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The Balancing Act: Currency and Inflation
by Terminus Zaire, Contributor — Category: Editorials
Post #50015
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The Balancing Act will be released prior to the Beta and once the NDA is lifted to discuss issues that will arise if The Elder Scrolls Online is designed with an imbalance in one particular aspect of the game, and how this will ultimately affect the entire game play as a whole. This series will discuss the warning signs of these imbalances, and what Zenimax can do to reverse or minimize the impact of the results of them.


I was planning to wait until we had a better understanding of crafting before beginning any discussion on the economy of TESO, but I’ve decided to start a little early due to the fact that we may get a good look at the systems in less than 2 weeks at PAX East. I’ve always been a fan of “playing the market”, and it’s been difficult for me to wait this long before discussing it as a major topic!


This article will focus primarily on economic theory based not only on the observation of the global economies of many of the most popular MMOs, but also through personal experience of price manipulation and exploitation. The economy is the heart of any MMO, providing players with a means of fiscal interaction with others rather than a basic social one. Constant balancing over long periods of time is required to ensure it stays healthy and that inflation is prevented or at least minimized. A variety of factors control the success and stability of dynamic economies in MMOs, including the design of the auction house and trade systems, a balanced ratio of gold sources and sinks, and control over the global offset and ratio between the number of players and total quantity of gold in existence.

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Many of the early MMOs built their economies around the exchange of items using a traditional barter system rather than gold due to the lack of an official auction house. The economies were composed of crowds of people spamming their desire to buy or sell items in the chat box, or otherwise using an external trade center such as forums. Players had to be more careful with accepting deals because better offers could be present but simply unseen and made it impossible to compare prices with other venders. However, opportunity also opened for merchants that identified desperate players who were willing to pay many times the price of an item to get back to focusing on the game. Economies such as these were full of opportunity, if you had the patience to find it. Professional merchants would spend their time “flipping” items, purchasing them and immediately reselling for a profit to unsuspecting players. This inefficient marketing strategy for obtaining goods ultimately resulted in the invention of the auction house, the most widely accepted trading center design used today.

There are a variety of factors that contribute to the successful design of an auction house, the first being a unified global market with easily accessible information on the history and value of each item over days or weeks at a time. This allows all players to make an accurate judgment of the value of any given item, increasing the chances that it will be sold for a fair and modest price. Another factor is the ability to place both buy AND sell offers in the market, allowing for negotiation between buyers and sellers rather than the buyer simply choosing to make the purchase or refuse, limiting the exchange rate of goods. Finally, the design needs to remain streamlined and simple to ensure that all players understand what they’re looking at, and aren’t confused or overwhelmed with information. This will encourage the entire community to embrace the use of the auction house and help to strengthen the exchange rates of goods.

With a trade system successfully designed and implemented, it’s then up to the players to build the economy through quests, raiding, and ultimately having fun as they train their characters’ skills and combat abilities. While many believe that the most important factor in a balanced economy is the quantity of gold that exists in the entire market, it actually relies more heavily on the rates at which gold enters and leaves the game. Creating content to add more gold into an economy is relatively easy, and can come from the completion of quests or challenges to help players increase their power and strength in the game. It’s much more difficult to design content that players will be interested in investing their money in, because there’s a chance that the community may determine the investment to not be worthwhile to their mastery of the game. Examples of money sinks include potions and supplies, mounts or other services that aid in traveling, or item degradation requiring fees to restore equipment when used over long periods of time. Skyrim had a very effective money sink through the use of skill trainers, which increased in price depending on your skill level. Players who had spent hundreds of hours in Skyrim could have over 50,000 gold, but could spend it very quickly on trainers depending on the level of the skill they wished to train. Gold sinks that increase in price parallel to your skill level are referred to as dynamic money sinks, and are one of the most effective ways to ensure an MMO economy stays balanced.

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In order for Zenimax to determine the status of the economy and how much gold exists in the game, they’re obviously going to need to track it. Without a tracking system, the only way to track imbalances is through community feedback, and at that point it’s too late to fix the problem. Imbalances can take weeks to create, but months or years before the effects begin to wear off. This can include trickle effects where players earn money unintentionally while gathering resources, or with little intentional effort on their part. This is one of the primary causes of inflation in any economy, and can have devastating effects after being left out of check for years. While tracking how money enters the game can also help to identify inflation patterns, it can also be useful in identifying gold farmers by triggering value checks during trades or player interactions. By tracking how often gold or items enter the game, Zenimax can manipulate the economy without direct intervention by changing drop rates and rarity of items. This subtlety results in the illusion of a free enterprise system, but is still limited and controlled by its creators. A system of this nature is referred to as global offset control, manipulating the rate at which gold enters the game through loot drops to maintain a stabilized economy over long periods of time. Rates would never be changed more than a fraction of a percent, but this is still enough to normalize an economy that may be beginning to inflate.

While there are still a variety of balancing techniques utilized by many other games, these are only some of the most common techniques that most (if not all) players would support. Other systems for balancing include a taxation system for large quantities of gold, but some would claim that this is unfair to individuals who are saving for large purchases. Another is player housing, which will provide a fantastic money sink in the future once Zenimax releases it as an add-on. Unfortunately, this also takes a lot of effort on the part of the developers, who may be better off spending their time on the development of other expansion projects. One of my personal concerns regarding The Elder Scrolls Online is going to be a lack of money sinks available at launch, which will cause mass inflation until patched by a future update. Hopefully Zenimax has been focusing on the long term stability of the global economy; if they have, we can expect TESO to be successful for many years to come.
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The following 6 users Like Terminus Zaire's post:
Balkoth, Duraikan617, Ewan, MushinWolf, Najla, Radioactive Man


Comments on The Balancing Act: Currency and Inflation
Post #50016
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VERY good article @"Terminus Zaire". A few of us have touched on this topic briefly in other posts involving crafting. Im glad you made this.

Im also someone that likes to play the market. Ive seen economies go drastically out of control in many games. One example that comes to mind is STO, where many of the necessary weapons for your ships have exploded to prices of 10mil or more. When you take into consideration that a ship can need from 4 to 8 weapons, then you get an idea how out of control the economy had gotten.

You have a good grasp on economies in these games and I like your ideas on it.

On a side note, you forgot the very early days of MMORPGs where there were player run merchants all over (or in their little areas). This was not only messy, but left the economy completely at the mercy of individuals or certain unscrupulous vendors that formed secret merchant groups. The economy was even tied into the spawn rate of reagents and such, which in turn were limited by time and population. This became a real nightmare when hording began, and those reagents werent respawning correctly.

Anyway, thnx again, for another great article man. keep 'em coming
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Radioactive Man
Post #50102
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When in an mmo with an auction house, i preferred to buy items on the weekends when competition would drive prices lower most often, Then sell my items during the week, because less mat gathering was going on. It would have been easy to play this market up for profit but I was more interested in playing the game then in making imaginary money. I did however utilize it a bit when I was saving to buy my house, and that one time my wife needed mats to up her crafting before we could enter the zone where one would gather them.

All in all I would say the biggest hindrance to the economy are the Gold Farmers. They drive the price of Mats up well beyond that of the items one can make with them. Then crafting takes a hit because it is easier to work towards gaining better weapons from quests then from leveling up crafting because of the crazy expenses.

The only suggestion my little brain can think of to deal with this type of gold farmer, is an understanding between dedicated MMO veterans like ourselves to set a reasonable limits on how much we would charge for simple mats used to level crafts and items. However endgame items this one would expect to be no holds barred.
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Post #50135
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I believe that Gold Farmers and Botter play a far bigger role in a game economy than many people are comfortable in acknowleging.

For me a sucessful economony would be based on systems that discourage Gold Farmers ad Botters. That can only be achieved by controlling the demand for gold. If, for example, Zenimax makes Endgame items availiable for selling, then the demand for Gold will skyrocket.

That is the biggest reason that I am concerned about crafting in this game. If crafters are able to sell some of the best gear in the game, then the demand for gold, and thus Gold Farmers and Botting, will get out of control. This will utimately lead to insane amounts of inflation.
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Post #50220
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a very good read! it is going to be interresting how they will handle the inflation. Hopefully the worth of gold in terms of what you can buy, will be stable.
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Post #50259
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An interesting article @Terminus Zaire! But one thing none of you have not seem to have been thinking of (excuse my grammar, i've just come home from a party, and yes, my spelling is STILL unaffected) is what effect stealing or pickpocketing will have on economy. How will it look like is every player can pickpocket an item from an NPC whether it is for a quest or not? If you can sell a thing people can aquire in great numbers, my drunken brain tells me that it would surely NOT look great in TESO.

The great thing with Skyrim's was that merchants didn't' have endless money (like in Oblibion) AND there was this trainer system-thingy our good sir have mentioned in the article above. Now please tell me you theories, people! Have an awesome night!
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Post #50556
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Do you plan to talk about how "Megaserver" will impact Economy and Action house, During my WoW experience i saw that "prices" and economy differ from server to server, when at some key material would be extremely cheap at others it would be overpriced.
What about huge population and its impact on AH? will there be chaos with thousands of entry's of same item, or will it be "phased" dpending on your questioner, and if so Will prices be different from 1 phase to another, what stooping players from changing from 1 phase where items are cheap buying them out and then selling them at some phase that they are expensive.
Actually now that i think about it we still dont know much abut economy or how other elements will impact it, like say Cyrodill, what type or reward will players receive and will it be able to sustain and grow there personal wealth or will the be force to PvE content to fill there pockets.
I am relay looking forward to part2 and your future articles, keep up the good work.
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Post #50631
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Yea your right @"Ewan", we really dont know enough about the economy, the megaserver, the AH or how any of them will work together yet.

Id say as a VERY general statement though, that more people will tend to make prices lower. Obvioulsy theres so much more to this, but just as a general statement, this is what Id think.

@"Terminus Zaire" may have a different take on this though. Im not sure.
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Post #50642
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I just hope it wont be complete fiasco as Daiblo 3 was, that AH was horrible, they should learn with other people mistakes.
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Post #50734
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(March 14th 2013, 01:30 PM)Ewan Wrote: Do you plan to talk about how "Megaserver" will impact Economy and Action house, During my WoW experience i saw that "prices" and economy differ from server to server, when at some key material would be extremely cheap at others it would be overpriced.
What about huge population and its impact on AH? will there be chaos with thousands of entry's of same item, or will it be "phased" dpending on your questioner, and if so Will prices be different from 1 phase to another, what stooping players from changing from 1 phase where items are cheap buying them out and then selling them at some phase that they are expensive.
Actually now that i think about it we still dont know much abut economy or how other elements will impact it, like say Cyrodill, what type or reward will players receive and will it be able to sustain and grow there personal wealth or will the be force to PvE content to fill there pockets.
I am relay looking forward to part2 and your future articles, keep up the good work.

(March 14th 2013, 07:16 PM)Balkoth Wrote: Yea your right @"Ewan", we really dont know enough about the economy, the megaserver, the AH or how any of them will work together yet.

Id say as a VERY general statement though, that more people will tend to make prices lower. Obvioulsy theres so much more to this, but just as a general statement, this is what Id think.

@Terminus Zaire may have a different take on this though. Im not sure.

Hey guys, sorry I've been extremely busy preparing for next Tuesday's article, I think you guys are going to be as excited as I am about it... it's going to encourage a lot of community involvement, is all I'll say for now.

It really all depends on how the phasing and megaserver is going to work. It makes little sense to me to isolate the market on different phases or "worlds", and you're correct in stating that prices would vary if the auction houses weren't combines globally. Even still, there will be some phases that are easier to gather resources from than others because there'll be less competition, which will encourage people to spread as evenly throughout the phasing system as possible.

There are still SO MANY factors that need to be considered, which is why I was hesitant to even begin writing about the economy in the first place. For example, I really can't even begin to predict what would happen if the different Alliances were allowed to trade with each other. Northern Skyrim probably has more ores and lumber than say Valenwood (where we aren't allowed to cut the trees due to the Green Pact), but should we be allowed to trade with our enemies?

It also heavily relies on the inventory and banking system, where the price of materials will increase depending on the amount of time it takes to collect those natural resources. Zenimax has claimed that they're using a slot system, not a weight system, meaning we can't use horses or other mounts to travel while encumbered.

What does that mean for the economy? Who knows.
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