As we all know by now (and the rest of the world is rapidly learning), the imaginary currencies that are earned, spent and traded in massively multiplayer online games and other virtual worlds are anything but virtual, themselves. While no government authority stands behind them to insure their value, a seal of approval isn't needed for a currency to become "real." A World of Warcraft gold piece is worth as much as you can get for it on the market - about $0.10 at the moment. The U.S. dollar derives its value in exactly the same way.

The people who inhabit virtual worlds have long realized this. Out-of-world sales of gold and other virtual items have been going on since the early days of text-based "multi-user dungeons" and other online spaces, in the late 1970s. And "real-money trade," as it's commonly known, can be an emotional issue, generating harsh conflicts between players who feel it's just part of the landscape and those who feel it ruins the integrity of their games, and between game companies and those who engage in the practice.

But as The Escapist looks back at 2005, it seems virtual worlds have reached a new level of sophistication and complexity where commerce and economics are concerned. In Second Life - a world in which real-money trade has the explicit stamp of approval of Linden Lab, the company behind the world - an avatar named Anshe Chung gained worldwide renown this year for her clever (and profitable) play of Second Life's real-estate market. It has reportedly garnered her hundreds of thousands of dollars worth of SL currency - which is, of course, freely convertible to hundreds of thousands of dollars in cold, hard cash.

But even in SL, trade in the virtual currency known as the Linden dollar has generated controversy. For more than a year, a web site called, created and managed by Second Life residents, was the most trusted exchange for buying and selling Linden dollars. Residents listed their L$ buy and sell orders there, and received payments in the world, or through PayPal. But when Linden Lab opened its own currency exchange to compete with GOM, that era ended. Unwilling to go head to head with the company that was printing the money itself (and who can blame them?), GOM closed up shop.

GOM built a service that Second Life's residents trusted and used. Despite there being nothing wrong with it, Linden Lab pulled the rug out from under the venture, rather than supporting it. The excuse the company gave bespoke an alarming lack of confidence in the residents of its virtual world. "We want to ensure that new residents have easy access to additional L$ without having to take yet another leap of trust to sign up and give payment information to a third party," said Linden Lab economic czar Lawrence Linden. But residents had already taken that leap of trust with GOM, and been rewarded. What Lawrence Linden's statement essentially boiled down to was Linden Lab telling its residents not to trust each other. The company didn't seem to trust them, itself.

It remains to be seen what economic strides (if any) can be made in such an atmosphere. But in virtual worlds where trust and responsibility are placed on the shoulders of residents, 2005 proved remarkable things are possible. For my money (virtual or otherwise), the biggest story of the year in virtual economics took place deep in outer space, surrounded by the harsh player vs. player realities of an MMOG known as EVE Online.

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