bitcoin best: Eve Online

Monday, December 14, 2015

The speculation market of everything

Sometimes it is very interesting to take a step back and look at how we act in the modern world. We seem to be striving for passion and excellence in everything. If it can be compared, we are becoming connoisseurs in it. If it can be done, we will compete in who can do it best. And if it can be sold, it is very likely there will be plenty of room for us to speculate on.

Magic the Gathering and Bitcoin

Magic the Gathering and Bitcoin have some interesting history. One of the first and biggest Bitcoin exchanges originated from "Magic the Gathering Online eXchange" - MtGox. However, that is not the story we'll be talking about today.

A few months back at /r/Jobs4Bitcoins subreddit someone was paying people to buy out and burn some Magic card - Seance. Fast forward a few months to 5 days ago and the same user offered a bounty of $40k to a any pro tournament player who would build and play a deck in a Magic tournament around that specific card (the text of the original thread appears to be removed unfortunately). Some people are already putting up some theoretical decks around it, while a lot of people are asking what's going on. Some more astute redditors have already seen through to the real motivation behind those actions - market manipulation.

Yes, it looks like speculating on the market of Magic the Gathering cards is an interesting investment. If a card becomes popular to play in some tournaments and it is in limited supply, it can appreciate in value.

Even if you are not affecting the market, there seem to be a lot of people speculating on price of various cards. Some are also gambling on opening packs of old cards in full latex gloves in hopes of finding mint condition rare cards to later have them sealed and graded for resell value.

The unregulated, legal inclusive investment market of... sneakers

Collectible card games is not the only game in town when it comes to speculation, investments and human ingenuity when it comes to making money with a passion. Apparently, the secondary market for Nike shoes is quite interesting:

If you are savy enough, you can build your own portfolio of shoes, track its worth over time, and hopefully gain better return than investing in Apple stocks. The resell market for Nike shoes is apparently even bigger than the actual market for Nike's biggest competitor... Just watch the video - it's fascinating.

Everything else

It seems that this sort of behaviour is rather common in many places. Awhile back someone in the EVE Online subreddit described how he made his Internet fortune buying and selling limited-edition items (unfortunately, the original thread seems to be deleted). His total net worth was about 2.5 trillion ISK, worth about $40k at today's PLEX value of $20 - 1.2 Billion ISK (explanation on how this works). There are plenty of other stories from the EVE universe on people creating monopolistic cartels or speculating on future patches.

Of course, a lot of people will also point out the notable stories of Beanie Babies and the Tulip Mania bubbles and they would be right to do so. Collectors markets are inherently speculative and sitting under the Damocles Sword of the company that is creating the items. If they created it once, they could recreate it again and destroy any value such items would hold.

The future?

With all that being said, it would be interesting to see more sophisticated speculation markets pop up for collectible commodities. Being able to invest in portfolios of art, speculate on drug research, short some overhyped videogames, or perhaps bet on whether or not a terrorist attack might take place.

If there is money on the line, there is a room for a speculation market...

Saturday, August 16, 2014

On Eve, Plex, ISK and Bitcoin

Bitcoin Eve Online ISK Plex

While browsing around the Internet today I came across an article on Dr. Eyjolfur Gudmundsson's view on Bitcoin in comparison to ISK and Plex, the main currencies of the Eve Online game. Reading into the points mentioned a bit further one comes across similar points that have been raised against Bitcoin many times. However, the comparison between Bitcoin and Plex is interesting enough that it can make for a good discussion.

Eve Online in brief

Just to make sure we're all on the same page here, let me quickly bring everyone up to speed on Eve Online and things surrounding it.

Eve Online is a space MMO game that is heavily focused on open-ended gameplay. Unlike most MMOs, where grinding for levels, loot and quests is the main focus of the game, Eve is a lot more focused on economics and large player corporation versus player corporation warfare. Most items in Eve are crafted by the players from simpler objects. For example, ores are refined into metals, which are built into modules, which build space ships the players use. Eve's economy is based on players performing each of those steps - players dig the ore, refine it and so forth, not the NPCs. Because of this, Eve's economy is closer to reality, with large supply chains, supply and demand, than say, World of Warcraft.

Eve's economy is running on ISK - The Interstellar Kredit. They are the base currency everyone is using in the game to buy and sell their wares. Eve is a subsciption-based MMO, meaning that each player has to pay each month in order to play the game. They can do it for real-world money, or they can buy an in-game item called PLEX - Pilot License Extension. Plex is bought and sold for ISK just like any other item in the game. The players can also buy Plex for real world money and put it in the game to sell for ISK if they want to get some in-game currency without having to grind for it. However, players can't sell Plex for real money, because that's violating the terms of services of the game.

So the exchange chain looks like this: fiat->Plex<->ISK<->Everything else in the game.

Arguments against Bitcoin

Dr. Gudmundsson raised a few points against Bitcoin in comparison to Plex:

Bitcoin is volatile
Nobody knows who is behind Bitcoin
Bitcoin relies on trust
Makers can cash out and crash the market
Asks to prove that Bitcoin is not a scam

I do agree that the price of Bitcoin is volatile, but it's driven by an open market. Anyone can buy and sell it freely, so the price can be gamed by anyone with enough money and determination. Price of Plex in fiat is stable, because the market is a monopoly owned by CCP and people they license it to. You don't have a free market for Plex, since anyone that tries to sell the Plex they own gets their account shut down by CCP. Moreover, the Bitcoin market will never be flooded with excessive Bitcoins, sicne you can't make them out of thin air, unlike Plex which can be created at a whim. Heck, if someone makes a mistake selling Plex, like Amazon did (selling it at 90% discount), the commodity suddenly can lose a lot of value. All in all, Bitcoin's price is determined by free market, Plex's is determined by its monopolistic producer. Both of the approaches work because they both fulfil a different role.

Points 2-5 have been done to death and aren't that interesting in comparison, so I'll skip them. Instead, I will make some more general comparison between Bitcoin and Plex.

Bitcoin vs Plex

The main points Dr. Gudmundsson is making, is that a currency needs a government or an entity to back it - to assure it's value, price stability and so forth. In case of Plex - it is redeemable for game time and for ISK, therefore it's valuable. However, it looks like the big point about Bitcoin that Dr. Gudmundsson is missing, is that it is valuable because it's not controlled by anyone. If anyone backs a currency, that currency will only be worth something as long as they are around. Take E-gold for example - it was a centralized company backing its own currency. Because they had a real-world presence, they were shut down. CCP can be shut down and Plex will be worthless then. Bitcoin, just like gold cannot be shut down, since there is no central point of failure. Anyone can transact in Bitcoin as they do in gold if they have it - they don't need a third party to let them do so. Because Bitcoin enables anyone to transact with anyone around the globe instantly, it's valuable to the people that need it and that's one of the ways it derives its value.

Now lets say I wanted to use Plex like I would Bitcoin. I pay my friend a Plex for a drink, I start transacting with a few other people, and soon enough my Eve Online account is shut down since I just breached the terms of service... Well, so much for that... But lets say CCP relaxed their stance and let you trade Plex for anything. By necessity, it would be trade-able for USD (either it's trade-able for everything or nothing). Someone starts buying some illicit things with it and CCP suddenly finds itself needing a FinCEN Money Services Business license (Plex would be categorized as a centralized virtual currency). It's workable - now to buy some Plex you just need 2 photo IDs, a utility bill and you're all set (unless your account gets flagged for suspicious activity).

However, if all of this was tackled correctly, we could see a few interesting things come out of it. First of all, there would be little to no discounts on Plex - it would need to be sold at the market value, or else you would be just giving people money. On the flip side, people could start making a real income for playing Eve. You could have full-time professional players making a living wage. This could be huge! Thirdly, you would see people starting to use Plex to pay for real-world goods and services. With certain setups it would be damned easy, but that's a topic for another day.

Conclusions

At the moment, Plex is not a good currency outside of Eve Online as its use is heavily restricted by CCP and the terms of services. Given free reign, it would be a very interesting commodity-backed currency. Dr. Gudmundsson's arguments against Bitcoin are mainly misplaced and are similar to many concerns raised over the years.

I personally would love to see Plex explored as a free currency outside of Eve Online. If anyone from CCP would be interested, I could give you a personal overview of how it could be easily done and even show you a live demo of the implementation on live, existing technologies without any special code created by me.

Likewise, if Dr. Gudmundsson would be interested in having his concerns about Bitcoin addressed, I can personally explain every concept to him.

Interesting topic that didn't make it to this post but I would probably want to explore in the future - ISK as a currency with inevitable inflation...

bitcoin best