Goats, camels and gold are all conventional things we will have all heard about being traded for goods with the same value, but what about the exchange of Facebook credits for some virtual fertilizer or Linden Dollars for a new online avatar (graphical person) hair cut?
The sale of virtual dollars this year is expected to be $2.4bn, giving a growth rate of 40% on last year. Compare this figure to the US economy, which has a revised expected growth rate of 2.4%. To put this into perspective, virtual dollars are expected to grow at a rate 1,667% higher than the US economy, 5,000% higher than the UK economy and 526.3% higher than the economy of China, which is currently one of the world’s fastest growing.
Farmville is the first game which comes to my mind when I think of online game currencies. The aim of the game is to grow virtual plants and harvest them for coins used to develop your Facebook farm. This game somehow managed to take over the life of millions of teenagers whilst tempting them to reach for their credit card and buy Facebook credits in order to get more coins, grow more crops and ‘level up’ that little bit faster, but for what? To say you have the biggest pixelated farm with the most up-to-date combine harvester out of your friends?
It’s common knowledge that most little kids dream of becoming something glamorous, such as an astronaut or a ballet dancer, it was when I realised I was wasting my life growing virtual strawberries on a virtual farm to become a proficient virtual farm girl that I knew I wasn’t living up to my full potential. We have all been told that these days you must find a way to ‘stand out from the crowd’ because everybody has a degree when applying to graduate schemes, I still have no idea what is expected of me but I’m pretty sure ‘level 52 farm’ isn’t it. Despite this, Zynga, the company responsible for Farmville, somehow earns around $600m a year with the game itself estimated at a worth of $5-6bn.
There are many other online games, such as Eve Online and World of Warcraft, (WoW), hooking the general public and trying to take our real money for what I can only describe as their ‘fake’ money. Even if the trading of items or virtual currency for real money isn’t actually prohibited on the sites, there are still black markets where coins, special swords, pet dragons and even whole accounts are sold. Just doing a quick Google search came up with numerous websites selling high level WoW accounts for around $500. However, there have been accounts sold for around $10,000 because they contained some legendary armour and sword.
Second life, on the other hand, is another online game which takes virtual currencies to a whole new level. From everything I have read about this website, it seems to be a virtual world where you can chat to others, trade items and property and make your avatar ‘look cool’. The currency in this game, Linden Dollars, can be traded back and forth between any real life currency and the virtual one. This currency has become so developed that an acting central bank called the Linden Lab is needed to monitor inflation and exchange rates, but instead of monetary and fiscal policy, promotions on certain items are used to take money out of the system. If only the real world worked like that; all clothes this month are half price – economic downturn sorted.
As ridiculous as some of this sounds, these currencies do have the potential to affect exchange rates of the real world if they continue to grow at their current rate. If use becomes widespread enough, virtual currencies could act as ‘the middle-man’ for currency exchange allowing people buying online credits, with dollars for example, to withdraw them as yen at whatever rate the website creates. This could lead to either deflation or inflation, thus potentially destabilising an economy.
The Chinese government is already attempting to break down the link between the virtual world and the real world. In 2009 the use of any online currencies being traded for real goods or services was banned. In the rest of the world, for now, no online currency has been deemed legal tender and therefore does not have to be accepted as a form of payment, which should prevent the rapid growth continuing. Because of this no online money is protected, and legal disputes are mainly unresolved as there are no distinct laws for ownership of what, in the eyes of the law, has no intrinsic value and therefore can only be thought of as what it literally is: computer pixels. I can’t see many people willing to hold large sums of money in an account protected only by a password, with no real security or legal backing behind it if the company goes bust or someone manages to hack in.
In the future, stock markets might also be trading Linden Dollars, and maybe you could even pay for a messer bomb in the union with Facebook credits… But I think for now I’ll keep counting my pennies.
Image by Images_of_Money