Virtual economy
Encyclopedia
A virtual economy is an emergent
economy
existing in a virtual persistent world
, usually exchanging virtual good
s in the context of an Internet
game
. People enter these virtual economies for recreation and entertainment rather than necessity, which means that virtual economies lack the aspects of a real economy that are not considered to be "fun" (for instance, players in a virtual economy often do not need to buy food in order to survive, and usually do not have any biological needs at all). However, some people do interact with virtual economies for "real" economic benefit.
Virtual economies are observed in MUD
s and massively multi player online role-playing games
(MMORPGs). The largest virtual economies are currently found in MMORPGs. Virtual economies also exist in life simulation games which may have taken the most radical steps toward linking a virtual economy with the real world. This can be seen, for example, in Second Life
's recognition of intellectual property
rights for assets created "in-world" by subscribers, and its laissez-faire
policy on the buying and selling of Linden Dollars (the world's official currency) for real money on third party websites. Virtual economies can also exist in browser-based Internet games where "real" money can be spent and user-created shops opened, or as a kind of emergent gameplay
.
Virtual property is a label that can refer to any resource that is controlled by the powers-that-be, including virtual objects, avatars
, or user accounts. The following characteristics may be found in virtual resources in mimicry of tangible property. Note however that it is possible for virtual resources to lack one or more of these characteristics, and they should be interpreted with reasonable flexibility.
The existence of these conditions create an economic system with properties similar to those seen in contemporary economies
. Therefore, economic theory can often be used to study these virtual worlds.
Within the virtual worlds they inhabit, synthetic economies allow in-game items to be priced according to supply and demand
rather than by the developer's estimate of the item's utility. These emergent economies are considered by most players to be an asset of the game, giving an extra dimension of reality to play. In classical synthetic economies, these goods were charged only for in-game currencies. These currencies are often sold for real world profit.
in 2004 and its subsequent huge success across the globe has forced both MMORPG and their secondary markets into mainstream consciousness, and many new market places have opened up during this time. A search for WoW Gold on Google
will show a multitude of sites (more than 90 sponsored results ) from which Gold can be purchased. Real money commerce in a virtual market has grown to become a multi billion dollar industry. In 2001, EverQuest players Brock Pierce and Alan Debonneville founded Internet Gaming Entertainment Ltd (IGE
), a company that offered not only the virtual commodities in exchange for real money but also provided professional customer service. IGE had a trained staff that would handle financial issues, customer inquiries and technical support to ensure that gamers are satisfied with each real money purchase. It also took advantage of the global reach of synthetic worlds by setting up a shop in Hong Kong
where a small army of technically savvy but low wage workers could field orders, load up avatars, retrieve store goods and deliver them wherever necessary. This lucrative market has opened a whole new type of economy where the border between the real and the virtual is obscure.
Hundreds of companies are enormously successful in this new found market, with some virtual items being sold for hundreds or even thousands of dollars. Some of these companies sell multiple virtual goods for a single game, others sell multiple virtual services based upon various games. Virtual real estate is earning real world money, with people like 43-year old Wonder Bread
deliveryman, John Dugger, purchasing a virtual real estate for $750, setting him back more than a weeks wages. This virtual property includes nine rooms, three stories, rooftop patio, wall of solid stonework in a prime location, nestled at the foot of a quiet coastal hillside. Dugger represents a group of gamers that are not in the market for a real house but instead to own a small piece of the vast computer database that was Britannia, the mythical world in which the venerable MMO
Ultima Online unfolds. Such trading of real money for virtual goods simply represents the development of virtual economies where people come together where the real and the synthetic worlds are meeting within an economic sphere.
Although virtual markets may represent a growth area, it is unclear to what extent they can scale to supporting large numbers of businesses, due to the inherent substitutability of goods on these markets plus the lack of factors such as location to dispense demand. In spite of numerous famed examples of the economic growth of Second Life
an amateur analyst in 2008 estimated the income inequity in Second Life's economy as worse than has ever been recorded in any real economy: a Gini coefficient
of 90.2, a Hoover index of 77.8, and a Theil index
of 91%. However, the application of these economic measures to a virtual world may be inappropriate where poverty is merely virtual and there is a direct relationship
between in-game wealth and time spent playing.
As MMORPG
s continue to grow in popularity and the secondary markets grow with them (some industry experts have suggested that secondary market sales may total more than subscription sales by 2009), services like those above are likely to become less curiosities and more accepted means of interacting with these markets.
Commentators in taxation law speculate "that profits made in virtual worlds could be taxable even before they are withdrawn as dollars." The speculation seems to based on the observation that, as one commentator said, "the easier it is to buy real goods with virtual currency (e.g. order a real life pizza) the more likely the IRS will see exclusively in-world profits as taxable."
During an interview with Virtual World News, Alex Chapman of the British law firm Campbell Hooper stated: "Now we’ve spoken with the gambling commission, and they’ve said that MMOGs aren’t the reason for the , but they won’t say outright, and we’ve asked directly, that they won’t be covered. You can see how these would be ignored at first, but very soon they could be in trouble. It’s a risk, but a very easy risk to avoid." He suggested that compliance might require MMOGs and related traders to obtain a gambling license, which is not excessively difficult in the EU.
When queried about games where real-world transactions for in-game assets are not permitted, but there is an 'unofficial secondary market', Chapman responded: "Ultimately the point is whether the thing that you win has value in money or money’s worth. If it does have value, it could be gambling." So to avoid regulation by these laws, the "operator would need to take reasonable steps to ensure that the rewards they give do not have a monetary value[,]" possibly by demonstrating enforcement of their Terms of Service
prohibiting secondary markets.
, where the number of computer game players is massive, some have reported the emergence of gangs and mafia, where powerful players would threaten beginners to give money for their "protection", and actually steal and rob.
Other similar problems arise in other virtual economies. In the game The Sims Online
, a 17-year old boy going by the in-game name "Evangeline" was discovered to have built a cyber-brothel
, where customers would pay sim-money for minutes of cybersex
. Maxis
canceled each of his accounts, but had he deposited his fortune in the Gaming Open Market he would have been able to keep a part of it.
A 2007 virtual heist has led to calls from some community members in Second Life
to bring in external regulation of these markets: "In late July, a perpetrator with privileged information cracked a stock exchange's computers, made false deposits, then ran off with what appears to be the equivalent of US$10,000, disappearing into thin air. Despite the seemingly small haul, this heist left investors feeling outraged and vulnerable."
In EVE Online
however, theft and scamming other players is perfectly allowed within the game's framework as long as no real world trading is committed. Players are allowed to loot all items from fallen victims in battle, but there is a disincentive in the form of NPC
police intervention in higher-security space. Virtual possessions valued in the tens of thousands of USD have been destroyed or plundered through corporate espionage and piracy
. This has resulted in widespread retributive warfare and crime between various player corporation
s.
, World of Warcraft
, Guild Wars
, Warhammer Online, Lord of the Rings Online and Final Fantasy XI
strictly prohibit buying gold, items, or any other product linked with the game, with real world cash. RuneScape
went as far as making this practice impossible by removing unbalanced trades and their traditional player killing system (this was scrapped on February 1, 2011 after having been in place for 3 years), resulting in over 60,000 cancelled subscriptions in protest. Final Fantasy XI
and Warhammer Online both have entire task forces dedicated to the removal of real money trading from the game. To control real money trading, EVE Online
created an official and sanctioned method to convert real world cash to in-game currency; players can use real world money to buy a specific in-game item which can be redeemed for account subscription time or traded on the in-game market for in-game currency.
. In practice, this results in constantly rising prices for traded commodities. With the proper balance of growth in player base, currency sources, and sinks, a virtual economy could remain stable indefinitely.
As in the real world, actions by players can destabilize the economy. Gold farming
creates currency within the game more rapidly than usual, exacerbating inflation. In extreme cases, a cracker may be able to exploit the system and create a large amount of money. This could result in hyperinflation
.
In real world entire institutions are devoted to maintaining desired level of inflation. This difficult task is a serious issue for serious MMORPG's, that often have to cope with mudflation
.
.
Players also acquire human capital
as they become more powerful. Powerful guilds often recruit powerful players so that player can acquire better items which can only be acquired by the cooperation among many players.
or DKP are a semi-formal score-keeping system used by guilds in massively multiplayer online game
s. Players in these games are faced with large scale challenges, or raids
, which may only be surmounted through the concerted effort of dozens of players at a time. Dragon kill points are not official currencies, but are created and managed by endgame guilds to manage distributions of rewards in those raids.
, Reddit
, care2
and Yahoo! Answers
, points are gained through the garnering of trust evidenced in upward moderations of posted content
; however, as stated by Slashdot co-founder CmdrTaco, his implementation of user moderation
was not intended as a currency, even though it has evolved on other discussion-oriented sites into such a system. On some such sites, the accumulation of "karma points" can be redeemed in various ways for virtual services or objects, while most other sites do not contain a redemption system.
On some sites, points are gained for inviting new users to the site.
for real money. While many game developers, such as Blizzard
(creator of World of Warcraft
), prohibit the practice, it is common that goods and services within virtual economies will be sold on online auction sites and traded for real currencies.
According to standard conceptions of economic value (see the subjective theory of value), the goods and services of virtual economies do have a demonstrable value. Since players of these games are willing to substitute real economic resources of time and money (monthly fees) in exchange for these resources, by definition they have demonstrated utility
to the user.
On January 2010, Blizzard stepped up its offensive on account security scams with the launch of a new website. The new Battle.Net account security website hopes to highlight the importance of keeping it safe when it comes to subscribers' accounts.
Ongoing campaign by WoW fan sites to boycott gold ads on their sites is just one of several community efforts to raise awareness against crackers.
Some virtual world developers officially sell virtual items and currency for real-world money. For example, the MMOG There
has therebucks that sell for US dollars. If the currency in Second Life
, the Linden Dollars, can be easily acquired with real money, the reverse is done through a market place owned by Linden Lab, but is not guaranteed, as the TOS of linden Lab explicitly says that Linden dollars are not redeemable. Rates would fluctuate based on supply and demand, but over the last few years they have remained fairly stable at around 265 Linden Dollars (L$) to the US Dollar, due to "money creation
" by Linden Lab. The currency in Entropia Universe
, Project Entropia Dollars (PED), could be bought and redeemed for real-world money at a rate of 10 PED for U.S.$ 1. On December 14, 2004, an island in Project Entropia sold for U.S. $26,500 (£13,700). One gamer also purchased a virtual space station
for U.S. $100,000 (£56,200) and plans to use it as a virtual nightclub
.
Many Korean virtual worlds (such as Flyff
) and other worlds outside that country (such as Archlord
and Achaea, Dreams of Divine Lands
) operate entirely by selling items to players for real money. Such items generally cannot be transferred and are often used only as a means to represent a Premium subscription via a method which is easily integrated into the game engine.
These intersections with real economies remain controversial. Markets that capitalize in gaming are not widely accepted by the gaming industry. Reasons for this controversy are varied. Firstly, the developers of the games often consider themselves as trying to present a fantasy experience, so the involvement of real world transactions takes away from it. Further, in most games, it would be unacceptable to offer another player real currency in order to have them play a certain way (e.g., in a game of Monopoly
between friends, offering another player a real dollar in exchange for a property on the board); and for this to be necessary or valuable may indicate a Kingmaker scenario
within the game. However, such rules of etiquette need not apply, and in practice they often don't, to massive game worlds with thousands of players who know one another only through the game system.
Further and more involved issues revolve around the issue of how (or if) real-money trading subjects the virtual economy to laws relating to the real economy. Some argue that to allow in-game items to have monetary values makes these games, essentially, gambling
venues, which would be subject to legal regulation as such. Another issue is the impact of taxation that may apply if in-game items are seen as having real value. If (for example) a magic sword is considered to have real-world value, a player who kills a powerful monster to earn such a sword could find himself being charged tax on the value of the sword, as would be normal for a "prize winning". This would make it impossible for any player of the game not to participate in real-money trading.
A third issue is the involvement of the world's developer or maintenance staff in such transactions. Since a developer may change the virtual world any time, ban a player, delete items, or even simply take the world down never to return, the issue of their responsibility in the case where real money investments are lost through items being lost or becoming inaccessible is significant. Richard Bartle argued that this aspect negates the whole idea of ownership in virtual worlds, and thus in the absence of real ownership no real trade may occur. Some developers have acted deliberately to delete items that have been traded for money, as in Final Fantasy XI
, where a task force was set up to delete characters involved in selling in-game currency for real-world money.
However, Second Life
has shown a legal example which may indicate that the developer can be in part held responsible for such losses. Second Life at one stage, offered and advertised the ability to "own virtual land", which was purchased for real money. In 2007, Marc Bragg, an attorney, was banned from Second Life
; in response he sued the developers for thereby depriving him of his land, which he – based on the developers' own statements – "owned". The lawsuit ended with a settlement in which Bragg was re-admitted to Second Life. The details of the final settlement were not released, but the word "own" was removed from all advertising as a result. (It should be noted that Bragg purchased his land directly from the developers, and thus they were not an uninvolved third party in his transactions.)
Emergence
In philosophy, systems theory, science, and art, emergence is the way complex systems and patterns arise out of a multiplicity of relatively simple interactions. Emergence is central to the theories of integrative levels and of complex systems....
economy
Economics
Economics is the social science that analyzes the production, distribution, and consumption of goods and services. The term economics comes from the Ancient Greek from + , hence "rules of the house"...
existing in a virtual persistent world
Virtual world
A virtual world is an online community that takes the form of a computer-based simulated environment through which users can interact with one another and use and create objects. The term has become largely synonymous with interactive 3D virtual environments, where the users take the form of...
, usually exchanging virtual good
Virtual good
Virtual goods are non-physical objects purchased for use in online communities or online games. They have no intrinsic value and are intangible by definition....
s in the context of an Internet
Internet
The Internet is a global system of interconnected computer networks that use the standard Internet protocol suite to serve billions of users worldwide...
game
Game
A game is structured playing, usually undertaken for enjoyment and sometimes used as an educational tool. Games are distinct from work, which is usually carried out for remuneration, and from art, which is more often an expression of aesthetic or ideological elements...
. People enter these virtual economies for recreation and entertainment rather than necessity, which means that virtual economies lack the aspects of a real economy that are not considered to be "fun" (for instance, players in a virtual economy often do not need to buy food in order to survive, and usually do not have any biological needs at all). However, some people do interact with virtual economies for "real" economic benefit.
Overview
MUD
A MUD , pronounced , is a multiplayer real-time virtual world, with the term usually referring to text-based instances of these. MUDs combine elements of role-playing games, hack and slash, player versus player, interactive fiction, and online chat...
s and massively multi player online role-playing games
MMORPG
Massively multiplayer online role-playing game is a genre of role-playing video games in which a very large number of players interact with one another within a virtual game world....
(MMORPGs). The largest virtual economies are currently found in MMORPGs. Virtual economies also exist in life simulation games which may have taken the most radical steps toward linking a virtual economy with the real world. This can be seen, for example, in Second Life
Second Life
Second Life is an online virtual world developed by Linden Lab. It was launched on June 23, 2003. A number of free client programs, or Viewers, enable Second Life users, called Residents, to interact with each other through avatars...
's recognition of intellectual property
Intellectual property
Intellectual property is a term referring to a number of distinct types of creations of the mind for which a set of exclusive rights are recognized—and the corresponding fields of law...
rights for assets created "in-world" by subscribers, and its laissez-faire
Laissez-faire
In economics, laissez-faire describes an environment in which transactions between private parties are free from state intervention, including restrictive regulations, taxes, tariffs and enforced monopolies....
policy on the buying and selling of Linden Dollars (the world's official currency) for real money on third party websites. Virtual economies can also exist in browser-based Internet games where "real" money can be spent and user-created shops opened, or as a kind of emergent gameplay
Emergent gameplay
Emergent gameplay refers to complex situations in video games, board games, or table top role-playing games that emerge from the interaction of relatively simple game mechanics....
.
Virtual property is a label that can refer to any resource that is controlled by the powers-that-be, including virtual objects, avatars
Avatar (computing)
In computing, an avatar is the graphical representation of the user or the user's alter ego or character. It may take either a three-dimensional form, as in games or virtual worlds, or a two-dimensional form as an icon in Internet forums and other online communities. It can also refer to a text...
, or user accounts. The following characteristics may be found in virtual resources in mimicry of tangible property. Note however that it is possible for virtual resources to lack one or more of these characteristics, and they should be interpreted with reasonable flexibility.
- Rivalry: Possession of a resource is limited to one person or a small number of persons within the virtual world's game mechanics.
- Persistence: Virtual resources persist across user sessions. In some cases, the resource exists for public view even when its owner is not logged into the virtual world.
- Interconnectivity: Resources may affect or be affected by other people and other objects. The value of a resource varies according to a person's ability to use it for creating or experiencing some effect.
- Secondary markets: Virtual resources may be created, traded, bought, and sold. Real-world assets (typically money) may be at stake.
- Value added by users: Users may enhance the value of virtual resources by customizing and improving upon the resource.
The existence of these conditions create an economic system with properties similar to those seen in contemporary economies
Economy
An economy consists of the economic system of a country or other area; the labor, capital and land resources; and the manufacturing, trade, distribution, and consumption of goods and services of that area...
. Therefore, economic theory can often be used to study these virtual worlds.
Within the virtual worlds they inhabit, synthetic economies allow in-game items to be priced according to supply and demand
Supply and demand
Supply and demand is an economic model of price determination in a market. It concludes that in a competitive market, the unit price for a particular good will vary until it settles at a point where the quantity demanded by consumers will equal the quantity supplied by producers , resulting in an...
rather than by the developer's estimate of the item's utility. These emergent economies are considered by most players to be an asset of the game, giving an extra dimension of reality to play. In classical synthetic economies, these goods were charged only for in-game currencies. These currencies are often sold for real world profit.
Marketplace
The release of Blizzards' World of WarcraftWorld of Warcraft
World of Warcraft is a massively multiplayer online role-playing game by Blizzard Entertainment. It is the fourth released game set in the fantasy Warcraft universe, which was first introduced by Warcraft: Orcs & Humans in 1994...
in 2004 and its subsequent huge success across the globe has forced both MMORPG and their secondary markets into mainstream consciousness, and many new market places have opened up during this time. A search for WoW Gold on Google
Google
Google Inc. is an American multinational public corporation invested in Internet search, cloud computing, and advertising technologies. Google hosts and develops a number of Internet-based services and products, and generates profit primarily from advertising through its AdWords program...
will show a multitude of sites (more than 90 sponsored results ) from which Gold can be purchased. Real money commerce in a virtual market has grown to become a multi billion dollar industry. In 2001, EverQuest players Brock Pierce and Alan Debonneville founded Internet Gaming Entertainment Ltd (IGE
IGE
IGE was one of the largest services company buying and selling virtual currencies and accounts for MMORPG. During its peak time, it had offices in Los Angeles, China , and headquarters & customer service centre in Hong Kong. IGE was one of the main monopoly in virtual economy services, also known...
), a company that offered not only the virtual commodities in exchange for real money but also provided professional customer service. IGE had a trained staff that would handle financial issues, customer inquiries and technical support to ensure that gamers are satisfied with each real money purchase. It also took advantage of the global reach of synthetic worlds by setting up a shop in Hong Kong
Hong Kong
Hong Kong is one of two Special Administrative Regions of the People's Republic of China , the other being Macau. A city-state situated on China's south coast and enclosed by the Pearl River Delta and South China Sea, it is renowned for its expansive skyline and deep natural harbour...
where a small army of technically savvy but low wage workers could field orders, load up avatars, retrieve store goods and deliver them wherever necessary. This lucrative market has opened a whole new type of economy where the border between the real and the virtual is obscure.
Hundreds of companies are enormously successful in this new found market, with some virtual items being sold for hundreds or even thousands of dollars. Some of these companies sell multiple virtual goods for a single game, others sell multiple virtual services based upon various games. Virtual real estate is earning real world money, with people like 43-year old Wonder Bread
Wonder Bread
Wonder Bread is the name of three North American brands of white bread: One produced by George Weston Bakeries in Canada, another by Hostess Brands in the United States, and the third by Grupo Bimbo in Mexico.- United States :...
deliveryman, John Dugger, purchasing a virtual real estate for $750, setting him back more than a weeks wages. This virtual property includes nine rooms, three stories, rooftop patio, wall of solid stonework in a prime location, nestled at the foot of a quiet coastal hillside. Dugger represents a group of gamers that are not in the market for a real house but instead to own a small piece of the vast computer database that was Britannia, the mythical world in which the venerable MMO
Massively multiplayer online game
A massively multiplayer online game is a multiplayer video game which is capable of supporting hundreds or thousands of players simultaneously. By necessity, they are played on the Internet, and usually feature at least one persistent world. They are, however, not necessarily games played on...
Ultima Online unfolds. Such trading of real money for virtual goods simply represents the development of virtual economies where people come together where the real and the synthetic worlds are meeting within an economic sphere.
Although virtual markets may represent a growth area, it is unclear to what extent they can scale to supporting large numbers of businesses, due to the inherent substitutability of goods on these markets plus the lack of factors such as location to dispense demand. In spite of numerous famed examples of the economic growth of Second Life
Second Life
Second Life is an online virtual world developed by Linden Lab. It was launched on June 23, 2003. A number of free client programs, or Viewers, enable Second Life users, called Residents, to interact with each other through avatars...
an amateur analyst in 2008 estimated the income inequity in Second Life's economy as worse than has ever been recorded in any real economy: a Gini coefficient
Gini coefficient
The Gini coefficient is a measure of statistical dispersion developed by the Italian statistician and sociologist Corrado Gini and published in his 1912 paper "Variability and Mutability" ....
of 90.2, a Hoover index of 77.8, and a Theil index
Theil index
The Theil index is a statistic used to measure economic inequality. It has also been used to measure the lack of racial diversity. The basic Theil index TT is the same as redundancy in information theory which is the maximum possible entropy of the data minus the observed entropy. It is a special...
of 91%. However, the application of these economic measures to a virtual world may be inappropriate where poverty is merely virtual and there is a direct relationship
Direct relationship
In mathematics and statistics, a positive or direct relationship is a relationship between two variables in which change in one variable is associated with a change in the other variable in the same direction. For example all linear relationships with a positive slope are direct relationships...
between in-game wealth and time spent playing.
Price comparison
Tools for the comparison of this secondary market have recently become more numerous. This has occurred as a response to alleviate the labor involved in leveling that requires hours, days or weeks to achieve. Being able to exchange real money for virtual currency provides the player purchasing power for virtual commodities. As such, players are guaranteed opportunities, increased skills and a fine reputation, which is a definite advantage over others.As MMORPG
MMORPG
Massively multiplayer online role-playing game is a genre of role-playing video games in which a very large number of players interact with one another within a virtual game world....
s continue to grow in popularity and the secondary markets grow with them (some industry experts have suggested that secondary market sales may total more than subscription sales by 2009), services like those above are likely to become less curiosities and more accepted means of interacting with these markets.
Taxation
Income from sale of virtual items is being considered as real revenue as players in such games have ascribed a real-world value onto them: "By taking any aspect of the game and connecting it directly to the real world, the games have only brought this possibility on themselves." And as that ascribed value is being increasingly converted into real money, attention is now being given by those in taxation law and in governments.Commentators in taxation law speculate "that profits made in virtual worlds could be taxable even before they are withdrawn as dollars." The speculation seems to based on the observation that, as one commentator said, "the easier it is to buy real goods with virtual currency (e.g. order a real life pizza) the more likely the IRS will see exclusively in-world profits as taxable."
Gambling regulation
Conversion between in-game and real-world currency has led to direct comparisons with other on-line games of chance as 'virtual winnings'. This is why gamers and companies engaged in this conversion, where it is permitted by a game, may fall under gambling legislation.During an interview with Virtual World News, Alex Chapman of the British law firm Campbell Hooper stated: "Now we’ve spoken with the gambling commission, and they’ve said that MMOGs aren’t the reason for the , but they won’t say outright, and we’ve asked directly, that they won’t be covered. You can see how these would be ignored at first, but very soon they could be in trouble. It’s a risk, but a very easy risk to avoid." He suggested that compliance might require MMOGs and related traders to obtain a gambling license, which is not excessively difficult in the EU.
When queried about games where real-world transactions for in-game assets are not permitted, but there is an 'unofficial secondary market', Chapman responded: "Ultimately the point is whether the thing that you win has value in money or money’s worth. If it does have value, it could be gambling." So to avoid regulation by these laws, the "operator would need to take reasonable steps to ensure that the rewards they give do not have a monetary value[,]" possibly by demonstrating enforcement of their Terms of Service
Terms of Service
Terms of service are rules which one must agree to abide by in order to use a service. Unless in violation of consumer protection laws, such terms are usually legally binding...
prohibiting secondary markets.
Virtual crime
Monetary issues can give a virtual world problems similar to those in the real world. In South KoreaSouth Korea
The Republic of Korea , , is a sovereign state in East Asia, located on the southern portion of the Korean Peninsula. It is neighbored by the People's Republic of China to the west, Japan to the east, North Korea to the north, and the East China Sea and Republic of China to the south...
, where the number of computer game players is massive, some have reported the emergence of gangs and mafia, where powerful players would threaten beginners to give money for their "protection", and actually steal and rob.
Other similar problems arise in other virtual economies. In the game The Sims Online
The Sims Online
The Sims Online was a massively multiplayer online variation on Maxis's highly popular computer game The Sims. It was published by Electronic Arts and released on December 17, 2002 for Microsoft Windows. In March 2007, EA announced that the product would be re-branded as EA-Land and major...
, a 17-year old boy going by the in-game name "Evangeline" was discovered to have built a cyber-brothel
Brothel
Brothels are business establishments where patrons can engage in sexual activities with prostitutes. Brothels are known under a variety of names, including bordello, cathouse, knocking shop, whorehouse, strumpet house, sporting house, house of ill repute, house of prostitution, and bawdy house...
, where customers would pay sim-money for minutes of cybersex
Cybersex
Cybersex, also called computer sex, Internet sex, netsex, mudsex, TinySex and, colloquially, cybering, is a virtual sex encounter in which two or more persons connected remotely via computer network send each other sexually explicit messages describing a sexual experience...
. Maxis
Maxis
Maxis is an American company founded as an independent video game developer in 1987. It is currently a subsidiary of Electronic Arts . Maxis is the creator of one of the best-selling computer games of all time, The Sims and its first sequel, The Sims 2...
canceled each of his accounts, but had he deposited his fortune in the Gaming Open Market he would have been able to keep a part of it.
A 2007 virtual heist has led to calls from some community members in Second Life
Second Life
Second Life is an online virtual world developed by Linden Lab. It was launched on June 23, 2003. A number of free client programs, or Viewers, enable Second Life users, called Residents, to interact with each other through avatars...
to bring in external regulation of these markets: "In late July, a perpetrator with privileged information cracked a stock exchange's computers, made false deposits, then ran off with what appears to be the equivalent of US$10,000, disappearing into thin air. Despite the seemingly small haul, this heist left investors feeling outraged and vulnerable."
In EVE Online
EVE Online
Eve Online is a video game by CCP Games. It is a player-driven, persistent-world MMORPG set in a science fiction space setting. Characters pilot customizable ships through a galaxy of over 7,500 star systems. Most star systems are connected to one or more other star systems by means of stargates...
however, theft and scamming other players is perfectly allowed within the game's framework as long as no real world trading is committed. Players are allowed to loot all items from fallen victims in battle, but there is a disincentive in the form of NPC
Non-player character
A non-player character , sometimes known as a non-person character or non-playable character, in a game is any fictional character not controlled by a player. In electronic games, this usually means a character controlled by the computer through artificial intelligence...
police intervention in higher-security space. Virtual possessions valued in the tens of thousands of USD have been destroyed or plundered through corporate espionage and piracy
Piracy
Piracy is an act of robbery or criminal violence at sea. The term can include acts committed on land, in the air, or in other major bodies of water or on a shore. It does not normally include crimes committed against persons traveling on the same vessel as the perpetrator...
. This has resulted in widespread retributive warfare and crime between various player corporation
Corporation
A corporation is created under the laws of a state as a separate legal entity that has privileges and liabilities that are distinct from those of its members. There are many different forms of corporations, most of which are used to conduct business. Early corporations were established by charter...
s.
Black market
Many MMORPGS such as RuneScapeRuneScape
RuneScape is a fantasy massively multiplayer online role-playing game released in January 2001 by Andrew and Paul Gower, and developed and published by Jagex Games Studio. It is a graphical browser game implemented on the client-side in Java, and incorporates 3D rendering...
, World of Warcraft
World of Warcraft
World of Warcraft is a massively multiplayer online role-playing game by Blizzard Entertainment. It is the fourth released game set in the fantasy Warcraft universe, which was first introduced by Warcraft: Orcs & Humans in 1994...
, Guild Wars
Guild Wars
Guild Wars is an episodic series of online 3D fantasy role-playing games developed by ArenaNet and published by NCsoft. Although often defined as an MMORPG the developers define it as a CORPG due to significant differences from the MMORPG genre. It provides two main modes of gameplay—a cooperative...
, Warhammer Online, Lord of the Rings Online and Final Fantasy XI
Final Fantasy XI
, also known as Final Fantasy XI Online, is a MMORPG developed and published by Square as part of the Final Fantasy series. It was released in Japan on Sony's PlayStation 2 on May 16, 2002, and was released for Microsoft's Windows-based personal computers in November 2002...
strictly prohibit buying gold, items, or any other product linked with the game, with real world cash. RuneScape
RuneScape
RuneScape is a fantasy massively multiplayer online role-playing game released in January 2001 by Andrew and Paul Gower, and developed and published by Jagex Games Studio. It is a graphical browser game implemented on the client-side in Java, and incorporates 3D rendering...
went as far as making this practice impossible by removing unbalanced trades and their traditional player killing system (this was scrapped on February 1, 2011 after having been in place for 3 years), resulting in over 60,000 cancelled subscriptions in protest. Final Fantasy XI
Final Fantasy XI
, also known as Final Fantasy XI Online, is a MMORPG developed and published by Square as part of the Final Fantasy series. It was released in Japan on Sony's PlayStation 2 on May 16, 2002, and was released for Microsoft's Windows-based personal computers in November 2002...
and Warhammer Online both have entire task forces dedicated to the removal of real money trading from the game. To control real money trading, EVE Online
EVE Online
Eve Online is a video game by CCP Games. It is a player-driven, persistent-world MMORPG set in a science fiction space setting. Characters pilot customizable ships through a galaxy of over 7,500 star systems. Most star systems are connected to one or more other star systems by means of stargates...
created an official and sanctioned method to convert real world cash to in-game currency; players can use real world money to buy a specific in-game item which can be redeemed for account subscription time or traded on the in-game market for in-game currency.
Stability
For a persistent world to maintain a stable economy, a balance must be struck between currency sources and sinks. Generally, games possess numerous sources of new currency for players to earn. However, some possess no effective "sinks", or methods of removing currency from circulation. If other factors remain constant, greater currency supply weakens the buying power of a given amount; a process known as inflationInflation
In economics, inflation is a rise in the general level of prices of goods and services in an economy over a period of time.When the general price level rises, each unit of currency buys fewer goods and services. Consequently, inflation also reflects an erosion in the purchasing power of money – a...
. In practice, this results in constantly rising prices for traded commodities. With the proper balance of growth in player base, currency sources, and sinks, a virtual economy could remain stable indefinitely.
As in the real world, actions by players can destabilize the economy. Gold farming
Gold farming
Gold farming is playing a massively multiplayer online game to acquire in-game currency which is then sold to other players. People in China and in other developing nations have held full-time employment as gold farmers....
creates currency within the game more rapidly than usual, exacerbating inflation. In extreme cases, a cracker may be able to exploit the system and create a large amount of money. This could result in hyperinflation
Hyperinflation
In economics, hyperinflation is inflation that is very high or out of control. While the real values of the specific economic items generally stay the same in terms of relatively stable foreign currencies, in hyperinflationary conditions the general price level within a specific economy increases...
.
In real world entire institutions are devoted to maintaining desired level of inflation. This difficult task is a serious issue for serious MMORPG's, that often have to cope with mudflation
Mudflation
Mudflation, from MUD and inflation, is an economic issue that exists only in massively multiplayer online games. Mudflation occurs when future additions to a game causes previously acquired resources to decline in value...
.
Capital
In these virtual economies, the value of in-game resources is frequently tied to the in-game power they confer upon the owner. This power allows the user, usually, to acquire more rare and valuable items. In this regard, in-game resources are not just tradable objects but can play the role of capitalCapital (economics)
In economics, capital, capital goods, or real capital refers to already-produced durable goods used in production of goods or services. The capital goods are not significantly consumed, though they may depreciate in the production process...
.
Players also acquire human capital
Human capital
Human capitalis the stock of competencies, knowledge and personality attributes embodied in the ability to perform labor so as to produce economic value. It is the attributes gained by a worker through education and experience...
as they become more powerful. Powerful guilds often recruit powerful players so that player can acquire better items which can only be acquired by the cooperation among many players.
Other virtual economies
Virtual economies have also been said to exist in the "metagame" worlds of live-action role-playing games and collectible card games. Other "metagame" currencies have cropped up in games such as Everquest and World of Warcraft. Dragon kill pointsDragon kill points
Dragon kill points or DKP are a semi-formal score-keeping system used by guilds in massively multiplayer online games. Players in these games are faced with large scale challenges, or raids, which may only be surmounted through the concerted effort of dozens of players at a time...
or DKP are a semi-formal score-keeping system used by guilds in massively multiplayer online game
Massively multiplayer online game
A massively multiplayer online game is a multiplayer video game which is capable of supporting hundreds or thousands of players simultaneously. By necessity, they are played on the Internet, and usually feature at least one persistent world. They are, however, not necessarily games played on...
s. Players in these games are faced with large scale challenges, or raids
Raid (gaming)
A raid is a type of mission in a video game in which a very large number of people attempt to defeat a boss monster...
, which may only be surmounted through the concerted effort of dozens of players at a time. Dragon kill points are not official currencies, but are created and managed by endgame guilds to manage distributions of rewards in those raids.
Moderation on social news and networking sites
On a number of discussion and networking sites, such as SlashdotSlashdot
Slashdot is a technology-related news website owned by Geeknet, Inc. The site, which bills itself as "News for Nerds. Stuff that Matters", features user-submitted and ‑evaluated current affairs news stories about science- and technology-related topics. Each story has a comments section...
Reddit
reddit is a social news website where the registered users submit content, in the form of either a link or a text "self" post. Other users then vote the submission "up" or "down," which is used to rank the post and determine its position on the site's pages and front page.Reddit was originally...
, care2
Care2
Care2 is a social network website that was founded by Randy Paynter in 1998 to help connect activists from around the world. It has a membership of more than 17 million people....
and Yahoo! Answers
Yahoo! Answers
Yahoo! Answers is a community-driven question-and-answer site or a knowledge market launched by Yahoo! on June 28, 2005 that allows users to both submit questions to be answered and answer questions asked by other users...
, points are gained through the garnering of trust evidenced in upward moderations of posted content
Trust metric
In psychology and sociology, a trust metric is a measurement of the degree to which one social actor trusts another social actor...
; however, as stated by Slashdot co-founder CmdrTaco, his implementation of user moderation
Moderation system
On Internet websites which invite users to post comments, a moderation system is the method the webmaster chooses to sort contributions which are irrelevant, obscene, illegal, or insulting with regards to useful or informative contributions....
was not intended as a currency, even though it has evolved on other discussion-oriented sites into such a system. On some such sites, the accumulation of "karma points" can be redeemed in various ways for virtual services or objects, while most other sites do not contain a redemption system.
On some sites, points are gained for inviting new users to the site.
Controversy
A game's synthetic economy often results in interaction with a "real" economy; characters, spells, and items may be sold on online auction websites like eBayEBay
eBay Inc. is an American internet consumer-to-consumer corporation that manages eBay.com, an online auction and shopping website in which people and businesses buy and sell a broad variety of goods and services worldwide...
for real money. While many game developers, such as Blizzard
Blizzard
A blizzard is a severe snowstorm characterized by strong winds. By definition, the difference between blizzard and a snowstorm is the strength of the wind. To be a blizzard, a snow storm must have winds in excess of with blowing or drifting snow which reduces visibility to 400 meters or ¼ mile or...
(creator of World of Warcraft
World of Warcraft
World of Warcraft is a massively multiplayer online role-playing game by Blizzard Entertainment. It is the fourth released game set in the fantasy Warcraft universe, which was first introduced by Warcraft: Orcs & Humans in 1994...
), prohibit the practice, it is common that goods and services within virtual economies will be sold on online auction sites and traded for real currencies.
According to standard conceptions of economic value (see the subjective theory of value), the goods and services of virtual economies do have a demonstrable value. Since players of these games are willing to substitute real economic resources of time and money (monthly fees) in exchange for these resources, by definition they have demonstrated utility
Utility
In economics, utility is a measure of customer satisfaction, referring to the total satisfaction received by a consumer from consuming a good or service....
to the user.
On January 2010, Blizzard stepped up its offensive on account security scams with the launch of a new website. The new Battle.Net account security website hopes to highlight the importance of keeping it safe when it comes to subscribers' accounts.
These pages are part of a larger effort to provide you with the knowledge and tools necessary to identify and report threats to your account’s safety, to spotlight ways in which we work to fulfill our security commitment, and to act as a helpful resource in case someone manages to steal account information from you.
Ongoing campaign by WoW fan sites to boycott gold ads on their sites is just one of several community efforts to raise awareness against crackers.
Gold sellers and leveling services are responsible for the vast majority of all account thefts, and they are the number-one source of World of Warcraft-related phishing attempts, spyware, and even credit card theft. Players who buy gold actively support spam, hacks, and keyloggers, and by doing so diminish the gameplay experience for everyone else.
Some virtual world developers officially sell virtual items and currency for real-world money. For example, the MMOG There
There (internet service)
There is a 3D online virtual world created by Will Harvey and Jeffrey Ventrella. There Inc. was founded in the spring of 1998. Closed beta began in July 2001, with various stages of beta following, and ending with an October 2003 launch date...
has therebucks that sell for US dollars. If the currency in Second Life
Second Life
Second Life is an online virtual world developed by Linden Lab. It was launched on June 23, 2003. A number of free client programs, or Viewers, enable Second Life users, called Residents, to interact with each other through avatars...
, the Linden Dollars, can be easily acquired with real money, the reverse is done through a market place owned by Linden Lab, but is not guaranteed, as the TOS of linden Lab explicitly says that Linden dollars are not redeemable. Rates would fluctuate based on supply and demand, but over the last few years they have remained fairly stable at around 265 Linden Dollars (L$) to the US Dollar, due to "money creation
Money creation
In economics, money creation is the process by which the money supply of a country or a monetary region is increased due to some reason. There are two principal stages of money creation. First, the central bank introduces new money into the economy by purchasing financial assets or lending money...
" by Linden Lab. The currency in Entropia Universe
Entropia Universe
Entropia Universe is a massively multiplayer online virtual universe designed by the Swedish software company MindArk, based in Gothenburg. Entropia uses a micropayment business model, in which players may buy in-game currency with real money that can be redeemed back into real world funds at a...
, Project Entropia Dollars (PED), could be bought and redeemed for real-world money at a rate of 10 PED for U.S.$ 1. On December 14, 2004, an island in Project Entropia sold for U.S. $26,500 (£13,700). One gamer also purchased a virtual space station
Space station
A space station is a spacecraft capable of supporting a crew which is designed to remain in space for an extended period of time, and to which other spacecraft can dock. A space station is distinguished from other spacecraft used for human spaceflight by its lack of major propulsion or landing...
for U.S. $100,000 (£56,200) and plans to use it as a virtual nightclub
Nightclub
A nightclub is an entertainment venue which usually operates late into the night...
.
Many Korean virtual worlds (such as Flyff
Flyff
Flyff is a fantasy MMORPG by Korean development company Gala Lab .Flyff is a fairly typical party-oriented grinding game where no character can do everything, and efficient play requires working in groups to level up by killing monsters, or Masquerpets...
) and other worlds outside that country (such as Archlord
ArchLord
ArchLord is a 3D fantasy MMORPG developed by NHN Games and Codemasters Online Gaming . The game was released in March 2005 in South Korea and October 2006 in North America and Europe, receiving poor reviews from the gaming press. In August 2007, ArchLord became free-to-play to coincide with the...
and Achaea, Dreams of Divine Lands
Achaea, Dreams of Divine Lands
Achaea, Dreams of Divine Lands is a roleplay-focused, text-based multi-user dungeon released in 1997. It was published by Achaea LLC, now known as Iron Realms Entertainment...
) operate entirely by selling items to players for real money. Such items generally cannot be transferred and are often used only as a means to represent a Premium subscription via a method which is easily integrated into the game engine.
These intersections with real economies remain controversial. Markets that capitalize in gaming are not widely accepted by the gaming industry. Reasons for this controversy are varied. Firstly, the developers of the games often consider themselves as trying to present a fantasy experience, so the involvement of real world transactions takes away from it. Further, in most games, it would be unacceptable to offer another player real currency in order to have them play a certain way (e.g., in a game of Monopoly
Monopoly (game)
Marvin Gardens, the leading yellow property on the board shown, is actually a misspelling of the original location name, Marven Gardens. The misspelling was said to be introduced by Charles Todd and passed on when his home-made Monopoly board was copied by Charles Darrow and thence to Parker...
between friends, offering another player a real dollar in exchange for a property on the board); and for this to be necessary or valuable may indicate a Kingmaker scenario
Kingmaker scenario
A kingmaker scenario, in a game of three or more players, is an endgame situation where a player unable to win has the capacity to determine which player among others is the winner. Said player is referred to as the kingmaker or spoiler...
within the game. However, such rules of etiquette need not apply, and in practice they often don't, to massive game worlds with thousands of players who know one another only through the game system.
Further and more involved issues revolve around the issue of how (or if) real-money trading subjects the virtual economy to laws relating to the real economy. Some argue that to allow in-game items to have monetary values makes these games, essentially, gambling
Gambling
Gambling is the wagering of money or something of material value on an event with an uncertain outcome with the primary intent of winning additional money and/or material goods...
venues, which would be subject to legal regulation as such. Another issue is the impact of taxation that may apply if in-game items are seen as having real value. If (for example) a magic sword is considered to have real-world value, a player who kills a powerful monster to earn such a sword could find himself being charged tax on the value of the sword, as would be normal for a "prize winning". This would make it impossible for any player of the game not to participate in real-money trading.
A third issue is the involvement of the world's developer or maintenance staff in such transactions. Since a developer may change the virtual world any time, ban a player, delete items, or even simply take the world down never to return, the issue of their responsibility in the case where real money investments are lost through items being lost or becoming inaccessible is significant. Richard Bartle argued that this aspect negates the whole idea of ownership in virtual worlds, and thus in the absence of real ownership no real trade may occur. Some developers have acted deliberately to delete items that have been traded for money, as in Final Fantasy XI
Final Fantasy XI
, also known as Final Fantasy XI Online, is a MMORPG developed and published by Square as part of the Final Fantasy series. It was released in Japan on Sony's PlayStation 2 on May 16, 2002, and was released for Microsoft's Windows-based personal computers in November 2002...
, where a task force was set up to delete characters involved in selling in-game currency for real-world money.
However, Second Life
Second Life
Second Life is an online virtual world developed by Linden Lab. It was launched on June 23, 2003. A number of free client programs, or Viewers, enable Second Life users, called Residents, to interact with each other through avatars...
has shown a legal example which may indicate that the developer can be in part held responsible for such losses. Second Life at one stage, offered and advertised the ability to "own virtual land", which was purchased for real money. In 2007, Marc Bragg, an attorney, was banned from Second Life
Second Life
Second Life is an online virtual world developed by Linden Lab. It was launched on June 23, 2003. A number of free client programs, or Viewers, enable Second Life users, called Residents, to interact with each other through avatars...
; in response he sued the developers for thereby depriving him of his land, which he – based on the developers' own statements – "owned". The lawsuit ended with a settlement in which Bragg was re-admitted to Second Life. The details of the final settlement were not released, but the word "own" was removed from all advertising as a result. (It should be noted that Bragg purchased his land directly from the developers, and thus they were not an uninvolved third party in his transactions.)
See also
- Electronic moneyElectronic moneyElectronic money is money or scrip that is only exchanged electronically. Typically, this involves the use of computer networks, the internet and digital stored value systems...
- Simulated realitySimulated realitySimulated reality is the proposition that reality could be simulated—perhaps by computer simulation—to a degree indistinguishable from "true" reality. It could contain conscious minds which may or may not be fully aware that they are living inside a simulation....
- Social simulationSocial simulationSocial simulation is a research field that applies computational methods to study issues in the social sciences. The issues explored include problems in sociology, political science, economics, anthropology, geography, archaeology and linguistics ....
- Virtual realityVirtual realityVirtual reality , also known as virtuality, is a term that applies to computer-simulated environments that can simulate physical presence in places in the real world, as well as in imaginary worlds...
External links
- Virtual Economy Research Network bibliography – a comprehensive bibliography of publications related to virtual economy
- Castronova, EdwardEdward CastronovaEdward "Ted" Castronova is a Professor of Telecommunications at Indiana University Bloomington. He is known in particular for his work on the economies of synthetic worlds.- Biography :...
. "Virtual Worlds: A First-Hand Account of Market and Society on the Cyberian Frontier," CESifo Working Paper No. 618, December 2001. - Castronova, Edward. "On Virtual Economies," CESifo Working Paper Series No. 752, July 2002.
- Castronova, Edward. "The Price of 'Man' and 'Woman': A Hedonic Pricing Model of Avatar Attributes in a Synthethic World," CESifo Working Paper Series No. 957, June 2003.
- Dr. Richard A. BartleRichard BartleRichard Allan Bartle is a British writer, professor and game researcher, best known for being the co-creator of MUD1 and the author of the seminal Designing Virtual Worlds. He is one of the pioneers of the massively multiplayer online game industry.-Life and career:Bartle received a Ph.D...
, Pitfalls of Virtual Property – A philosophical case against the concept of "virtual property" ownership. - Virtual Economies The Economist, Jan 2005, (subscription)
- Zonk (Slashdot). "Virtual Island Sells For $26,500". 14 December 2004.
- Fairfield, Joshua, "Virtual Property". Boston University Law Review, Vol. 85, 2005
- Internet Gambling Regulation Present and Future – Mark Methenitis' Essay for Texas Tech University School of LawTexas Tech University School of LawThe Texas Tech University School of Law is an ABA-accredited law school located on the campus of Texas Tech University in Lubbock, Texas. Known nationally for their continual success in trial advocacy competitions, the school focuses on forming practical lawyers who are ready to practice law upon...
detailing internet gambling and economies within MMORPG's and the problems that will be faced in the future. - Economic Theory and MMOGs – Powerpoint presentation by Sam Lewis, a designer working with SOESony Online EntertainmentSony Online Entertainment is a game development and game publishing division of Sony that is best known for creating massively multiplayer online games, including EverQuest, EverQuest II, The Matrix Online, PlanetSide, Star Wars Galaxies, Free Realms, and Vanguard: Saga of Heroes, DC Universe...
, on the interaction between economic theory and MMO design. - Virtual Goods: the next big business model by Susan Wu
- Lastowka, Greg and Hunter, Dan. "The Laws of the Virtual Worlds," California Law Review
- Yoon, Ung-Gi. "Real Money Trading in MMORPG items from a Legal and Policy Perspective", South Korean Judge's thought on RMT in virtual world