Author and journalist Julian Dibbell recorded the following statement from a cartel informant in a book he published in 2006:
“That’s the ugly side of [the game]… a side I prefer not to get involved with. Those guys are serious people… I would love nothing more than to see them all rot in prison, but I would fear for the safety of my family if they found out I told anyone.”
It seems like standard mafia fare, but “those guys” referred to here weren’t managing construction rackets or laundering money. They were actually gathering gold coins in the virtual world of Ultima Online, one of the first big multiplayer roleplaying games. The book, Play Money, details the drama of making money while rival gold cartels compete for turf in Brittania, the fictional setting of the game.
The idea of nerd mafias duking it out seems comical. Frankly, it often is. But the money involved is real, and when the sums get large enough, people are willing to protect it. One racketeer named “Destiny” suggested he would show up at the scammer’s real-world house with a weapon when he got ripped off for several hundred dollars. “F**k, I don’t care. I used to live in Long Beach right in the heart of the riots. I don’t give a f**k. I will go packing [a gun] too.”
It doesn’t appear Destiny made good on his threats toward this particular scammer, but he did destroy a competing cartel when they moved in on his poultry sales. You read that right. Called “running birds,” users would set up automated characters called “bots” to purchase 300 units of raw poultry from a butcher, cook it all, and sell the resulting mountain of delicious avian goodness to a tavern keeper. The total profit for each round was six gold pieces. It doesn’t sound like much, but by automating the process, one bot could make 500,000 gold pieces running birds each hour. Those could then be turned around and sold on eBay for about $6.50. (At this time, it was still allowed.) With just four bots running, and each going 24 hours a day, there was potentially $18,720 worth of gold pieces being generated each month.
But the prices were unstable. When the aforementioned Destiny encountered “the EasyUO Cartel,” an international group of coders also making money through Ultima Online, he realized there was an opportunity.
“…if the REAL producers…you and us… were to begin working together, not bulls***ting, we would literally control the entire supply. That coupled with extreme prejudice on the price structure, you would see a dramatic increase in price.”
This is precisely cartel behavior. And while it’s not a well-known phenomenon, virtual cartels do seem to emerge regularly when in-game resources acquire “real-world” value.
Take the example of the “Black Lotus Mafia.” The black lotus is the rarest of herbs in World of Warcraft Classic, and if you want to make some of the most powerful flasks in the game, you’ll need some. Raiding guilds often required their members to be stocked up with them, so there was a constant need for more. Black lotus, however, only appeared in a few specific places in the virtual world, and not terribly often.
Sensing the opportunity, a group of players banded together to snag them as soon as they appeared. They were well organized and very effective. For months, if competitors (or just ordinary players) attempted to camp the spots where a lotus would appear, bots would arrive and circle the spawn point so no human-run player could click on it and claim it. Truly diabolical. From there, the mafia bought up all other listings for black lotuses in the auction house and set their price at about 300 gold per blossom. (That much gold was worth approximately $18 on the Internet black market.) Bit by bit, the Black Lotus Mafia juiced the high-level citizens of Azeroth for their gold.
Enter Loknar, a priest in WoW Classic that had it up to here with high-priced loti. Loknar organized a virtual protest in the city of Orgrimmar. “There were over 500 people doing a line walk and yelling,” he reported to Wired. Realizing the danger he posed, the mafia had him whacked. The bots all reported him to Blizzard, the game developer, for “abusive chat,” and Loknar was temporarily locked out of the game.
Blizzard eventually got wise to the mafia and stepped in, drowning the racketeers in surplus flowers. They increased the rate at which the lotuses would appear, and set up many new locations as well. The tactic worked. Blizzard broke the icy grip the mafia had on the aquatic plant racket and crashed the price in the auction house by about 87%. They also suspended or removed many thousands of accounts they believed were botting. There are still whispers and rumors about back-alley deals to corner the Devilsaur leather market, but for now the WoW Classic mafiosi are staying low relative to how things were in 2020.
These are but two examples, and others are easy to find. The most common are probably in EVE Online, where frankly, pretty much anything short of real-life murder is fair play anyway. The point is that it just doesn’t matter what sort of world we’re talking about, virtual or physical: when a valuable resource is in the hands of only a few people, they often collude to fix prices at an inflated value. It requires only four things:
Limited resources
A willingness to collude among the people who control those resources
Authorities that can’t or won’t stop the collusion
Buyers in need of the goods
So, here’s my question to you: Why shouldn’t we assume that Metaverse cartels are coming? All four conditions are quickly coming together.
With the launch of Illuvium’s land sale earlier this month, we saw a continuing trend of land that generates usable, salable resources. Prior to them, Axie Infinity had announced their land would generate resources. Worldwide Webb is also bringing resource generation into play. And by far the largest player of all, Otherside, has both items and many different kinds of resources being generated by their land. It seems likely at this point that more projects will soon follow suit, as it provides even more incentive to purchase their virtual land.
Only time will tell how much such resources will be worth. But, it seems that not much would be needed to get people interested. We saw the “Smooth Love Potions” generated within Axie Infinity resulting in an incredible amount of interest last year for just a few cents each. Imagining several of the higher-tier landowners in Otherside colluding to raise the price of the rare “dimensional” resources isn’t out of the question. Depending on their level of utility, buyers wanting to make use of these resources may end up like the black lotus users in World of Warcraft. Many were without a choice: they needed them to participate in the highest-level content.
So, we have limited resources. We have a reasonable assumption, but admittedly not certainty, that there will be both buyers in need of them and sellers willing to collude with each other. The only matter remaining is authorities that either can’t or won’t stop the collusion. And, this is where the Metaverse is particularly vulnerable.
In the case of the “Black Lotus Mafia,” Blizzard could step in and delete their accounts and possessions. They could also unilaterally flood the market to destroy lotus farming’s profitability. But it’s unclear what, if anything, metaverse projects can do to stop users from doing things that negatively affect the platform.
It would seem that one thing they can’t do is dispossess the cartel members of their land. Transferring an NFT out of someone’s wallet requires a signature at some step in the process. Without the owner’s consent, the NFT remains in their possession. It would seem that the people running the platform could prevent the wallet user from logging into the game, but then what happens to the land? Is it just left blank in perpetuity — until the NFT representing it is in someone else’s possession?
Plus, it remains an open question whether a developer could or would intervene at all. Perhaps banning decisions are designated to a DAO rather than in the developer’s purview. Perhaps the party who can stop cartel members from participating isn’t competent, or doesn’t care. The point of the matter is that a profitable cartel won’t stop on their own — ask OPEC — and requires a capable and motivated authority to make it happen. Even if these are all in place, they would need to be consistently operational. It would seem that, given a span of years, there would be at least a few months where the defenses are down on at least one platform enough such that a cartel may appear.
All in all, it seems that such anti-competitive behavior and racketeering is inevitable. There will be at least some. Possibly a lot. If we’ve seen them develop in less profit-oriented virtual environments than modern metaverse projects, why wouldn’t we see them there as well? I feel nearly completely certain we will.
One of the themes I find myself writing about repeatedly is the damage that bad actors can cause in a decentralized environment. Any time control is moved away from a central authority, there’s a concern that systems will break down. The concerns that these new technologies and the people who use them will be horribly damaged by people with bad intentions is both reasonable and a bad reason to avoid the change.
The promise of Web3 is to deliver control of vital social institutions to transparent code (law) and its users, away from empowered individuals. It is the continuation of a trend that has been with us since the development of civilization. As time passes, authority is distributed. And, as a result of that distribution, life tends to improve. Few people believe that the world was not improved by the movement of rule from kings to elected representatives. When everyone could own land, and not just the nobility class, we found that things were better.
As the structures of policing and governance melt and spread, there will surely be those who will take advantage of the situation. When the opportunity presents itself, they will organize and try to exploit it. There’s nothing new or suprising about racketeers. So, we should be ready for that, even in this new virtual context. History already makes it clear that the gap between digital and analog worlds is not a sufficient barrier to keep them out. So, here they come. Luckily for us, as surely as the creation of new digital resources and decentralized control structures will sprout them, they are not sufficient to stop the broader movement.