WoW token, part 3

Back to the WoW token. The tokens are now available in the US, EU, and China regions, I will refer only to the US market because that is where I am. The tokens appear to work the same way in all three markets.

Again, as in the other 2 posts, I will refer to the the tokens separately. There is the RMT token you buy for dollars in the Item Shop, and the Game Time token you buy for gold in the Auction House.

What's new this time is the rate of swing between the price extremes in the auction house. Our friends at www.wowtoken.info shows this:

Notice how the wave is smoother, almost perfectly sinusoidal. That's not the web site smoothing it, that's the raw data, Blizzard is calculating a sine wave around the desired average and setting the price to that. Again, the “market price” is not driven directly by supply and demand, but is a calculated value set by goals Blizzard wants to achieve.

What are these goals? Possible goals include reduce illicit RMT, make cash by selling gold, create a gold sink by selling game time for gold.

The cynical among us have expressed the opinion that their goal is to grab the cash. I don't think that's what they're going for right now? But I'm fairly sure the system will eventually slide in that direction just because it can. This is the “Moral hazard” of an unregulated money printing machine.

So I ran a little experiment to probe the workings of the system. First, I waited for the price of the Game Time token to be at it's lowest and tried to buy one. Nope, all sold out. And when you try and they're not there, you're locked out from trying again for one minute. So I waited a minute and tried again. Nope. A few more times, nope. Nope. Nope. They are really out of stock. That makes sense, the price is really low and they all got bought. The price was set by Blizzard to ensure that all the RMT tokens that got converted to Game Time tokens were bought so as to not have too long a delay for the people buying the RMT tokens.

Ok. On the next part of the experiment. I then waited until the price was at it's peak and bought an RMT token in the Item Shop and listed it on the AH. It did not immediately sell, as you would expect. The price swing is so great that anyone who wants to buy a Game Time token has noticed this and knows to NOT buy when it's at the high point... come back in 12 hours and start looking for the low point.

I bought my RMT token at 11:26 pm on Sunday, May the 3rd when the price of the Game Time token was 25,742 gold. I immediately listed it for sale with the knowledge that my sale price was guaranteed. 13 and a half hours later, at 1:07 pm, it sold for 19,648 gold, just over the low point of 19,482 which occurred at 2 pm. That was a bitch because I had to sit there and watch it for hours waiting for it to sell. There was no other way to know exactly when it sold. Sometimes you have to take a beating for science! I then immediately bought a Game Time token off the AH (There were some now because the odds of mine being the last were statistically impossible, and since mine just sold, they were still in the process of being emptied from the AH.) and converted it to game time.

I got 25,742 gold for my RMT token, but the guy who bought it only paid 19,648 gold. The difference, over 6000 gold, is gold Blizzard pumped directly into the economy for cash. This goes on for every RMT token bought at the high point and sold as a Game Time token at the low point. Which I am certain is the vast majority of the tokens.

What did I learn? First, that they're not gaming the availability of the Game Time tokens. They are also not gaming the sale of the RMT tokens, either, even though they easily could seeing as how the sell price is guaranteed. They made me wait the full 13 and a half hours to get my gold. The illicit gold sellers don't make you do that, at least as far as their advertisements claim. So, of the 3 goals I suggested earlier, the ones best served are “reduce illicit RMT” and “make cash by selling gold”. “Create a gold sink by selling game time for gold” doesn't even start because the system is a gold faucet. Not a gold sink.

In my opinion, the GOOD goals are “reduce illicit RMT” and “create a gold sink by selling game time for gold.” There should NEVER be a case where you make dollars directly by injecting gold into the economy.

So Blizzard has already blown the moral hazard here. But why? Let's analyze. The tokens are different, apples and pineapples different, that's why a straight up supply and demand market won't work. A stable price won't work either, the prices need to be separate, with the amount of gold the RMT token sells for balanced against the fight against illicit gold sellers, and the price of the Game Time tokens set to remove the same amount of gold (or more) from the economy. Right now, you would have to sell more Game Time tokens than you sold RMT tokens to eliminate the gold faucet they have right now.

The morally superior position would be to guarantee that there was no profit motive by selling enough Game Time tokens to create a gold sink in addition to removing the gold created by the RMT tokens. That position would be the one that is “best for the game” and the one they should be taking.

Their system cannot do that because the tokens are linked by price, the mechanic of applying a sine wave to the price creates a QE scheme that essentially unpins the prices, but without allowing the quantities to change to compensate, creating a gold faucet. By accident or design (I'm assuming by accident.) they've created a cash grab that is injecting gold into the economy, gold the economy doesn't need and will probably respond to with inflation. How much inflation is unknown.

What I would do if I were Blizzard:

First, set the amount of gold you get for an RMT token to a stable value, set to fight illicit RMT. Give the gold to the player immediately.

Then set the price of the Game Time token to remove all that gold plus 10%. Sell as many as it takes to do that. Heavily advertise the fact that they're sacrificing subscription fees to effectively combat illicit RMT and the “good of the game” by creating a needed gold sink.