This article was written by David Kinnear, a 20-year veteran financial advisor working with ultra-high-net-worth business owners, entrepreneurs and executives.
Digital games (PC and console), massively multiplayer online (MMO), social, and mobile platforms comprise a dedicated and diverse culture. Overall, nearly 1.2 billion people worldwide currently engage in some form of online game across the globe with the space consistently showing strong growth.
A standard aspect in gaming culture is the use of digital currency in exchange for tokens, items, or materials that assist players in their gaming universes. Now, the Securities and Exchange Commission (SEC) has approved Coinbase in the US, a digital asset exchange company, meaning investors may purchase and trade virtual currencies like Litecoin and Ether, allowing for a growing and thriving fintech industry.
Overall, virtual currency (VC) offers many positive influences on gaming culture. In the short term, psychological and economic impacts of VC may increase the wellbeing of gamers and the value of the gaming marketplace. However, in order for gaming culture to remain positive long-term, investors and gamers will need to demand stronger cryptographic securities and/or regulations.
Social and Psychological Impacts
There are many social and psychological influences that support the success of virtual currency in gaming culture. Consumer behavior is influenced by many factors including motivation, culture, and social economics. Virtual currency allows gamers to socialize and build relationships with other gamers, creating individualized personas, building cultural awareness, and developing quicker problem-solving skills.
It also allows users a sense of escapism, advancement, and challenge. In many ways, the gaming world is an activity that creates both an entertaining and educational atmosphere. Virtual currencies offer more incentive for gaming subscriptions or player use because they are investing their money and time in gaming transactions.
In some studies it’s predicted that selling virtual currency can reduce the playing time for users and decrease the chances of excessive gaming. As businesses sell virtual currency, they may see a larger player base because of the increased marketing and attention. Moreover, the more benefits and options a game offers to its user base, the more satisfaction users will express.
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In many ways, the social and psychological impacts provide beneficial outcomes for players, game providers, and gaming society. With more satisfied users playing in moderation, all the while learning, spending, and socializing, the benefits of VC for players and game providers are clear.
Psychological and social impacts of virtual currency on gaming culture are inextricably linked to its economic impacts. In return, these economic and financial factors will affect gaming culture. According to a GAO Report and Yale University analysis, open flow virtual systems – where real dollars are used to purchase virtual items – has the greatest income and growth potential.
In addition, virtual currency in gaming culture is highly likely to become more popular because of its speed and cost. Users can transfer and receive funds within a couple hours compared to longer, traditional waiting periods. Although speed and costs vary between different types of VCs, it’s generally a more reliable and quicker way to purchase smaller items.
Theoretically, cost reduction and faster transaction times should be widely beneficial to the financial system and decrease counterparty risks. Additionally, cost reduction will broaden the appeal to new users, creating more market efficiency. This largely unregulated market will continue to expand and innovate if the industry appropriately protects the interests of consumers and investors. As it stands, they face a multitude of financial, security, and market risks that must be addressed.
Virtual Finance in the Future
Overall, the financial system may see risks of price and payment system stability, but these would only materialize if VC-based assets become widespread and begin functioning as fiat currency. In this case, traditional clearinghouses and securities depositories, among others, would experience significant risks to their current business models.
In the future, digital currencies will likely be forced to develop and adapt within the larger financial and regulatory frameworks. If they remain unregulated however, competition and regulatory arbitrage may lead investors to accelerate adoption to take advantage of lower costs.
VC has been one of the biggest innovations in finance in 500 years. By 2019, global online gaming revenue for PC and console alone will be a $24 billion industry. With such massive turnover and anonymity, virtual currency and fintech industries will surely become targets of regulators, tax authorities and law enforcement. Gaming providers will need to offer stability and security to gamers to drive revenue growth and loyalty.
In addition, cryptocurrency providers will need to carefully balance the requirements of government and society with the needs of their customers to avoid costly regulation and reputational damage. Once these concerns are addressed, we can expect to see the popularization of virtual currency and online games open doors of abundance for both the finance and entertainment sectors.