The following is a draft section of an article I’m working on, made available for STRAB0 members:
The idea of a “virtual economy” is probably super exotic to anyone not involved in gaming. But, multiplayer games like “EVE Online,” “World of Warcraft,” “Lost Ark,” and so many others involve obtaining lots of in-game items. There’s in-game currency to trade for them, and the fact that they’re scarce and in demand creates a market within the game for them. It doesn’t take long within these worlds to realize people really want these things, and if one could find a way to pull it off, you could get paid in dollars for providing them.
Thus, shortly after the creation of the multiplayer online role-playing game (MMORPG) in the late 1990s, a black market emerged to trade in-game supplies for out-of-game dollars. It was typically done over normal venues like eBay, which only banned the sale of virtual goods in 2008.⁵ Such trade still takes place, but now typically in even darker corners of the Internet.
The amount of wealth contained within virtual worlds is substantial. In his groundbreaking 2001 paper on EverQuest (an MMORPG of that era), economist Edward Castronova estimated the wealth within that game world.⁶ He used a few different methods, but the simplest and most direct was to find the value of the characters sold on eBay per level, multiply that by average level, and multiply that by the number of characters. The result of his efforts was an estimated gross national product per capita of the game world that came out to about $2,266 a person. For context, that placed them somewhere between Bulgaria and Russia at that time, making EverQuest’s game world “richer” than all but 76 countries on Earth!
In the same marketplaces people sold off their characters, they also traded in-game currencies. You could buy, for example, 1000 platinum pieces on eBay. Upon winning the auction, the players get in touch, and a delivery is made in-game. Definitionally, this sets up an exchange rate between currency in the real world and the virtual. At the time of his article, one platinum piece in EverQuest was worth a little over one cent USD. That made it more valuable per unit than the Japanese Yen or the Italian Lira!
From there, Castronova considered the value in USD of the equipment and cash on a character, and then divided that value by the number of hours played. He was able to determine that players were creating approximately $3.42 in value per hour of effort.⁶ At 40 hours a week with two weeks of vacation, a person could have created $6,840 in cash and goods per year. Today, some 21 years later, that would be equivalent to $11,162.88. That’s higher than the average income in Poland or Portugal is currently.⁷
Bear in mind, this was 20 years ago. The participation in online games has exploded since then. World of Warcraft was still 3 years away at that point. The amount of value locked in virtual worlds is hard to estimate, but it’s many orders of magnitude higher than it was in that one world at that one time. We may be talking about the equivalent of the wealth of an entire continent, locked behind the walls that separate the digital and the physical.