Remember Steve Bannon? The leader of the alt-right, former Chief Strategist to the President of the United States and Executive Chairman of Breitbart News has a much more complicated past than most know. And one of the stops on his journey coincided with the birth and explosive growth of cryptocurrency.
After serving as a Naval Officer, Bannon made his way to Georgetown University to earn a master’s degree in National Security and to Harvard to receive an MBA. He then went to Goldman Sachs for a period of time before he started his own investment bank. As part of his compensation relating to the sale of Castle Rock Entertainment, he received on-going royalties for a handful of television shows, including Seinfeld. He produced 18 films during the 1990s. For a couple years, Bannon was the head of the Biosphere 2 project located in southern Arizona. The project focused on space colonization and under Bannon’s watch, scientific research relating to the Earth’s atmosphere and climate change.
In 2006, he convinced his old colleagues at Goldman Sachs to invest $60 million in a Hong Kong company called Internet Gaming Entertainment (IGE). And in 2007, he took over the company as its CEO.
During the 2000s, before the emergence of mobile games, the world of gaming was dominated by giant Internet games called massively multiplayer online role-playing games (MMORPG). These games allowed players from around the world to participate in competing with (and against) each other in a massive online world where completing tasks could earn you virtual currency. That “gold” was then used to purchase equipment, skills and other items that made a player’s character more powerful. The more you played the game, the more likely you were to be successful because you’d earn more gold.
The incredibly popular World of Warcraft has had more than 100 million player accounts created over its lifetime. For a monthly fee, a player can play and work hard to earn virtual gold to buy virtual goods.
IGE and Bannon hired Chinese workers, who for $4 an hour could “farm” virtual gold. This fake currency was then sold for real money for people who wanted to progress more quickly in the game. The players who couldn’t devote as much time playing the game were now on the same level – or way ahead of their fellow players. All it cost was a few real dollars to buy virtual gold. Was it a legitimate use of the free market to advance in the game or a glorified cheat?
The makers of World of Warcraft didn’t think too highly of this business model. Not only was it affecting the “enjoyment” of legitimate players (a claim in a class action lawsuit against IGE), but the makers of the game weren’t getting a cut of the money. The accounts of the “farmers” were shut down by the makers of the game. And IGE melted away.
Steve Bannon went on to become the head of Breitbart News in 2012. His involvement with the alt-right news site led to his involvement with Donald Trump. And he helped coin the term “fake news” to describe mainstream news sources.
The founder of IGE, who convinced Steve Bannon to help raise money from Goldman Sachs and take over the company was a former child actor, Brock Pierce. He was best known for his work on Mighty Ducks and its sequel. IGE grew to more than $250 million in annual revenue selling virtual gold for real money.
Brock Pierce has also found something else to do. While Bannon went to work for Breitbart and Trump, Pierce became chairman of The Bitcoin Foundation. Modeled on the Linux Foundation, Pierce is focused on guiding the development of the Bitcoin blockchain and public policy relating to Bitcoin.
Mobile apps embraced the IGE business model. While a player can earn tokens through gameplay in many mobile games, a player can also advance by purchasing tokens directly through the app for real money.
At the same time, players are no longer limited to using real money to buying game tokens. Now they can use Bitcoin or other cryptocurrencies to buy the “fake” money. Which begs the question: what is “real” when fake money is used to buy fake tokens to buy fake virtual items?