MMOs suffer from a strange problem,
at least in a real world economic sense.
Everybody is printing money all the time.
For years, every massive multiplayer game
has struggled with this.
And as any old school MMO player will tell you,
the results were as devastating as they
often were hilarious. But of late, games
have stolen a very real world economic solution.
We've covered this a bit before,
but basically every time you kill a
monster in an MMO it drops money or a
piece of loot that a vendor can
conveniently convert to money for you.
This money doesn't come from anywhere.
There's not a limited supply of it at all.
Rather, it's just magically created every
time you win a fight. And with hundreds
of thousands of players killing monsters
24 hours a day, 365 days a year
that's a lot of money being constantly
added to the economy. Imagine what this
would do to a real world economy.
Imagine if rather than your central bank
having the exclusive right to print
money and keeping careful tabs on how
much money is out there, everybody was
just printing money all the time.
You would hit hyperinflation pretty fast
The value of the currency would plummet
and the loaf of bread that costs five
dollars one day would cost 50 the next week.
And then 5,000. And then people
would just stop accepting money for
bread altogether. Your currency would be
effectively worthless. And that is
exactly what happens in most MMOs.
In Asheron's Call, the in-game currency
became so inflated that shards were used
as money. In Diablo 2, stones of Jordan
rapidly replaced gold. And in Gaia Online,
the currency became so worthless that
the company started offering to donate
two hundred and fifty dollars to charity
every time the players threw away 15
trillion gold. Players just abandoned the
designated currency and chose a
different, more restricted currency
because they could no longer trust the
initial game currency to retain any
value at all. And this has a devastating
impact on these games.
It makes the game less approachable for
new players. It means that returning
players come back to a now worthless
bank account.
It makes it harder for players to
exchange goods, and in some poorly
supported MMOs, it's even rendered the
in-game auction house unusable.
So of course, there were all sorts of ways
we always used to try to design around this.
We would put money sinks in the game.
Things like auction house fees,
vendor-only consumable items that were
practically necessary to play. Guild dues,
or even property tax for owning in-game
real estate. Those sinks were designed to
remove currency from the game. When you
paid for any of those items or services,
the money you paid with simply vanished,
which theoretically would have a
deflationary effect. But as we all know
when it comes to MMO players there is
practically no money sink you can build
that's going to exceed how much people
are willing to grind. And even if you
could get close,
well that could hurt your economy, too.
And honestly, it might make your game less
engaging to play if the player feels
like they're spending all of their time
just paying fees. It's not really why we
play games. But lately it seems like
designers have discovered another solution.
A reserve currency. In the real
world, almost every nation holds onto a
bunch of currency from other countries
to serve as a reserve currency.
This reserve currency is used for
international transactions, but far more
importantly to us, it's used to anchor
the local currency. Because, after all, if
you have 500 billion dollars in the bank
and you tell everybody that they can
trade 50 of your currency for one u.s.
dollar
well then the least your currency is
worth is 2 cents. It can't go below that
so long as you've got some of your
reserve currency left. If your currency
starts to inflate, then people start to
trade in your local money for the
reserve currency, effectively creating a
floor for what your currency is worth so
long as you still have a supply of the
reserve currency. So how does this work
in MMOs? Well of late, many MMOs have
started to allow players to buy things
of real-world value with in-game
currency, like Plex in EVE Online.
Many of the free-to-play MMOs have gone one step
even further and let players buy their
microtransaction currency -- the currency
that has to be bought with real money --
from other players for currency earned
in game. By tying the in-game currency to
real world currency, which has real value,
the in-game currency now can't lose all
of its value. But that alone didn't end
up being enough to prevent
hyperinflation in a lot of these games,
so two other aspects, somewhat lifted
from how real world reserve currencies work,
were put into place in order to overcome
the infinite money printing that MMOs
naturally engage in. The first is
illiquidity. In the real world, reserve
currencies can't really be traded among
the local populace. Like if you go to
China, even though the Chinese keep huge
amounts of US dollars as reserve
currency, you can't really simply trade
US dollars for things on the street.
You usually need to convert your money into
yuan first. And while clearly this is
not a hundred percent true in the real
world because the real world basically
breaks every rule at some point, you can
make it a hundred percent true in games
because you set the rules of that world.
You can prevent players from trading the
purchased currency. Players can convert
their earned currency to purchased
currency, but that currency can't then be
traded to players except by converting
it back to earn currency through the
same system. The purchased currency can
only ever be spent. You know what, this
would actually probably be easier to
follow if I had named these currencies
and gave some examples or something.
So, let's call the currency you earn
in-game by killing monsters and stuff
silver pieces, and the currency that
you've gotta pay real money for, those
are diamonds. In our hypothetical game,
you can use the game's currency exchange
to, let's say, pay 10,000 silver pieces to
buy a hundred diamonds.
Once you've done that, you either have to
spend those 100 diamonds in the in-game
store, thereby permanently removing
those diamonds from the economy, or you
can just sell the diamonds to somebody
else for 10,000 silver to get your money back.
You can't ever use diamonds to buy
things from players. Like, you can't offer
to buy somebody's Epic Sword of
Awesomeness using your newly acquired
diamonds because if you could do that,
diamonds would just become the new
currency and people would abandon silver
entirely. But, because there's a whole
host of items that you can't buy with
diamonds, even players with a lot of
money to spend on the game still need to
earn that in-game silver, and thus will
trade their diamonds for it.
In our real-world analog, buying something with
diamonds is basically like buying
something from a foreign market.
That money leaves the economy, but in return
you get a good or a service that you
couldn't purchase locally. But clearly in
this scenario, if silver is added to the
world faster than diamonds, the price of
silver to diamonds will inflate.
Creating a reserve currency might
help you avoid the problem of silver
becoming totally worthless, but you
haven't yet prevented crippling inflation.
To do that, you need to take
one more step. And that is setting a
maximum limit on how much a diamond can cost.
Back when we used the gold standard
in the real world which we talked about
a little bit in this Extra History
series on paper money, and gold was used
as the reserve currency internationally,
nations would just set a fixed price for
how much an ounce of gold was worth.
They would say, alright
the government says you can always trade
23 US dollars for an ounce of gold.
And all of a sudden, the very least a dollar
could be worth. Or put another way, the
most it could inflate to is 120 third of
an ounce of gold. Now in the real world,
there's all sorts of problems and
complications with this that involve the
limit on the gold supply and how hard it
is to respond to economic shocks when
you have declared your currency worth a
certain amount of gold, but we don't have
to deal with any of that in games. And
this form of currency reserve was really
really good at one thing: keeping
inflation down. Now, because money is
still being perpetually printed in your
game, you are still gonna need money
sinks. And even with those, because there
are items that simply can't be bought
with diamonds, some inflation is going to
occur. But, with these systems in place,
instead of hitting hyperinflation, you'll
get something much closer to the
rational real-world inflation that comes
with an expanding economy. And while
there are a million other complexities
with reserve currencies that I've not
been able to even scratch the surface of
in this 10-minute video, and because
there's other weirdness with MMOs that
throws a bit of a wrench into the whole
thing,
this stuff isn't a magic bullet. It's not
a perfect solution. But by stealing one
of the quintessential economic tools
that makes our real-world run, we are one
huge step closer to solving one of the
oldest problems in MMO design.
See you next time!