Friday, May 19, 2006

Game Economies!

I'm in love. Quoted from the comment section at Terra Nova:

I used to have an account on Project Entropia and was intrigued by their claims for some time -- I still pop in to their web site occasionally to see what they're up to.

I partially agree with Dan here, the new (debit)-card has been heavily spun by MinkArk(MA) as a new type of credit card based on a "virtual currency". My own "hype-detector" goes off when I hear this or see the platinum blonde spokesperson for PE. :)

But I can think of a way this could be functionally true (if not specifically true). Dan, what if MA is acting as a proxy service between the virtual microtransactions in PEDs and the regular bank transactions in dollars (i.e. a branded real-world debit-card)?

* deposit real cash into a real bank and likewise make real-world purchases with your debit-card (because it *is* a real world debit-card as Dan says).

* make additional money in PE, (it's likely that MA converts PEDs to "dollars" and deposits it in your debit-card account somewhere) and/or spend your money in PE (it's likely that MA bills your debit-card account for the corresponding cash).

* pay someone else in-game in PEDs (trade). (MA could bill your debit-card and deposit to the other guy's debit card.)

Now, ordinarily all this would create a billion microtransactions (each worth fractions of cents) that no external bank would ever accept on debit-cards. However, since MA is acting as a proxy here, they can put in place delays and controls to allow them to consolidate the daily or even weekly net transactions against balances available to the debit-card. They can even hold onto "fractional funds" virtually backed by their real-world escrow until they sum big enough to become transactions on the real-world debit-card. (someone who has a card could check the fine-print for evidence of such controls)

I don't belittle MA's accomplishment in that area if that's what they've done. It would be a huge e-financial system in its own right. Although not bound directly by the international banking laws and regulations it would be in effect mimicking the transaction systems of real banks for microtransactions in the virtual world and interfacing with real banks via standard merchant controls. (i.e. a proxy bank)

But I'm a bit surprised by the thuggish reaction of MA's PR/Legal team, which I think was uncalled for-- look guys, seriously, you really have to reign that in a bit-- you might let your technical team provide a rational technical response beforehand if you think someone is uninformed rather than yell "slander".

Dan, stepping back from the fray for a moment, what are your impressions of the kind of approach I outlined whether or not it's actually what MA implements? Does it bring us closer to true hybrid economies or still have a ways to go?

Posted by: Larry Kyrala | May 18, 2006 6:08:49 PM

Larry Kyrala,
The way you lay it out is as I imagine things working also. From that co-branded debit, mindark manages the array of microtransactions. It still isn't anything very noteworthy- it just makes getting money in and out a bit easier... They were tracing the micropayments anyway.

I'd also bet that it'll make any inflationary tendencies even more difficult to manage.

Remember, I CAN earn the ingame currency the hard way- hunting, mining, etc... (and paying a "tax" to the landholders). That game currency wasn't generated by real-world money, but can be pulled out for real world currency just as easily... ingame currency will always be growing faster than the real-world cash deposits that back them.

Either the game developer will have to back the game currency with their own (forcing them to create and sell more landmarks to support the endeavour, potentially devaluing existing properties if done at a rate faster than new player growth will support) or the game developer has to vary the exchange rate (killing the entire ATM system instantly- would you risk losing to a hyperinflating currency? Today, it's $10 ingame to $1 real world. Tomorrow, its $11)

Seems its VERY dependent on getting new business in there to support new land sales without diluting the value of existing land sales.

Maybe the "pyramid scheme" reference isn't THAT far off. (NOTE: That's maybe- not a slanderous assertion, just speculation suggesting that maybe this needs more attention :P )

Now, the rusty (it's been 10 years) crim student is getting interested:

As the system seems to stand now we have:
-a fixed exchange rate,
-money that can be easily drawn in and out,
-a history of handling relatively large cash transactions
-plenty of internal game-currency transactions happening within the confines of a "game model" that can muddy the view of where the money went or came from

We've alluded to the risky nature of MMO's used for money laundering. Don't these features make PE a rather valuable resource for just this kind of business?

(NOTE: I'm not claiming that there is anything CRIMINAL about the Entropia business model, or that people are using it for this purpose now. I'm not implying that a Miami DJ/actor to remain nameless got any of his money illicitly, nor that he'd need to launder it for any reason. (the press releases would kinda destroy that motive anyway) Nor am I suggesting that Entropia may be banking on... well... banking laundered goods. It's an observation that the processes in place might make the game more appealing to MMO money laundering than other games. Don't sue me. I'm not a lawyer- and I'm broke :P )

Posted by: Chas | May 18, 2006 8:43:28 PM

"Remember, I CAN earn the ingame currency the hard way- hunting, mining, etc... (and paying a "tax" to the landholders). That game currency wasn't generated by real-world money, but can be pulled out for real world currency just as easily... ingame currency will always be growing faster than the real-world cash deposits that back them."

Incorrect. The ingame currency total CANNOT grow faster, thanks to the "decay" of the conditions of items. And without it, the ingame currency would grow at an EQUAL rate, due to the way the looting/deposit spawning system works.

Posted by: DaveJ | May 19, 2006 3:01:34 AM

I agree with much of Andy haven's post but:

> 4. With a regular bank card, you can't go into
> a bank, scrub the floors or paint a wall and
> ask for more money out than you put in.

Ah, but the rules of the game must be rigged (or else they cannot make a profit*). So the actual process is:

I give my bank 20 quid. They let me come in and clean two patches of floor that they sometimes throw pennies onto, for thirty hours a week. Occasionally I sprint to the teller and bank the cash. At the end of a month of this I see that I have made £6.20 back. They wait a few weeks then let me have my money.

That floor had better be fun to clean.



*They won't make a profit anyway.

Posted by: Endie | May 19, 2006 7:00:50 AM

(Back to me:)

If TerraNova could keep this kind of quality in their actual posts, I would sign up for their feed again.

This commentary is awesome. It's insightful, careful, and deep - without being soul-less or baroque.

It also agrees with my thoughts on game economies, so I suppose that might be a factor...

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