SlideShare a Scribd company logo
1 of 45
Designing Successful Virtual
Currency by Breaking (Almost) Every
Rule in the Economics Textbook

Dr Vili Lehdonvirta
Visiting Fellow, London School of Economics

Twitter: @ViliLe
Designing Virtual Currency by Breaking (Almost) Every Rule in the Economics Textbook
Designing Virtual Currency by Breaking (Almost) Every Rule in the Economics Textbook
.com

Virtual Economists L td                                                                M arch 2012      Virtual Economists L td                                                                  A pril 2012




                                  Social Games                                                                                            M obile Games
  Virtual Goods & Currencies Pricing Report                                                                 Virtual Goods & Currencies Pricing Report
                                           1/ 2012                                                                                                 1/ 2012




 Introduction and                 Virtual goods catalogs           Pricing virtual goods:                Introduction and                 Virtual goods catalogs           Pricing virtual goods:
 definitions                      in social games                  general distribution                  definitions                      in mobile games                  general distribution
 Social games are games played    N umber of virtual goods for     Introductory goods convert            Social games are games played    N umber of virtual goods for     Introductory goods convert
 on social networking sites.      sale depends on genre and age.   players into payers.                  on social networking sites.      sale depends on genre and age.   players into payers.

                         Page 2                           Page 3                           Page 4                                Page 2                           Page 3                           Page 4
 Pricing virtual goods:           Vanity goods and                 Durable goods and                     Pricing virtual goods:           Vanity goods and                 Durable goods and
 price points                     functional goods                 consumable goods                      price points                     functional goods                 consumable goods
 Common virtual goods prices      D ifferent genres emphasize      L imited number of uses or            Common virtual goods prices      D ifferent genres emphasize      L imited number of uses or
 are $0.20, $2.00 and $6.80.      different types of goods.        expiration time?                      are $0.20, $2.00 and $6.80.      different types of goods.        expiration time?
                         Page 5                           Page 6                           Page 7                                Page 6                           Page 7                           Page 9
 Pricing and bundling             Research                                                               Pricing and bundling             Research
 virtual currencies               methodology                                                            virtual currencies               methodology
 Quantity discounts and typical   Based on manually collected                                            Quantity discounts get players   Based on manually collected
 currency package sizes.          data on over 3,000 products.                                           to commit while enthusiastic.    data on over 3,000 products.
                         Page 8                           Page 9                                                               Page 11                          Page 13
Overview
1.   What is money?
2.   What kind of an object makes a good money?
3.   Efficiency is boring, let’s design bad money
Designing Virtual Currency by Breaking (Almost) Every Rule in the Economics Textbook
What is money?
1.   Medium of exchange
2.   Store of value
3.   Measure of value
MONEY =
Designing Virtual Currency by Breaking (Almost) Every Rule in the Economics Textbook
Habbox.com 3 Jan 2007
CS =




Habbox.com 3 Jan 2007
Designing Virtual Currency by Breaking (Almost) Every Rule in the Economics Textbook
“Real” money vs “virtual” money
“Real” money vs “virtual” money
●Currency area = total set of goods and
services payable with a currency

●   Large currency area -> “real” money
●   Small currency area -> “virtual” money
Designing money
≠ designing markets
Designing markets                Designing money
How do you obtain the money?     What shape, form or appearance
Earn through play? Purchase?     does the money take?
What can you spend the money     What behaviors does the money
on? User-to-user? User-to-NPC?   as an object have?
Can you redeem the money back How do people interact with the
to national currency?         money?
What is good money?
Something that is...
     ...a good medium of exchange
     ...a good store of value
     ...and a good measure of value
A good store of value
A good medium of
exchange               is durable
is fungible
                       is resistant against theft
is divisible
                       is inexpensive to store
is readily countable
                       is private
is recognizable
                       retains its value
is convenient
                       A good measure of
is valuable            value
                       has a constant value
Designing bad money
● Efficiency is boring
● Games are about challenges; online
games are also about social interaction
● Shouldn’t your money present some
challenges and encourage social
interaction?
World’s most efficient virtual
economy
A bad medium of exchange   is...

Not very
divisible




    Stone money of the
          island of Yap
CS =




                          = 75 RD




Habbox.com 3 Jan 2007
A bad medium of exchange   is...

Not fully
fungible
German coin balance
  and weights, 1765
A bad medium of exchange        is...

Misrecognizable

            = currency


            = super rare item, worth ~300
Ancient Chinese money,
                       7-22 CE




       Chinese knife
money, 600-200 BCE
A bad medium of exchange   is...

Troublesome
to move
Designing Virtual Currency by Breaking (Almost) Every Rule in the Economics Textbook
Designing Virtual Currency by Breaking (Almost) Every Rule in the Economics Textbook
A bad store of value   is...

Vulnerable
to theft
Designing Virtual Currency by Breaking (Almost) Every Rule in the Economics Textbook
Designing Virtual Currency by Breaking (Almost) Every Rule in the Economics Textbook
A bad store of value   is...

Costly to
store
A bad store of value   is...

Perishable
“Oh, blessed money which yieldeth sweete and profitable drinke
for mankinde, and preserveth the possessors thereof free from
the hellish pestilence of avarice because it cannot be long kept
or hid underground”                    –Anghiera (1457-1526)
A bad store of value   is...

Not very
private
●   Public
●   Flauntable
Designing Virtual Currency by Breaking (Almost) Every Rule in the Economics Textbook
The 8 attributes of a bad money

   1. Not very divisible   5. Vulnerable to theft
   2. Not fully fungible   6. Expensive to store
   3. Misrecognizable      7. Perishable
   4. Troublesome to move 8. Public/flauntable
All money must be...

Valuable
= can be used as payment for other goods
and services
4 ways to make money valuable
  Commodity       • gold, squirrel pelts
    money         • Habbo sofas, TF2 keys

 Representative   • gold certificates
    money         • Digital Gold

                  • dollar, euro, Ultima Online gold
  Fiat money      • EverQuest plat

                  • gift cards, IOUs, Nexon NX
  Scrip money     • Facebook Credits
A good store of value...

Retains its value
= does not significantly depreciate in
exchange value over time

    →   must also be resistant against
        counterfeiting
Designing Virtual Currency by Breaking (Almost) Every Rule in the Economics Textbook
A good measure of value has a...

Constant value
Does not
significantly
depreciate nor
appreciate in
exchange value
over time
Summary
● Money is a medium of exchange, a store of value, and
a measure of value
● Good money has attributes that make an economy run
smoothly and efficiently
● We can reverse the attributes to design bad money that
adds challenge and social interaction to game economies,
and can help balance them
● All money must nevertheless have exchange value
.com
Promo code: GDC2012




            Thanks for listening! Slides will be posted online
                                          @ViliLe @VEconomists
Image credits
● 3: Cousseran & Rahmouni (2005) The CDO market.
Banque de France.
● 16 & 22: English Wikipedia: Eric Guinther (2002)
● 19: Gilai Collectibles
● 21: English Wikipedia: PENG Yanan (2006); Flickr: (CC)
Woody1178a (2010)
● 30: Flickr: (CC) Sifu Renka (2008)

More Related Content

What's hot

Gamification - A Brief Introduction to Gamification
Gamification - A Brief Introduction to GamificationGamification - A Brief Introduction to Gamification
Gamification - A Brief Introduction to GamificationChetan Sundarde
 
1인개발자가되기전알아야할것들
1인개발자가되기전알아야할것들1인개발자가되기전알아야할것들
1인개발자가되기전알아야할것들Jinsub Jung
 
Ready, aim, create an FPS in Unity - Unite Copenhagen 2019
Ready, aim, create an FPS in Unity - Unite Copenhagen 2019Ready, aim, create an FPS in Unity - Unite Copenhagen 2019
Ready, aim, create an FPS in Unity - Unite Copenhagen 2019Unity Technologies
 
NDC 2011 영웅전 런칭팀 박영준
NDC 2011 영웅전 런칭팀 박영준NDC 2011 영웅전 런칭팀 박영준
NDC 2011 영웅전 런칭팀 박영준영준 박
 
게임 레벨 디자인 - 강의 소개서
게임 레벨 디자인 - 강의 소개서게임 레벨 디자인 - 강의 소개서
게임 레벨 디자인 - 강의 소개서용태 이
 
게임 스토리 텔링이란
게임 스토리 텔링이란게임 스토리 텔링이란
게임 스토리 텔링이란sinnoske
 
Improving LTV with Personalized Live Ops Offers: Hill Climb Racing 2 Case Stu...
Improving LTV with Personalized Live Ops Offers: Hill Climb Racing 2 Case Stu...Improving LTV with Personalized Live Ops Offers: Hill Climb Racing 2 Case Stu...
Improving LTV with Personalized Live Ops Offers: Hill Climb Racing 2 Case Stu...Jessica Tams
 
슈팅 게임에서 레벨 디자인 하기
슈팅 게임에서 레벨 디자인 하기슈팅 게임에서 레벨 디자인 하기
슈팅 게임에서 레벨 디자인 하기용태 이
 
게임기획자 준비는 어떻게 하고, 면접은 어떻게?
게임기획자 준비는 어떻게 하고, 면접은 어떻게?게임기획자 준비는 어떻게 하고, 면접은 어떻게?
게임기획자 준비는 어떻게 하고, 면접은 어떻게?Sunnyrider
 
[IGC 2017] 청강문화산업대학 TGB 김다찬 - 소년이여 개발자가 되어라 - 계획성 0% 막무가내 HP소드 개발기
[IGC 2017] 청강문화산업대학 TGB 김다찬 - 소년이여 개발자가 되어라 - 계획성 0% 막무가내 HP소드 개발기[IGC 2017] 청강문화산업대학 TGB 김다찬 - 소년이여 개발자가 되어라 - 계획성 0% 막무가내 HP소드 개발기
[IGC 2017] 청강문화산업대학 TGB 김다찬 - 소년이여 개발자가 되어라 - 계획성 0% 막무가내 HP소드 개발기강 민우
 
Social Games in China - The New Import/Export Business!
Social Games in China - The New Import/Export Business!Social Games in China - The New Import/Export Business!
Social Games in China - The New Import/Export Business!James Gwertzman
 
NDC 2015. 한 그루 한 그루 심지 않아도 돼요. 생태학에 기반한 [야생의 땅: 듀랑고]의 절차적 생성 생태계
NDC 2015. 한 그루 한 그루 심지 않아도 돼요. 생태학에 기반한 [야생의 땅: 듀랑고]의 절차적 생성 생태계NDC 2015. 한 그루 한 그루 심지 않아도 돼요. 생태학에 기반한 [야생의 땅: 듀랑고]의 절차적 생성 생태계
NDC 2015. 한 그루 한 그루 심지 않아도 돼요. 생태학에 기반한 [야생의 땅: 듀랑고]의 절차적 생성 생태계Imseong Kang
 
기획자의 포트폴리오는 어떻게 써야 할까
기획자의 포트폴리오는 어떻게 써야 할까기획자의 포트폴리오는 어떻게 써야 할까
기획자의 포트폴리오는 어떻게 써야 할까Han Je Sung
 
Lean Live Ops - Free Your Devs (annotated edition) - Joe Raeburn
Lean Live Ops - Free Your Devs (annotated edition) - Joe RaeburnLean Live Ops - Free Your Devs (annotated edition) - Joe Raeburn
Lean Live Ops - Free Your Devs (annotated edition) - Joe RaeburnSimon Hade
 
블랙옵스4의 레벨 디자인
블랙옵스4의 레벨 디자인블랙옵스4의 레벨 디자인
블랙옵스4의 레벨 디자인용태 이
 
NDC2013 - 심리학으로 다시 보는 게임 디자인
NDC2013 - 심리학으로 다시 보는 게임 디자인NDC2013 - 심리학으로 다시 보는 게임 디자인
NDC2013 - 심리학으로 다시 보는 게임 디자인Jubok Kim
 
김충효, 10년째 같은 회사를 다니고 있습니다
김충효, 10년째 같은 회사를 다니고 있습니다김충효, 10년째 같은 회사를 다니고 있습니다
김충효, 10년째 같은 회사를 다니고 있습니다devCAT Studio, NEXON
 

What's hot (20)

게임강연정리
게임강연정리게임강연정리
게임강연정리
 
Gamification - A Brief Introduction to Gamification
Gamification - A Brief Introduction to GamificationGamification - A Brief Introduction to Gamification
Gamification - A Brief Introduction to Gamification
 
Video Gaming.pptx
Video Gaming.pptxVideo Gaming.pptx
Video Gaming.pptx
 
1인개발자가되기전알아야할것들
1인개발자가되기전알아야할것들1인개발자가되기전알아야할것들
1인개발자가되기전알아야할것들
 
Introduction to Gamification
Introduction to GamificationIntroduction to Gamification
Introduction to Gamification
 
Ready, aim, create an FPS in Unity - Unite Copenhagen 2019
Ready, aim, create an FPS in Unity - Unite Copenhagen 2019Ready, aim, create an FPS in Unity - Unite Copenhagen 2019
Ready, aim, create an FPS in Unity - Unite Copenhagen 2019
 
NDC 2011 영웅전 런칭팀 박영준
NDC 2011 영웅전 런칭팀 박영준NDC 2011 영웅전 런칭팀 박영준
NDC 2011 영웅전 런칭팀 박영준
 
게임 레벨 디자인 - 강의 소개서
게임 레벨 디자인 - 강의 소개서게임 레벨 디자인 - 강의 소개서
게임 레벨 디자인 - 강의 소개서
 
게임 스토리 텔링이란
게임 스토리 텔링이란게임 스토리 텔링이란
게임 스토리 텔링이란
 
Improving LTV with Personalized Live Ops Offers: Hill Climb Racing 2 Case Stu...
Improving LTV with Personalized Live Ops Offers: Hill Climb Racing 2 Case Stu...Improving LTV with Personalized Live Ops Offers: Hill Climb Racing 2 Case Stu...
Improving LTV with Personalized Live Ops Offers: Hill Climb Racing 2 Case Stu...
 
슈팅 게임에서 레벨 디자인 하기
슈팅 게임에서 레벨 디자인 하기슈팅 게임에서 레벨 디자인 하기
슈팅 게임에서 레벨 디자인 하기
 
게임기획자 준비는 어떻게 하고, 면접은 어떻게?
게임기획자 준비는 어떻게 하고, 면접은 어떻게?게임기획자 준비는 어떻게 하고, 면접은 어떻게?
게임기획자 준비는 어떻게 하고, 면접은 어떻게?
 
[IGC 2017] 청강문화산업대학 TGB 김다찬 - 소년이여 개발자가 되어라 - 계획성 0% 막무가내 HP소드 개발기
[IGC 2017] 청강문화산업대학 TGB 김다찬 - 소년이여 개발자가 되어라 - 계획성 0% 막무가내 HP소드 개발기[IGC 2017] 청강문화산업대학 TGB 김다찬 - 소년이여 개발자가 되어라 - 계획성 0% 막무가내 HP소드 개발기
[IGC 2017] 청강문화산업대학 TGB 김다찬 - 소년이여 개발자가 되어라 - 계획성 0% 막무가내 HP소드 개발기
 
Social Games in China - The New Import/Export Business!
Social Games in China - The New Import/Export Business!Social Games in China - The New Import/Export Business!
Social Games in China - The New Import/Export Business!
 
NDC 2015. 한 그루 한 그루 심지 않아도 돼요. 생태학에 기반한 [야생의 땅: 듀랑고]의 절차적 생성 생태계
NDC 2015. 한 그루 한 그루 심지 않아도 돼요. 생태학에 기반한 [야생의 땅: 듀랑고]의 절차적 생성 생태계NDC 2015. 한 그루 한 그루 심지 않아도 돼요. 생태학에 기반한 [야생의 땅: 듀랑고]의 절차적 생성 생태계
NDC 2015. 한 그루 한 그루 심지 않아도 돼요. 생태학에 기반한 [야생의 땅: 듀랑고]의 절차적 생성 생태계
 
기획자의 포트폴리오는 어떻게 써야 할까
기획자의 포트폴리오는 어떻게 써야 할까기획자의 포트폴리오는 어떻게 써야 할까
기획자의 포트폴리오는 어떻게 써야 할까
 
Lean Live Ops - Free Your Devs (annotated edition) - Joe Raeburn
Lean Live Ops - Free Your Devs (annotated edition) - Joe RaeburnLean Live Ops - Free Your Devs (annotated edition) - Joe Raeburn
Lean Live Ops - Free Your Devs (annotated edition) - Joe Raeburn
 
블랙옵스4의 레벨 디자인
블랙옵스4의 레벨 디자인블랙옵스4의 레벨 디자인
블랙옵스4의 레벨 디자인
 
NDC2013 - 심리학으로 다시 보는 게임 디자인
NDC2013 - 심리학으로 다시 보는 게임 디자인NDC2013 - 심리학으로 다시 보는 게임 디자인
NDC2013 - 심리학으로 다시 보는 게임 디자인
 
김충효, 10년째 같은 회사를 다니고 있습니다
김충효, 10년째 같은 회사를 다니고 있습니다김충효, 10년째 같은 회사를 다니고 있습니다
김충효, 10년째 같은 회사를 다니고 있습니다
 

Viewers also liked

Loss Aversion in Facebook Games
Loss Aversion in Facebook GamesLoss Aversion in Facebook Games
Loss Aversion in Facebook GamesJuho Hamari
 
Knowledge Map of the Virtual Economy: an Introduction
Knowledge Map of the Virtual Economy: an IntroductionKnowledge Map of the Virtual Economy: an Introduction
Knowledge Map of the Virtual Economy: an IntroductionVili Lehdonvirta
 
Framework for Designing and Evaluating Game Achievements
Framework for Designing and Evaluating Game AchievementsFramework for Designing and Evaluating Game Achievements
Framework for Designing and Evaluating Game AchievementsJuho Hamari
 
How to plan a virtual goods sales business model
How to plan a virtual goods sales business modelHow to plan a virtual goods sales business model
How to plan a virtual goods sales business modelJuho Hamari
 
Designing Virtual Markets for Fun and Profit - GDC 2013
Designing Virtual Markets for Fun and Profit - GDC 2013Designing Virtual Markets for Fun and Profit - GDC 2013
Designing Virtual Markets for Fun and Profit - GDC 2013Vili Lehdonvirta
 
Big Fish, small pond - strategies for surviving in a maturing market - Ed Biden
Big Fish, small pond - strategies for surviving in a maturing market - Ed BidenBig Fish, small pond - strategies for surviving in a maturing market - Ed Biden
Big Fish, small pond - strategies for surviving in a maturing market - Ed BidenWooga
 
GDC 2017: Evaluating Monetization Early
GDC 2017: Evaluating Monetization EarlyGDC 2017: Evaluating Monetization Early
GDC 2017: Evaluating Monetization EarlyAdam Telfer
 

Viewers also liked (7)

Loss Aversion in Facebook Games
Loss Aversion in Facebook GamesLoss Aversion in Facebook Games
Loss Aversion in Facebook Games
 
Knowledge Map of the Virtual Economy: an Introduction
Knowledge Map of the Virtual Economy: an IntroductionKnowledge Map of the Virtual Economy: an Introduction
Knowledge Map of the Virtual Economy: an Introduction
 
Framework for Designing and Evaluating Game Achievements
Framework for Designing and Evaluating Game AchievementsFramework for Designing and Evaluating Game Achievements
Framework for Designing and Evaluating Game Achievements
 
How to plan a virtual goods sales business model
How to plan a virtual goods sales business modelHow to plan a virtual goods sales business model
How to plan a virtual goods sales business model
 
Designing Virtual Markets for Fun and Profit - GDC 2013
Designing Virtual Markets for Fun and Profit - GDC 2013Designing Virtual Markets for Fun and Profit - GDC 2013
Designing Virtual Markets for Fun and Profit - GDC 2013
 
Big Fish, small pond - strategies for surviving in a maturing market - Ed Biden
Big Fish, small pond - strategies for surviving in a maturing market - Ed BidenBig Fish, small pond - strategies for surviving in a maturing market - Ed Biden
Big Fish, small pond - strategies for surviving in a maturing market - Ed Biden
 
GDC 2017: Evaluating Monetization Early
GDC 2017: Evaluating Monetization EarlyGDC 2017: Evaluating Monetization Early
GDC 2017: Evaluating Monetization Early
 

Similar to Designing Virtual Currency by Breaking (Almost) Every Rule in the Economics Textbook

Virtual Worlds and Real Metrics:
Virtual Worlds and Real Metrics:Virtual Worlds and Real Metrics:
Virtual Worlds and Real Metrics:William Grosso
 
Social Gold: How to Launch your own Currency
Social Gold: How to Launch your own CurrencySocial Gold: How to Launch your own Currency
Social Gold: How to Launch your own CurrencySocial Gold
 
Chinwag Psych London 2014. Leigh Caldwell, The Irrational Agency. " Intangibl...
Chinwag Psych London 2014. Leigh Caldwell, The Irrational Agency. " Intangibl...Chinwag Psych London 2014. Leigh Caldwell, The Irrational Agency. " Intangibl...
Chinwag Psych London 2014. Leigh Caldwell, The Irrational Agency. " Intangibl...Chinwag
 
Odrl prez schull
Odrl prez schullOdrl prez schull
Odrl prez schullJon Schull
 
Jll2020report beyondretail
Jll2020report beyondretailJll2020report beyondretail
Jll2020report beyondretailP.S.A. Tonkes
 
Monetization
MonetizationMonetization
Monetizationfox
 
New Media Alchemy
New Media AlchemyNew Media Alchemy
New Media Alchemygoodold
 
Virtual goods forum_uk__vikas_v1_6-17-10
Virtual goods forum_uk__vikas_v1_6-17-10Virtual goods forum_uk__vikas_v1_6-17-10
Virtual goods forum_uk__vikas_v1_6-17-10Social Gold
 
EIA2016Turin - Nick De Mey. Revenue Model Design
EIA2016Turin - Nick De Mey. Revenue Model Design EIA2016Turin - Nick De Mey. Revenue Model Design
EIA2016Turin - Nick De Mey. Revenue Model Design European Innovation Academy
 
Casual Connect Keynote - Creating a Bull Market: How to Manage a Successful V...
Casual Connect Keynote - Creating a Bull Market: How to Manage a Successful V...Casual Connect Keynote - Creating a Bull Market: How to Manage a Successful V...
Casual Connect Keynote - Creating a Bull Market: How to Manage a Successful V...Social Gold
 
Virtual Currency at Mobile Casinos
Virtual Currency at Mobile CasinosVirtual Currency at Mobile Casinos
Virtual Currency at Mobile CasinosDroid Slots
 
Marketing avatar
Marketing avatarMarketing avatar
Marketing avatarArjun Paul
 
Undercover economist review
Undercover economist reviewUndercover economist review
Undercover economist reviewjoysebastin
 
Mobile + Social: Show us the Money
Mobile + Social: Show us the MoneyMobile + Social: Show us the Money
Mobile + Social: Show us the MoneyVolker Hirsch
 
Mobile + Social: Show us the Money
Mobile + Social: Show us the MoneyMobile + Social: Show us the Money
Mobile + Social: Show us the MoneyVolker Hirsch
 
Introduction to Cryptocurrency by fmr Google Product Leader
Introduction to Cryptocurrency by fmr Google Product LeaderIntroduction to Cryptocurrency by fmr Google Product Leader
Introduction to Cryptocurrency by fmr Google Product LeaderProduct School
 
Indonesia outlook the rise of marketing 3000 feb 22, 2011
Indonesia outlook the rise of marketing 3000 feb 22, 2011Indonesia outlook the rise of marketing 3000 feb 22, 2011
Indonesia outlook the rise of marketing 3000 feb 22, 2011mohammadtazam
 

Similar to Designing Virtual Currency by Breaking (Almost) Every Rule in the Economics Textbook (20)

Virtual Worlds and Real Metrics:
Virtual Worlds and Real Metrics:Virtual Worlds and Real Metrics:
Virtual Worlds and Real Metrics:
 
Social Gold: How to Launch your own Currency
Social Gold: How to Launch your own CurrencySocial Gold: How to Launch your own Currency
Social Gold: How to Launch your own Currency
 
The Future of Shopping
The Future of ShoppingThe Future of Shopping
The Future of Shopping
 
Chinwag Psych London 2014. Leigh Caldwell, The Irrational Agency. " Intangibl...
Chinwag Psych London 2014. Leigh Caldwell, The Irrational Agency. " Intangibl...Chinwag Psych London 2014. Leigh Caldwell, The Irrational Agency. " Intangibl...
Chinwag Psych London 2014. Leigh Caldwell, The Irrational Agency. " Intangibl...
 
Odrl prez schull
Odrl prez schullOdrl prez schull
Odrl prez schull
 
Jll2020report beyondretail
Jll2020report beyondretailJll2020report beyondretail
Jll2020report beyondretail
 
Monetization
MonetizationMonetization
Monetization
 
New Media Alchemy
New Media AlchemyNew Media Alchemy
New Media Alchemy
 
Virtual goods forum_uk__vikas_v1_6-17-10
Virtual goods forum_uk__vikas_v1_6-17-10Virtual goods forum_uk__vikas_v1_6-17-10
Virtual goods forum_uk__vikas_v1_6-17-10
 
EIA2016Turin - Nick De Mey. Revenue Model Design
EIA2016Turin - Nick De Mey. Revenue Model Design EIA2016Turin - Nick De Mey. Revenue Model Design
EIA2016Turin - Nick De Mey. Revenue Model Design
 
Casual Connect Keynote - Creating a Bull Market: How to Manage a Successful V...
Casual Connect Keynote - Creating a Bull Market: How to Manage a Successful V...Casual Connect Keynote - Creating a Bull Market: How to Manage a Successful V...
Casual Connect Keynote - Creating a Bull Market: How to Manage a Successful V...
 
Virtual Currency at Mobile Casinos
Virtual Currency at Mobile CasinosVirtual Currency at Mobile Casinos
Virtual Currency at Mobile Casinos
 
Marketing avatar
Marketing avatarMarketing avatar
Marketing avatar
 
Undercover economist review
Undercover economist reviewUndercover economist review
Undercover economist review
 
2014 Business Model Selection by Nick De Mey
2014 Business Model Selection by Nick De Mey2014 Business Model Selection by Nick De Mey
2014 Business Model Selection by Nick De Mey
 
Mobile + Social: Show us the Money
Mobile + Social: Show us the MoneyMobile + Social: Show us the Money
Mobile + Social: Show us the Money
 
Mobile + Social: Show us the Money
Mobile + Social: Show us the MoneyMobile + Social: Show us the Money
Mobile + Social: Show us the Money
 
Introduction to Cryptocurrency by fmr Google Product Leader
Introduction to Cryptocurrency by fmr Google Product LeaderIntroduction to Cryptocurrency by fmr Google Product Leader
Introduction to Cryptocurrency by fmr Google Product Leader
 
CrossShops
CrossShopsCrossShops
CrossShops
 
Indonesia outlook the rise of marketing 3000 feb 22, 2011
Indonesia outlook the rise of marketing 3000 feb 22, 2011Indonesia outlook the rise of marketing 3000 feb 22, 2011
Indonesia outlook the rise of marketing 3000 feb 22, 2011
 

Recently uploaded

LRFD Bridge Design Specifications-AASHTO (2014).pdf
LRFD Bridge Design Specifications-AASHTO (2014).pdfLRFD Bridge Design Specifications-AASHTO (2014).pdf
LRFD Bridge Design Specifications-AASHTO (2014).pdfHctorFranciscoSnchez1
 
High-Quality Faux Embroidery Services | Cre8iveSkill
High-Quality Faux Embroidery Services | Cre8iveSkillHigh-Quality Faux Embroidery Services | Cre8iveSkill
High-Quality Faux Embroidery Services | Cre8iveSkillCre8iveskill
 
Building+your+Data+Project+on+AWS+-+Luke+Anderson.pdf
Building+your+Data+Project+on+AWS+-+Luke+Anderson.pdfBuilding+your+Data+Project+on+AWS+-+Luke+Anderson.pdf
Building+your+Data+Project+on+AWS+-+Luke+Anderson.pdfsaidbilgen
 
Production of Erythromycin microbiology.pptx
Production of Erythromycin microbiology.pptxProduction of Erythromycin microbiology.pptx
Production of Erythromycin microbiology.pptxb2kshani34
 
Khushi sharma undergraduate portfolio...
Khushi sharma undergraduate portfolio...Khushi sharma undergraduate portfolio...
Khushi sharma undergraduate portfolio...khushisharma298853
 
Introduce Trauma-Informed Design to Your Organization - CSUN ATC 2024
Introduce Trauma-Informed Design to Your Organization - CSUN ATC 2024Introduce Trauma-Informed Design to Your Organization - CSUN ATC 2024
Introduce Trauma-Informed Design to Your Organization - CSUN ATC 2024Ted Drake
 
The future of UX design support tools - talk Paris March 2024
The future of UX design support tools - talk Paris March 2024The future of UX design support tools - talk Paris March 2024
The future of UX design support tools - talk Paris March 2024Alan Dix
 
WCM Branding Agency | 210519 - Portfolio Review (F&B) -s.pptx
WCM Branding Agency | 210519 - Portfolio Review (F&B) -s.pptxWCM Branding Agency | 210519 - Portfolio Review (F&B) -s.pptx
WCM Branding Agency | 210519 - Portfolio Review (F&B) -s.pptxHasan S
 
Best-NO1 Pakistani Amil Baba Real Amil baba In Pakistan Najoomi Baba in Pakis...
Best-NO1 Pakistani Amil Baba Real Amil baba In Pakistan Najoomi Baba in Pakis...Best-NO1 Pakistani Amil Baba Real Amil baba In Pakistan Najoomi Baba in Pakis...
Best-NO1 Pakistani Amil Baba Real Amil baba In Pakistan Najoomi Baba in Pakis...Amil baba
 
Math Group 3 Presentation OLOLOLOLILOOLLOLOL
Math Group 3 Presentation OLOLOLOLILOOLLOLOLMath Group 3 Presentation OLOLOLOLILOOLLOLOL
Math Group 3 Presentation OLOLOLOLILOOLLOLOLkenzukiri
 
Designing for privacy: 3 essential UX habits for product teams
Designing for privacy: 3 essential UX habits for product teamsDesigning for privacy: 3 essential UX habits for product teams
Designing for privacy: 3 essential UX habits for product teamsBlock Party
 
Mike Tyson Sign The Contract Big Boy Shirt
Mike Tyson Sign The Contract Big Boy ShirtMike Tyson Sign The Contract Big Boy Shirt
Mike Tyson Sign The Contract Big Boy ShirtTeeFusion
 
How to use Ai for UX UI Design | ChatGPT
How to use Ai for UX UI Design | ChatGPTHow to use Ai for UX UI Design | ChatGPT
How to use Ai for UX UI Design | ChatGPTThink 360 Studio
 
Embroidery design from embroidery magazine
Embroidery design from embroidery magazineEmbroidery design from embroidery magazine
Embroidery design from embroidery magazineRivanEleraki
 
Construction Documents Checklist before Construction
Construction Documents Checklist before ConstructionConstruction Documents Checklist before Construction
Construction Documents Checklist before ConstructionResDraft
 
Cold War Tensions Increase - 1945-1952.pptx
Cold War Tensions Increase - 1945-1952.pptxCold War Tensions Increase - 1945-1952.pptx
Cold War Tensions Increase - 1945-1952.pptxSamKuruvilla5
 
Design mental models for managing large-scale dbt projects. March 21, 2024 in...
Design mental models for managing large-scale dbt projects. March 21, 2024 in...Design mental models for managing large-scale dbt projects. March 21, 2024 in...
Design mental models for managing large-scale dbt projects. March 21, 2024 in...Ed Orozco
 
UX Conference on UX Research Trends in 2024
UX Conference on UX Research Trends in 2024UX Conference on UX Research Trends in 2024
UX Conference on UX Research Trends in 2024mikailaoh
 
Create Funeral Invites Online @ feedvu.com
Create Funeral Invites Online @ feedvu.comCreate Funeral Invites Online @ feedvu.com
Create Funeral Invites Online @ feedvu.comjakyjhon00
 

Recently uploaded (19)

LRFD Bridge Design Specifications-AASHTO (2014).pdf
LRFD Bridge Design Specifications-AASHTO (2014).pdfLRFD Bridge Design Specifications-AASHTO (2014).pdf
LRFD Bridge Design Specifications-AASHTO (2014).pdf
 
High-Quality Faux Embroidery Services | Cre8iveSkill
High-Quality Faux Embroidery Services | Cre8iveSkillHigh-Quality Faux Embroidery Services | Cre8iveSkill
High-Quality Faux Embroidery Services | Cre8iveSkill
 
Building+your+Data+Project+on+AWS+-+Luke+Anderson.pdf
Building+your+Data+Project+on+AWS+-+Luke+Anderson.pdfBuilding+your+Data+Project+on+AWS+-+Luke+Anderson.pdf
Building+your+Data+Project+on+AWS+-+Luke+Anderson.pdf
 
Production of Erythromycin microbiology.pptx
Production of Erythromycin microbiology.pptxProduction of Erythromycin microbiology.pptx
Production of Erythromycin microbiology.pptx
 
Khushi sharma undergraduate portfolio...
Khushi sharma undergraduate portfolio...Khushi sharma undergraduate portfolio...
Khushi sharma undergraduate portfolio...
 
Introduce Trauma-Informed Design to Your Organization - CSUN ATC 2024
Introduce Trauma-Informed Design to Your Organization - CSUN ATC 2024Introduce Trauma-Informed Design to Your Organization - CSUN ATC 2024
Introduce Trauma-Informed Design to Your Organization - CSUN ATC 2024
 
The future of UX design support tools - talk Paris March 2024
The future of UX design support tools - talk Paris March 2024The future of UX design support tools - talk Paris March 2024
The future of UX design support tools - talk Paris March 2024
 
WCM Branding Agency | 210519 - Portfolio Review (F&B) -s.pptx
WCM Branding Agency | 210519 - Portfolio Review (F&B) -s.pptxWCM Branding Agency | 210519 - Portfolio Review (F&B) -s.pptx
WCM Branding Agency | 210519 - Portfolio Review (F&B) -s.pptx
 
Best-NO1 Pakistani Amil Baba Real Amil baba In Pakistan Najoomi Baba in Pakis...
Best-NO1 Pakistani Amil Baba Real Amil baba In Pakistan Najoomi Baba in Pakis...Best-NO1 Pakistani Amil Baba Real Amil baba In Pakistan Najoomi Baba in Pakis...
Best-NO1 Pakistani Amil Baba Real Amil baba In Pakistan Najoomi Baba in Pakis...
 
Math Group 3 Presentation OLOLOLOLILOOLLOLOL
Math Group 3 Presentation OLOLOLOLILOOLLOLOLMath Group 3 Presentation OLOLOLOLILOOLLOLOL
Math Group 3 Presentation OLOLOLOLILOOLLOLOL
 
Designing for privacy: 3 essential UX habits for product teams
Designing for privacy: 3 essential UX habits for product teamsDesigning for privacy: 3 essential UX habits for product teams
Designing for privacy: 3 essential UX habits for product teams
 
Mike Tyson Sign The Contract Big Boy Shirt
Mike Tyson Sign The Contract Big Boy ShirtMike Tyson Sign The Contract Big Boy Shirt
Mike Tyson Sign The Contract Big Boy Shirt
 
How to use Ai for UX UI Design | ChatGPT
How to use Ai for UX UI Design | ChatGPTHow to use Ai for UX UI Design | ChatGPT
How to use Ai for UX UI Design | ChatGPT
 
Embroidery design from embroidery magazine
Embroidery design from embroidery magazineEmbroidery design from embroidery magazine
Embroidery design from embroidery magazine
 
Construction Documents Checklist before Construction
Construction Documents Checklist before ConstructionConstruction Documents Checklist before Construction
Construction Documents Checklist before Construction
 
Cold War Tensions Increase - 1945-1952.pptx
Cold War Tensions Increase - 1945-1952.pptxCold War Tensions Increase - 1945-1952.pptx
Cold War Tensions Increase - 1945-1952.pptx
 
Design mental models for managing large-scale dbt projects. March 21, 2024 in...
Design mental models for managing large-scale dbt projects. March 21, 2024 in...Design mental models for managing large-scale dbt projects. March 21, 2024 in...
Design mental models for managing large-scale dbt projects. March 21, 2024 in...
 
UX Conference on UX Research Trends in 2024
UX Conference on UX Research Trends in 2024UX Conference on UX Research Trends in 2024
UX Conference on UX Research Trends in 2024
 
Create Funeral Invites Online @ feedvu.com
Create Funeral Invites Online @ feedvu.comCreate Funeral Invites Online @ feedvu.com
Create Funeral Invites Online @ feedvu.com
 

Designing Virtual Currency by Breaking (Almost) Every Rule in the Economics Textbook

  • 1. Designing Successful Virtual Currency by Breaking (Almost) Every Rule in the Economics Textbook Dr Vili Lehdonvirta Visiting Fellow, London School of Economics Twitter: @ViliLe
  • 4. .com Virtual Economists L td M arch 2012 Virtual Economists L td A pril 2012 Social Games M obile Games Virtual Goods & Currencies Pricing Report Virtual Goods & Currencies Pricing Report 1/ 2012 1/ 2012 Introduction and Virtual goods catalogs Pricing virtual goods: Introduction and Virtual goods catalogs Pricing virtual goods: definitions in social games general distribution definitions in mobile games general distribution Social games are games played N umber of virtual goods for Introductory goods convert Social games are games played N umber of virtual goods for Introductory goods convert on social networking sites. sale depends on genre and age. players into payers. on social networking sites. sale depends on genre and age. players into payers. Page 2 Page 3 Page 4 Page 2 Page 3 Page 4 Pricing virtual goods: Vanity goods and Durable goods and Pricing virtual goods: Vanity goods and Durable goods and price points functional goods consumable goods price points functional goods consumable goods Common virtual goods prices D ifferent genres emphasize L imited number of uses or Common virtual goods prices D ifferent genres emphasize L imited number of uses or are $0.20, $2.00 and $6.80. different types of goods. expiration time? are $0.20, $2.00 and $6.80. different types of goods. expiration time? Page 5 Page 6 Page 7 Page 6 Page 7 Page 9 Pricing and bundling Research Pricing and bundling Research virtual currencies methodology virtual currencies methodology Quantity discounts and typical Based on manually collected Quantity discounts get players Based on manually collected currency package sizes. data on over 3,000 products. to commit while enthusiastic. data on over 3,000 products. Page 8 Page 9 Page 11 Page 13
  • 5. Overview 1. What is money? 2. What kind of an object makes a good money? 3. Efficiency is boring, let’s design bad money
  • 7. What is money? 1. Medium of exchange 2. Store of value 3. Measure of value
  • 11. CS = Habbox.com 3 Jan 2007
  • 13. “Real” money vs “virtual” money
  • 14. “Real” money vs “virtual” money ●Currency area = total set of goods and services payable with a currency ● Large currency area -> “real” money ● Small currency area -> “virtual” money
  • 15. Designing money ≠ designing markets Designing markets Designing money How do you obtain the money? What shape, form or appearance Earn through play? Purchase? does the money take? What can you spend the money What behaviors does the money on? User-to-user? User-to-NPC? as an object have? Can you redeem the money back How do people interact with the to national currency? money?
  • 16. What is good money? Something that is... ...a good medium of exchange ...a good store of value ...and a good measure of value
  • 17. A good store of value A good medium of exchange is durable is fungible is resistant against theft is divisible is inexpensive to store is readily countable is private is recognizable retains its value is convenient A good measure of is valuable value has a constant value
  • 18. Designing bad money ● Efficiency is boring ● Games are about challenges; online games are also about social interaction ● Shouldn’t your money present some challenges and encourage social interaction?
  • 19. World’s most efficient virtual economy
  • 20. A bad medium of exchange is... Not very divisible Stone money of the island of Yap
  • 21. CS = = 75 RD Habbox.com 3 Jan 2007
  • 22. A bad medium of exchange is... Not fully fungible
  • 23. German coin balance and weights, 1765
  • 24. A bad medium of exchange is... Misrecognizable = currency = super rare item, worth ~300
  • 25. Ancient Chinese money, 7-22 CE Chinese knife money, 600-200 BCE
  • 26. A bad medium of exchange is... Troublesome to move
  • 29. A bad store of value is... Vulnerable to theft
  • 32. A bad store of value is... Costly to store
  • 33. A bad store of value is... Perishable
  • 34. “Oh, blessed money which yieldeth sweete and profitable drinke for mankinde, and preserveth the possessors thereof free from the hellish pestilence of avarice because it cannot be long kept or hid underground” –Anghiera (1457-1526)
  • 35. A bad store of value is... Not very private ● Public ● Flauntable
  • 37. The 8 attributes of a bad money 1. Not very divisible 5. Vulnerable to theft 2. Not fully fungible 6. Expensive to store 3. Misrecognizable 7. Perishable 4. Troublesome to move 8. Public/flauntable
  • 38. All money must be... Valuable = can be used as payment for other goods and services
  • 39. 4 ways to make money valuable Commodity • gold, squirrel pelts money • Habbo sofas, TF2 keys Representative • gold certificates money • Digital Gold • dollar, euro, Ultima Online gold Fiat money • EverQuest plat • gift cards, IOUs, Nexon NX Scrip money • Facebook Credits
  • 40. A good store of value... Retains its value = does not significantly depreciate in exchange value over time → must also be resistant against counterfeiting
  • 42. A good measure of value has a... Constant value Does not significantly depreciate nor appreciate in exchange value over time
  • 43. Summary ● Money is a medium of exchange, a store of value, and a measure of value ● Good money has attributes that make an economy run smoothly and efficiently ● We can reverse the attributes to design bad money that adds challenge and social interaction to game economies, and can help balance them ● All money must nevertheless have exchange value
  • 44. .com Promo code: GDC2012 Thanks for listening! Slides will be posted online @ViliLe @VEconomists
  • 45. Image credits ● 3: Cousseran & Rahmouni (2005) The CDO market. Banque de France. ● 16 & 22: English Wikipedia: Eric Guinther (2002) ● 19: Gilai Collectibles ● 21: English Wikipedia: PENG Yanan (2006); Flickr: (CC) Woody1178a (2010) ● 30: Flickr: (CC) Sifu Renka (2008)

Editor's Notes

  1. Work as a scholar, currently an Adjunct Professor at the University of Turku and a visiting fellow at the London School of Economics. I also spent three years in Tokyo and one year in Singapore.I’ve been doing research on virtual economies for almost eight years now.When I first started speaking at developer events about the idea of selling virtual goods and powerups to make money, the response was like, Vili, you’ve spent too much time in Asia, all that dim sum messed up your noodle, the item sales business model only works in Asia, not on Western consumers. See who’s right now, hah!But to be fair, some companies like Sulake with Habbo have been virtual item sales on the Western market for ages.And I’ve done a lot of research collaboration with Sulake and also with other game companies like CCP Games, the publishers of EVE Online.
  2. Worked as a game programmer at a Finnish online game publisher more than 10 years agoWorld’s first real-time multiplayer browser games with a freemium business model?even experimented with selling powerupsbombs in a game called Pearl Harbor
  3. Also done some consulting on the side as part of Virtual Economists Ltd.One thing Virtual Economists does is collect data on virtual goods and currencies pricing and assortments in social and mobile games. The results are published as reports that developers can use to benchmark and optimize their virtual currency lineups.
  4. - Money has become mystified
  5. Let’s return to the very fundamentals of moneyBefore money existed, trade was conducted via barter: exchanging goods for goodsThe problem in barter is that there needs to be a double coincidence of wants, or else you have to involve a third and possibly a fourth or fifth party to make an exchange possibleSo how do you solve this problem? You adopt some third commodity, like gold, as a medium of exchange.Instead of trying to exchange your produce directly to the goods that you want, you first exchange them to some universally desirable commodity, like gold, and then go and exchange that gold to the goods that you really want. Even if you don’t need gold yourself, you’re fairly safe accepting it as payment, because so many other people want it.There’s a second problem with barter. What if you’re an apple farmer, and try to use apples to pay for everything? You’d think that that would work quite well, because apples are universally liked. But two months after your harvest, your apples are spoilt! You’re fortune is lost. To avoid this, you need to adopt some third commodity as a store of value. Instead of trying to store your wealth in produce, you must first exchange it to something that doesn’t spoil, and then use that to pay for purchases later.The third and final problem in a barter economy is that it’s hard to go shopping without price tags, and hard to do business deals without some common yardstick of value. The solution is to again adopt some universal commodity in which prices and values can be expressed, and use it as a measure of value.So there we have it, the definition of money: anything that is used as a medium of exchange, a store of value, and a unit of account. It’s that simple.
  6. Because money is so useful, and makes an economy so much more efficient, people tend to adopt one spontaneously. Whenever you take an environment with goods but no money, some commodity money almost always emerges. In ancient Egypt, it was gold. In Babylon, it was silver. In ancient Finland, it was – guess what – squirrel pelts. Few Finns know this, but the very word for money in Finnish means squirrel pelts.Prisoners used to use cigarettes as money, but since U.S. prisons have become non-smoking, the Wall Street Journal reports that prison economies now use plastic-and-foil pouches of mackerel fish fillets as money.
  7. The thing happens in virtual economies. Take Habbo Hotel, a teenage virtual world with over 200 million accounts and 10 million monthly unique visitors. When it was first launched over ten years ago, it had no money at all. All trade was barter.
  8. But then the users adopted a virtual currency, known as CS. This is a user-maintained list of current market prices for various virtual goods, their value measured in CS.
  9. What does CS stand for? It stands for “Club Sofa”. Users of Habbo adopted big green sofas as their currency.
  10. So let’s say we want to buy the purple parasol. It’s price is 3 CS. Trading using this currency looks like this.
  11. Habbo’s Club Sofas are an example of what many people today call “virtual currency”. Before we go any further, let’s spend a minute to think about what “virtual currency” means. How is it different from “real currency”?The difference is not that one is digital and the other is not. Most dollars and euros today are digital, while some virtual currencies also exist in physical token form (game cards).The truth is that there is no real fundamental difference between so-called virtual currency and real currency. Currencies with a small currency area (i.e. can only buy items in one online environment) tend to be called virtual currencies, while currencies with a large currency area tend to be called real money. But this is not a difference of quality but quantity, and there are also examples where it does not hold (e.g. Tencent Q Coin). It would be more accurate to talk about “national currency” or “legal tender” rather than “real money”. All money is real unless you’re dreaming.
  12. Habbo’s Club Sofas are an example of what many people today call “virtual currency”. Before we go any further, let’s spend a minute to think about what “virtual currency” means. How is it different from “real currency”?The difference is not that one is digital and the other is not. Most dollars and euros today are digital, while some virtual currencies also exist in physical token form (game cards).The truth is that there is no real fundamental difference between so-called virtual currency and real currency. Currencies with a small currency area (i.e. can only buy items in one online environment) tend to be called virtual currencies, while currencies with a large currency area tend to be called real money. But this is not a difference of quality but quantity, and there are also examples where it does not hold (e.g. Tencent Q Coin). It would be more accurate to talk about “national currency” or “legal tender” rather than “real money”. All money is real unless you’re dreaming.
  13. A few words about the scope of this talk. I’m not going to be talking about market design, but money design. Questions like whether your currency can be earned through play or purchased for national currency are matters for market design. The topics this talk addresses applies just as well to “soft” virtual currencies used in player-to-player ingame trade as to “hard” currencies purchased for national currency, etc. The fundamentals of money are the same in all cases.The CS is a virtual currency adopted spontaneously by users, but everything in this presentation applies just as well to both user-adopted currencies and currencies put in place by designers. User-adopted currencies tend to be more creative and have more rough edges, so I will be using them as examples more.
  14. Money is anything that functions as a medium of exchange, a store of value, and a measure of value. Good money is something that does these three jobs well. Commodities like gold and cigarettes don’t get picked as currency by chance; they have some useful attributes that make them particularly suited for these purposes. Economists have studied these attributes for a long time. I’ve gathered them in a list.
  15. This is the list of attributes of good money.Fungible = Any one unit of the currency is as good as the otherDivisible = Capable of being divided into smaller units without loss of valueReadily countable = The quantity of the money can be easily ascertainedRecognizable = Easily distinguished from other objectsConvenient = Easy to transport and handleValuable = can be exchanged to other goods and servicesDurable = Retains itscharacteristicsover timeResistant against theftInexpensive to storePrivate = the value held is not visible to outsidersRetains its value = does not significantly depreciate in exchange value over timeConstant value = neither depreciates nor appreciates in value over timeAnything that has these attributes will make a superbly efficient money that makes the economy run smoothly. If you are wondering why some particular object was picked by your users as a currency, it’s because it ranks higher on these attributes than the other available objects. And if you are designing a new currency that you would like people to use for some serious purpose, like buying game time or transferring value across the globe, then this is your design guideline: you need to design the user experience and the underlying digital objects so that they rank high on these attributes.
  16. However, if you’re designing a game with an in-game currency, then your design objectives are completely different. You’re not trying to design for efficiency, you’re trying to design for experience. There are many ways to formulate what game experience is, but a key concept is definitely challenge. In online games, another key attraction is social interaction. So you need to also think about the economy from the perspectives of challenge and social interaction. Mere efficiency for efficiency’s sake has zero interest.So the previous part of the talk was the “economics textbook” part. From here begins the “breaking the rules” part.
  17. To further emphasize the point: efficiency is easy to achieve in a virtual economy, you can make everyone rich in the blink of an eye. But that’s not the point. The value of a virtual good to a user is often in the challenge of obtaining it, rather than in its actual possession. Your currency should support this idea, too.
  18. A divisible currency makes it possible to convey the correct amount of value in a trade: not too much, not too little, but “exact change”. Rice and gold are very divisible, but diamonds and paintings are not: if they are cut in half, the two halves are together less valuable than the whole was.(real story about the stone money of the island of Yap here)So if your virtual currency was not very divisible, how would that be fun, as opposed to merely inconvenient? One thing is that a less-than-perfectly divisible currency makes it slightly harder to reach an agreement, so it forces people to negotiate more. This increases the amount of social interaction involved in the economy. Contrast this with a perfectly divisible money, which makes transactions fast and smooth, but makes trading less sociable. The correct design is a balancing act between efficiency and social interaction: if your currency unit is too big and indivisible, trade will simply not happen or people will adopt another object as the currency.
  19. Another possible fun upside from poor divisibility is that it forces players to be innovative and come up with new tricks to trade efficiently. The Club Sofa used as a currency in Habbo UK had a fairly big unit value. To improve divisibility, the players created a sub-unit: one Club sofa was equated with approximately 75 rubber ducks, in the same way as one dollar equals 100 cents. This deepened the economic lore of the environment and gave virtual traders a new important object to track and trade.
  20. A good, smooth medium of exchange is fungible, that is, any one unit of the currency should be as good as the other, interchangeable. If individual units are different, people assign different values to them and they no longer function as a neutral medium. Standardized commodities such as 18-carat gold or white rice are very fungible, as one measure of either is for all intents and purposes equal to another measure of the same size. Virtual goods tend to be extremely fungible: one virtual item is an exact copy of another item of the same type, unless quality differences have been expressly programmed in.Medals in World of Warcraft are used as an efficient currency in player-to-NPC transactions; they are fully fungible. In contrast, medals in TF2 are not fully fungible: they have a serial number, and medals with lower numbers are considered more valuable. Not surprisingly, they have not been adopted as a currency by the player community.
  21. So what fun could there be in forcing a currency upon your players that lacks fungibility? Consider the history of coins. One euro coin today is exactly the same as any other, and this makes trading smooth, since you don't have to pay attention to each coin you're giving or receiving. But back in the days of gold and silver coins, one coin could actually be worth less than another supposedly equivalent coin, because someone might have shaven some of the gold off, or the coin might simply be worn out. Unless you had the skills and equipment to measure coins, you risked being shafted every time you dealt with coins.Imagine introducing this mechanic into a game. There are two types of coins, good ones and bad ones. They look identical, but the bad ones are less useful, because NPCs won't accept them. Only some players can tell them apart. This introduces a whole new element of trust into the economy. Do you trust your friend to give you good coins? Do you trust that NPC? If you do happen to end up with bad coins, do you try pass them on to some other poor sucker, or do you do the right thing and have them re-cast into half as many good coins? The economy of the game is suddenly much more social.
  22. A good medium of exchange should be recognizable, that is, not easily confused with other objects.A bad medium of exchange is easily misrecognized, like the plastic chair in the picture, used as a currency in the Finnish version of Habbo Hotel.
  23. Accidentally giving away your super rare item instead of a piece of currency is not much fun. But if designed on purpose, lack of recognizability could also be a fun feature. In every fantasy game today, like Skyrim, no matter how exotic a culture you meet, their currency is always round coins which the player character immediately recognizes as money. But if you look at the history of coinage, there have been some really funny designs that through today’s eyes are not recognizable as money at all. In a more challenging adventure game, the player would discover all kinds of objects lying around, and it would be up to their anthropological acumen to figure out which of the objects are actually used as currency in the culture they are visiting.
  24. A good, smooth medium of exchange – like a credit card -- allows you to move an unlimited amount of value around effortlessly. A bad medium of exchange makes it considerably more troublesome to move value around. I’m pretty sure the stone money of Yap wins the title of the most incovenient money of all time.
  25. Game currencies are rarely bad in this respect. Ultima Online and EverQuest were some of the few games that actually had money that weighed something. This is a screenshot of Ultima Online, of a place where one player was accepting donations for the victims of the 2004 tsunami. One stack of 60,000 coinsweights 400 stone – a very significant weight barely within the carrying capacity of a typical character. So all that money on the ground represents not just generosity on the part of the players, but also a whole lot of hauling.
  26. What could be fun about wealth being troublesome to move? The challenge itself might be fun and it might not be. Additional features that designers have added to games to help players overcome this challenge can sometimes be fun and interesting as well (explain pictures).But one potentially very useful aspect of heavy money that to my knowledge has not been explored in game design is this: weight could be an alternative or complement to sinks in balancing the economy. If you are worried that players in your game will eventually be so rich that no matter where they go, they can simply buy everything they see, perhaps spoiling the game for newbie players, then making it difficult to move large amounts of money over significant distances could address this problem without imposing heavy sinks that players hate. Players have lots of money at home like Scrooge McDuck, but when visiting faraway places, their buying power would be limited to what they can carry on their person.Unless of course you make it possible to move wealth around in a silver train or convoy, which brings us to the next point...
  27. A store of value that is easy to steal is obviously not very good. This is one reason why people prefer bank money over cash for long-term storage. Players hate it when their virtual money gets stolen due to hacking or scamming, and developers are doing their best to improve their money in this respect.But being vulnerable to theft can be entertaining as well. Consider EVE Online, where the space equivalent of miners and truck drivers spend countless hours drilling rocks and hauling valuables from one start to another. If these were risk-free activities, they would be deadly boring. But in EVE, they entail a constant risk of attack by pirate players, who seek to steal the valuable cargo. In the same way, making a currency vulnerable to theft can make an economy more exciting.There are a number of differences between scary, non-fun risks and risks that are exciting. The main one is that in the latter, the player gets to control when and how much they expose themselves to theft.
  28. Team Fortress 2 has an exciting economy that involves a number of player-adopted currency units:ear budskeysBill’s hatsscrap metal
  29. One problem with these commodity currencies, especially the low-value scrap metal, is that they take up a lot of inventory space.
  30. A bad store of value is costly to store. This attribute doesn’t really add any meaningful challenge or social interaction to the game, but it does have a few advantages to the developer: a currency that is costly to store to the player can be lucrative to the developer (TF2 example above), and it tends to keep the database clean.
  31. A good store of value should be durable, that is, it should not deteriorate, expire or otherwise lose its utility over time. A bad store of value is perishable. Being digital records, virtual goods can be extremely durable. But it is also common for virtual goods to be programmed to disappear after a certain time.
  32. The virtues of a perishable currency are explained in this quote from a 15th-century Spanish historian Anghiera. He is talking about cocoa beans, which native Mexicans used as a currency. Spanish colonists found the idea crazy, because cocoa beans go bad in a few months. But Anghiera argued that this is perfect, because it prevents people from hoarding money and keeps the economy flowing. In a game economy, perishable currency would have similar benefits.
  33. Financial privacy is an important thing, but in a game economy, we don’t need to be so uptight about it. A money can lack privacy in two different ways, each with its own benefits:Money is public: outsiders can see how much you are worth. A negative (or positive, depending on how you look at it) consequence is that it can make you vulnerable to theft. A more interesting consequence is that it promotes social interaction and trade. In TF2, other players can see your inventory through third-party sites like the one shown in the picture. If they find that you have a lot of money of the type that they want, like the keys in this picture, then they will contact you and offer to sell all kinds of stuff. And you can’t say that you can’t afford to buy; they know exactly what you can afford.
  34. 2) Money is flauntable: flauntability simply means that you can show your money to other people. There are many situations in real life where you need to prove to others how much you’re worth, like when applying for a mortgage or courting a girl in China. Cash can be shown directly, banks issue balance certificates. But doing the same in a game is surprisingly difficult; many games take financial privacy too seriously. In many games the only way to do it is to take a screenshot, which could be altered. In Habbo, people can show off how much hard currency they have by exchanging it to gold bars. Pictured are around $10,000 worth of gold bars.
  35. This table summarizes the usefulattributes of bad money, reached by breaking the rules of conventional money design. They allow you to add challenge to the economy, to encourage socia interaction, and to help balance the economy.One caveat is that when designing money for a market that allocates naturally scarce resources between different uses, such as server capacity or polygons (e.g. Second Life), then the situation is different. To get the best value out of the limited resources, it is probably best to strive for a market that is as efficient as possible. In this case, use the list of attributes of good money identified earlier.Another caveat: if a virtual economy has a user-to-user market but the currencies available on this market are really bad, as in really challenging to use, then users may just adopt a national currency as the medium of exchange instead. For example, when counterfeiting (duping) destroyed the value of the official currency in Ultima Online, many users found it most convenient to trade very large assets such as castles in U.S. dollars. Not all real-money trade is motivated by a desire to cheat!
  36. Remember how in the title of this talk it said, “breaking almost every rule in the economics textbook”? This is the one rule you can’t break: any object or record that is intended to be used as money absolutely must have exchange value. Something that no-one is willing to give anything in exchange for is obviously not a viable medium of exchange; nor can it store any value (beyond its possible personal utility to the owner) or function as a yardstick for exchange value. Thus for the last few slides of this talk we return back to the world of textbook economics, to talk about value.
  37. So if you’re designing a new money, how do you make it valuable? There are four basic strategies:1. Commodity money: valuable thanks to being made from a valuable substance2. Representative money: valuable thanks to representing a claim to valuable goods3. Fiat money: valuable thanks to being generally accepted as payment for goods or services, usually due to a government decree (fiat) but sometimes also due to no other reason than social norm (case Swiss Dinars in Iraq)4. Token money: valuable thanks to someone pledging to redeem it for something of value (money, goods, services)A typical player-to-player virtual currency is fiat money: players accept it as payment because the game UI has been built in such a way that there’s little alternative to using it. But this only works inside a game. If you are building an economy that spans over several services or involves third parties, then it’s worth thinking about what other basis for value your currency has.A typical “hard” virtual currency used in cash shops is of the scrip type: it is valuable because the publisher promises to redeem it for virtual goods. Facebook Credits are ultimately valuable because Facebook promises to redeem them for US dollars.
  38. Two more finer points need to be made about money and value. For a medium of exchange, it is enough that the currency simply has some exchange value. But to also function as a store of value, the currency should should retain its exchange value over time. Goods that have a limited supply and steady demand are good candidates. In Habbo Finland, the turntable was considered a very safe store of value, as only a limited number had been issued as part of a one-off campaign in 2002. But in 2006, the operator started a new campaign and issued more turntables to the users. The turntables’ exchange value against other goods fell sharply, seriously hurting the net worth of avatars who had been hoarding them. Probably not much fun.
  39. A corollary to the above is that a store of value should be resistant against counterfeiting. In principle, counterfeiting is not possible in virtual economies unless such a feature has been expressly programmed in. In practice, all software tends to contain bugs and vulnerabilities, and attackers have sometimes been able to exploit these to achieve an effect similar to virtual counterfeiting. Early MMO game economies, such as Asheron’s Call, Ultima Online and Lineage 2, suffered from “dupe bugs”, or bugs that allowed unscrupulous players to duplicate items and money. This destroyed the value of official currencies and lead to the spontaneous adoption of commodity currencies, made from goods that were not subject to the dupe bug and thus retained their value.
  40. The second finer point about value:A good measure of value has only one important attribute: its value against other goods should remain stable over time. A store of value is good as long as its value doesn’t depreciate, but in the case of a measure of value, we don’t want its value to significantly appreciate, either. The reason is that if the value of a measure of value rises or falls significantly, it ceases to be the same measurement stick that it used to be, forcing a costly re-evaluation of all values expressed in the unit. Price tags in shops have to be changed, numbers in accounting books become disparate with past numbers, and business deals may have to be renegotiated. The picture above shows how the value of Bitcoin fluctuated wildly in 2011. All this is costly and reduces the efficiency of the economy. If this happened in a game economy, it’s hard to see how it would be fun. Managing the value of a game currency is a topic for another talk, but the essence is in understanding which of the four strategies the value of the currency is based on.