The Banking Executive Magazine - September Issue 2022

Virtual Economy VIRTUAL ECONOMY TECHNOLOGIES Technologies and concepts which can be used in virtual economy cre- ation include: BLOCKCHAINS A blockchain is an immutable digital ledger in which data and transac- tions are recorded chronologically. Blockchains hold batches of valid transactions in blocks. Each block is linked to the blocks before and after it using cryptographic hashes. Decentralization is at the heart of public blockchains. Every user of a public blockchain can participate by downloading the entire blockchain as well as the associated software. Decentralized data storage enables each user to have the exact same copy of the evolving blockchain ledger. CRYPTOCURRENCIES Cryptocurrencies are digital assets which were primarily designed to be mediums of exchange. Cryptocurren- cies are powered by blockchain technology, and are therefore decen- tralized in nature. Cryptocurrencies use extremely powerful crypto- graphic security mechanisms to se- cure financial transactions. TOKENS A token represents a unit of value of an asset or utility issued by a private entity. Tokens are digital and usually reside on top of a blockchain plat- form. Tokens are usually fungible, meaning that a token issued by a company holds the same value as all the other tokens that it has issued. There are various types of tokens: • Utility Tokens: Utility tokens represent a unit of value and can be redeemed for a good or service provided by the is- suing company. • Security Tokens: Security tokens are tradeable finan- cial assets issued by a private com- pany. Security tokens represent either debt, equity or derivatives. • Expiring Tokens: Tokens can be programmed to ex- pire at a certain time or when par- ticular conditions are met. These tokens may or may not have eco- nomic value or certain rights at- tached to them. • Limited Use Tokens: The use of tokens can be limited by the issuing authority. Tokens can be programmed so they can only be spent in certain places or when certain conditions are met. The limited use feature can help set the economic value of the tokens. • Non-Fungible Tokens: Non-fungible tokens (NFTs) are a special type of cryptographic token that represents something unique. Each non-fungible token is differ- ent from other tokens, not directly interchangeable with them and valued differently. NON-FUNGIBLE TOKEN ENABLED ASSET OWNERSHIP The ownership of virtual and real world assets can be embedded into non-fungible tokens. DIGITAL SCARCITY Scarcity is what makes a good valu- able. Digital media can be easily shared and replicated, with or with- out the consent of the owner of the media’s intellectual property. Non-fungible cryptographic tokens have enabled digital scarcity to exist. A non-fungible token cannot be replicated. An image held in a non- fungible token could be copied, but the ownership of the original image can only be held in that one token. Digital scarcity is becoming an in- creasingly important topic in the fields of entertainment and Digital Rights Management. BUILDING A VIRTUAL ECONOMY According to the HackerNoon Ulti- mate Guide for Creating Virtual Economies by Shaan Ray [3], in a vir- tual economy, value is created by users, so the logical place to start the process of the design of a virtual world is with the user. There are various steps for building a virtual economy [3], these include: STEP #1 CREATING USER PROFILES Creating a user profile involves defin- ing users’ types, functions and per- missions Users’ types: Virtual platforms can have various types of users, for example: • Instagram and Twitter both have one type of User • Uber has 2 types of Users: Drivers and Riders • Games can have multiple types of Users Defining users’ types is not a com- plex task. It can be just a list of users and their types. Users’ Functions: Functions are the actions that users can take on a platform, for example: • Twitter’s functions are: tweet, retweet, tweet at users, delete tweet, reply to user tweets, follow users, block users, message users, edit profile, make account private, etc.. • Instagram’s functions are: Upload posts, delete posts, add a location to posts, add descriptions to posts, comment on other pictures, follow other users, like posts, forward posts, message users, block users, etc.. • Uber’s functions are: select desti- nation, select pickup location, order a ride, cancel a ride, select number of riders, select which type of car (pool or private), report inci- dent, add tip and so on. From a dri- ver’s perspective, the functions are turn on drive mode, accept ride, message rider, cancel ride, among others. Next to each user type, we can list all the functions that the user can per- form. ISSUE 165 SEPTEMBER 2022 the BANKING EXECUTIVE 13