Depending on the proverb, money is the root of all evil, time is money, or a fool and his money are soon parted. These age old adages about money are as true in the virtual world as they are in the real world.
While some form of virtual currency exists in the majority of video games, it has become much more prevalent with the quick growth of online multiplayer video games. Virtual currency acts as both spending power and as a way to keep score in most interactive multiplayer online games. The most elite players tend to make money fastest and are able to earn the best margins when selling to, buying from, or trading with other players.
Not all virtual currency is created equally. Three major types of virtual currency exist in the world of online gaming. The differences between these three types of currency relates to how the currency interacts with real world money. Generally, the type of currency in any game has to do with the business model for the game. The three types of currency are: exchangeable, purchasable, and in-game only.
Exchangeable – This form of virtual currency is the least common. It appears in games like Second Life or Entropia Universe. Exchangeable money can be bought and sold for real world money at a specific exchange rate. In games that use exchangeable money, you actually own your currency and may even own other virtual property in the game. The rules of these games allow for players to trade virtual goods and services for real money. Games that have exchangeable currency are usually designed to be economically stable and the earning of money is often the primary reason that many people play the game.
Purchasable – Purchasable currency is most common in free-to-play games, similar to the ones found on Facebook or MySpace, as well as games like Allods Online or Warstorm. Usually, a game with purchasable money also has a form of currency that is entirely in-game, though this is not always the case. Purchasable money allows the developers of the game to provide free play while earning income from players who want to spend money to gain an advantage in the game. Players who purchase virtual currency usually are provided with a significant enough advantage that most free-to-play players can not compete. This often creates some bad blood between the two types of players, but without purchasable currency, the developer could not afford to provide the game for free.
In-Game Only – Found in the majority of online games, this form of currency is the one that players are the most familiar with. Games like World of Warcraft, Eve Online, and City of Heroes all use in-game only money. In the vast majority of games that only use in-game money, all virtual money, items, and property belong to the developer and players simply gain the privilege of using it by paying a subscription fee. Buying or selling any virtual item or currency in the game for real world money is strictly forbidden by the game’s user agreement. Because the virtual currency has no real world value, the economy of these games usually is non-functional in a real world setting, as money can be created infinitely. Despite the lack of real world value, the user agreement, and unstable economy, currency peddlers can be found in the majority of these games. Known as gold sellers in World of Warcraft, these are people who sell in-game money for real world money. The activity is much less profitable than it once was, but continues to this day and is a banning offense for anyone caught buying or selling.
Despite the fact that virtual economies are not governed by real world economic principles, the majority of online games still have a relatively functional in-game economy. Most notably, the in-game economy of Second Life is so robust that there are individuals who make their income entirely by playing the game. On the opposite side of the spectrum, due to the massive influx of players that the game has experienced and billions of hours of time played, the World of Warcraft economy has experienced massive and uncontrollable inflation, making the economy unpredictable and unrealistic. Oddly, no matter how realistic the virtual economy, the old proverbs tend to be true. Money takes time to earn, fools lose money to the wise, and the most underhanded and vicious acts in the game are often committed in order to earn money.