Understanding What Makes Virtual Items Valuable: The Diamond Standard

Why are virtual objects valuable? This is a question I’ve heard a lot from individuals who can’t understand why someone would spend $20,000 on a virtual plot of land or $2,000 on a pair of virtual armor. The idea of paying actual money on intangibles may seem absurd to these folks, but it makes sense to someone who grew up playing video games with artificial scarcity. Allow me to explain…

Scarcity

Scarcity is unquestionably a significant component in determining the value of virtual things. Diamonds, for example, were formerly among the least frequent raw commodities in the video game Minecraft, but they are now among the most valuable.

Diamonds were frequently employed as a store of value by players on online multiplayer Minecraft servers, who treated them as treasure and kept them concealed in chests. Diamonds were occasionally utilized as a means of exchange when players swapped them for other in-game commodities that were rare. The “era of the diamond standard” is how I refer to this phase in Minecraft’s history.

Minecraft diamonds were likewise tough to come by in the days of the diamond standard. Another reason they were so valuable to players was because of this. Before you could start mining diamonds, you had to spend hours gathering the resources you’d need to make diamond-mining instruments. You couldn’t start a diamond-mining expedition until you obtained the necessary tools, and even then, you’d have to spend hours mining enough raw diamonds to make a full set of diamond armor.

Utility

Minecraft diamonds were also valuable due of their in-game functionality. A player with 24 diamonds could make a full set of diamond armor, which was one of the most sought-after in-game items during the diamond standard’s heyday. Diamond armor was not only the most durable sort of armor, but it also provided the best protection against hostile things.

Wearing diamond armor and using diamond weapons boosted your odds of surviving by a factor of two. You would be able to keep your in-game fortune if you managed to survive. You may even enhance your productivity in-game by employing diamond tools. Putting your (diamond) savings to work, much like investing in the real world, was a proven method to increase your riches in Minecraft.

A full suit of rune armor, like diamond armor in Minecraft, is one of the most wanted in-game goods in Runescape. In middle school, I would skip out on after-school activities with my buddies to go fishing for swordfish, sometimes known as “swordies,” on Karamja Island in Old School Runescape (OSRS).

After hundreds of hours spent fishing swordies and several trips to the Grand Exchange, I was able to save up enough in-game currency to purchase my dream set. With my new rune armor, I was finally able to fight some of the game’s most dangerous and powerful foes, reaping the rewards in coin, the Runescape universe’s native currency.

Runescape’s and Minecraft’s virtual economies had a lot in common. Because virtual items were algorithmically rare and difficult to get, they effectively served as value stores. I had swordies in Runescape. I had diamonds in Mincecraft. I wasted an absurd amount of time and effort in both games gathering value and preserving it in these virtual assets. Value-capture methods like these can also be seen in newer metaverse platforms like Decentraland.

Capturing Value

Golfcraft is one of a few innovative and promising play-to-earn games in Decentraland that allows users to collect, store, and exchange value. In Golfcraft, players complete virtual mini golf courses in order to collect gold coins, the game’s currency. Coins are rare and difficult to get by. They’re also useful in-game, so they’re an excellent way to save money.

By playing competitively, coins can be re-invested in the game for a chance to obtain tickets. Golfcraft wearables can be purchased with tickets. Some Golfcraft wearables boost your stats, allowing you to gain more XP and cash for your time spent playing. Wearables in Golfcraft are similar to armor in Minecraft and Runescape in this regard. Players buy them using in-game currency (tickets) and utilize them to grow their in-game fortune. Diamonds are used for a similar but slightly different purpose.

Golfcraft users receive diamonds at random for merely playing the game. Players must spend diamonds to improve the properties of their clubs, which include power, control, and aim. Upgraded clubs have a higher secondary market value since they are more useful to players in-game.

Extracting Value

The major difference between play-to-earn games like Golfcraft and legacy games like Runescape is that play-to-earn games like Golfcraft take advantage of technology that allow players to quickly transfer value off-platform. Because golf craft gear and clubs are stored as NFTs on the blockchain, they can be readily transferred to third-party marketplaces such as OpenSea and sold for MANA, Decentraland’s native currency. MANA can then be exchanged for FIAT currencies such as the US dollar, which have higher physical utility.

This was one of the most important aspects in Runescape that was missing in games like Minecraft. To obtain in-game items such as gems and armor, players would have to work for hundreds of hours. Due to rarity and utility, these goods effectively acted as value stores in-game, but their value was not easily transferable into the real world. Outside of their own virtual worlds, these objects were poor transaction mediums.

Players have traditionally been constrained by the rules of isolated metaverse systems that lack interoperability. Players may now extract real-world value from their virtual goods thanks to blockchain technology like NFTs and cryptocurrencies.

Players may currently buy and self-build Golfcraft clubs on third-party markets like OpenSea. It’ll only be a matter of time before participants in metaverses other than Decentraland can draw value and utility from these clubs.