The Banking Executive Magazine - September Issue 2022

Virtual Economy • Virtual crime: Monetary issues give rise to virtual world problems similar to those in the real world. • Black market: Online created worlds has official and sanctioned method (black market) to convert real world cash to in-game currency. • Stability: To maintain a stable economy, a balance must be struck between currency sources and sinks. Gener- ally, games possess numerous sources of new currency for play- ers to earn. With the proper bal- ance of growth in player base, currency sources, and sinks, a vir- tual economy could remain stable indefinitely. As in the real world, actions by players can destabilize the economy. • Virtual Assets: A non-fungible token (NFT) is a unit of data on a digital ledger called a blockchain, where each NFT can represent a unique digital item, and thus they are not inter- changeable. NFTs can be used to represent in-game assets which are controlled by the user instead of the game developer. • Capital: In virtual economies, the value of in-game resources is frequently tied to the in-game power they confer upon the owner. This power allows the user, usually, to acquire more rare and valuable items. WHAT IS A DIGITAL ECONOMY? Below we present the evolution of the term “digital economy” as de- fined by various world entities: • OECD definition (2013): “The digital economy enables and executes the trade of goods and services through electronic com- merce on the Internet”. • European Commission EC definition (2013): “The digital economy is an econ- omy based on digital technologies (sometimes called the internet economy)”. • British Computer Society (2014): “The digital economy refers to an economy based on digital tech- nologies, although we increasingly perceive this as conducting busi- ness through markets based on the internet and the World Wide Web” • European Parliament (2015): “A digital economy is a complex structure of several levels/layers connected with each other by an almost endless and always growing number of nodes. Platforms are stacked on each other allowing for multiple routes to reach end-users and making it difficult to exclude certain players, i.e. competitors”. • House of Commons (2016): “The digital economy refers to both the digital access of goods and services, and the use of digital technology to help busi- nesses”. • Group of 20 (G20) Digital Econ- omy Task Force (DETF) (2016): “A digital economy is a broad range of economic activities that include using digitized information and knowledge as the key factor of production, modern information networks as an important activity space, and the effective use of in- formation and communication technology (ICT) as an important driver of productivity growth and economic structural optimization”. VIRTUAL VERSUS DIGITAL ECONOMY A virtual economy is a more ambigu- ous and multifaceted concept than the digital economy. It has a longer history of development and is closely intertwined with digital technology. The World Bank and Infodev re- search report by Lehdonvirta and Ernkvist [6] suggests three ap- proaches to the definition of the vir- tual economy. The first approach ISSUE 165 SEPTEMBER 2022 the BANKING EXECUTIVE 11