The challenge of turning a game economy into a crypto economy

Video games have experimented with purely digital currencies and digital assets for years, often with great success. However, until the advent of blockchain technology, these economies existed in official isolation to the real economy.

Up until today, it was largely up to players trusting each other that made any kind of exchanges of game assets possible.

Even for hard-core gamers like us, it is no small miracle that rare spaceships or houses or weapons could be sold for tens of thousands of dollars in what was effectively a black market.

That said, it does point to the great desire and need to have such a market.

With blockchain, we can make those interactions safer by securing the transactions, insuring that players know what they are getting when they make a trade.

Of course, the devil is in the details. To prepare our family of products for this change we had to think through some unique problems.

First, what do we do with the old premium currency?

The old currency was tradable one way from fiat money, but it held an important role in the SKARA universe, because it was the only way to purchase certain things. And yet, it wasn’t able to be secured on the blockchain.

So we decided to turn it into our basic game currency, called shards, making the start of the cryptocurrency a clean one.

Second, how do we make sure players can actually use the currency in the game?

This problem was a bit trickier. For one, we wanted to allow players who desired to have no interaction with the crypto part of the currency to be able to enjoy the same experience of the game. So we decided to build a game wallet that would handle the crypto part of the experience for those players.

This has the added benefit of simplifying the process of using the currency in the game, making for immediate transactions instead of the slower ones experienced because of the blockchain verification process.

Third, how do we ensure that the cryptocurrency communicates with the outside economy through exchanges and wallets?

We designed a process for this:

A holder of SKARATs inside the game would have to do the following to transfer and then use SKARATs outside of the game:

** Create an ERC20 token compliant wallet address
** Submit the wallet address and the amount of SKARATs to withdraw from the ‘SKARAT withdrawal’ option in the game
** Pay any small fees to cover the cost of the transaction
** Wait whilst Skara processed your transaction and you receive your tokens.

This enables tokens to be tracked, and have an equal life inside or outside of the game.

How do we make sure the value is stable and ideally more valuable over time?

For this, we had to put our thinking caps on in a big way. By following basic economics, however, we hit upon an idea.

In all transactions that are player-to-game (an estimated 20% of total transactions), 50% of the tokens sent from the player to the game will be burnt. This means that whilst 50% will be sent to a token pool earned by Skara, 50% will be sent to a publicly auditable smart contract with a burn function that will destroy the tokens.

This will result in a gradually reducing pool of tokens. And as it is a limited supply, this game mechanic will create a scarcity in the tokens that will gradually increase the value of SKARATs. However, the fiat value of in-game assets will remain steady.

But what if SKARATs become too valuable to be used in the game?

For this alternative scenario, we have the token split.

We are implementing a token split function that adds tokens without decreasing the market cap, or the value of any individual token holders’ holdings.

This is done in the same manner as a share split for public companies on stock exchanges — for every token owned by a wallet, a certain number of additional tokens are issued to that same wallet, as required.

This ensures Skara never runs out of tokens, despite the token burn.

Technical challenges

Coding all of this and making sure it works is of course a challenge in and of itself. We have developed a lot of expertise tackling these problems, however, which will stand us in good stead.

The good thing about the blockchain and ERC20 contracts is they cannot be altered once set, which means investors and gamers are safe.

Final thoughts — How will Skarats be used outside of SKARA?

While SKARATs will have an immediate use with the family of SKARA products, most notably from our multiplayer game, the potential to increase the use of the tokens is unlimited.

For example, it is common practice for game currencies to be exchangeable with one another on platforms such as Steam or Playstation. To that end, we are already having conversations with studios that have a desire to use SKARATs within their game. Since we are miles ahead of most studios in this field, we can help each other and benefit significantly.