What Is the Virtual Economy?

A virtual economy is one which exists within a fantasy, usually gaming, world. These economies are primarily found online in multiplayer, real-time virtual worlds. Virtual economies have virtual currencies. While these currencies typically cannot be traded for real-world currencies in a bank or a change bureau, such trading does occur.

The nature of a virtual economy often mirrors that of a real one, though some differences exist. Since people generally interact in these virtual worlds as a fun escape from everyday life, certain factors such as needing to buy food, paying an electricity bill, or the possibility of being mugged on the way home from work might be absent in a virtual economy. People playing online games are normally represented by a character called an avatar. Avatars are usually not weighed down by all the same worldly restrictions as their controllers.

The resources available to avatars are often distinct from those possessed by their human counterparts. The property and services involved in a virtual economy might be, depending on the realism of the game, more or less similar to those found in a real-world economy. In one game, a player could buy a quiet country cottage that resembles one that might be bought in the real world, and in another game, a magical floating castle. There are a couple of features that even the most fantasy-based worlds tend to share with the real world — people can exclusively own things and can normally also sell or trade them; the market value of something is usually based on what it can do or on how many people want it.

In the more popular games, some people find they start to want virtual items just as badly as they want real ones. This very real demand is the principal bridge between a virtual economy and a real one. Though many games have sought to prohibit such transactions, some players are now paying real money to either buy virtual world currency or resources.

Virtual economies did exist before the Internet, though not to the same extent. Card and live role-playing games also often involve economic transactions, providing players points or other forms of virtual currency. In card games, many players have attached large value to certain useful or rare cards; this might be seen as a predecessor to the current and growing phenomena of real money being spent and earned on virtual resources.