Scott Jennings has a post up about gold-farming and how to mitigate against it (since you can’t stop it). It’s generally a good read, and he references the work I’ve done at Iron Realms in setting up a dual-currency exchange back in the late 90s. (Those currency exchanges remain very popular features in our MUDs.) I’m not going to spell out the model again. I wrote about it previously in a somewhat comprehensive manner on Jeremy Liew’s blog.

I’ve always felt that the dual-currency model is a big deterrent to gold farming but as Iron Realms is a niche product we’ve never had to worry about professional gold farmers coming in to do their thing. The scale isn’t there. Scott appears to agree but goes further and suggests that gold farming can be stopped completely by ensuring that the only place to trade those two currencies is the in-game exchange. He writes,

“Allow players to place buy and sell orders freely, one for the other.

But -

  • do not allow the players to know who is placing those buy and sell orders within the auction interface
  • enforce through the game rules that the ONLY place to exchange RMT currency between characters is that auction interface

A blind auction. ENABLE the free market of in-game and RMT currency between the game’s players. But DISABLE the ability for players to assign an out-of-game worth to that currency, outside of your own storefront.”

At Iron Realms, we do the first but not the second. The auctions are blind but you can directly transfer credits (the currency that initially is purchased from us) to other players for a number of reasons, including that players actually use it as a currency with each other in some transactions rather than gold. Restricting the transfer of credits between players now would also upset a lot of players who would view their credits as worth less (and indeed they would be, since we’d have largely removed their utility as a currency).

At Sparkplay, we’re tentatively planning to restrict credit transfers as well as have the currency exchange (blind auction) that Iron Realms has, and I’m reasonably confident it will keep professional gold farmers out of the game. I firmly believe that gold farming isn’t the problem anyway - it’s the behavior of many of the pro gold farmers that’s the problem. Anyone throwing ‘morality’ out there as an indictment against gold farming is not to be taken seriously on the matter in my book, but it’s certainly legitimate to find being spammed with gold ads obnoxious as hell.

Scott writes:
“However, my belief - and this may well be false - is that enlightened self-interest does in fact work, and given the choice between patronizing other players and bad actors for RMT sales, players will patronize other players.”

I agree, but I think the reasons go beyond simply preferring other players to ‘bad actors.’ The fact is, a third party currency exchange is inherently risky if it’s not integrated with the publisher. You have no guarantee the transaction will be completed with a third party exchange. There’s no such thing as a reliable escrow service since the currency is ultimately under the control of the developer/publisher, not the currency seller (who has control over the currency only as long as the developer/publisher allows it). In an in-game exchange, the risk of a transaction not being fully consummated goes way, way down. Only a bug and unresponsive customer service combined can rob the buyer of what he paid for.

Beyond that, when a buyer of gold goes to a third party website to purchase gold with his credit card he’s handing over his credit card data to a company that is clearly willing to operate in the grey areas of the law. If you found a way to purchase gold with cold, hard cash you’d not have that worry but then, of course, you have no protection against simply never receiving the goods. You can’t claim your money back in case of being ripped off like you can with a credit card.

The in-game exchange solves all of those issues. It’s safe, it benefits all parties involved (the buyer, the seller, and the developer/publisher who created the world you’re in), and at the very least it seriously discourages professional gold farming.

The Untapped Resource
There’s another major force working against pro gold farmers in a game where it’s easy for any player to convert gold into a resource he cares about (not real-world dollars, but credits….if they’re playing the game and you’ve done your job properly as a dev, your players will value credits (or whatever you call your purchased currency) heavily. In a game like WoW where there is no legitimate way to exchange the product of time (gold) for the product of money (credits), there’s a huge untapped resource that, by virtue of the fact that it’s untapped, allows gold farmers to price gold at a price point where it’s profitable to operate in countries with low wages (China, etc).

With a currency exchange in your game you, the developer, have just created an easy way for every single player in the game with more time than money to add his or her disposable gold to the market. In other words, all that excess gold that many ‘normal’ players have is suddenly accessible to the market. Econ 101 folks: What happens when supply goes up? Price goes down. When price goes down, it’s less profitable to operate a gold farming operation and making it unprofitable for gold farmers to operate is the only way to stop them.

Caveats
I say that it seriously discourages professional gold farming rather than preventing it outright because, well, people are tricky and as the whole capitalist world is finding out right now, there are no reliable experts when it comes to human behavior writ at a large scale. In a game with a currency exchange and no ability to transfer the ‘hard’ currency (credits in the case of Iron Realms), it’s still possible to farm gold and sell it for real money. The real question is: Will the real cost of buying gold out of the game be lower than the cost in-game?

The real cost here has to include the perceived risk and friction costs of buying from a third party. If you can get your playerbase to understand that they’re potentially increasing the risk of being a victim of identity theft when they buy from some shady (I’m not sure there are other kinds) gold seller, you actually do raise the cost of buying in a third party market. Likewise with highlighting the risk of being ripped off if you buy from a third-party or the risk of being banned for violating your game’s rules against paying real dollars (as opposed to ‘credits’ or the equivalent thereof).

I am not an economist (and economists aren’t very good at seeing even a short way into the future), but I think that if you have enough scale to have pro gold farmers trying to sell gold on their own sites to you, you also have enough scale to see people arbitraging between the external and internal markets, which will bring the prices into balance. When the prices are in balance, the costs are not since the extra risks of being ripped off out-of-game raise the true cost above the price determined by the in-game market. I put this under the Caveats section because my caveat here is that this is purely theoretical. Iron Realms doesn’t have the scale to properly test this. Sparkplay will, however.

Example arbitrage opportunity:

  1. Goldsellers Inc. employees a bunch of ambitious, hard-working young Chinese or Malays or whatever. They earn gold for Goldsellers Inc. at a rate faster than almost any of your ‘normal’ players can.
  2. On the in-game currency exchange, credits are going for 1000 gold each (sounds like an absurd amount to a WoW player I know, but the numbers themselves are arbitrary here).
  3. Credits cost $1 each. (It’s not really this simple in the model we use, as credits cost varying amounts depending on how many you buy from us at one time. The difference in price/credit between the biggest and smallest batches you can buy is almost double. That really complicates this example, so let’s just ignore that facet for the sake of this.)
  4. Goldsellers decides to try pegging its sale price to the in-game price, and sells gold on its website in 1000 gold chunks, at $1/chunk. (Note that this assumes there is any price they can sell gold at that’s profitable given that the in-game exchange has lowered prices for gold beyond where they’d be if the internal market didn’t exist.)
  5. Nobody buys from Goldsellers since they trust the publisher/developer more and find it easier to simply buy credits from the dev/publisher and then use those to buy gold. No risk of being banned this way, no risk of being ripped off, etc. (This assumes your players trust your service. If they don’t, you’re probably fucked anyway.)
  6. Goldsellers lowers its price and finds that it gets a bit of traction. Say that it finds that it can manage to sell 1000 gold for 90 cents. (again, the actual numbers here are arbitrary. The point is that this number is less than the $1 that a credit costs you on the internal market, with that one credit able to purchase 1000 gold)
  7. Mr. Arbitrage steps in, looks around and sees a classic arbitrage opportunity here. He buys Goldsellers entire existing inventory of gold.
  8. Mr. Arbitrage takes that gold and sells it on the in-game exchange at 1 credit for 1050 gold (rather than 1 credit for 1000 gold) to ensure he can unload his inventory  Point is, now the price of gold on the exchange is, temporarily at least, lower than $1 for 1000 (since $1 in credits now gets you 1050 gold rather than 1000 gold). Goldsellers previously found that they needed to discount by 10% in order to get people to use their site instead of the in-game exchange. If the new price on the exchange is lower than $1, they will have to lower their own price as well. Since credits (what you purchase with gold on the internal exchange) can only be used in-game there is, of course, a soft ceiling after which point credits don’t become worth that much to an individual player (once you’ve exhausted all you can buy, the value of non-tradeable credits decreases drastically for you personally). Happily, you’ll have a lot of players willing to do this. The friction costs of the transactions are the only things that will stop the prices from being driven to the point where they are effectively precisely the same.
  9. Inevitably, the external market will be driven down by this method just as the internal market is, until the price on the internal exchange effectively recognizes the supply that exists both on the internal exchange and the 3rd party websites, or something approximating that. It seems to me that it’s virtually impossible for the external market to survive in these conditions.

I’m unsure whether this type of arbitrage would be more or less effective with tradeable credits. If you allow players to trade credits outside of the internal exchange, then it literally only takes a single organized person/group performing arbitrage to equalize the markets and stuff it to the pro gold farmers, since said person/group could just sell those credits to other players for real cash (granted, on a third-party site, which repeats many of the above problems involved transaction risk for the buyer) and thus there’s no real ceiling to an individual’s potential demand for credits.