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Not one, not two, but three virtual world related stories on the front page of CNet this morning. The first one to catch my eye: the Project Entropia ATM card.
Basically, a much more convenient and fluid way to convert their virtual cash into real cash, something that has always been possible. The article ends with a statement:
He said that MindArk had never been asked about the game by the Internal Revenue Service or U.S. law-enforcement agencies.
As was once said by someone at a conference I attended, “virtual item sales aren’t yet at drug dealer money, but they’re at terrorist money levels.” And what we have here, absent the level of control implicit in a bank’s fiduciary responsibilities, is a fantastic way to launder money.
I have thought for a long time that one of the inevitable consequences of item sales was that service providers will end up having to actually be banks; if the burgeoning business model continues to grow, the level of cash moving through the system will attract the attention of governments that will attempt to regulate via the methods they are most accustomed to. While the RL-bound governments had trouble enough coping with stuff like retail sales over the Internet, they found a way: pin down the service provider, since the service typically requires a large amount of infrastructure and a physical location. Then they can tax ’em because the service is essentially too big too get away or go under the radar.
The same is a step in the development of virtual worlds. Transactions increase, service gets bigger, more cash flows through, host nation of service gets interested.
The end point is “service goes distributed and multinational” but we’re a ways away from that, and political pressures on the Internet itself are Balkanizing it to the point that it may be this step doesn’t happen for a long time.
In any case, an ATM card certainly is another big step towards the radar range.
In other but structurally similar news, we see Linden Lab resorting to the feds to help control their denial-of-service problems caused by players who want to crash the grid with self-replicating objects, a story I have mentioned before. It’s a DNS attack today, it’s a bank robbery tomorrow… felony either way (I guess… is a DNS attack a felony?). It’s certainly exactly the sort of attack that cannot be allowed to exist against a bank-like institution, and won’t be allowed to once the regulators show up.
As we charge headlong towards being banks, are we ready for the massive operational burdens that will place on us? I’m betting we’re not.
“As we charge headlong towards being banks, are we ready for the massive operational burdens that will place on us? I’m betting we’re not.”
Turns out there was an exploit revealed yesterday in the SL sim auction system. No surprise. I’m in firm agreement that these companies aren’t ready for what users will dream up to exploit this functionality.
As soon as real money comes into play. Real as in large enough to get the attention of government and organized crime, the problem for developers gets significantly harder. Figuring out how to move from a single player game development mentality to a multiplayer mentality was a challenge in and of itself. Now figuring out how to do that securely while still on a “thin” Game-developer budget… That’s difficult. Banks throw hundreds of millions of dollars at this one problem. Our biggest projects have never seen half that much money for the total development project, let alone just the security piece. I can definately see where your coming from but the full realization of the bank idea is a bit of a ways off in my mind.(with a couple of exceptions)
Crazyness. I have never been one to like using Real money in games. Sub fess is one thing. But in game items for real cash. I dont think ill ever use it.To many things that break some “Gaming morals” for me. Advancement linked to bank account, and “Keeping up with the joneses” who now, are alot more “advanced” than you becouse they have the money to throw. This type of advancement breaks down the Compition that most people have when playing game to an Unfair playing field. Time invested is one thing, everyone is still a a level playing field no matter what your background, but buying your way? Thats just bad, and to me , somewhat “Unsportsmen” like.
This also applys to Pay-by-the-hour (ETC..).
2c
One thing that freaked me out and actually led me to stop playing in Second Life was an experience I had while looking at prices for huge parcels of land (that I had no hope of owning, I just wanted to see what the going rate was). While clicking on the info for one of these ultra high-priced properties I decided to click on the purchase button just to see what sort of error message I got. There was no error message – instead I was informed of what my $Linden deficit was and would I like to continue with the transaction? WTF?? Apparently the client was perfectly prepared to go ahead and charge my credit card for the difference once I gave the okay.
Now, I’m not suggesting that it was something where a slip of the finger could cost you hundreds of dollars, but I was just so shocked by the prospect of charging fake money to my real credit card (yes, I know there’s an exchange rate).
It was just one of those line-blurring moments for me that turned me off of SL.
Yay! Shadowrun’s back! 🙂
This concept absolutely amazes me. I’ve never seen a game that was secure enough to allow game value to equal real value.
That being said, it seems to me that the possibilities of the on-line companies could be endless. Let’s remember, those virtual dollars become real dollars for the companies as well.
A simple virtual tax on in-game transfers could easily pay for “bank grade” systems.
Need more money? Add on another server and open a new “Island”. Instant capitol.
I could even see an opening for “economy management companies” who layer their services into your game.
This path strikes me as unbelievably dangerous. Bringing in regulation and government involvement would artificially promote a sense of “security” in these virtual currencies, that the host company simply cannot provide. It seems this could lead to lawsuits over damages caused by bugs, exploits, hackers, scams and everything else that game companies have a hard enough time controlling today.
Would these lawsuits eventually lead to government enforced (expensive) security regulations to ensure safer online worlds? A doomsday theorist would call this the end of days for the independent MMORPG!
Project Entropia has always danced over the line. The big problem comes when you allow people to convert from in-game currency to offline currency. In my speculation, this is going to be the part that brings the terrible taxation from the government. I think the goal as businesspeople and designers is to make sure there isn’t an officially recognized way, even indirectly, of converting in-game currency you purchase with offline funds back into those offline funds.
I think this really gets sticky when it comes to international law. How much ability does the U.S. have in regulating a Swedish company that issues an ATM card? There’s probably some banking treaties in place, but will they cover cases like this?
Not something I want to get involved in.
I found these issues interesting as well. Mindark seems to be opening themselves up as a money laundering platform. And Linden Lab is giving up on its security responsibilities – which should really start driving the in-game businesses that make Second Life away.
This could be why so many of the Asian games are moving towards Virtual Asset business models – since everything can be bought, the incentives for “RMT” disappear as do the problems.
Game companies are going to have to start seriously looking at their infrastructures. These are the biggest cost drivers over time. Everyone seems to be getting hit in this area (after all World of Warcraft is having server problems and NCSoft is having identity theft and data leakage issues). Performance, liability, and security are going to begin to really hurt.
Welcome to success & real online business.
Can’t we just go back to MUDs, this is all far too serious! :/
Project Entropia is a nicely disguised online casino, with perhaps the greatest risk-offload scam since the Peruvian government convinced people they wanted to be “landowners” when the government controlled seed supply, delivery infrastructure, and market prices.
Good crop? Whoops, special “surcharge” on this month’s shipment. Bad crop? Oh well, at least it’s your own land.
–GF
This is a strange twist on the surreal globalization market. Who gets taxation rights over my sales? The US, because I live here, or some other country? Does the other country get to tax me? Player X screwed me over in a transaction, which court do I sue in?
What exactly, is the agency in charge of all of this?
The short answer is: none