The Fairness of Virtual Currency

CNet.com is running an article looking into the fairness of the virtual currency exchange. From the article: "...according to two of the leading experts in the economies of these virtual worlds, getting a fair price in the exchange of real dollars for fantasy coins can be a crapshoot. Turns out it's hard to find reliable data about the dollar/virtual currency exchange rates in a pretend world where there's no Alan Greenspan setting interest rates and scolding everyone about irrational exuberance."

Artificial?

[wlan0]

Wait. Aren't all currencies artificial by now? I mean, not all countries have enough gold to substain the amount of "money" they have.

Re:Artificial?

[Nasarius]

Of course. Hence inflation, which the Federal Reserve tries to control. In an online economy, the market should determine the exchange rate. As long as you have a decent medium for competition (eg, eBay), it's difficult to charge much more than your competitors.

Re:Artificial?

[interiot]

It's easier to argue that the falling exchange rates are more due to the in-game economy [mine-control.com] (eg. the economies have actual inflation) than it is due to increased competition among MMORPG currency sellers. In fact, that paper almost seems to be arguing that MMORPG economies, as they currently stand, are almost unavaoidably always inflationary.

(city of heros seems to buck the trend... is there anything fundamentally very different about its economy?)

Re:Artificial?

[droleary]

In fact, that paper almost seems to be arguing that MMORPG economies, as they currently stand, are almost unavaoidably always inflationary.

That's pretty much true. With timed spawns and random drops, there is no real economy. I mean, there have only been so many bills printed by the US Mint but in most games it's like every wandering monster can print money. The false economies of games are directly related to the false ecologies. There is no real population of rats (or whatever) that make up the

Re:Artificial?

[dfenstrate]

World of Warcraft end-game money sinks:
repair bills
air taxis
auction fees

Seems relatively stable to me, but it's the first mmo i've played.

Re:Artificial?

[HyperTiger]

There really is nothing to spend on in COH in the later half of the game that drains your money (or influence). In the first half, costs for buying upgrades for your powers (damage enhancements, accuracy enhancements, duration enhancements, etc) are a significant part of the game so much that most people don't enhance until level 33 or so (out of 50 levels) for their first characters. After that though, all money issues are over as people have much more than they know what to do with. Costume changes are

Re:Artificial?

[blackicye]

"(city of heros seems to buck the trend... is there anything fundamentally very different about its economy?)"

City of Heroes has a system that uses no items at all. The only things characters purchase are skills.

In COH, the currency (influence) is fairly easy to acquire. Also rarity of in-demand skills is not generally completely insane.

Re:Artificial?

[interiot]

What's interesting is that that paper addresses attempts to tie the sinks and sources together. He says this was tried many years ago, in Ultima Online, but was eventually a solid failure. He says this is because players hoard items in various places, and this eventually ends up slowing down the money sources (mob drops, etc) to a very slow trickle, at which point it's no longer fun to play the game. (he also says that adding new money sinks in the form of item degredation while in the user's storage are

Re:Artificial?

[dfenstrate]

I'd say that the initial storage limitation is one of the least fun parts of the beginning game in WoW

After you get your first 60, this isn't such a problem because you can always send gold and bags to your low level alts. But yeah, a pain at the start.

Other than that, I've actually noticed deflation on my server- arcane crystals and arcanite bars are down 9g or so from their peak, runecloth is down from 2g a stack, and some other crafting items have taken price hits as well. Gold sellers prices are also down a few bucks. I'm not entirely sure how that relates, if at all.

I think it has to do with the game/server reaching 'maturity'. Most of the first adopters who rushed to the scene have maxed out a character or two, and have them equipped with all the craftable items they're going to get. They also have an alt or so that can provide all of the players characters with whatever they need, so they don't visit the AH as much, driving up prices. So know you just have a trickle of characters passing through various levels and buying up some stuff, but at a slower rate than the original mass leveling that came with the server opening.

Anyway, I hope that all makes sense, cause i've been up far too late. And it's just my humble observations, I have no data to back any of it up.

Re:Artificial?

[interiot]

Yes, production/gathering items are absolutely in deflation. That's covered in the Ultima Online paper too.

For a manufacturing profession such as tailoring or smithing, players are motivated to improve skills because it will allow them to make better items for themselves on-demand in the future. Thus players, in the process of training, produce huge numbers of item regardless of whether there is a market for them. This, combined with the effects of macroing and the fact that some players create items fo

Re:Artificial?

[snuf23]

As the WoW server I'm playing on matures, I've noticed a both inflation and deflation as the supply and demand shifts. For example, Kingsblood which is a low level herb usually harvested in the 20s, now goes for 7-10 gold per stack of 20 herbs. This is because late in the game Kingsblood is required for a repeatable quest used to gain reputation with a particular faction.

Re:Artificial?

[jafuser]

There is/was an exchange market designed just for this very purpose:

http://gamingopenmarket.com [gamingopenmarket.com]

They used to support a dozen or so game currencies, until someone scammed them [penny-arcade.com] through PayPal.

Now they only support the Second Life currency, since they are they are probably nearly the only MMO which encourages currency exchange (and they have also agreed to work with them if someone pulls another scam).

Re:Artificial?

[TheLink]

Money is and has always been an artificial concept. Artificial but very useful.

Gold as money is about as artificial as other currencies. Except it's harder to print gold than it is to print money :) (there are pluses and minuses to that[1]).

Still, it doesn't make the value of gold fixed. If I have the last few loaves of bread in the world and you are hungry and have one ton of gold, one loaf of bread could be worth many kilos of gold.

[1] Won't go into all that. Do note though that someone else can legitimat

Re:Un-fair.

[Meagermanx]

Yeah, I hate when people use no-clipping cheats and god-mode in MMORPGs. It just ruins the game for everybody else.

Re:Un-fair.

[C0rinthian]

No. MMO's don't have cheat codes. Hacks are rare as well, as all important data is not trusted to the client. MMO's are basically graphical front-ends to server-side databases.

Did someone say the T word?

[toad3k]

"Cyberspace nations that are issuing these currencies are going to be under legal obligation to report sales and volumes and transactions, because in worlds where those currencies can be freely liquidated into dollars, there are clear tax implications."

Man I can't even avoid taxes in a videogame.

Black Market

[Gamelore]

This is a black market with respect to the rules in many games. Expecting some kind of fairness when breaking the rules in those games is simply ludicrous.

Re:Black Market

[nelsonal]

Why? The mob is expensive, but they enforce a certian level of fairness/justice on those who cannot go to a courtroom to resolve issues. People are quite good at setting up a social structure (in any environment) that centralizes a basic ruleset that will apply to everyone. Even black markets work (enforced by the threat of violence) most of the time.

NO

[vga_init]

I've posted on this subject before (and rather passionately). The past article was about property rights in a virtual world (ie MMORPGs and the like). It's just ludicrous. Now it's about currency value...

I love games. I love to play these games; my girlfriend and I play a MMORPG together and think it's great. It is great to collect virtual money and spend it in entertaining ways, notwithstanding getting awesome items and equipment.

That being said, the currency is worthless. Just plain worthless. Virtual assets don't exist; they're intangible. They're in a proprietary gameworld and if they belong to anyone they belong to the company that is providing the game. Also, trying to assign real value to items in-game by exchanging them for things outside the game like money is strictly prohibited in the license agreement of most games.

Come on, people! The state should never be involved in this sort of thing.

Re:NO

[Eugene]

it's not worthless, just like collectable items, although it might be worthless in some people's eye, for the *collector*, the collectable items (cards, stamps, whatever) has it's market value based on those who want such items.

it's the same for virtual property, and now there are countless sweatshops in third world countries that actually hire people to work in MMORPG to farm in game currencies.. it's a virtual economy turn into real world economy.

Re:NO

[megrims]

Countless eh? Start by counting to one...

Re:NO

[Eugene]

IGE is not the only one, it is probably the largest and most visible, but it is certainly not the only one that does it. plus, there are many others that is working to *supply* the currency to IGE and other online trading sites.

Re:NO

[snuf23]

Um. I guess you've never met your local Chinese farmer contingent in your MMO?
I had never really seen them in World of Warcraft until I hit lvl 50. Now I see them all over the place. They ninja loot, they speak chinese, their characters are on 24 hours a day, they run goofy auctions, they camp chests for hours on end, they repeatedly request raid group invites with the intention on ninja'ing the first good drop and bailing.
If you want to see where all this effort ends up, do a search on ebay. ige.com is the

Re:NO

[Vacuous]

MMORPG currency is only worthless if your time has no value. perosnally My time has value, so MMORPG has value to me as well (Not that I have, or will, ever buy gold/gil/whatever online)

Re:NO

[vga_init]

The time that you spend playing video games indeed has no value. At least, not economically. It does have entertainment value for you, but that's where the buck stops.

Re:NO

[vga_init]

You are an idiot if you think entertainment has no economic value. Billions of dollars per year are spent on entertainment.

It does, which is precisely why you're paying for it. You pay the service, not vice versa.

Re:NO

[L7_]

when you play for 2 hours and find an item that is worth $100 on ebay then you bet the time that you spent playing that game has 'real economic value'.

when the character that you create is how worth 5000 US dollars to someone, then the hours that you spent leveling/macroing/whatever that character up, definetly has economic value.

the thing is, there are plenty of gamers that buy and sell things online through ebay. they are not companies like IGE or whatever, they are just college kids (or now adults) that

Re:NO

[vga_init]

the buck never stops. you are being delusional if you think it does.

Not delusional, but idealistic (if there is indeed a difference).

First of all, I'm not a capitalist, and yes, I'm fighting the idea of abusing games in this way. I understand the how's and why's, but that doesn't stop me from resenting it and saying "no."

In the end, people can do whatever they want, but I'm siding with any effort to prevent them from doing something like this.

Re:NO

[Incoherent07]

Shrieking "it's not true, it's not true!" doesn't make it not true.

Fact: People sell online currency for real money, the license agreement notwithstanding. Companies deny their currencies have value for the most part because of possible legal liability.

This article simply says that the effective exchange rate fluctuates a lot because of imperfect information exchange.

Re:NO

[vmardian]

Being tangible isn't a requirement for having value. Very soon this market will be worth more than $1B per year. Seems quite valuable to me.

Re:NO

[j3b4]

>Come on, people! The state should never be involved in this sort of thing. I think the game companies should make a better effort to crack down on this sort of thing to avoid the state eventually being obliged to step in.

Re:NO

[sandwiches]

So, you're saying, since the virtual property is intangible, it is worthless?

I knew I was doing the right thing by not paying Adobe for my copy of Photoshop.

fun at risk

[j3b4]

I would very much like to see game companies take a stronger stance opposing real-life trading of their virtual gold/properties. Some free games that I play in have a strict rule prohibitting the sale of goods or game accounts in real life.

The reason I support this is that the more value these things are allowed to have in 'real' economies the less freedom we'll have in the game. Many fun games allow players to kill, loot and steal from eachother. Other games offer opportunities for fraud and deception

SWG credits value in US $

[phixson]

The economic studies are always interesting to me and occasionally something will happen in-game that provides a quick "level check". Recently SOE published a new boxed version of Star Wars Galaxies which includes both of the add-ons, Jump to Lightspeed and Rage of the Wookies. As an incentive, SOE included a BARC speeder special item, from the last movie. The new speeder is the only new content in the box, so it's the only incentive for existing players to buy it. The BARC speeders immediately started s