Tag: Virtual

The way that we comprehend money, in terms of its value to us, is mainly based on trust and shared belief in common value. This isn’t really news to anyone, and it does not stop being true if you stop thinking of currency and start thinking of precious metals such as gold instead; while a handful of hard commodities retain value as material used in manufacturing, much of the reason we value gold so highly is because we perceive it as valuable. With that out of the way we can really start to think of why we value money and how we go about doing it, and with that in mind let’s analyze the complex phenomenon of the digital age: the virtual economy.

The 1st place to look for an example of a virtual economy is the world of online gaming. Massively Multiplayer Online Roleplaying Games (MMORPGs or MMOs for short) feature in-game economies of varying robustness as part of the structure of the game. Depending on the game, this may range from common trading of goods between players to auction houses using in-game currency to manipulation of in-game investments, commonly including unaffiliated however inextricably linked side economies involving exchanges of real currency for in-game items through eBay or other sites specifically created for this purpose.

One game in particular, EVE Online, focuses heavily on economics and trade in its gameplay, with players often taking on the roles of outer-space traders and merchants. What makes EVE particularly interesting is its approach to the interaction of real money to in-game commodities: because of rampant abuse by unscrupulous individuals, the game’s 30-day subscriptions have been commoditized as in-game PLEX items which can be actual items that can be picked up and carried around. CCP, the game’s publisher, doesn’t place any additional restrictions or penalties on player behavior, so it is not only possible for someone to steal these kinds of PLEXes and resell them, it is a definite concern given the community of in-game pirates and raiders.

Between the open market economy and the sideline economy of selling PLEXes and in-game currency for real money, it is entirely possible to trade and raid in-game with the end result of turning a real world profit. Recently, one player manipulated other players in an investment scheme that allowed him to gain majority control of an in-game corporation and liquidate its assets. “Negative Bobby” walked away from his months-long scheme with some 850 billion worth of the game’s currency, that can then be used to buy over 2500 PLEX. Given that each PLEX is worth $ 14.95, “Harmful Bobby” was able to turn his months of gameplay and fictional currency into around $ 45,000 worth of cold hard cash. “Bobby” is just one example, indicative of the thousands of players who keep this virtual economy running.

Virtual economies don’t just appear online, though. In 1992, the Brazilian government launched a plan to save the country’s economy, which was in a terrible state since the Brazilian people didn’t trust the government to control inflation because of decades of failed attempts. This plan, at its core, involved using a new currency called the “real” (which means both royal and exact in Portuguese) which remained stable, while the old cruzeiro’s value fluctuated. Before the real, if you went to the store to buy an apple, the nation’s 80% inflation rate meant that you might see an apple for 1 cruizeiro one day and eight cruzeiros the next month. After the real was implemented, that same apple would cost 1 real every single day, but the number of cruzeiros that made up a real would be different from day to day.

Basically, the Brazilian government tried to trick its people into choosing to use a currency that was not tied to any other currency and did not have any physical representation as a way to convince the people that inflation was not an issue. And it worked. As of August 2010, the Brazilian inflation rate is 4.44%, and though a sizable number of people live below the poverty line there, the fact that Brazil still exists as a country and that an orange does not cost eight million reais shows that the plan was a success.

Let’s stop and consider that for a minute, because the comparison is extremely interesting. What this says, deep down, is that for a time the Brazilian economy was even less real than the economic system of a video game is nowadays. What’s more, each of them are entirely viable in their own way: the Brazilian government really succeeded in its goal, and the EVE economy acts like a real one in every way, with currency and commodities and relationships with other currencies. This means, at its core, that it’s entirely possible to create an economy wholesale online which can theoretically be linked to national economies in a way that actually affects the national economies in a meaningful fashion. The trick to it, as with any economy, is convincing people that it works.

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