MMO Economies – How to Manage Inflation in Virtual Economies – Extra Credits


Before we start, a big thank you to Nick Dewitt for tackling guest art for this episode. Today, we’re gonna talk about economic balance in MMOs. It’s one of the most complex things you can wrestle with as a designer. And it offers a fascinating view into where real-world economic theory and the inherent strangeness of running an MMO collide. Now, this topic could easily be an entire series unto itself. But today, we’re gonna dive into one of the most important issues that MMO economies face: The tendency toward hyperinflation. Pretty much any of you who have played an MMO for any length of time have seen this tendency in effect. The value of a Gold piece in the game drops and drops as time passes. In the first month after launch, you could buy great items for 20 gold pieces. Fast forward to three years later, and those same items are costing ten thousand gold pieces in the auction house. This is why players eventually improvise by adopting alternate currencies… …such as Stones of Jordan in Diablo 2, or Shards in Asheron’s Call. But why does this hyperinflation happen in the first place, and how can we prevent it? Okay, so let’s start by defining “inflation”. When the buying power of a given amount of currency drops, we call that “inflation”. So, for example, a nickel buys a lot less in the United states today than it did in 1850. As you probably know, whenever you print money in a real-world economy, you inflate the currency. Print too much money and you hit hyperinflation – an economic state where the currency effectively becomes worthless. That’s essentially what’s happening in all of these MMOs. You see, in the real world, governments control how much money is printed in a given amount of time… …so that they can regulate how much currency enters the economy. And thus control the rate of inflation to some degree. But where does currency come from in an MMO? Well, monsters. Every time a monster spawns, you’re effectively printing money. Every time you kill a mob in an MMO, you either get money directly or you get loot that can be exchanged for money. But to keep the game engaging for the players, these monsters have to respawn in a timely fashion… …with an amount of loot and currency similar to what they had last time they spawned. If they didn’t, you just end up with big empty zones with nothing to fight. Or people feeling cheated when the first players to get to his own swipe all the good loot. It would be a great way to kill your MMO in a hurry. So over time, more and more currency is being added to the world as, in aggregate, the player base is killing and looting huge amounts of mobs. This effectively devalues the currency and leads to runaway inflation… …creating the worthless currency scenario that I described before. So how do we combat this problem as designers? The standard answer is to find currency sinks. Places where you can use game mechanics to take currency out of the world. The obvious go-to is your death mechanic. Every time you die in World of Warcraft, your equipment takes damage. Eventually you have to repair it, which costs money. And that money goes to a vendor, and not another player. So you’re giving money to an NPC without getting any resellable goods in return. Effectively taking the full value of that repair out of the world economy. It’s a great design idea, but it’s not gonna single-handedly solve your problem. The trouble with death sinks is that it’s almost impossible to make them effective enough by themselves without feeling onerous. The amount you’d have to charge for repairs would really start frustrating your players. Especially those playing tank classes. The only devs I’ve seen come close to controlling inflation solely through death mechanics are the folks at CCP with Eve Online. In that game, the economic cost of dying is so staggering, it becomes a strong tool to rein in inflation. They also encourage large-scale player wars as a key element of the game. These wars destroy so many goods, which then must be replaced, which helps to keep inflation in check. But since death penalties alone usually aren’t enough to prevent the hyperinflation incurred by player farming, what else do games do? Well, first off, they use the buy and sell prices of vendors. Note how most NPC vendors in these games only give you a very small percentage of an item’s value when you try to sell it to them. Where does that value difference go? Nowhere. It falls out of the economy, effectively reducing the amount of currency in circulation. Unfortunately, this technique isn’t a cure-all for the problem either. Because our NPC merchants aren’t all that discriminating about what they’ll buy. In real life, a shopkeep would tell you, “No. Stop trying to sell me rusty knives.” “You’ve sold me thirty of them now. I don’t want any more. Get out of here.” But nope, our NPCs are happy to pick up those tattered rat pelts all day long! Rag, weeds, a handful of rocks… Doesn’t matter if they’re worthless at the auction house; that NPC will buy as many as you can bring them. This means that items which otherwise would have zero economic value now have some economic value due to our NPC vendors. Which, in the end, often results in the sell function actually adding more currency to the economy than it removes. This is doubly true when you introduce the concept of soulbound items. Sure, it creates scarcity for those specific items… But it also means the only place you can eventually offload them is with a vendor. Which just floods more and more money into the economy. If it were a regular item, it could at least get circulated among the playerbase forever… …as players kept selling it to each other, which is a currency neutral activity. But okay, what other options do we have? Well, there’s also consumables. Potions, ammo, food and drink. All of these serve as ways to remove currency from the economy. And games which make these systems crucial parts of play tend to do so… …so that the designers can have a big lever to pull to stop runaway inflation when they need to. Is inflation growing too fast? Well, create an expensive high-end consumable that all your players are gonna wanna burn through… …and you can level out that problem real quick. Auction house fees are another common system. Besides simply deterring players from putting up junk auctions all the time… …these fees serve to remove a small percentage of the cost of an item from the economy every time it circulates through the playerbase. There’s also services. Have you ever wondered why you have to pay for fast travel, or why that griffin ride costs you money? It’s because it’s another economic sink. This can be anything from transportation, to fees for sending letters, to money paid to open up new bank slots. All of these services take money from the player without returning a tangible good, thus effectively deleting that money from circulation. I could go on all day about this stuff, but let’s talk about some of the more inventive solutions that could be used. First off, let’s talk about this idea of tying currency to a consumable necessity. Let’s say, for example, that you put a high-end potion into your game for ten thousand gold that every raid player is gonna want every time they go raiding. Now let’s say that it’s only purchasable from vendors. And not only does this remove ten thousand gold from your economy every time a player swings one of these things… …but it also sets a baseline for the value of money. Your currency may inflate, but by essentially backing it with another good – by saying that at any point, you can trade in ten thousand gold for this potion… Your currency will never become worthless. Or you could tie it to real-world currency. If players can trade your in-game currency for something with real-world value… It’ll inflate, but it’ll always retain value. In Eve Online, Plex serve this function. Plex are game codes that can be used to pay the monthly subscription fee for the game, but they’re also tradable on the in-game market. And this means that the in-game currency will always have value, because it’s tied directly to something with a real-world dollar value. There are also taxation systems in games, which help to keep things regulated. You wanna keep your guild for another month? Well, you better pay x amount of gold. You wanna keep that farmland you bought? I guess you better pay the NPC lord a few hundred guilders before the week is out. It’s an effective option, although it’s really hard to manage without making it feel burdensome to the player. Lastly, there’s the idea of permanent purchasable upgrades for a character. We do already use this to a limited degree. Have you ever wondered why this trainer who wants to guide you through life or prepare you to save the world… …isn’t gonna teach you that new kick until you fork over four platinum? It’s to get that money out of the game. The problem is that this often stops at the level cap, when you run out of stuff to learn. Which is unfortunate, because that’s the place where it would actually be most effective. There is an alternative, though: premium endgame trainers. Have you already maxed out your level? Well, here’s a special trainer who will increase any stat you want by one point, for 40,000 experience points and 10,000 gold. The great thing about this is that it can be an exponential system, which causes the high-end players to just drain money out of the economy. Which is good, because those players are usually the biggest generators of inflationary influxes of cash. This stuff is all just the tip of the iceberg, but we are way out of time. If you guys found this interesting, let us know. We may come back to it. There is no shortage of special weirdness that comes with trying to craft an economy for an MMO. See you next week!

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100 thoughts on “MMO Economies – How to Manage Inflation in Virtual Economies – Extra Credits

  1. One thing Fallout 76 did right was making it cost caps to fast travel and limiting vendors cap stash so you cant sell 1000 Yao Guai ribs.

  2. i love the economic state in metin2, very unpredictable and it fluctuates randomly, the players control half of the market and the company controls the other half, you can change the price if you have influence and wealth.

  3. Many games won't let you sell junk or limit the traders funds and on top of it they introduce weight limit for you so that you can't carry 1 million arrows and 200 rusty swords…

  4. They need to introduce nonsensical money dumps like drugs, hookers and prestige (fancy equipment, housing, hiring NPCs for singing and dancing…).

  5. the issue with inflation in MMOs (or any game with an economy that player action causes such great harm to), is there isn’t enough forced commerce on players to make the money vanish fast enough, there is no actual circulation of the coin (cause spent money typically just vanishes and loot drops from thin air and are the income).

    dnt have to watch the vid to know that no developer can create a popular enough game with an worthwhile economy for players to use. unless the loot must be earned at a marginal profit (meaning spend money to make money) and the large playerbase is both directly funding and utilizing the economy.

    Eve online is the only game to handle this well for so many years. other games dont have the playerbase or the right method.

  6. Sorry to cerrect that EVE Online thing you said. It's a common mistake many people make: By loosind your ship you are NOT destroying currency in this game. When you BUY a ship you buy it from a player that crafted it. So the money goes to another player and AFTER that you use and might loose your ship. Then you buy another ship by buying it from a player again. The money goes to that player and so on. So you as a player "loose money" but you don't give it to an NPC. You give that to another player. Thus the money stays in the game and is now posessed by another player. EVE online has other ways to correct the inflation rate and this is mostly done by PLEX which reflects game time. I will not explain this here on detail though. Have fun guys!

  7. path of exile did a great job by making crafting items the currency, by doing so you always have money that is worth something.

  8. Your video just popped up in my "recommended" section for the first time. It's a bit ironic that you example EVE so well when ust this week I've seen a few videos (that I do subscribe to) and forum threads talking about EVE's inflation problem. CCP doesn't know how to control it and it's getting out of hand. December 2018 had 114.9 trillion ISK faucet with only 70.2 trillion ISK sink, leaving 1.321 quadrillion isk at the end of the month/year in game.

  9. In eve online basicly anything you buy is produced and then sold by another player instead of having npc venders the few things that are sold by npcs are things that cannot by produced by players such as skill books and original copys of blueprints (wich are used to produce items) and the way new isk(ingame currency is intruduced into the economy is by killing rats ( name given to enemy npcs due to them being called piRATS) wich have bountys on them or completing missions for npcs wich will reward you with isk and the way isk flows out of the ecomony is mostly trough pvp since there is no place in the game that is pvp free there are places that have a sort of police called concord wich punish criminals but you can still die and there for the isk that you used to buy the ship ammo and fittings is almost all destroyed with the ship itself the only exception is what parts of what was on the ship survive and get droped as loot wich can then be sold to another player wich can then die and continue the cycle

  10. How about WoW's genuis soultion.. sink your gold to actually play the fucking game (Time-coins).. although the price isn't set and inflation hit them fucking haaaard, my cuz bought one when they were first release and they were worth something of 20,000g but now they sell at an average 300,000g

  11. I've always thought one powerful method to solve this problem is to keep the amount of coin dropped by mobs the same no matter what level the player.

    At level one, when you start the game and have a newbie character, you fight many monsters and gain very little coin. But as you level up the amount of coin you earn per kill increases. HOWEVER – your effort didn't suddenly grow. The monsters you are killing at level 50 are just as dangerous (to you) as they were at level one. A level 50 player killing a level 50 monster has X effort and Y risk. X and Y are very similar at level 1, and level 20 and 30, etc.

    Instead actually reward risk. You get very little coin for killing an easy monster. (This is a control for farming.) You get more coin for killing harder monsters. And it doesn't matter what level you are. This also gives a great incentive to join guilds and go raiding the really really hard monsters in the game, to get a lot more coin.

    I've tried to think of a system that didn't even have levels. Instead of levels, you lock content based on equipment and stats and "magic keys". But there are so many complexities to such a system.

  12. I have no experience with this stuff…

    But what if someone made an MMO With a currency system identical to (as an example) the US? I'm not sure how it would work or if it's plausible, but it's an idea.

  13. I wanna make an mmorpg where the economy always has a set amount of money in it and it's possible for players to become vendors and such

  14. Path of Exile has a rather interesting economy with no money at at all. Vendors sell their items only for other, consumable items.

  15. So what games need to do is set a Max capacity on the amount of gold in a world. But people who stop playing who also horded money won't be affected. A simple way to fix that is to make it so that whether or not your character is playing they have to pay for living costs. Even if they are just game characters. It just taxes players until they run out of gold, Even if it is hidden, recycling the money into the system permanently. If you have to many players raise the money capacity and the daily living cost to maintain balance and allowing people to do as they wish without feeling like 10 gold for everyone because too many people is a problem. Although they could have just made it so every monsters does not give money except the boss monsters and the only efficient way to gain gold is to complete quests that require groups so not just one person gets all the money.

  16. without a doubt the very best (and most entertaining btw ) article on the topic. Things you think you know but .. you dont really, awesome job thank you

  17. In Eve, scammers also combat inflation as they tend to hoard many billions, and for some, trillions of ISK on one toon that just sits in the trade hub collecting billions off of new or naive players.

  18. Or dont print money and have money sinks in the first place. Have a limited amount of new gold coming in from say, mines, and make the entire economy player based. No NPC merchants.

  19. Actually, dying in EVE online is an ISK faucet, since you get ISK via the insurance. No ISK is lost from the game by dying, only from the player.

  20. This can be fixed like in Slime Rancher
    Ho many items the playees sell for money they get cheaper and the un used ones get more expensive

  21. Growtopia has its own economy as well.
    And you can see the effects of inflation and such. Four years ago one crimson wing sold for one world lock, now days you can buy 14 crimson wings for 1 world lock. See people can make the wings and there's so many now their worthless.

  22. So, real quick, the problem with property taxes in games is that more often than not (I'm looking at you Arc) the property tax is charged through real world items that are entirely unavailable outside of the cash shops
    It was the one thing that actually pushed me away from that game, cause I LOVED actually running supplies from my farm across the entire continent, or across the sea after I finally did enough to get my boat…
    But I had to deploy for awhile, and couldn't access the game from where I was, and my friend who co owned the property with me couldn't get the tax stamps, so we essentially lost everything market related, including the boat.

    Too long of a story short, we left the game and searched for others, never really found one like that again, but if another one did come out, and did balance that tax system…

    I think I'd die happy lol.

  23. I'm terrible at economics; could anyone explain why game devs don't just 'reset' the inflation by lowering all gold pools and costs to a certain percentage of the original number? Eg in the case where the normal currency is inflated beyond repair, simply set everyone's savings, all values of investments and all prices to, say, 5% of the original number? It's impossible in real life because of the logistics, but for a game it would simply mean the press of a button and inflation progress is reset, albeit not fixed.

    I guess portions of the playerbase would be very dissatisfied, but in the end it doesn't really affect anyone's wealth. Surely there's a much better reason as to why they don't do this?

  24. I like how most of these economic problems with inflation go away as soon as you decentralize money creation completely, and give players the ability to extend credit to each other with whatever they want. As seen in the Diablo example.
    Why do developers manage game economies like they're centralized States again? lol. It seems like a huge hassle.

  25. I used to play a very good ROBLOX(no judging) game called Swordburst 2. When I played in April of 2018, you could get a robux exclusive cosmetic for 40k, which you could get fairly easily. Now the cheapest one is 1 million, and while I have all of them already, I really want a similar economy based rpg to play for free. Any recommendations?

  26. Forgot to fix my tank gear after a wipe in swtor back in the day. That final raid boss was a little tricky when half my armor vanished after i had to eat a hit because i misread the scenario… we won though

  27. 1 Standard Tie
    2 Piano Tie
    3 Bacon Tie
    4 Fish Tie
    5 Banana Tie
    6 Deflated Balloon Tie
    7 Shirt
    8 Hotdog Tie
    9 Fez and Bowtie
    10 Pencil Tie
    Your welcome

  28. Elder scrolls online has a great money sink with Guild Traders. Highest bidder to throw away the most money get the right to sell to the public.

  29. Or your MMO of choice has a black market on Facebook where you pay real money in exchange for that really awesome in-game item you've always wanted. Looking at you, Mabinogi!

  30. Why not have a set amount of gold and then when players buy stuff that gold gets put into a pot for when enemies die

  31. An easy way to limit (if not outright destroy) the abusiveness of selling stuff to NPC shopkeeps is to, well, do what
    Skyrim did, and give the shopkeeps a limited amount of gold.

    To explain further, when the server for an MMO starts, the shopkeeps would all be given a limited reserve of gold.
    Whenever a player would sell an item to a shopkeeper, that reserve would decrease, as the shopkeeper is paying for
    the sold item with gold from that reserve. If a shopkeepers gold reserve runs out, the player would no longer be able
    to sell items to that shopkeep. This could be easily conveyed by removing or greying-out the "Sell" option in the
    shopkeepers menu. That being said, the player can replenish the shopkeepers gold reserve by simply buying
    items from the shopkeep.

    Essentially, by limiting the amount of gold a shopkeeper can use to pay a player, you prevent your NPC shops
    from contributing to hyper inflation.

  32. If we invoke TierZoo here, essentially the problem is that the Earth has massive sunlight inflation and we're seeing the impact of billions of years of a unit of sunlight reducing in value to the point where you need entire mols of sunlight to trade for loot of any value.

  33. SW: Tor went way too overboard with their money sinks and still had overinflation. It's just too frustrating for casual and f2p players.
    They tried to address this by making the skill tree and overall game difficulty more simple in order to appeal to the casuals but that just pissed of players who enjoyed a high skill cap game and it did nothing to fix the insane money sink fees casual players had to face, effectively pissing off everyone.

  34. Solution: Closed economy. Money doesn't just spawn out of thin air or vanish into it, but circulates in the world, between player and NPC entities alike. NPC Monsters don't have money just because, they need to rob NPC peasants first. NPC peasants who got their money by farming and selling the surplus after taxes, to craftsmen who got the money by building stuff to sell others, etc etc.

    It doesn't mean the game needs to simulate lots of NPC entities and transactions. It'd be enough to just have a few bank balances for different entities/sectors, and make sure that whenever money is "spawned" it's taken out of one of those, whenever it "disappears" through player expenditure it goes into one of those, that money is passed between them, and that the quantities money transferred between player and NPC entities are scaled according to the wealth of that NPC entity to prevent it from either going broke or sucking up all the money in the world.

  35. 06:32 IS SIMPLY FALSE. the dollar is fiatmoney, it has not more value then we believe it to be having, so it doesn't have any more value then the ingamecurrency and so, the ingamecurrency also doesn't have value.

  36. @00:58 It can honestly be pretty immersion breaking in fantasy games beacuse your like….. This should more gold than this planet is capable of mining for the entire decade….

  37. @4:25 So why not have shopkeepers behave more realistically by refusing to take just any random junk? You could avoid having players feel cheated by instead making the junk usable for crafting?

  38. Oh also you guys love tangental learning? What if we use this to teach civics in game!? Your character pays in game currency as a tax and you see that manifested as better in universe infrastructure. Better roads that give a movement speed buff or if the game has a semipermant injury system maybe suddenly there's a hospital that can help with that….

  39. Why hasn't the MMO world adopted a blockchain currency?
    a Titan class ship on Eve online can cost $1,500(2008cad) and take months to complete. they are virtual currencies worth millions undercut by the banks as "virtual Game currencies", id bet some skins in fortnight right now are worth tens of thousands of real American dollar. for a kid that's enough to grind someone out of poverty and well paid… our hard-earned gear could be a few bucks one day

  40. What the devs have never discovered is that you have to have an onerous taxation for those who ACCUMULATE or STORE cash or you will invariably have a hyperinflationary economic model.
    Now, some people will argue that taxing the rich is a bad thing that punishes those who prove themselves to be the most economically efficient… However, this is a necessary evil to have some sort of chance to have the currency remain valuable.

    The easiest solution is to put a cryptocurrency miner mechanic into the play of the game and then as the gameplay generates cryptocurrency, the currency is distributed across the entirety of the game economy. The monsters that are not killed will accumulate cash value until they are killed. As long as there are players, the cash value of the kills will continue to be active.
    When you spend money to advance your character or buy items from the vendors, the game company can tax the purchase and put the remainder into the monster cashflow paradigm.
    Have the monsters ONLY drop crypto loot and buy literally EVERYTHING from vendors. Crafting can be done by buying raw materials and then trying to sell your crafted items for more than the parts cost you to buy. As long as the value of the item crafted is higher than the purchase price from the vendor, the system stays afloat and crafting is worthwhile.

    Shame I don't have 250 million $$$ to hire a dev team and find out if my MMO would work.

  41. I think path of exile has one rly great economy. Instead of gold that is essential useless you trade with usable items. The currency is basically Chaos orbs and exalted orbs, arguably mirrows. The thing is that all of these get used all the time. In Standard for example an exalt holds an extremly stable value in the past. Obviously in season you got some inflation at the start, around 300 percent over a week or two, which then stabelises

  42. Amazing subject. I feel like worlds with complex environments with sistemas at work such as a well designed economy are able to satisfy and keep the player coming. Even games that simulate this in a minor scale have an effect on people like Sim city or strategy games. I can go further to say that some of those games even teach a lot of culture to people and sometimes make them money… I miss that diablo 3’s auction house hahahhahaha

  43. A Argetinian kirchnerist Will watch this video and will say that inflation is caused by the dirty capitalists and has nothing to do with printing money

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