Introduction
Old School RuneScape, EVE Online, World of Warcraft, and all the big-name games, and gems of our time, all share one thing in common. Though their plotlines, their graphics, and even their currency differ, they all have an in-game, player-run economy. This is precisely what we see in many MMOs today, but what are these economies? Are they important? And do they have real-world influences?
‘Virtual Economy’ : What Does It Mean?
Let’s start off with what a video game economy truly is. This falls under the umbrella term of ‘virtual economies. In layman’s terms, a virtual economy is an economy found in a virtual world. In this, people exchange virtual goods and services for in-game or real-world currencies. This is the system that drives most MMORPGs today. It’s the backbone of what draws players to spend time in a game, enticing them with rewards in-game, better equipment, etc, this is commonly referred to as “grinding” ( GET YOUR HEAD OUT OF THE GUTTER!!!).
Let’s take the example of Old School RuneScape. This is a popular MMORPG, which uses the concept of a virtual economy. In-game, there’s a place called the “Grand Exchange”, where players can trade items and gear for the in-game currency, gold. This can tell us about another factor in these economies, they’re more likely than not, player-run. This allows for natural changes in the price of items and helps the economy balance itself over time, rather than needing developer attention.
Virtual Economies: The Open, The Closed, The Distributed
However, not all virtual economies are the same. They can be broadly classified into 3 main divisions, closed, open, and distributed openly. Closed economies are found in games like Fortnite, where the developer doesn’t allow 3rd party sale of in-game items, i.e, money goes in, but no money comes out. Whereas open economies are found in games like The Sandbox, where players can buy “LAND” that other users have created, while the developers take a small cut, i.e, money in, money out. Finally, there are open-distributed economies. They are only slightly different from open economies in the way that a decentralized infrastructure that no single person owns is used, unlike the central authority in open economies.
Virtual Currencies: The Dollar of Virtual Space
In the above paragraphs, we’ve mentioned “virtual currencies” and “in-game currencies” a lot, but what exactly are they? These are the currencies that we find within the virtual space or within a game, that are used to facilitate the exchange of goods and services. Think of it as a Dollar or Euro or Rupee, etc of the digital world. These currencies too are of 2 types. The first is the standard currency, this is what one can obtain from simply interacting with the vast virtual worlds. Whereas, premium currency requires one to pay to obtain it, but offers a lot of benefits as well.
Let’s take a look at a popular mobile example, War Robots. In the game, you have 2 currencies, Silver (Ag) and Gold (Au). Silver is the common currency, which can be used to buy robots and weapons and is obtained from playing matches. Gold is a premium currency, with which one can buy overpowered weapons, robots, speed up tasks, etc. You can obtain gold in small amounts from matches, but for a significant amount, you need to break out the wallet.
Virtual Spaces : The Applications and The Acquisitions
After reading all this, you may be confused as to what the real use of these economies is. It seems fun to interact with but nothing more and nothing less, just a way to get ahead in a hobby. However, wrong you are young padawan. These economies, as explained in the title, are like the shadows of real-world economies, and provide valuable insights that one simply can’t obtain from analyzing real economies.
Firstly, these virtual economies are imperative for research. One simply can’t expect or wait for a country’s economy to crash or inflate to analyze it. Not only is that inhumane, but it also would be next to impossible, since most world powers have highly qualified economists at their disposal. So, what does one do? Analyze economies of games of course! For example, EVE Online, it’s a massive open-world space game with more than 400,000 players participating in its market, that’s more people than the population of Iceland! Economies such as this, provide extraordinary insight with rich data, into methods of banking, trade, and taxation that simply can’t be tried in the real world due to inherent risk factors. Guðmundsson, an economist working for the IMF, himself analyses the economy of EVE, finding the causes of inflation, deflation, and purchases. In his own words, EVE’s economy is like that of a mini country!
There’s also another unfortunate use for these economies, specifically the currencies. Many people from poverty-stricken and deprived states like Venezuela depend on the virtual world for their income. The economy in Venezuela is so inflated that it's comparable to that of the Weimar Republic! It's an absurd truth that in many parts of the country, it's more profitable to log on to Old School RuneScape, “farm” gold, and pawn it off to earn money, even when compared to minimum wage.
Virtual Economies: The Finale
So, in conclusion, these video game economies, despite sounding like a trivial matter, are true of great importance and scale, to economists worldwide, gamers, and gold farmers alike. Despite these systems being complex, we interact with them every day, and possibly in the future, one that one of you may create. I’d like to leave you all with a question, What’s your opinion? Do these economies truly matter or not? And do they play a role in our society today?
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