Money, everyone uses it. We all want it, work for it and think about it. Money is arguably the most important aspect of human life. Since early childhood, we deal with money daily. So we all grow up thinking we know what it is.
Yet, when some economist or crypto nerd throws up sentences like “Money is not a real object, its value is abstract”, we get confused. How can something we use daily not be real? Interestingly a banker, business man or a cnbc host will never tell you money is not real. If you try to search on google or oldschool dictionaries, you wont find direct definition of it, rather you will find sentences like “A current medium of exchange in the form of coins and banknotes; coins and banknotes collectively”, which if nothing tells you that it is very real. So today we will try to understand what’s going on here. Now I can just throw up some words like medium of exchange, supply demand, inflation, etc. But no, that aint fun, and I aint no economist. So, we will try to understand it through “Imaginary Wealth of Runescape.”
Most of you probably don’t know what Runescape is. Runescape is a massively multiplayer online role-playing game. By massively, I mean really massively. At the time of writing, there are at least 50,000 people live, playing the game online. Its an open world multiplayer game, that means there is a fantasy land where you can go, meet other people and do all sorts of stuff inside it. There are many versions of it, but we will focus on one called “Old School RuneScape” because that is the one I am most familiar with.
Unlike real world, here you can choose your name and how do you look. We are interested in this game with crapy graphics because it have a “Economy” and even “Economic crashes”, so it very closely matches with real word. Runescape’s currency is “Gold Coins”. Apart from a currency, it has lots of other items also which you can “trade” with other people, items like iron ore, lobster, raw tuna, big bones. You can open a farm, grow stuff and sell it for gold coins. Or just go around pickpocketing people. You can do gambling and fight other people. Build houses. There are also banks where you can deposit/withdraw your “money” and beer. There are exchanges and auction houses where people buy sell stuff. There are expensive magic rings and stones which lets you teleport to places. So lots of stuff and means to “trade”. Because most of trades happen in gold coins, everyone “desires it” hence it has “value”.
Now gold having value inside game makes sense, but whats interesting is, you can also buy gold coins with “real money”, not on official website of runescape, but on many websites run by individual entrepreneurs. This “Runescape Economy” is not a small one. A friend of mine sold $1,25,000 worth gold coins in last 5 months and there are hundreds of other bigger gold shops than of his. According to his estimates, total market cap of runescape is around 100 million us dollars and almost 100–200k daily trade of usd and gold coins.
100–200k usd in daily trade, yet there is no exchange which lets people bid on price of gold coins, all these trade happen on website selling and buying gold at fixed prices. Arguably, the price of gold coins is not driven by demand and value. These websites just sell it at whatever price they want. Not to mention Runescape is run by a private company, which have absolute control over supply and use of “gold coins”. Yet somehow, people thinks it has value and its “real”.