This article first appeared in Wealth, The Edge Malaysia Weekly on October 31, 2022 - November 6, 2022
"We create worlds”. This was the mission of Origin Systems, one of the most successful video game developers of the 1990s.
Founded in 1983 by a team of programmers and astronauts, Origin shot to fame with Ultima, a Dungeons & Dragons-style game that would end up revolutionising the industry and spark the birth of virtual economies.
In 1997, Origin released Ultima Online, widely considered the world’s first massively multiplayer online role-playing game (MMORPG). It took just a year for Ultima Online to draw in more than 1,000 players, securing a Guinness World Record in the process.
As hardcore players began spending less time in real life and more time in Britannia, Ultima’s virtual world, the value of the game’s digital items began to rise.
In 1999, a two-year-old Ultima account appeared for auction on eBay. The prize asset: a virtual “castle” that bidders could tour beforehand.
The account sold for US$2,025 (US$3,601 in today’s money, after adjusting for inflation) to a self-styled Ultima “addict”. This was the earliest known trade involving virtual items and real dollars, launching a market that grew to be worth US$92 billion in 2020.
Ultima’s virtual economy exploded, creating never-before-heard-of jobs for virtual asset dealers and avatar developers. Although some transactions closed on eBay and other websites, most took place inside the game itself. Items and avatars traded hands, mostly in exchange for the game’s built-in currency, “Britannian gold”.
There was a big problem, though. As Javier Barnes — a prominent game designer who has worked on blockbusters including Candy Crush — relates, Britannian gold “was strongly devalued because new gold was constantly being generated” inside the game. Worse still, as Wired (an American magazine that focuses on how emerging technologies affect culture, economy and politics) reported at the time, there were software bugs that could be exploited by counterfeiters, turning a single piece of gold into billions “with just a few dozen mouse clicks”. The ensuing inflation made Britannian gold nearly worthless.
But as it turns out, not all was lost. When they built the game, Origin’s developers had littered some Britannian horse stables with poop — presumably to make Ultima’s fantasy world more realistic. For some reason, however, the developers did not give Britannian horses the ability to generate new poop.
This made Britannian horse poop a truly scarce object. It was estimated that at one point, just a single lump of horse dung existed for every 30,000 players in Ultima Online.
Once players wrapped their heads around this, horse poop “became a highly coveted collector’s item”, writes Jamie Madigan, author of The Psychology of Video Games. In the words of a virtual goods dealer, having a lump of horse dung in Ultima “was a status symbol, akin to owning a diamond in the real world”.
This was how digital horse poop became a store of value and means of payment across Britannia. It replaced gold for high-value exchanges and even became the subject of speculation with real money.
Picture this: You are in your car looking at the GPS. It says you are 50km away from your destination. If you are driving at 50kph, you know you will be there in an hour. If you are less than 50km away, the journey will take less than an hour. If you go any faster, you will arrive before an hour is up.
Similarly, when you have more money, you can buy more things. And when you earn money at a faster rate, you will be able to reach your goals faster.
As Jeff Booth, a technologist and serial entrepreneur, points out, “Money is just information.” Think about it. At the granular level, money is an information product that tells us what we have, what we can buy and what we could buy in the future.
But what happens when money is manipulated? Booth argues that if money is information, it follows that a distortion in money is a distortion in information. This distortion means you do not know what you own or what the future holds.
As misinformation accumulates across an existing monetary system, trust declines throughout the system. At the same time, this accelerates the search for a better alternative.
Take the case of Ultima. There was no clarion call from Britannia’s overlords to drop gold and use digital dung for payments. It was the market deciding what it wanted to use as money. Hyperinflation meant Britannian gold was no longer a reliable product. Poop became the “people’s money” because it could store information accurately and immutably.
Once you start seeing money as a product, you start seeing the rise of crypto assets as the result of free-market innovation. As long as there is desire for a better form of money, new “information products” will keep emerging, each promising to be better than those that came before.
In the end, the market will decide which money wins out. Without the trust of its users, one form of money will lose its value, while wealth shifts to improved alternatives. Be it gold or poop, money only works when there is demand for it. Maybe that is why Elon Musk once said. “Bitcoin is almost as BS (bullshit) as fiat money.”
Andrew Vong is chief future officer at EquitiesTracker Holdings Bhd
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