind of useless to brands (beyond showing that they are ahead of the curve and culturally relevant), it does make you wonder where we end up when all these technologies begin to come together and disrupt legacy industries (like fashion)."
For my non-gamers out there, you may be thinking "ok, what's the big deal?" The big deal is that the cosmetic economy within gaming is enormous. In a 2017 study, the in-game cosmetic economy, which is defined as purchases of "skins" and other "microtransactions" that do not have an effect on gameplay, was estimated to be pacing toward $50 billion dollars by 2022. Since then, high-profile collaborations between luxury houses like Louis Vuitton and popular titles like League of Legends (both IRL and in-game), have really cranked the dial. So much so that I believe the industry will dwarf that $50 billion projection. The killer app? Two words: digital scarcity.
Before we get into the concept of digital scarcity, it is important to understand what a digital item currently is, what it is not, how to acquire one and what you can and cannot do with it once acquired.
First and foremost, digital items, by their very nature (at least historically/currently), are not scarce. Take the mp3, for instance: it is nearly impossible to trace the provenance of a single mp3 file, and any "owner" of such file can simply make a copy and distribute it. The same can be said of jpgs: there's no way to prove that a particular jpg of the Mona Lisa, for example, is the immutable original--anyone can take a screen shot and send it along. And even if you could trace these digital items' provenance, there is no inherent value in what equate to highly compressed pixels on a screen or waveforms moving through speakers, particularly because anyone can make a copy and distribute it ad infinitum.
Within the realm of video games, this is further complicated around the issue of "ownership." Without getting too deep into nuance and legal terms, digital items within a game ecosystem is essentially a license to use said item under very strict circumstances. The usual set of circumstances include, but are not limited to: within a single particular game (non-transferable to another game), non-exclusively (producers are incentivized to create unlimited amounts of these items) and for a limited amount of time (from a few weeks, like Marvel's Thanos crossover skin in Fortnite, to indefinitely as long as the developers continue operating their servers, like Warcraft's Brutosaur).
Transferability is another incredible pain point: it's fraught with peril. If you are looking to sell one of these products, you are either stuck trusting (1) an offline (meaning, outside of the game ecosystem) third party who acts like a broker and clearinghouse, holding funds in escrow, open to hacks and cyber attacks or (2) the reputation of a complete stranger online within the game's ecosystem for such game's virtual currency (which has no inherent value or very little (and oftentimes questionable) value in real world dollars).
And what if you wanted to liquidate your virtual holdings? Whether that be digital currency (WoW Mana, Final Fantasy Gil, Fortnite V-Bucks etc.) or digital assets, you're beholden to the above two painful options. What if you want to exchange them? Good luck finding a broker for that! What if the game developers stop servicing their servers, what happens to your hard earned assets? You guessed it, poof, gone. And finally, what if you wanted to import an item into another virtual world? Fat chance: developers are disincentivized to allow this; they have control over production and distribution, so why would they allow you to continue using an item within another game (even if they develop that game) when they can incentivize you to spend anew within this new world?
You could sense it, right? A denouement of sorts! But with this letter growing in size, you are going to have to wait for Part 2 to learn about *drumroll* crypto collectibles! Feel free to get a head start with this primer, that way I can quickly overview the technology behind crypto collectibles and spend the bulk of the newsletter on how this will change the world of digital ownership in video games, fashion, art and just about every other visual media.
Before I sign off, a PSA: OFFICE HOURS are back!
Tomorrow, from 6:00 - 7:30, I will be hanging out, playing Mario Odyssey (finally got my hands on a Switch) and waiting for friends, followers, supporters etc. to join my Zoom chat for 10-to-15-minute conversations about anything. I hope to see you there.