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The big gaming news this week is that Blizzard are getting into trading gold for game time using something that’s similar, but not identical, to EVE’s PLEX – the WoW Token. These create a pseudo-market that let’s gold-rich players (i.e. time-rich, in most cases) trade their Azerothian gold pieces for subscription time bought with Earth dollars/pounds/euros/whatever by other players. Note that I say pseudo-market, because the prices are set by Blizzard rather than a free market, and because the price paid by player A for his token may not match the amount of gold player B receives for putting that token on the market. This is because player A pays the (Blizzard-set) rate at the moment he makes his purchase, but player B receives whatever the (Blizzard-set) rate was at the time he put the token on the market in the first place (but he has to wait until A comes along and buys it off the market before he gets his gold).

This isn’t a free market, or a free-floating exchange rate such as we have with PLEX or with trading dollars for euros. This is a controlled currency, as evidenced by the likes of Venezuela today, Zimbabwe before they gave up completely on having their own currency (for those who didn’t know – you can trade in Zimbabwe in US dollars, euros or several other currencies but not the Zimbabwean dollar, which was abolished after basically hyper-inflating itself out of existence), or as was used in the good old Soviet Union.

Apart from the greater or lesser unsavouriness of the currency-fixing regimes, this has several consequences. The first is that without a free exchange seeking an equilibrium point, we could well see either a glut or else rationing and/or queuing occur if Blizzard are too far out in setting their price. If they set it too low (say, at 10K gold), then we have lots of people trying to turn their gold into tokens and not many people willing to exchange $15-$20 for such a paltry amount of gold, resulting in the auction house goblins queuing up waiting for their turn to hand a few crumbs from their vast fortune over in return for 30 days of game time. If they set it too high (maybe 100k gold) then loads of players will be putting tokens on the market but not that many buyers will be found, resulting in a long wait to actually get gold back for those real world dollars you plunked down. How bad will this be? Depends how good Blizzard are at setting their prices and how responsive they are to shifts in supply and demand. Real world experience suggests that command economies have a lousy record of efficiency compared to free markets however.

Secondly, Blizzard will end up creating or destroying gold from the economy as they shift the price. If they put the ‘market’ rate up, then the guy buying a token pays more than the guy selling it receives, and gold vanishes from the economy. If they shift the rate down, then gold gets created with each transaction. Blizzard can do this because the Azerothian gold piece is actually a fiat currency – there are as many gold pieces in existence as Blizzard set their database to say there are, just as central banks for modern states can print as much money as they wish. It has the same consequences in WoW as it has in real life, however – debauch the currency and you’ll get more inflation. Note that Blizzard have actually eliminated a moderating mechanism, because speculators can’t bet on the market by buying tokens at a low price and re-selling at a higher one (which in a free market acts to moderate swings – see, all those bankers do provide some sort of useful service). Once you’ve bought a token, the only thing you can do with it is pay your subscription – there’s no option to re-sell it.

Thirdly, Blizzard have pretty much guaranteed that there will continue to be a black market in gold pieces, and possibly even stimulate it. There are always black markets in controlled currencies, usually offering a more realistic and less favourable exchange rate. In the case of WoW – the gold sellers won’t go out of business. They aren’t selling at their break-even price and will make losses if Blizzard undercut them. They’re currently charging all that the market can bear, and their limiting factor isn’t how much gold they can farm, it’s how many customers they can lure in. What they’ll do here is undercut Blizzard’s price (but still make a profit because the cost of producing gold pieces is negligible when you’re farming with a swarm of bots on accounts bought with stolen credit cards) and get increased sales from people who buy cheap illegal gold which they then convert to subscription time at the ‘official’ exchange rate. Net result – asshat players who don’t mind dealing with the scum of the MMO world get to play WoW for less than the actual subscription rate, whale players willing to turn their dollars into gold get more gold, everyone else watches the extra farmed gold feed into the economy and wonder why everything on the auction house is so darned expensive.

Now, I’m not predicting economic apocalypse here. All of these effects are real, but just how strong they are depends on how accurate and timely Blizzard are at adjusting the official exchange rate in line with what a free market would set. You can be reassured by looking at just how accurate and timely Blizz have always been with balancing classes and releasing new content.

Hmmm. Welcome to the apocalypse, kid.

EDIT: I’ve just discovered that not only is Scott Jennings actually still alive (or as much alive as the slave minions of Richard Garriott can be), he’s started posting on Broken Toys again and had much the same to say about this topic Can I just plead that everything here was original to me, at least, when I wrote it? 🙂

2 Trackbacks/Pingbacks

  1. By WoW Token | GamingSF on 06 Mar 2015 at 8:24 am

    […] edit: I rarely go back to a post later but feel I should add this excellent post by Tremayne on the potential game economy impact of Blizzard’s design choices regarding the […]

  2. […] Thirdly, Tobold has been looking at the Wow Token prices on and come to the conclusion that that the market is behaving oddly and predictably, which lets players game the cycle and generate gold out of thin air (or at least Blizzard’s ass) which nobody could possibly have foreseen […]

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