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.
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!.