This blog post begins a new type of article style for this website. As much as I enjoy presenting interesting collages of work for readers of this blog, some of the pieces which have been cited for some of the content presented thus far deserve a different type of appreciation on this platform. In order to give these pieces the recognition they deserve, I will make use of excerpts in order to achieve this. These excerpts will be followed by a brief discussion thereafter. Not to waste any time, let us begin!
Written by Augustus Urschel:
Understanding Real-Money Trading
“In late 2006, the MMORPG community witnessed one of the most massive scams in online gaming history. The crime scene was EVE Online, a massively multiplayer online role-playing game (MMORPG) where users fly a myriad of spaceships around a fictional universe. One of the game’s main selling points is its open‐endedness; while there are quests and preprogramed adventures, the overall objective of the game is entirely up to its players. Pilots can form organizations, participate in the player‐ run economy, build empires, and war with each other.
One gamer playing as the avatar “Cally” went so far as to form a fully functioning financial institution, which he called Eve Investment Bank. The bank grew immensely in popularity until one year after the bank’s opening, when Cally grew tired of running the institution. Because he had unlimited access to the entire system, he cleaned out the banks coffers and all of his client’s invested assets. The white-collar bandit made off with 700 billion ISK (the currency of EVE Online) which, using the game’s ISK‐to‐game time trading system (which allows you to use ISK to buy $15 worth of game time), could be converted to about USD 100,000.
It was the single biggest online scam in the history of MMORPGs. What did this mean for the online world as a whole? For some, it was an interesting in‐game curiosity—and nothing more. To the players involved however, this was an episode of the real world massively intervening in their online game. Suddenly, a sizable chunk of players’ virtual wealth was stolen and converted to world dollars for a personal profit. While the concept of trading online items for real world money is a well‐known occurrence in the virtual world, this scam was on a scale that dwarfed its predecessors.
Not only did the thief pocket one hundred grand of real money over an online video game, but he faced no real world or in‐game, legal repercussions because of it. Perhaps most importantly, this anecdote showed the world that trading virtual goods and currencies with real world ones is a serious economic force. While the macroeconomic structure of EVE online remained unchanged by this event, it adversely affected a large number of players who associated with the game, and some pointed fingers at the ability to cash out game currency for real money as a prime motive for the crime. This ability to exchange virtual goods for real dollars (or vice‐versa) is a somewhat controversial process known as real money trading (RMT).
Even consensual real money transfers are a powerful force in modern popular MMORPGs, yet the nature of their existence is often misunderstood. While many developers take a hardline stance against RMTs—as they can potentially threaten a game’s profitability—these same developers fail to fix or even understand the reasons why RMTs occur in the first place. Contrary to popular perception, the sale of virtual wealth is not necessarily a means of “cheating” the game system to gain an edge over opponents, but is instead an economic response to shoddy game design. Not only is it possible to understand and model exactly why most RMTs occur in the first place, it is also possible reduce or even effectively eliminate RMT through better game design.”
Before continuing with my two cents on the above information, I must firstly state that I am grateful to Augustus Urschel for speaking so clearly about Real-Money-Trading. Had he not done so back 2011, I would have not traversed down the rabbit hole that is real money trading. In so doing I have learnt a great deal more about economics.
The knowledge gained comes primarily from the simplification of the economic system when one compares the economy of a Minecraft Server to that of a country like Namibia for instance. Such a simplification, along with the visualization that comes along with it makes for much more comprehensive learning than simply reading about an economy. And that is what I am thankful. Even though I might never meet him, I am grateful for the passion and direction his paper has given me up to and beyond this point.
Okay so back to it. More than anything, it seems from the above information that the player by the name of Cally simply exploited a loophole in the design of the game and in so doing was able to amass a sizeable fortune. Cally exploited a type of opportunity that, as Augustus Urschel has noted, the developers should have taken care of in the design of the game's system.
Cally’s actions very much resemble an action known as regulatory arbitrage, which is defined as “the structuring of a financial product in such a way that it brings about the lowest regulatory burden, both in terms of capital requirements and in terms of administrative burden, or that it even evades a regulatory regime.” The low regulatory burden[inadequate game design] inherent in the game[the financial product] allowed for the player to rob the other players and not face any legal backlash for doing so.
The similarity between Cally’s actions and regulatory arbitrage comes about because of Eve Online’s developers designing the game without considering the possibility of actions like those this particular player took. Whether the developers try to resolve this issue in future remains to be seen. Irrespective of what transpires in future regarding the game’s design, it is always interesting to read about the different ways in which players collude with and against one another in Eve Online. Complement this article with the following video.
References
Creative Writing Excerpts from the The Writers College Students, writerscollegeblog.com
Understanding Real Money Trading in MMORPGs, ResearchPaper
Between the art of exploiting loopholes and the spirit of Innovation, scribd.com
How one guy stole $170 000 in Eve Online, youtube.com
Minecraft Server, Wikipedia.com
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