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Can fake economies create real jobs? EVE Online CEO Hilmar Veigar Pétursson talks cryptocurrency, blockchain

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There's never been a better time to try to build a perpetual jobs machine.

There are currently about 13 million working people in Australia, and an estimated 3 million jobs set to be lost to automation by 2030.

Over in the USA, democratic presidential candidate Andrew Yang has warned that automation will continue improving efficiency, cutting costs, killing jobs and hollowing out the economic backbone of America, starting from the centre of the country and moving outwards. His plank is a universal basic income (UBI) scheme to counter the impending tidal wave of mass unemployment.

In addition to outright unemployment, automation will also drive chronic underemployment and the growth of less-than-living wages, in places where machines incrementally nibble away at working hours rather than swallowing jobs whole.

At the same time, common job creation techniques such as business tax incentives don't actually work in the long run, and factors such as population growth mean that even in periods where the unemployment rate decreases, the total number of unemployed people increases.

Recent years are also marked by record low interest rates from central banks around the world, coupled with ongoing fears about what kind of economic crisis may result from being unable to cut rates even further when needed.

Modern monetary theory (MMT) is coming to the fore as part of the wider idea that the existing financial system needs a total overhaul, and with it comes the idea of a jobs guarantee. This is essentially where the government gears itself up to act as an employer of last resort, to ensure that anyone who wants to work can, to earn the minimum wage.

In short, there's never been a better time to throw around wild blockchain-powered digital economy employment theories. So Finder sat down with CCP Games CEO and EVE Online creator Hilmar Veigar Pétursson to talk about EVE Online, blockchain, cryptocurrency and how to create real jobs with a synthetic game economy that runs parallel to the real world.

Serious business

EVE Online is a good study in this respect.

It's an online space strategy game in which people create corporations and then set out to find power and fortune by crushing competitors, and plumbing deep space revenue models such as asteroid mining.

The fortune, and by extension the power, are quite real.

An infamous EVE Online space battle in 2014 destroyed some $330,000 worth of player property, mostly in the form of 75 destroyed "Titan class" spaceships, worth an estimated $2,500 each at the time of the battle. One of the most valuable flagships was worth about $5,500 when it was destroyed.

Hundreds of people need to come together and pool their resources to create these behemoths, building trust on mutual economic interests and other shared goals. It's a very social and transactional game, in which digital money lubricates interactions between large groups of strangers.

EVE Online is now in its 16th year, predating Bitcoin by a solid half-decade.

Essentially, the purpose of the game hinges on the value of its currency and the robustness of its economy, which means Pétursson and the rest of his team has been hard at work creating fake jobs, and fighting against the automation of those fake jobs. He's the combined deity and central bank of one of the world's oldest synthetic economies.

Job creation

"All of a sudden, a large part of the work in the economy is just gone, because robots have taken it over and you have replaced them with nothing."

"You could absolutely replace it with games," Pétursson says.

"You could argue a lot of economic activity is superfluous. It's not needed. Take the fashion industry - it isn't needed, not really. We could completely just wear ugly clothes. But we don't. We spend enormous amounts of brainpower to make sure that we look a certain way. We have gigantic parts of the world economy just being completely superfluous. They're not implementing any fundamental, basic needs. They are, in a way, computer games."

When Pétursson envisions his role on the economy of EVE Online, he views it as providing labour, he says.

"It is different to think of it as gameplay versus thinking of it as work. But if you really boil it down, EVE Online in particular is full of activities which are much more like work than they are like gameplay."

Get a real job

Of course, the idea of creating fake digital jobs is a lot harder to swallow than the idea of creating fake physical-world jobs, and there's going to be that perception that it's "not real". But as Pétursson mentioned, it's a bit of a false distinction.

You only need to look as far as the streamers who make more from playing games than developers do from building the games the streamers play, or the professional eSports athletes whose earnings fall somewhere between NBA and WNBA.

"Many gamers make a living from playing games," Pétursson says.

"Obviously streamers, and eSports are the best examples. Many streamers make way more money than game developers make, from just streaming the game - playing it versus making it - and already eSports teams make more money than many sports teams. So it's already happened."

But that's just the entertainment industry. We're more interested in the creation of digital labour, which is a much harder bridge to cross.

"There's a massive, massive mental bridge, and it even took myself - who works on this - it probably took me a decade to be able to abstractly reason my way through these things in the way I can do now. And that's even though I work on it every day, and I see the value and I see the completeness of it, I still have a hard time imparting that mining asteroids in EVE Online is an actual economic activity."

"There is a pretty fundamental difference in the abstract reasoning of it at an academic level, and really living the actual thing of 'you're managing a labour economy.' I'm not sure Blizzard even looks at it as they're making labour for people to do, even though prisoners in China are mining in World of Warcraft rather than making sneakers."

It's a living

"Where it becomes interesting is when you take something like EVE Online, which is a social economy, where people are doing work in the economy, when you do that work and you can arbitrage that work for real value in the real world," Pétursson says.

Basically, we're looking at a system where people perform in-game tasks to earn digital currency, which can then be sold for real money.

There are two parts to this system:

1. Being able to perform in-game jobs that produce digital rewards that carry real world monetary value

The first part is easy enough and already happens by accident.

"It's been happening in EVE Online, and all MMOs frankly, since day one," Pétursson says. "It's been done through RMT (real money trading) and eBay and things like that. It's not usually supported by the owners, and we don't really support it."

One of the clearest examples can be found in Chinese labour camps in 2011. Here prisoners would be forced to perform manual labour all day, carving chopsticks and toothpicks and assembling car seat covers for export. They would then be forced to work all night by corrupt labour camp bosses, who would make them "farm" video game money for 12-hour shifts. The chopsticks and toothpicks were practically worthless. The video game money, on the other hand, was pulling in the equivalent of US$500 to $600 a day.

Any sufficiently large and compelling massively multiplayer online game will have a valued currency.

2. Being able to convert those digital rewards into real-world monetary value

The second part isn't quite so common, and most games typically don't allow unsanctioned digital currency markets. This is one of the reasons today's games aren't suitable "job creators".

Once you have a good way of managing the flows of money between your synthetic economy and the real one, Pétursson suggests, the line between playing a game and creating value with an economic activity gets a lot blurrier.

"So, we need to come up with better ways to manage the outflows. We manage the inflow pretty good, but at some point, we will come up with a way to manage the outflow," Pétursson says. "And at that point in time, you could just, like, mine rocks in EVE Online just like you mine coal in Russia, and there will be no fundamental difference to the economic activity."

"There's obviously a huge difference in the actual activity - mining for coal and mining for rocks in a computer game are very different activities - but from an economic standpoint, there'll be very, very little difference."

But once you do create these formal on and offramps for video game value, you've fundamentally changed the dynamics of your game economy.

How to price fake labour

The scheme would naturally suggest a unified currency for use across multiple games. You'd want to ensure that all the labour from these fake jobs has value, which means it would have to be useful across a wide enough field of games that almost anyone can find a reason to buy some of that currency.

But once again, a unified currency across all these games changes the dynamics of your economy and raises new problems. The questions now are:

  • Do you let market forces naturally price the labour carried out in different game economies?
  • Or do you have some kind of authority or trustless system set the prices of in-game labour?

There's no perfect answer, but depending on which way you go, you'll have a different ideal system.

Fake jobs at market rates

"I think even the proponents of the Eurozone, initially, they were saying the Eurozone will struggle to really work unless there's a unified way to manage government finances across the board. So game economies that you integrate together with have the same problem, because they will not have a unified way of managing scarcity, managing supply and demand."

"So you will always have some form of a trading mechanism."

You can theoretically just let market forces price people's efforts, but that would lead to massive labour migration to the easiest games.

"If people are pricing their own work, that's fine. But as soon as you make a unified currency system across the games, then you have to start to harmonize what is the effort per currency per game... and obviously, you will just have labor migration over to where you get the highest amount of unit per hour."

"The challenges with immigration and all these things are ultimately arguments about labor mobility," Pétursson says. "If I can get a better hourly rate in Germany than Turkey, I would want to move to Germany. But moving to Germany involves traveling there, getting an immigration license, having the ability to work there. So "reality" helps you a little bit in managing or slowing down the labor mobility."

Game economies are trickier in this respect, Pétursson says, because they're so frictionless.

"If you're running game economies, the labour mobility is instant, you can just log into this game, that game and whatever, so you don't have any natural way to manage labor mobility. So we will immediately just have, kind of, seven year old soccer where everyone just crowds the ball. You would immediately go where the hourly rate is the highest."

The only real solution here is to ensure you have a very tightly controlled economy, Pétursson suggests. You would need to make sure the amount of effort which goes into each unit of currency is fixed at a suitable rate.

"And that's why you cannot run those kinds of economies unless you control the whole equation, because somebody has to regulate what the permissible effort is for each currency unit of a new issuance."

"We have similar issues in EVE Online, but they have more to do with types of work, like mining. So certain amount of reward and risk and reward dynamics... it has to be dangerous to give you high rewards. So often we fall into mistakes, where certain activities, they are not risky enough given the reward benefit they have. So we constantly have to be pricing various aspects of EVE Online... because we also have labour mobility issues."

A dual currency system

One way you could manage this would be a dual currency system, Pétursson suggests.

"For example, if you were to have implemented the Eurozone differently, you could have created the Euro, which would be like a uniform transport mechanism. And then you would have each and every country still retain their own currency, which actually you could implement with the blockchain. You could do almost like a dual currency system for Europe with blockchain. It obviously wasn't possible at the time, but you could do that today."

You'd now have different game currencies attracting different exchange rates for their own currency on an open market, based on how each manages the inflation within their own economy.

This would be a bit of a parallel to the real world, where different digital game countries each set their own economic policies. You'd also have the risk of individual game economies tanking, as well as equivalents of real world concerns such as automation-driven job loss.

Setting the rates for fake jobs

Automation-driven job loss is a major concern in online games. It's typically called botting.

And given the economic incentives in play in this theoretical synthetic economy, it's essential that you can completely prevent all automation, and ensure that every task is done solely by humans.

"It is our ability to regulate the playground so that you're not competing against the robots, you're competing against other humans, that dictates the value of an activity," Pétursson says. "So we, at that point, would be like a government that is banning automation to reduce job loss in the economy."

"And I think, actually, oddly enough, computer games have an easier time doing that than governments in reality, because they have no defense mechanism to defend against autonomy, other than just regulating it. You can pass a law that says an artificial intelligence cannot drive a car. You could do that for the purpose of saving the jobs of people that do drive cars."

But for the most part, restricting automation just isn't on the cards in the real world. Arguably, games are one of the only places where automation can be held at bay.

Automation-driven fake job loss

The core issue here can be distilled as a need to confirm that a certain amount of work was actually done by a human. Appropriately, this is the exact foundation underpinning blockchain, minus the requirement that a human performs the work.

"So the principal problem that Bitcoin is solving - and also quite masterfully and why it's important - it is providing a proof that the work has occurred, in the absence of a central authority to validate the work occurred," Pétursson says. "Blockchain and proof of work can be useful because it can validate that work has occurred in the absence of central authority, to do things such as client-side validation that game work has occurred."

"There are interesting mental exercises of, like, how could you make somebody mine in EVE Online without being connected to the server, and there you would have to come up with math, like Bitcoin has used, to verify that they did do the work. But this is not really a problem we have. It's an academic mental exercise, to think through."

"And sometimes it's fun to do that, and just reason through how you'd do it. But our problem mostly has to do with people are automating the work with macros. And thus they're actually not doing work. They're having a robot do their work. So our talents has more to do with did they do human work, or did they do automation work? But the math of Bitcoin does not help you with that. Because it's fundamentally a problem for computers, not a problem for humans."

But maybe it should be a problem for humans, not computers.

This is more or less the same question at the forefront of consensus mechanism design today: which finite resources can be trustlessly measured, and how?

Proof of work indirectly measures electricity consumption to ensure that the work has been honestly done, while proof of stake is all about measuring money. Then on the more exotic side of things you have systems which measure authority and reputation.

The holy grail then – a machine that can theoretically just produce jobs out of thin air – would be a mechanism which can measure work of the kind that can only be performed by a human, and for the work itself to be fun. The closest anyone has come to date is probably proof of dance, where a couple of MIT students secured a private Ethereum blockchain with a modified Dance Dance Revolution mat.

That kind of consensus mechanism would bring this perpetual jobs machine that much closer to reality, and it would theoretically give you a unified system with which to price the amount of human effort that's gone into completely different game activities in different games.

Fake economic collapse

If EVE Online has any kind of overarching gameplay goal, it's to tear down the economy. That's how you "win".

The usual economic cycle of the game is for one group to accrue an enormous amount of power over the in-game universe, and to increasingly seize control of the economy simply from people joining the winning side, until they get forcefully toppled.

"We constantly have to respond to people gaining too much confidence, security, out of having reached a certain control over the economy of EVE. And we have to do that because we have not made an economy which is mathematically sound. Because then you end up with something like the Bitcoin economy, and you couldn't really build a game around just mining. I mean, I guess the game of mining is a form of game, but nobody would play that game."

The best way to do this is "giving people tools to pull out their own pieces out of the Jenga tower, so that you can on your own, through your own effort, topple the economy," Pétursson says. "It becomes less interesting if we sort of step into the role of the hand of God and start to muck about with it."

But sometimes he does, Pétursson concedes. The EVE economy simply wasn't built to be indefinitely sustainable, and "there's only so much smarts you can apply to build something which is a sustainable puzzle piece to go on for decades."

It's never really an economic problem at its heart though, Pétursson says. Rather, it's mostly a social problem. It doesn't matter how clever you get, because at the end of the day there's no way to outsmart massive power and wealth consolidation. When you have finite resources, more resources in one place means fewer resources in other places.

That's when things crumble in EVE, usually from within.

"Usually what is crumbling are stable social structures inside the game. An alliance, or a coalition of alliances, reaches a certain dominance at that period of time. And usually what happens is that they then crumble from the inside, because somebody breaks the trust and runs around with the money. So it isn't so much the economy itself, but it's the staple social structures that need to be toppled."

In the real world, economic inequality is also one of the best indicators of economic collapse. The table below shows household wealth, by income percentile, relative to 1984.

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As we can see, the collapse was immediately preceded by a massive consolidation of wealth at the top 5%. It got the bulk of the benefits, but overall the top 75% grew their average household wealth relative to 1984. This economic growth came at the expense of the bottom 25%, which also bore the brunt of the 2007 economic collapse.

Far from flushing things out, that particular collapse only made things worse.

"Addressing [income inequality] has moved to the top of the policy agenda in many countries. This is partly due to worries that a persistently unbalanced sharing of the growth dividend will result in social resentment, fuelling populist and protectionist sentiments, and leading to political instability," the OECD said in 2014.

And right now we also have automation squeezing jobs away, starting from the bottom of the income bracket and quickly making its way up the chain.

Maybe you could theoretically build a job-creating synthetic economy, but its economic stability would probably be betrayed by the social structures that form in it. The collapse and crisis is the name of the game in EVE Online, but only because the stakes are so low.

When a synthetic economy starts providing jobs for thousands of people, the stakes get a lot higher and people start depending on it just as surely as any "real" economy.

Maybe UBI or MMT is the way to go after all.

Also watch

Disclosure: The author holds BNB, BTC at the time of writing.

Disclaimer: This information should not be interpreted as an endorsement of cryptocurrency or any specific provider, service or offering. It is not a recommendation to trade. Cryptocurrencies are speculative, complex and involve significant risks – they are highly volatile and sensitive to secondary activity. Performance is unpredictable and past performance is no guarantee of future performance. Consider your own circumstances, and obtain your own advice, before relying on this information. You should also verify the nature of any product or service (including its legal status and relevant regulatory requirements) and consult the relevant Regulators' websites before making any decision. Finder, or the author, may have holdings in the cryptocurrencies discussed.

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