Author Archives: Skilliard

The Emergence of Free to Play, and Decline of Pay to Play

When the first online games emerged, most were based on a pay-to-play model. Some involved an hourly rate that was charged to play; however, the monthly subscription method of monetization became the most common method. As these games grew in popularity and e-commerce websites such as Ebay and Paypal began to grow, players began buying and selling digital items within games for large sums of money. This quickly exploded into a massive industry in which actual companies began to arise around the sale of virtual items in games. This turned ugly quite rapidly, as the pursuit of profit led these sellers to use automated tools, hacked player accounts, and cheats to earn their items, and bots to spam the in game chat for the purpose of advertising their website, thus ruining the player’s experience.

As these gold sellers began to undermine the enjoy-ability of their games, developers began to push back, prohibiting real money trade(RMT) and the advertising of it in game. The massive growth of these “gold-sellers” were a clear indication of demand to publishers. It was proof that players would in fact pay for fake, digital items with no real world value, a concept that would have seemed completely bizarre 20 years ago.

When the first “free-to-play” games emerged, many of them were known to be extremely “pay-to-win”. Quite often, the best items could only be earned by paying, meaning that the only way to be competitive would be to spend a large amount of money. At first, publishers felt that players would only buy digital items if they were significantly useful, as the idea of fake, virtual items being sold was still seen as bizarre. Over time, developers tested the limits of what players will spend money on, with games starting to shift from “pay-to-win” to “Pay-for-convenience”.

Over time, players began to push back against “pay-to-win” games, and new games began to reflect such changes in consumer interests. “Is it Pay to win?” is usually one of the first questions asked by players looking into a free to play game. What counts as pay-to-win is always a controversial topic, with many players holding different standards regarding what’s fair and what isn’t. Games such as Dota 2 have pushed the limit of free-to-play, with items sold having absolutely no impact on gameplay, and being entirely cosmetic.

Another reason subscription-based games are becoming less common is due to the decline in hosting costs per user. Highly scale-able cloud-based hosting such as Amazon AWS, as well as the massive improvement in server hardware and networking technology since the 90’s has reduced the cost per user connected to a game.

Micro-transactions are a large and growing trend in the video-game industry. It is a trend that has been with with intense criticism from hardcore gamers, but continues to persist because it is more profitable than purely subscription-based games. In fact, even subscription-based games such as World of Warcraft and Final Fantasy XIV have adapted micro-transactions on top of their mandatory subscriptions, simply because they’re so profitable.

The subscription-based model has been attempted countless times over the past 5 years, and has seldom been met with success. Almost every recent title launched as a subscription-based game has been converted into a free-to-play or buy-to-play game with micro-transactions. To name a few:

  • Star Wars: The Old Republic(subscription->free-to-play)
  • Elder Scrolls Online(subscription->buy-to-play)
  • Tera(subscription->free-to-play)
  • Wildstar(subscription->free-to-play)
  • Archeage(was initially subscription based in Korea, launched in US/EUas free-to-play)
  • Blade and Soul(started out as subscription based in Korea, launched in US/EU as free-to-play)

Despite nearly every game that launches as a subscription-based title dying within a year, developers are still insistent on launching games as subscription-only titles. This may stem from the fact that the designers/developers are often gamers themselves, and prefer to launch games without micro-transactions out of principle.

With every new game being launched as a pay to play, monthly subscription based title, every company feels as if their game is the exception. They feel as though their game is so revolutionary and exciting that players will continue to pay a subscription and won’t get bored, so they can get away with charging a subscription. The latest of this trend is Ashes of Creation, which recently launched a Kickstarter indicating that the game will require a monthly subscription.

Another theory is that many games launching as subscription-based games are intended to convert to free-to-play at a later date. The idea is that the game will make the majority of it’s revenue early on when there is significant hype, through sales of “Founder’s packs”, copies of the game itself, and the first few months of subscriptions. When the game begins to lose players, temporary sales of the game itself can stimulate further sales. When the game really starts to feel dead and sales aren’t attracting many new players, the game can transition to free-to-play, and the game will experience a new surge of players once again, with revenue from previous sales secured, with older players simply receiving compensation for their purchase of the now-free game in the form of digital items that cost no money to produce.

 

The subscription model fails to compete with free to play and buy to play games, for many reasons:

1. Online games, like social networks, rely on the network effect.

People don’t want to play a game with an inactive community. Online games rely on the existence of many players for the purpose of creating in game experiences.

Players generally want to play a game that they can play with their friends. Convincing your friend to try out a free game is easy, but convincing your friend to spend $60 followed by $15 a month is not. When groups of friends are looking for a game to play, they’re more likely to settle on a free-to-play game, in order to ensure everyone in the group can play it.

If a player doesn’t spend any money, they’re still valuable to the company that publishes the game. That’s because they may attract friends that will pay, or create solid experiences for other players that do pay.

2. Micro-transactions expand expand earnings potential per user.

With a purely subscription-driven model, the most money you can make per user is the cost of the game, plus the cost of a subscription. What you charge for a subscription must be equal for everyone. If you charge too much, you lose subscribers. If you charge too little, you miss out on potential revenue from consumers willing to pay more.

3. Subscriptions deter casual players/busy individuals.

While most hardcore players often prefer purely subscription-based games for the principle of fairness, they are often a minority in terms of players. When Wildstar launched with a subscription-based revenue model and challenging content that was specifically geared towards hardcore players, the game performed poorly in terms of player retention due to the game not appealing to a wide demographic. Shortly after launch, the developers rushed to produce easier content and make endgame content more accessible, but it was too late, players already had bad impressions.

Casual players are less likely to want to pay a subscription for a single game. If they only have time to play a few hours per week, they will feel as though they aren’t getting their money’s worth on their subscription.

4. There’s too much competition from free games.

One of the best thing about free to play or buy to play games is that there’s an abundance of games you can play as little or as much as you like. With a game you’re subscribed to, you likely feel obligated to play it more than other games, thus making it a game you need to stick with rather than having the freedom to play it in short bursts whenever you feel like it.

 

Design Transformation

The massive growth of free to play games has certainly transformed the industry. While it does make online games more accessible and affordable, it also can have negative impact on the ways games are designed. Free-to-play games are often designed around microtransactions rather than what’s fun. For example, in order to create a “pay for convenience” model, designers will implement inconvenient aspects of gameplay that make the game frustrating, such as repetitive gameplay that can be skipped or sped up by paying.

Just as players have demanded that games avoid being pay-to-win, they should also demand that games avoid being designed around micro-transactions rather than what’s fun. The most successful method of achieving a profitable free to play game without impacting gameplay experience has been charging for cosmetic items, and for large expansion packs/”DLC”

Bill Introduced In Illinois to Protect Online Privacy, But Threatens Small Business

The Right to Know act has been making progress in Illinois. If passed, the bill would require operators of websites or online services to notify users that reside in Illinois of any information sharing practices they partake in. The bill also requires that these sites provide a either a toll-free telephone number or email address where users can request such information, and the operator must provide a response within 30 days. The penalty for failing to adhere to this regulation would be the greater of either $10 (per individual affected) or “Actual damages”,  injunctive relief, and reasonable attorney fees.

The classification of “personal information” within the bill is quite broad. Essentially any user-generated content would be classified as personal information, and thus leave the operator liable for maintaining records of how user information is transmitted. One of the categories of personal information is “Content, including text, photographs, audio or video recordings, or other material generated by the customer”.

In other words, something as simple as allowing a user to leave a comment on an article on your personal blog could be considered transmission of personal information, and thus leave you liable to respond to user requests for who has accessed your information.
While the bill will protect the privacy of internet users by ensuring that they are aware of how various sites use their information, it may impose a significant cost on small businesses. Small businesses across the country would need to hire an expert to create a privacy policy that accurately describes their information gathering and usage if they wish to do business in Illinois. This can be difficult for some types of businesses. For example, consider an online store that uses a third party for shipping and billing, or often delivers straight through the manufacturer. The owner of the store would need to carefully track all instances where shipping information and billing information is transmitted, and then create a database that can be queried when the user requests how their data was used.

Should this law pass in its current state, small businesses with a limited tech background will likely have to hire a legal/technical consulting team to comply with the regulations imposed. Ideally, the wording of the law would be changed in a way that the company only has to disclose in what ways consumer information may be disclosed or used, rather than the ways it actually is. That way, companies do not need to spend millions of dollars implementing and maintaining a database of how user information is transmitted, but consumers are still informed of which ways their data may be used or shared.

The bill does provide a few cases where information can be disclosed to a third party without requiring notifying the user or maintaining a record. These cases are either when information is disclosed for security or fraud prevention purposes, or if there is a contract with the third party that requires that the shared data only be used to perform the services requested, such as billing,  filling orders, etc. While this does make the law easier for large corporations with legal teams to comply with, smaller business simply don’t have the resources to draft a contract with each service provider that ensures that personal information is used only as needed, in order to comply with the rules set within the bill.

A recent amendment to the bill stated that an operator would not be required to respond to a request from the same customer more than once in a 12 month period. This may be because of concerns regarding the cost of meeting the law’s requirements. However, because the bill says it requires operators to provide such information, but doesn’t say anything about answering questions(which would require human interaction), the process of sharing information via email or telephone on request could be easily automated at little to no cost. The largest cost associated with the regulations imposed in this bill would be the cost of implementing a system of tracking the ways that user information is transmitted, and creating/maintaining contracts with service providers to ensure that data is only used as needed to provide the service.

While the bill does provide privacy protections for internet users, changes in the legislation are needed to ensure that the bill does not create a situation in which small businesses cannot afford to meet regulatory standards. The bill is still quite new and off to a good start, so improvements will likely be made over time.
The bill is sponsored by Michael E. Hastings.

You can see actions taken on the bill and it’s details here

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Razer Server Outage Locks Users Out of Their Own Device Functionality

Users of Razer Peripherals such as mice and keyboards are reporting the error “System Error 3803” when attempting to login into Synapse, the app used to access custom keybinding settings. As a result of the server outage, users are stuck using default keybinds- macros, custom DPI settings, and custom keybinds are inaccessible during the outage.

Cloud-based applications are a rapidly growing trend. For Razer peripherals, cloud-based configurations enable users to access their keybindings across different devices. However, this functionality is not without it’s faults. Razer’s software currently lacks the ability to cache settings locally, causing issues such as this one when outages occur. Ideally, Razer would at least enable local caching of user settings, as it would really only take a few megabytes of data to store.

While cloud-based applications are quite valuable to producers of consumer hardware and software for data gathering purposes, they pose a serious threat when they begin to hinder the user experience. This outage has left users very upset, with many threatening never to purchase a Razer device again.

The outage has been resolved according to Razer. If you find yourself encountering this issue again(such as if another outage occurs), Reddit user “VossVossVossVoss” has shared a workaround .

Read more on the /r/Razer subreddit

Why Bill Gates is Wrong About Robot Taxation

In an interview with Quartz editor-in-chief Kevin Delaney, Bill Gates said that as robots are used to do work that used to be performed by humans, that robots should pay a tax:

“Right now, if a human worker does, you know, $50,000 worth of work in a factory, that income is taxed. If a robot comes in to do the same thing, you’d think that we’d tax the robot at a similar level.”

Bill gates goes on to express concern that as automation from robots replace jobs, that income taxes will be lost, resulting in the government being unable to fund important causes such as education and helping out the elderly.

The first thing to understand is that taxes are still being paid on the value the robot creates. If a company develops a robot that cuts labor costs by 10%, the money will end up in one of three places:

  • In the consumers pocket, due to a reduction in prices providing them with more money leftover, of which they either save/invest and pay taxes on interest, or spend, triggering taxable events elsewhere.
  • As bonuses for employees that have not yet had their jobs automated, who pay income taxes.
  • As an increase in net profit for the company, that ends up going to shareholders of company, who pay taxes on their investment income

Even if the company keeps its profits overseas to avoid taxation, their growth still triggers taxable events. First off all, value of shares in the corporation will likely increase, causing sellers to incur a capital gain that they must pay taxes on. In addition, if the company chooses to pay dividends to its shareholders, the investors must pay income taxes on the dividends received.

Due to the progressive nature of our federal tax system, profit generated through robotics will generally be taxed at a higher rate than personal income from a factory worker making $40,000-$50,000.

Some may argue that the wealthy don’t pay as much in taxes as working people. This is only true if you ignore several indirect taxes on investors:

  • The 39.6% federal corporate tax rate. In order to pay dividends, companies must bring profits overseas, which then get taxed. These taxes reduce the dividends corporations can pay out, thus being an indirect tax on shareholders. So while the investor may only pay a 20-23.8% federal tax rate on qualified dividends, they’re only taxed at a lower rate because the corporation already paid taxes on it which are passed onto the investor in the form of smaller returns.
  • The tax of inflation. The dollar loses a substantial percentage of its value every year due to the federal reserve increasing the money supply. Investors cannot deduct inflation against their capital gains, so their real effective gain in wealth is substantially less than what it is taxed as. In addition, CPI can be a misleading measure of inflation, because increases in productivity act as market forces against increasing prices.

An analysis by FactSet found that between 2010 and 2014, companies in the S&P 500 paid an effective average tax on profits of approximately 28.5%, which is substantially higher than the effective income tax rate of most working-class citizens. Investors also pay taxes on their income, on top of corporate taxes, effectively making it double taxation.

An important thing to understand is that automation and the use of technology to improve productivity has been going on for hundreds of years. It used to be that the majority of the population was employed in agriculture. This is no longer the case, as most of the population has been able to specialize, and provide products and services that were not available back then.

Human desire is limitless. As robots improve productivity and replace jobs, the economy will expand and create other jobs elsewhere, and the workers at these jobs will also pay income taxes. This has happened for the past 100 years as automation has put people out of work, and will continue to happen as industries such as transportation adapt autonomous technologies.

Yes, the factory that lays off 1000 factory line workers won’t hire 1000 programmers, machine operators, engineers, etc. But the reduction in prices and increased profits will cause the profits to flow elsewhere, increasing quantity demanded in other sectors. So as one industry shrinks employment due to automation, other industries will experience growth due to capital being freed up, and create jobs to fulfill a surge in demand.

One of the largest examples of this has been the recent boom of the food service industry.

In 2015, restaurant sales exceed grocery store sales for the first time ever. Costs of material goods have been declining(relative to inflation) for decades due to both globalization and automation enabling cheap production overseas. Cheaper product have left consumers with more to spend on other services, such as dining out. While it’s true that many of these jobs pay quite poorly, recent expansion in the economy has created competition among employers, and wages have begun to rise. Ideally, improved access to education  through affordable online learning programs would reduce the surplus of unskilled labor, resulting in improved wage growth due to competition.

Implementing a Robot Tax Isn’t Easy

The most difficult aspect of implementing a robot tax is finding a way to fairly and accurately classify what is and isn’t a robot. When you think of a robot, you might think of a human-shaped hunk of metal that performs the same labor that humans do. But the reality is that automation comes in many different forms, some involving mechanical devices, some involving sensors and image processing, and some existing purely on a computer, performing digital actions.

Here are many examples of the use of technology to reduce the amount of workers needed to produce a given level of output:

  • A calculator performing basic calculations for engineers, saving them time to work on more importing things.
  • A computer program that takes input and organizes data, reducing the amount of administrative staff needed.
  • A electrical circular saw, reducing the amount of time it takes for a human to cut wood, reducing the amount of workers needed
  • A machine that performs the work of 5 people, but requires a supervisor to oversee its operation.
  • A device that automatically performs welds in a pattern, replacing the work of welders.(but requires someone to design and maintain the machine)
  • An automated chat program on a website that answers 50% of users’ questions, reducing customer support staffing requirements by 50%.
  • Trucks that drive themselves, but require workers to monitor their travel and perform repairs.
  • Online learning software that reduces the amount of work required by the instructor, enabling them to teach more classes or increase class sizes, and therefore reducing the amount of instructors needed.

 

Which ones would you consider to be a robot, eligible to be taxed? All of them perform work that was once done by humans. All of them potentially reduce the amount of staff needed to produce a given product or service, and thus could be labeled “job killers”.

If a robot tax was to implemented, it would most likely be a bureaucratic mess, filled with loopholes, special interest lobbying, and wasteful spending by companies intended to avoid paying taxes.

For example, suppose the law says that a technology is a robot subject to taxation if it is a mechanical device containing sensors and a computer unit used to determine output, that does not require a human operator.

Suppose there is a robot that completely assembles a car through image processing. Engineers could easily create a loophole by adding a meaningless part to the device that must human can control manually, that simply involves walking down a line and pressing buttons that wave a “tail” on the back of the machine back and forth. The machine now has a human operator. One completely unproductive job might be created for the purpose of dodging Millions of dollars worth of taxes, something that does not benefit society at all.

To prevent nonsense such as this, there would have to be a bureaucracy that investigates factories to ensure their technology doesn’t fit their definition of robots, which of course would open up the door to bribery, lobbyists, and corruption, all while costing a ton of money to administer.

There’s Better Ways to Fund Progressive Goals

Utilizing public policy to punish companies that use robots will have negative effects on everyone. Corporations will find a way to legally dodge the robot tax while the government spends a ton of money trying to enforce it. Even if the government does manage to successfully enforce the tax, the tax will end up passed onto consumers in the form of higher prices. When you impose costs on business for the use of productivity-increasing technology, you’re actively increasing costs of production, which requires businesses to raise prices to break even- corporations will not sell at a loss unless sale of the product/service builds market share or increases sales of other products/services they sell.

Instead of creating bureaucracies that evaluate the usage of robots and calculate taxes owed, it would be ideal to make taxes purely results-based.

Taxes on profit are generally passed onto investors. Companies are already seeking the highest profits possible, so they can’t simply pass on the cost of higher profit taxes to consumers in the form of higher prices(if higher prices increased revenue, they would’ve done it already). Employees will only see the profit taxes passed onto them if they receive some sort of profit sharing.

It is true that high corporate taxes reduces investment, and thus can reduce job creation, and therefore hurting workers, but at least the taxes aren’t passed onto consumers or workers directly. The U.S already has one of the highest corporate taxes in the world, so raising it further would be an unintelligent move that would reduce investment in the US, and encourage investment overseas where corporate taxes are cheaper.

It is important to understand that the economy is not a fixed pie. Increases in productivity are a good thing for everyone, and government efforts to prevent or penalize the use of technology to improve production will only make everyone poorer.

The best way to ensure the needs of the working class are met is to simply let the market to continue operating as is, but reform it in areas in where excessive regulations provide companies with monopolies, causing higher prices due to limited competition(such as pharmaceuticals and Internet Service Providers). Jobs will continue to be created in new and existing fields as capital is freed up, Robotics will decrease the cost of many government services over time enabling the government to provide more for less, and overall cost of living will continue to decline in cost as production of necessities becomes cheaper.

 

Source: https://www.youtube.com/watch?v=nccryZOcrUg

Daybreak Games Is Shutting Down Landmark, Will Not Refund Users or Provide Offline Access

Daybreak Games has announced plans to shut down Landmark on February 21, 2017. Users will not be able to access the game after this date, and they will not receive a refund for their purchase. Daybreak has openly stated that they have no plans to release or license the software for users to create their own servers, and will not authorize the operation of private servers, implying that they may take legal action against operators of private servers.

Released into a pay-gated Alpha test in 2014, Landmark was intended to be a voxel-based sandbox MMO in a similar fashion to Minecraft(but with pretty graphics and more precision). Landmark utilizes the same technology that was being used to develop Everquest Next, a project that was ultimately canceled shortly after Sony Online Entertainment was acquired by the investment firm Columbus Nova.

When Columbus Nova acquired Sony Online Entertainment back in February 2015, the games department was renamed as “Daybreak Games Company”. Daybreak Games Company underwent a significant restructuring, laying off a significant portion of their staff, and canceling or modifying existing projects. Within the first two years of acquisition, Daybreak has shut down Planetside and Landmark, and canceled Everquest Next.

The intent of these executive decisions seem to be for the sake of short-term profitability. Creating an MMORPG, especially one as ambitious as Everquest Next, requires a massive amount of capital to create. As Everquest Next promised technologies and features never seen before in the genre, there’s a very high chance that it may not have turned out as expected.

In addition to the significant cost in creating a MMORPG, the PC MMORPG market has been declining in recent years. Returns on new western MMORPGs have been very poor, as we’ve seen with games such as Wildstar and Star Wars: The Old Republic. In the AAA western market, we’ve seen a large shift towards competitive, match based titles that carry the potential to become popular esports. Currently, most upcoming MMORPGs seem to be coming either from eastern countries such as Korea and China, or from indie developers with limited funding.

In terms of profitability, there’s often a much better ROI when investing in mobile games, as they require very little development cost in comparison to PC MMORPGs, but still carry significant earning potential. Mobile gamers are generally much more tolerant of game-changing microtransactions than PC gamers, and have much lower expectations regarding the depth and quality of games on the platform.

Overall, Columbus Nova is likely not willing to take the financial risks associated with creating a high cost title such as a MMORPG. Their goal seems to be to squeeze as much revenue as possible out of existing titles, while significantly reducing costs to improve profit margins. While this works great for short-term returns, it does raise questions about the distant future of the company. How will their revenue look when their existing titles inevitably lose popularity due to development budget cuts, and competition from other games? Daybreak Games seems very risk adverse when it comes to developing new products or maintaining failing ones. While capital investment is inherently risky, pocketing profits instead of reinvesting it in the company seems like a recipe for failure.

Currently, Daybreak Games publishes and manages the following games:

  • H1Z1: King of the Kill
  • H1Z1: Just Survive
  • Planetside 2
  • Everquest
  • Everquest 2
  • DC Universe Online

Link to the official announcement: https://www.landmarkthegame.com/news/important-news-about-landmark-2017

 

 

 

With Markets Surging, Bitcoin Network Experiencing Transaction Delays Due to Technical Limitation

Bitcoin’s price has risen from $750 to $1060 in the past month, which has created a huge surge in activity. Unfortunately, this activity has caused the network to stagnate, with many transactions taking several hours to confirm.

Unconfirmed transactions continue to pile up as the network cannot keep up with new transactions. Source: blockchain.info

The source of the stagnation stems from a technical limitation of the Bitcoin network. Bitcoin’s public transaction record, known as the “blockchain”, is made up of a series of blocks published by different entities through a process known as mining. These blocks are created at an average rate of one per 10 minutes. The size of each block is capped 1 Megabyte, a limit originally created to prevent malicious entities from creating unnecessarily large blocks, which could make the blockchain too large for most users to download and store. This limits Bitcoin to approximately 3-4 transactions per second, which is insufficient for it to fully replace credit card networks or other transaction methods.

This limit is beginning to limit Bitcoin’s growth as a currency. While Bitcoin provides enormous potential, such as protecting people from hyperinflation in countries such as Venezuela, and providing a secure and private transaction protocol, the 1 MB cap is preventing it from seeing widespread adaptation. Bitcoin recently adapted “dynamic fees” which adjust the fee that someone sending Bitcoins pays to have their transaction confirmed in a block. As traffic continues to rise, fees continue to rise, as users are competing for limited block space. If fees grow too high, it eliminates Bitcoin’s feasibility for day-to-day transactions.

I recently purchased a bit of steam wallet funds with Bitcoin to test the network. With a fee of 0.12 mBTC, the default fee with the wallet I used(approximately $0.13) I’ve been waiting over two hours, and lack a confirmation. The transaction can be viewed here. The transaction was sent at 2:48 AM central US time.

Currently, as of 4:53 AM US Central time, there are over 26,000 unconfirmed transactions waiting to be confirmed in a block, with a size totaling over 13 Megabytes, meaning that it will take over two hours for the system to catch up, assuming no more transactions are sent. However, at the current rate of transactions, the size of the queue only grows, meaning wait times do as well.

Solving the Block Size Limit Problem

Unfortunately, the block size limit cannot be adjusted without creating a “fork” in the network, essentially splitting the network, and hoping everyone agrees on which is the “real” Bitcoin network. Since Bitcoin is a decentralized currency, it’s very difficult to get the community to reach consensus on a network fork. There are many different proposals on how to solve the issue, and it is a very controversial issue within the Bitcoin community.

Some advocate a 2 Megabyte cap, as it is a small change, but many disagree because it’s simply kicking the can down the road, and we’ll see the same problem happen later. Some advocate increasing the cap, and creating a determined schedule at which further increases to the cap occur. Many disagree with this because it makes dangerous assumptions about growth in internet infrastructure, and the ability for large blocks to be reliably transported. Some support a dynamically scaling block size caps based on median block size, although some worry about the potential for this to be abused.

Ultimately, the only way that Bitcoin could undergo such a significant change would be for all of the industry leaders, such as exchanges, transaction processors, and mining groups, as well as a significant majority of users, to agree on a specific change and date of implementation(at a specific block number). Even once an agreement is made, such a change would likely take years, as developers of custom Bitcoin applications will need sufficient time to refine their code base to support the new changes, and test thoroughly.

One effective way to reduce risk when implementing a fork is to schedule it for a block several months or a couple years in the future, but only on the condition that a given percentage of blocks mined within the past few months of blocks contain a marker in support of it. Since blocks can contain non-transaction data, miners that support a given change to the network could contain a specific marker indicating their support.

Overall, Bitcoin has enormous potential, but the community and industry will have to find a way to address the transaction size issue in order to create a widely used transaction medium. If Bitcoin fails to improve it’s capacity, it’s possible that an alternative cryptocurrency could fill a niche for smaller transactions. This ultimately would depend on major Bitcoin payment processors such as Bitpay or Coinbase providing support for alternative currencies. While it’s unclear what the future for Bitcoin and cryptocurrencies will hold. What we do know is that they carry significant potential, and that any sort of prediction is pure speculation.

The Plug In Vehicle Tax Credit- A Corporate Handout That Doesn’t Help Consumers or the Environment

The Plug In Vehicle Tax Credit was created as a part of the Energy Improvement and Extension Act of 2008.  The tax credit was created with the intent of boosting consumer adaption of Electric Vehicles, as a way to help combat climate change. However, with the way the policy was created, it does very little to boost production of electric vehicles. Instead, it simply provides a handout to manufacturers of electric vehicles, at the expense of the taxpayer.

The electric vehicle tax credit provides a credit of up to $7,500 to individuals/households that purchase a qualifying electric vehicle, with no income limit. While the  credit is based on the capacity of the battery installed in the vehicle, most vehicles that qualify for this credit have a battery with a large enough capacity to qualify for the entire $7,500 credit.

Instead of creating an expiry date for the tax credit, the law instead created a threshold at which the tax credit phases out.  The tax credit can only be applied if the producer of the EV sold less than 200,000 qualifying vehicles in the United States within a 1 year time period. If the 200,000 threshold is hit, the tax credit begins to phase out over the course of a 1 year period.

The intended purpose of this is to ensure that the tax credit remains in effect until electric vehicles see widespread adaption, and then phases out in order to prevent the tax credit from becoming too expensive for the federal government. Basically, it is supposed to exist to help the electric vehicle market grow, and then phase out once it becomes large.

The tax credit, with it’s 200,000 vehicle limit, encourages EV manufactuers to keep prices high, and limit production. When the government will cover $7,500 of the bill of a purchased EV, this means that producers of the vehicle can raise prices by $7,500 while effectively maintaining the same level of demand they had prior to the tax credit.

Because the tax credit only applies to companies selling less than 200,000 electric vehicles in the US per year, the companies that make these vehicles are heavily rewarded for staying within this threshold. By keeping production low to maintain eligibility for the tax credit, electric vehicle producers can keep prices high, as the tax credit makes up for any loss in demand. It’s much more profitable to sell a small amount of vehicles with massive profit margins(thanks to the government) than it is to sell a large amount of vehicles with small profit margins.

Additionally, because the Tax credit is non-refundable(meaning it can’t reduce your tax liability below $0), this means that in many cases, only upper-middle and upper income taxpayers get the full benefit of the credit. This further incentives companies to brand electric vehicles as luxury vehicles, as the consumers that are most affected by the tax credit are those that pay at least $7,500 in federal income taxes per year.

By keeping production low to maintain eligibility for government subsidies, manufacturers don’t need to invest as much capital in building new facilities or hiring more workers for mass production, likely resulting in less job creation than if the government would have stayed out of the market.

teslamodelx

With A MSRP of $74,000, the Tesla Model X can be considered a luxury purchase, and not a mainstream vehicle.

Since the creation of the credit in 2008, we still haven’t seen manufacturers come close to the 200,000 vehicle phaseout threshold. Instead of investing resources in scaling production efforts and increasing sales, revenue from sales has either been pocketed as profits, or invested in creation and production of extra luxury features in order to justify the high prices of the vehicles sold.

The tax credit has created a shift in the electric vehicle market. Instead of investing capital in the mass production of affordable electric vehicles, which would be beneficial to the environment, the increased revenue resulting from the tax bill has instead encouraged companies to limit electric vehicle production to expensive vehicles with luxury features, in order to retain eligibility for indirect government subsidies. Many manufacturers of electric vehicles also produce gasoline powered cars, which they continue to sell to meet the demands for low-mid priced vehicles. If the U.S Federal government stopped discouraging corporations from designing electric vehicles as luxury cars via conditional tax subsidies, perhaps we’d see more entry-level electric vehicles being mass produced.

source: https://www.irs.gov/businesses/plug-in-electric-vehicle-credit-irc-30-and-irc-30d

 

Why Obamacare is Making Healthcare So Expensive

The Patient Protection and Affordable Care act, often called Obamacare, has resulted in healthcare expenditures growing at a rapidly increasing rate. The average premium on a benchmark silver health insurance plan is increasing by an average of 22% in 2017, according to the Department of Health & Human Services. Some states such as Arizona are seeing even worse results, which will experience a massive average increase of 116%.

Obamacare requires that insurance companies spend at least 80% of their insurance premium costs on healthcare expenses and healthcare quality improving activities- leaving only 20% of their gross income for administrative costs, marketing, overhead costs, and profits. If they fail to meet this requirement, they have to refund their enrollees the difference. The threshold is raised to 85% for companies providing large-group plans.

At first, this clause may sound good. It attempts to reduce insurance company profits and administrative expenses through force, in an attempt to ensure that the law isn’t a handout to insurance companies due to the mandate, and that money spent on premiums actually goes towards healthcare.

However, this clause means that the only way for insurance companies to increase profits is to drive up the cost of healthcare. They can’t increase the percentage of their profit margin due to the requirement that 80% of insurance premiums are spent on healthcare expenses, but they can increase the overall size of their profits by charging more for insurance, while simultaneously paying out more to hospitals and drug companies in order to stay within their limits.

The Affordable Care Act now includes an employer mandate, requiring that employers of full time employees provide their employees with health insurance, with an exemption for small businesses. This has resulted in many companies converting full time jobs into part time jobs, in order to circumvent having to pay for expensive healthcare.

The Affordable Care Act also established that anyone below 400% of the federal poverty level has a cap as to how much they personally will have to pay for an insurance premium, if their employer doesn’t provide it. If their insurance premium costs more than a figure based on their income, the government will make up the difference in the form of a refundable tax credit. For example, a family of 4 with an income of $36,450 will not have to pay more than 4.08% of their income on their insurance premium for a silver plan. For them, if the second cheapest insurance provider in their area charges more than $1487.16 per year, the government will make up the entire difference.

In a market without subsidies or government intervention, hospitals and drug companies could only charge what people are capable of paying. When the government starts providing unlimited subsidies(they’ll cover as much as the 2nd cheapest insurance provider charges with no limits) to it’s low and medium income citizens, it creates a situation where insurance companies and healthcare providers profit immensely from the federal government’s inability to negotiate it’s expenditures.

This likely contributes to why the cost of individual plans is growing at a rate substantially faster than group plans. The government has an enormous amount of money due to it’s massive tax revenue and ability to deficit spend, whereas businesses have a much more limited ability to pay for insurance. If insurers charge businesses too much for group plans, the business will either reduce the amount of people they hire, or attempt to convert full time jobs into part time jobs.

With businesses, there’s at least some elasticity involved in business demand for insurance plans, because they can reduce the amount of full time positions at their company if their healthcare costs become too expensive to justify them. With the federal government providing unlimited subsidies to qualifying individuals, they will pay whatever they are obligated to pay based on the tax code, until the law is changed. The insurance companies then take these maximum subsidy payouts, burn 80% of it by paying drug companies and healthcare providers way more than they need to, then profit from the rest. These terrible negotiations of pricing are mutually beneficial to both the insurance provider and the drug companies, at the expense of both the taxpayer, and the poor folks that have to pay for an overpriced individual health insurance plan without eligibility for a government subsidy.

You may think that competition will force insurance providers to keep insurance premiums low. Unfortunately this is not the case, as many locations are down to just one provider within the ACA exchange. Insurance companies are a type of company that require a massive amount of capital to create, so it’s very easy for monopolies to form. The 80:20 rule on insurance company spending requires insurance companies to maintain risky profit margins, so it isn’t something where a small business can just come in and compete. The nature of insurance is that it requires a large pool of people to balance risk and create predictable results based on probability and data.

Many have proposed allowing insurers to compete across state lines. This will help create competition and make it more difficult for insurance companies to drive up the cost of healthcare in order to improve their profits, but it is only a band-aid fix that will slow down the rate that insurance companies attempt to increase healthcare costs.

The Affordable Care Act, while it carries good intentions, ultimately acts a massive handout to healthcare providers, pharmaceutical companies, and insurance companies. It is creating a giant hole in our economy, dragging up costs for businesses as health insurance premiums rise, thus resulting in reduced wage growth, a weakened economic recovery, and less money leftover in the pockets of consumers.

Sources:

https://www.healthinsurance.org/obamacare/will-you-receive-an-obamacare-premium-subsidy/

https://www.whitehouse.gov/blog/2014/07/24/8020-rule-saving-americans-lot-money-what-exactly-it

http://money.cnn.com/2016/10/24/news/economy/obamacare-premiums/

 

Revelation Online Announces Closed Beta Date

My.com announced today that the first closed beta event for the NA/EU Version of Revelation Online will run from October 25 until November 8th. Players that won a key via a giveaway will be able to play in this closed beta event, and players that purchased a founder’s pack also have access to the event.

Revelation in a Chinese MMORPG that is in the progress of being ported into North America and Europe. Revelation Online will feature battlegrounds, sieges, dungeons, raids, and open world bosses. Revelation combines some of the best features from successful MMOS, and does a little bit of everything.

Revelation brings back the excitement in leveling. Instead of being a boring, short process that acts as a gateway to endgame, leveling in Revelation is the endgame. After level 50, players need to complete high difficulty dungeons to gear up their character in order to stand a chance at higher level brackets. Players can’t simply just rush to the level cap, as it’s important to progress adequately and actually play the game as you progress. Revelation also includes limitations that help close the gap between players with differing amount of time available to play.

In the closed beta, players can play the story up until level 49, have access to 4 different dungeons with multiple difficulty levels, and participate in 10v10 battlegrounds. The publisher plans to gradually increase the amount of content available in each beta test.

Like most beta tests of online games, it’s important to remember that progress will be wiped before the game officially launches into early access.

 

 

Dolby Axon, A Surround Sound VOIP Program, Is Shutting Down This Year

 

dolby_axon_software

Dolby announced today that Axon, their surround sound voice chat software, is shutting down on December 5, 2016. All user data will be erased one week after the shut down. Users will not be able to use the software after the shut down, as it relies on their servers to operate.

Dolby Axon is a gimmicky surround sound voice chat program in which users select a physical location within a virtual room, and hear other users based on their location in the virtual room relative to their own. This provides some level of tactical advantage in certain types of games, where you might need a lot of people in the same chat room, but want certain users to hear each other more than others.(For example, a large raid in an MMORPG where players are split up into smaller groups)

The application did not find much widespread use among gamers, and as a result, it is being shut down. The program was confusing and difficult for new users to figure out. While there are some cases in which hardcore gamers could benefit from the program, the low rate of market adaption, as well as difficulty in setting it up deterred most gaming guilds/groups from choosing it as their VOIP solution.

Dolby Axon allowed users to form permanent communities for free, much like what Discord now provides. With Discord being very easy to use, not requiring a download, having a mobile app, and being completely free, Dolby Axon lost the appeal it had as a voice chat solution that allows users to create channels for free.

The Dolby team recommends using Curse or Discord as an alternative for existing users/communities.

Other Potential Uses?

While Dolby Axon is shutting down, it’s quite possible that Dolby may find other uses for it’s client-server, surround sound VOIP technology. Online games, especially those in Virtual Reality, could benefit immensely from a surround-sound voice chat system, if it includes API to allow the game to provide in game player locations to the software. Surround sound voice chat could add another layer of realism to VR games. Many small development studios might not want to spend the time and money creating a surround-sound, client-server based voice chat system, and could theoretically opt to license it from another company to save on costs involved with reinventing the wheel.

This is all speculation, but it does seem like a smart way to make use of what they’re scrapping. Dolby Axon failed due to its confusing interface and high level of setup required of users. If they can find a way to create an API in which they can integrate the software directly with online games, it could solve every single issue the software faced, and create a lot of value for small-medium sized development studios creating online games.