Virtual economy

This can be seen, for example, in Second Life's recognition of intellectual property rights for assets created "in-world" by subscribers, and its laissez-faire policy on the buying and selling of Linden Dollars (the world's official currency) for real money on third party websites.

[citation needed] Virtual economies can also exist in browser-based Internet games where "real" money can be spent and user-created shops opened, or as a kind of emergent gameplay.

In 2001, EverQuest players Brock Pierce and Alan Debonneville founded Internet Gaming Entertainment Ltd (IGE), a company that offered not only the virtual commodities in exchange for real money but also provided professional customer service.

IGE had a trained staff that would handle financial issues, customer inquiries and technical support to ensure that gamers are satisfied with each real money purchase.

It also took advantage of the global reach of synthetic worlds by setting up a shop in Hong Kong where a small army of technically savvy but low wage workers could field orders, load up avatars, retrieve store goods and deliver them wherever necessary.

[6] Hundreds of companies are enormously successful in this newfound market, with some virtual items being sold for several million dollars, like Beeple's Everyday.

[8] This virtual property includes nine rooms, three stories, rooftop patio, wall of solid stonework in a prime location, nestled at the foot of a quiet coastal hillside.

[10] Before that, in 2004, the American economist Edward Castronova had estimated the turnover at over 100 million dollars based solely on sales figures from the two auction sites eBay and the Korean itemBay.

Also hampering the turnover growth are the extreme price drops that has followed the increased competition from businesses in mainland China targeting the global secondary market.

For example, South Korea is estimated to have the biggest share of the global real money trading market and it has there become an officially acknowledged and taxable part of the economy.

Team Fortress 2, a team-based online FPS released by Valve in 2007, is a hero shooter, where players selected from one of several created characters to control.

[19] This created a virtual economy around items in the game, as some rare items, known as "unusuals" by the game community due to various special effects applied, and are seen as having high social value, had traded for as high as US$1,000,[20] and because of the active trading that incorporated real-world money, Valve hired economist Yanis Varoufakis to help manage this.

[21] Valve followed the same pattern with its next major game, Counter-Strike: Global Offensive, where players could earn crates in-game that could be unlocked with keys purchased through real-world funds to obtain weapon skins that were doled out based on a rarity scale, a practice they had started in Team Fortress 2.

[32] For example, uncertainty regarding the nature and conceptual location of virtual property makes it difficult to collect and apportion tax revenue when a sale occurs across multiple jurisdictions.

[30] However, for policy reasons, many commentators support some form of a "cash out" rule that would prevent in-game transactions from generating tax liabilities.

"[35] The IRS had included in-game currency as taxable property in forms for calendar year 2019 reporting, but subsequently removed mention of them after complaints were filed about their inclusion.

[36] As with the above skin gambling concerns, conversion between in-game and real-world currency has led to direct comparisons with other online games of chance as 'virtual winnings'.

"[37] So to avoid regulation by these laws, the "operator would need to take reasonable steps to ensure that the rewards they give do not have a monetary value[,]"[37] possibly by demonstrating enforcement of their terms of service prohibiting secondary markets.

have reported the emergence of gangs and mafia, where powerful players would threaten beginners to give money for their "protection", and actually steal and rob.

In the game The Sims Online, a 17-year-old boy going by the in-game name "Evangeline" was discovered to have built a cyber-brothel, where customers would pay sim-money for minutes of cybersex.

[38][39] A 2007 virtual heist has led to calls from some community members in Second Life to bring in external regulation of these markets: "In late July, a perpetrator with privileged information cracked a stock exchange's computers, made false deposits, then ran off with what appears to be the equivalent of US$10,000, disappearing into thin air.

"[40] In EVE Online however, theft and scamming other players is perfectly allowed within the game's framework as long as no real world trading is committed.

[citation needed] Players are allowed to loot all items from fallen victims in battle, but there is a disincentive in the form of NPC police intervention in higher-security space.

[42] Final Fantasy XI and Warhammer Online both have entire task forces dedicated to the removal of real money trading from the game.

Simplified economy represented in almost all real-time strategies (StarCraft II: Heart of the Swarm, Command & Conquer: Red Alert 2) in a form of gathering and spending resources.

Since January 2007 users are no longer allowed to sell virtual goods of online games on eBay due to the ambiguous legal status of real world trading.

[45][46] While many game developers, such as Blizzard (creator of World of Warcraft), prohibit the practice, it is common that goods and services within virtual economies will be sold on online auction sites and traded for real currencies.

On August 1, 2011, Blizzard Entertainment announced that their forthcoming MMORPG, Diablo III, will include a currency-based auction house, wherein players will be able to buy and sell in-game items for real money.

[51] Robert Bridenbecker, Vice President of Online Technologies at Blizzard, explained that the intent behind the effort is largely to reduce account thefts resulting from player interaction with third-party sites.

Some argue that to allow in-game items to have monetary values makes these games, essentially, gambling venues, which would be subject to legal regulation as such.