Virtual Money More Valuable than Read Money?
Here is a story from Om Malik about a virtual currency called QQ by Tencent devaluing the Chinese Yuan.
And a genuine concern for the Chinese government, which now fears that the QQ is deflating the official yuan. “QQ” is the virtual currency created by Tencent2, China’s largest instant messaging platform based in Shenzen. Originally, Tencent sold QQ as a fun way for customers to purchase online games, greeting cards, and so on, but as the service became more popular, many started treating it as an alternative to the yuan, using it to, for example, bet in gambling games and (of course) purchase online sex. (For a wild time in Shenzen, you can now IM a “QQ girl”.) The expanding trade in QQ so worrisome to Chinese officials, they’re issuing warnings against its unauthorized use. “The QQ coin is challenging the status of the renminbi [yuan] as the only legitimate currency in China,” the Asia Times quotes public prosecutor Yang Tao.
He makes an interesting point that all modern currencies are virtual anyway since their peg against any tangeable item such as gold and other precious metals has been done away with quite sometime ago. It is just basically market forces and a central bank (money printer) that controls its value. This is actually the same phenomenon happening in the virtual world. The QQ and other virtual currencies’ values are also driven by a virtual market (supply and demand) and the vendor (in this case Tencent) is the one that control money flow in the system. These two things regulate the value of the QQ.
So what is the difference? The major difference is that a private corporation instead of the government is in control of the currency. This is actually something the Chinese government fears as it removes the power to regulate the value of their currency and thus the economy as a whole. Now that is their concern.
I wonder why the Tencent QQ was such a big hit but the super-dupper undervalued Ragnarok Zeny did not make such a big impact in the Philippines? It is probably because Level-up did not regulate the supply of Zenys in the system? Likely. This is akin to a bank that just keeps on printing money.
December 20th, 2006 at 5:53 am
William — it’s all about inflation.
In economies such as Ragnarok, there is an effectively infinite supply of zenny, because by “farming” you can create unlimited money at the expense of time.
Games such a WoW control the (infinite) money supply by creating new and ever more aspirational items which cost a ton of money. So your industrious farmer will rather buy that pair of Electrum Bikini Chainmail +25 rather than “sell” his or her virtual money to other people for real money or services.
But that said, there are lots of WoW “farming communities” in China. And even locally, in the provinces, there are internet cafes which PAY people to play, on the condition that all the money and gold goes to the cafe owner (this is very prevalent in MU Online). So you, the evil cafe owner, provides an airconditioned place, a nice computer, a chair, and unlimited junk food and soda (a recipe for disaster if ever there was one..) PLUS perhaps 10 to 15 pesos per hour as wages.
It actually is a viable business model.
December 20th, 2006 at 6:10 am
So you are saying that by doing these “farms” in other games they don’t encounter the inflation problem? But, the money supply is still unlimited right? The little critters that get killed and still drop money infinitely right?
Based on the logic above the answer to inflation is to not curb money flow but to introduce new “desirables” into the system? I wonder how this works in “real world” economic theory?
December 20th, 2006 at 9:39 am
there is always going to be an inflation problem. even in WoW people sell WoW gold covertly on ebay. the introduction of desirables only ensures that
1) only the truly dedicated (or truly rich..) can get the aspirational items
2) the “posers” who buy gold for real money can get ahead of the newbies, but not ahead of the serious players, who notably are always the ones who complain about people buying their way into in-game status
oh — another thing WoW does is, as your equipment becomes more expensive, it also becomes more expensive to REPAIR. generally if you have fancy gear, you’re high level and have a huge critterkilling capacity. but since your goodies cost a fortune to maintain, your personal inflationary capacity is reduced.
the “farms” work because the farmers don’t do anything. they don’t buy fancy chain mail bikinis, they just wear the entry level armor and farm. That, or they beg. There actually is a Pinoy WoW beggars’ guild. which doesn’t fill me with nationalistic pride.
December 20th, 2006 at 12:58 pm
so the increase in value of items just “normalizes” the economy by fixing the sense of value. so as the economy inflates the “valuable items” also become more costly. this makes it inapplicable in real life since we cannot change the economic value of basic necessities like food, water and clothing.
also it is interesting that “farming” works and that there are people who actually by the constantly devaluing currency.
December 21st, 2006 at 1:41 am
This works in the real world, too.
It’s called inflation.
The money supply is constantly expanding because the government keeps printing more money. So wages go up, but does purchasing power increase? hopefully, but for the vast majority of Pinoys, not always.
December 21st, 2006 at 1:51 am
Ah yes but not as fast as Virtual Currency inflation since current supply is regulated by the BSP.