People are inherently bad at interpreting the concept of “value.” Take the way people are continuously fooled into thinking that $9.99 is less than $10. Even though they don't do it consciously, they do it, or else pricing wouldn’t be done that way. The subjective theory of value states that things are only worth as much as people say they are, and humans are not very good at deciding what absolute value something has. This has become an even bigger problem in the last few years, thanks to the advent of digital objects.
The Cost Of Virtual War
Just recently, over $300,000 was “lost” in a space battle in the online multiplayer strategy and resource management game EVE Online. Two hundred thousand real dollars worth of in-game assets were blown up. Those digital spaceships, essentially collections of 1s and 0s that translate to pictures on a screen, were worth a pretty darn sizable salary.
This is all because of the idea that time can be directly converted into value – people put time into those ships, and they lost that time when the ships were destroyed. Furthermore, people pay real money on EVE Online for in game items, and finances and resources are such a key part of the game that it often looks less like a space battle game and more like a spreadsheet simulator.
The battle was a case of both sides refusing to give up until they burned up frankly ludicrous amounts of money. The official EVE blog had this to say:
“Unlike nearly every other large scale super-capital engagement up until this point, both sides thought they could win. They continued trying to get every single pilot into system with the most powerful warships they could bring to bear. After a few hours, the field was being lit up by doomsdays and the glittering hulls of hundreds of Titans and Supercarriers and thousands of Dreadnaughts and Carriers and smaller ships.”
While a lot of that might sound like gamer mumbo jumbo, the fact of the matter is that people placed value on something that inherently didn’t have any – aspects of a video game. To people unfamiliar with it, that seems strange.
Stranger Than Cardboard Battles?
Another example of the disconnect between real world and digital value is the massively popular trading card game Magic: The Gathering. Real life Magic cards - pieces of printed paper – can be worth thousands of dollars as collector’s items. This idea isn’t new to most of us, but it may come as a surprise to learn that the digital version of the game sells cards at the same prices as real ones.
Immediately, this seems insane and evidence of some sort of cash grab, but the fact of the matter is that it’s really no different. Pictures on a screen are no more valuable than pieces of cardboard – you can’t eat either of them (technically you can eat the cardboard, but since it might be worth thousands of dollars this is likely ill-advised).
The salient idea is that value, much like beauty, is in the eye of the beholder. Whatever you have is only worth as much as anyone else is willing to pay for it. Gold, which was the basis of all currency not that long ago, is almost completely useless (ignoring its modern applications in electronics). You can’t build armour or a house out of it, it can’t keep you warm in the winter, and it can’t help you fight off a bear any better than a rock or a stick would. Gold is valuable because we arbitrarily decided that it was, because it’s kind of rare and pleasantly shiny.
Recognizing The Value Of Virtual
That aside, everyone understands that gold is valuable, so why can’t we make the same leap when it comes to digital goods? The answer is that things like gold, while useless, can be held in our hands.
If you hold a piece of gold, someone who lives in another country, or even just isn’t in the same room, can’t take it away from you. Sure, the price can plummet and you can be left with a shiny paper weight, but by God it’s your paper weight and if anyone wants it they’ll have to pry it from your cold dead hands. You don’t get that same sense of security with numbers on a screen. This thought process is why internet shopping is so dangerous – seeing your bank account balance drop on an app on your phone is much less jarring than having a real person take cash out of your hands.
Money, of course, is now valuable only because we say it is, so placing value on virtual goods is not such a crazy idea. Society has been moving closer and closer to understanding digital value, and the most recent example of this is the surge in popularity, and indeed value, of everyone’s favourite cryptocurrency – Bitcoin.
Bitcoins work in a similar way to bearer bonds, in the sense that whoever has them is the owner of them. They aren’t anything new, but have skyrocketed in value recently, with one bitcoin now valued at over $800. They’re so valuable that Welsh early adopter James Howells is distraught that he threw out an old hard drive with some bitcoins on it. Some, in this instance, means almost $7 million worth.
Bitcoin is no different from most modern currency, except that it doesn’t have any sort of real-life analogue. While most people think of their account balance as a number, if you really wanted, you could walk into your bank and demand the whole thing in cash. Apart from a few unofficial physical coins, Bitcoins don’t have that option, but that doesn’t make them any less capable of putting food on your table (for now).
All in all, be it gaming or a pot of gold hidden in a landfill, the concept of digital value is something that we’re just getting used to. People all around the world, including the” least fortunate man in the world,” Mr. James Howells, reckon that digital currencies like Bitcoin are the way of the future, and they could easily be right. Just take a look at the hugely successful Kickstarter for Coin, an all in one card that aggregates your credit and debit needs into one insanely easy to lose black piece of plastic.
Problem: As storing and spending money gets easier and more simplified, humans will grow less and less attached to it, which is exactly what the people trying to sell us things want - a disconnect from our money. The more abstract and intangible money becomes, the easier it'll be to part with it.
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