Tobold's Blog
Sunday, October 25, 2015
Just another virtual currency

Some stories about EVE Online have headlines like "Spaceships worth more than $200,000 destroyed in biggest virtual space battle ever", suggesting that a lot of real dollars have been lost. But of course what *was* destroyed was spaceships worth a certain amount of ISK, the virtual currency of EVE. Much of that worth was created by mining and other in-game activities, and not bought with real money. Virtual currencies that can be bought and/or sold for real money, or exchanged for things worth real money, walk a fine line between real and virtual currency.

Technically these are all virtual currencies. Most countries require special banking permits to allow a company to trade with real currencies. Game companies don't have that sort of permit, so if asked they would say that those currencies are all virtual. That also absolves them from any liability if any virtual currency is lost in a bug or when the servers shut down. Virtual property rights are still an exception, so in most cases you have no way of redress if your virtual currency disappears for some reason.

Especially easy to treat as virtual currency are the cases where you didn't spend real money on them. For example I have the equivalent of $400 in my WoW account in the form of gold and tokens, but I don't think of those as real money. I earned the gold by playing, and since the tokens were introduced I didn't spend any more real money on WoW. For me that is just a weird game design decisions (why should I and people like me who just happen to be interested in making WoW gold play for free, and not the others?), and not a real money issue.

In the other direction, games that want you to spend as much as possible on the game almost always try to disguise the real cost by using virtual currencies: You don't buy the sword of uberness for $9.99, you buy it for 1,000 diamonds that you can buy for $9.99. And then of course you get some diamonds for free for in-game activities, and diamond bonuses here, and rewards for spending diamonds there, and you end up thinking of diamonds as just another virtual currency. It is easier to spend money if you don't think of it as real money, but consider it a virtual currency.

What helps is that the "whales" of Free2Play games are in reality just dwarf sperm whales, the smallest whales on Earth. To be considered a whale in Las Vegas you would need to gamble with hundreds of thousands of dollars, up to millions, while a typical Free2Play whale spends a few hundred dollars per month on the game. With 20% of US households having an annual income above $100,000, there are enough people around that can afford spending a few hundred dollars a month on games. People who can afford it will spend $10 on virtual currency as easily as giving a $10 tip in a restaurant. As long as the money is coming from the "disposable" part of the budget, it nearly is like a virtual currency, like play money.

Of course while many games stop rewarding you for spending after the first few hundred bucks, a few games are designed to be bottomless and can easily accommodate somebody spending thousands of dollars on them. The guys spending all his savings on a game makes for a good anecdotal story, but up to now there is no evidence of that happening all that often. Poor people are more at risk of losing their money in gambling than in gaming. That has to do with Maslow's hierarchy of needs, the rewards of video games typically fulfill needs of esteem, which is already in the upper part of the pyramid. Status symbols are less important for people struggling to make rent.

So while lots of the stories trying to link games with huge amounts of lost money and resulting destitution are more sensationalist than reporting on a real and present danger, another argument is most certainly true: Spending hundreds of dollars on a game is bad value for money. By better selecting the games you play you can achieve the same entertainment value and the same feeling of achievement for much cheaper. While the currencies in question might be in between real and virtual, the rewards of games are all just virtual. Feel free to spend hundreds of dollars on virtual rewards, but be aware that the rewards aren't real, and any status acquired is limited to that game, or even just one server of that game.

Tobold: "For me that is just a weird game design decisions (why should I and people like me who just happen to be interested in making WoW gold play for free, and not the others?), and not a real money issue."

Why would it be weird? In order for you to be able to buy a token, someone else has to give Blizzard money to allow you to RMT your gold for gametime.
You are playing for "free" by enabling someone else to not care about making gold who in turn is willing to pay for your sub.
Well, you could think of rewarding other types of players that contribute to the game. What makes my contribution to the game worth $400, while let's say a guild leader's contribution is valued at $0?
Well, you could think of rewarding other types of players that contribute to the game.


Why is working the auction house so 'valuable'? (Hint, it's not.) Sure, I work the auction house too, but I'm adding nothing to the game, per se. I can delude myself by thinking that I'm an indefensible system that brings goods to players that need them, but that's not even true.

What if the raid leader was rewarded with 2000 gold for killing each raid boss? (Actual reward would vary by raid and difficulty.) This would give people an incentive for running successful raids. People that were good at doing that would then have an incentive to run raids with the best chance of success.
Doh. 'indispensable'. Spell check must be monitored carefully, yo.
There are two things, one is that running a guild is reward in itself as is leading a raid.
The other one is the question of who would pay the reward? Blizzard, creating even more gold?
Another option would be those who use your service - and for that you don't need Blizzards interaction. If someone is good at leading, then selling those skills would be the proper course.
If you think of it, you could as well have a guild tax where you are paying the leadership for their effort of leading - but most people would laugh at that thought while they are buying stuff from the auction house.
So why are your contributions worth $400? Because players are willing to pay for your service.
Since 2009, "Entropia Universe gets real world banking licence" "User-to-user transactions within the cyber world exceeded $420 million during 2008."

The IRS has ruled that bitcoins are not a currency but a good.

IANAL, but I think people over-emphasize the direct cash conversion. If I pay you for your labors in cash, bitcoins, barter tokens, Amazon gift certificates or ISK, you owe income tax in the US.

Economically, it's the same opportunity cost mistake that cause people to say that mats they mined which were worth 1000g are free when computing cost of goods. I would rather someone steal a $10 bill from my wallet than a $15 WoW game card or Amazon gift certificate even if the latter have no fixed conversion.
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