Do gaming tokens and Rarepepes have a place on bitcoin?

It was a warm summers day, there was a sense of desperation in the air and a feeling of opportunity on the horizon. Patrick Nepomuceno of California and Michael Stinger of Maryland, who had met each other at a local hangout committed a series of “hold-ups” at the local Diablo Corral. They stole armour and weapons, gold and jewellery from humble passers by, for over $8,000, according to court documents, and then fled the scene of the crime…. by logging out of the server and turning their computers off. Yes it was an online theft in the popular game diablo by two players who had met on TeamSpeak chat platform. The crime was virtual but the theft was real.

There is and has been a lot of interest in registering custom tokens and assets on the bitcoin blockchain. The most popular platform for this currently is the Counterparty protocol. Coutnerparty allows you to embed data in the blockchain which can then be parsed to represent tokens. Spells of Genesis, Rarepepe and other projects are currently using this to create their own game items/currencies/collectables which is secured on the bitcoin blockchain.

The bitcoin blockchain is very attractive for this due to its network effect and security which a custom asset created on Counterparty inherits.
However with rising fees some people are begging to ask the question, should tokens be on the bitcoin blockchain?

“The bitcoin blockchain is for bitcoin”

This is a common criticism I hear, effectively the argument is that bitcoin’s main use case is for decentralized, uncensorable transactions. It’s not for low value “fun” transactions such as buying coffee or game items.

I tend to agree, sure transactions on the blockchain are cheap now but on chain transactions are expected to become even more expensive as its main use case is likely to be a settlement layer. If your token is low value why does it need the security, decentralisation and censorship resistance that bitcoin offers? especially when fees could be tens to hundreds of dollars.

Personally I believe that the bitcoin onchain layer cannot be both popular and cheap no matter what the blocksize. If it’s cheap to register your asset on the bitcoin blockchain then even if a block is 100GB, 99.9 GB will be filled with company assets and Rarepepes.

So I agree that low value tokens do not need to be on the bitcoin blockchain. (There is an argument about free trade as under current gaming regulation players cannot trade their inventory freely, however I will leave that issue aside for now). Spells of Genesis also seem to share this vision as most of their game items are normal database game items and only the rare high value game items will be registered on the blockchain.

If you change the word from “game item” to “digital property” then I think one can justify registering it on the expensive bitcoin blockchain. For example you may own physical property such as a cheap yamaha guitar which you are happy to leave in the living room for quick and easy use, you may then acquire or earn a rare 1950s Gibson which you’d want to store under secure lock and key in an expensive safe. It is easy to belittle game items as fun, useless tokens but to many gamers some game items are valuable digital property which currently cannot be fully owned or secured by the individual.

“Tokens should move to a more flexible cheaper blockchain”

This is another criticism I hear a lot, such as “Why don’t they just move over to Ethereum? faster blocktimes and cheaper fees”. I am not against such an idea, and I can imagine that projects can/will utilize assets on many different blockchains at the same time. However I think just because transactions get more expensive as bitcoin scales does not mean jumping to another quieter/newer blockchain will solve that issue, rather it may just kick the can down the road and by sticking with bitcoin and Coutnerparty you are closer to overcoming such an issue either by layer 2 protocols such as payment channels/side chains or/and on chain scaling solutions. Furthermore if you main goal is to secure expensive rare digital property then the Ethereum blockchain may not be best suited to that and may be better suited for lower value tokens.

Conclusion
I think the case can be made that the bitcoin blockchain should be reserved for high value assets and tokens whether it be bitcoin or digital property, no doubt the fee and the market will determine this not individual ideology. Low value tokens do have a place on blockchain not as a store of value but more for free trade and regulatory issues, this may be via layer 2 protocols, side chains, faster blockchains such as Ethereum and just regular old databases.

As virtual worlds and gaming continue to increase so will virtual theft and crime. I believe we need to look at the blockchain not just as a store of money but a store of value and currently there is not better blockchain for that than bitcoin.