Gold Farming

Reamde

Gold farming is playing a massively multiplayer online game to acquire in-game currency that other players purchase in exchange for real-world money. People in China and in other developing nations have held full-time employment as gold farmers.

While most game operators expressly ban the practice of selling in-game currency for real-world cash, gold farming is lucrative because it takes advantage of economic inequality and the fact that much time is needed to earn in-game currency. Rich, developed country players, wishing to save many hours of playing time, may be willing to pay substantial sums to the developing country gold farmers. In 2009 the global market for gold farming was valued at around $3 billion annually.

What began as a cottage industry in the late-nineties with players using ‘eBay’ and ‘PayPal’ to sell each other items and gold from ‘Ultima Online’ and ‘Lineage,’ has become increasingly more commercialized with the growing popularity of massively multiplayer online games. Today’s gold farming may have its origins in the massively multi-player online role playing game (MMORPG) ‘Lineage,’ where it was known as ‘adena-farming’ as ‘adena’ is the currency of ‘Lineage.’ 2001 reports describe Korean cybercafes being converted into gold farming operations to serve domestic demand. This model seems to have been outsourced to China to initially serve Korean and Western players, with full-time gold farmers working long hours in cybercafes. Circa 2004 this type of operation was experiencing swift growth. In 2011, ‘The Guardian’ reported that prisoners in Chinese labor camps were forced to engage in gold farming for the benefit of prison authorities. Academic studies of gold farming reveal that the social networks of gold farmers are similar to those of drug dealers.

While reliable figures for gold farming are hard to come by, there are some estimates of the market for in-game currency. In 2005 ‘The New York Times’ stated that there were over 100,000 full-time gold farmers in China alone. And in 2006 sales of such virtual goods were thought to amount to somewhere between 200 and 900 million USD. Another estimate, drawn from 2005/2006 data, valued the market at not less than USD200 million per year and suggested that over 150,000 people were employed as gold farmers with average monthly earnings of USD145. This same report estimated that 80% of all gold farmers were from China a fact which has led to prejudice towards Chinese players. 2008 figures from the Chinese State valued the Chinese trade in virtual currency at over several billion yuan, or nearly USD300 million.

Most game developers previously banned gold farming in the game’s EULA (licenseĀ agreement) or terms of service. Game developers such as Blizzard and ArenaNet are combating gold farming by including real-money transaction systems within the game environment itself. This makes it more difficult for third-party gold farming companies to compete with the in-game market, but individual players still work as gold farmers (especially in developing countries) by trading game items for real money.

Awakening to the idea that virtual goods can have real value, some governments have taken action in this area. In 2006 a spokesperson for the Australian Government stated normal earned income rules also apply to income from the sale of virtual goods. The Chinese government banned using virtual currency to buy real-world items in 2009 but not the reverse. In response to increases in gold farming, in 2006 the Japanese Government urged the computer gaming industry to self-regulate as well as vowing to investigate this species of fraud. A Korean high court’s 2010 ruling means that exchanging virtual currency for real money is legal in the country although subject to taxation. A United States Congressional committee investigated taxation of virtual assets and incomes derived from them in 2006, and the IRS has, in its ‘National Taxpayer Advocate’s 2008 Annual Report to Congress,’ expressed concern that virtual worlds are a growing source of tax noncompliance.

Zynga, the makers of ‘FarmVille,’ successfully sued to stop online sales of its in-game currency. Jagex, the makers of ‘RuneScape,’ have engaged in actions against several gold farmers and bot (software applications that run automated tasks over the Internet) programmers including lawsuits.

A business producing avatars and in-game currency in MMORPGs is a game sweatshop. Workers employed by these companies either collect in-game currency (known as gold farming) or generate high-level avatars (known as power-leveling). Organizations run like this are referred to as sweatshops because the gold farmers are usually paid very low wages. Game sweatshops can affect a game’s economy by causing inflation. They may degrade the game experience for users, too, as noted in an old legal case against IGE (Internet Gaming Entertainment, one of the largest services company buying and selling virtual currencies and accounts).

Gold farming has been discussed as a tool for socioeconomic development by the World Bank and University of Manchester professor Richard Heeks. The money involved is small enough to flow easily from many first-world players, and large enough to make a difference to the people doing the work. Gold farmers receive a higher percentage of sale revenue from their work than do farmers of fair trade coffee.

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