Virtual economies have become a feature of an increasingly large number of modern games and, like any other economy, the in-game ones need to deal with economic factors like inflation.

Handled correctly, inflation can actually be beneficial to your game.

Handled incorrectly, however, runaway inflation can turn your game into the virtual version of Hungary in 1946, with in-game currencies becoming so devalued that certain in-game mechanics cease to work.

To make sure that doesn’t happen to your game, we’ll be taking a deep dive into game economy inflation, its primary causes, and what game economy design solutions are available.

What Exactly Is Inflation?

Inflation is a function of a fiat currency economy where the amount of money in circulation begins to rise, promoting a rise in the value of goods and services, and an overall decrease in the value of the currency.

To use a relevant example, gold coins in the real world are valuable because of the scarcity of gold itself.

One assumes that, in Mario Land, where gold coins are liberally littered around the landscape, they don’t have any significant value because they are so readily available.

Obviously, the real-world drivers behind, and examples of, inflation and hyperinflation are far more complex than this one simple example.

However, the basic idea, that too much available currency leads to inflation, and inflation devalues the currency, is relevant to games design.

Examples of In-Game Inflation

Over the course of gaming history, there have been a number of famous examples of hyperinflation that have reduced a game’s primary currency to the point of uselessness.

● Asheron’s Call – The in-game currency because so widely available and was of so little utility that players created their own secondary barter-based economy that centered around shards, which were of use for crafting the essential late-game item, shadow armour.

● Diablo II – Famously, gold became so abundant so early in Diablo II that players abandoned it and started trading in the common, but useful item, the Stone of Jordan. The Stone of Jordan entirely replaced the game’s primary currency, as with shards in Asheron’s Call, and in-game items were priced in numbers of Stones of Jordan. Unfortunately, players quickly learned to spoof the item, so it was removed from the game. Instead of reverting to gold, the player base simply replaced the Stone of Jordan with another item as their base currency.

● Gaia Online – Because of the presence of gold generators, the gold currency in Gaia Online experienced rapid hyperinflation, leading to a huge increase in the cost of goods.

To remedy this, the developers took the drastic step of offering to donate $250 to charity every time a player threw away 15 trillion gold.

How to Spot In-Game Inflation Risks

Game economies are actually far more susceptible to inflation than real-world ones.

In the real world, it’s generally the government or the central mint that is able to create money and banks that can increase a country’s money supply through what is known as the money supply multiplier effect.

However, depending on your game design, players might be able to produce in-game currencies through killing enemies, selling items, or completing challenges. When this happens, the total amount of currency in the game increases, resulting in a devaluation of the total currency.

As the game ages, players will also begin to find more and more efficient ways to ‘farm’ in-game currency, increasing the problem.

If left unchecked, the ability of your player base to essentially print their own money can lead to hyperinflation, in which the currency becomes essentially meaningless.

The real issue here is that having constant control over the value of the currency in your game is vital to creating what is called the pinch point.

The Importance of the Pinch Point

We’ve spoken in detail about how important the pinch point is in another article, Game Economy Design in Free-To-Play Games, but as a brief refresher, the pinch point is an economic term that refers to the point at which demand for a resource is maximized due to customer concern about the supply of that resource.

In-game design terms, often means that the taps dispensing the resources are providing enough to keep the sinks interesting and offset the grind, but not so much as ever give the player a surplus, which decreases interest in the sinks and reduces the allure of in-app purchases.

If the player has control over the taps and finds a way to efficiently farm them, or the game designer allows them to naturally dispense too many resources, the value of those resources reduces, as does the player desire for both the sinks and the in-app purchases.

Are There Any Benefits to Inflation?

Interestingly, yes, depending on the design of your game, there can be some benefits to inflation.

If your game has a natural endpoint, you can increase both the amount of currency in circulation and the amount of currency needed to use the sinks in relation to each other.

This often fits well into the RPG leveling up system, where the player is able to access increasingly large or rare loot, giving them a sense of progression, but the corresponding increase in the cost of high-level items keeps the currency from becoming devalued.

This, however, does not apply to games that have no endpoint, as the game designer will need to continue to create content exponentially, with a corresponding cost in time and effort.

The other primary use for inflation is to solve what is known as the latecomer disadvantage.

Simply put, the latecomer disadvantage is pretty much what it sounds like. A potential player is attracted to a long-running game by recent expansions or late-game content but is then put off playing the game by the length of time that needs to be invested to reach that point.

If the economics of the game incorporate controlled inflation, then the amount of currency available to new players will significantly increase, meaning they will progress through the earlier stages of the game faster, keeping them interested.

The Problems With Incorporating Inflation Into Your Game

While inflation might seem like an easy fix to in-game problems like the latecomer disadvantage, it is not without its drawbacks, even when used deliberately.

The prerequisite of a game suited to inflation is that it can produce new end game content consistently enough that players don’t run out of sinks for the huge abundance of resources that inflation produces.

This is particularly true if inflation is used to solve the latecomer disadvantage, as it rapidly accelerates the pace at which players are able to traverse through the early stages of the game and access the late game.

Creating a balanced economy is already one of the harder aspects of game design. Adding in inflation in order to solve issues, simply increases the difficulty.

Not only does the level of inflation need to be constantly managed, but all additions to the game need to not only work with the current economy but also need to work with a theoretical future economy, accounting for inflation.

How to Mitigate the Impact of Inflation

Depending on the design of your game, inflation might not be something you can simply design out.

If your players receive a resource reward for killing an in-game enemy or completing a challenge, there will be some population of your player base that finds the most streamlined way to do that and starts farming those resources.

In the face of an inherently unbalanced in-game economy or player ingenuity, the best solution is to build in ways to remove resources from your game to counteract the inflation.

There are several ways you can do this and we’ve listed some below:

Incremental Mechanics

Incremental mechanics allow for inflation by inflating both taps and sinks proportionally.

As the player progresses through the game, they are able to build increasingly generous taps, which gives them a feeling of accomplishment. However, the cost to build the next level of tap also scales, creating a new sink.

Because the sink scales with the tap, the goalposts are always moving and even the increased production of resources from increasingly generous taps doesn’t introduce so much currency into the game that the sinks become irrelevant.

As an example, let’s say that the player is attempting to gather coal as a resource. They start with a shovel that gathers one coal per minute.

They can then pay 100 coal to upgrade that shovel to a steam drill that gathers two coal per minute. This increases the size of the tap.

However, the next upgrade, let’s say dynamite, increases the gathering rate to three coal per minute but costs 500 gold. The sink has increased in relation to the tap, and the inflation is offset.

PVP Staking/Gambling

PVP staking or gambling mechanics are an excellent way to remove currency from the game. One of the factors that make virtual economies so vulnerable to inflation is the fact that money can just be created from whole cloth.

Thankfully, the reverse is true. Once resources are out of the player’s hands, they simply cease to exist, making removing them from the game remarkably easy.

As with any gambling mechanic, from betting on PVP matchups to Las Vegas, the old adage that the house always wins needs to win out.

If a greater percentage of the players lose than win, the resources are always being drawn out of the system.

This is particularly true if the rewards for gambling are not additional resources, but timed stat increases, speedups, rare gear, cosmetics, pets, etc.

Seasonal Resets of Content

Content resets are somewhat controversial and only work for some games but are an effective way of combating inflation.

Often found in the form of season passes or leagues, hard resets put everyone back on a level playing field and normally accompanies the release of new content.

The players all start with zero resources and have to build up again.

This approach to combating inflation has to be handled carefully, as you are essentially taking all of your players’ hard-earned gains away from them.

Hard resets are most commonly seen in PVP games and sports games, as the concept of starting a new round or league with all players on a level playing field is built into the core of such games.

New Currency Crafting

Introducing a new premium currency is another popular option for combating inflation, particularly in MMOs.

The idea is that this premium currency can be bought with in-game currency and then used to either access rewards that can’t be bought with in-game currency or can be traded for items with real-world value.

Good examples of premium currencies are PLEX and WoW Token. The WoW Token was specifically created to hinder the illicit gold farming operations and the inflation they caused.

Both WoW Token and PLEX could be traded for game time that would normally cost a subscription fee. WoW Token could also be traded for Hearthstone cards and Overwatch loot boxes.

Because these premium currencies cost gold and do not add resources back into the game, they act as a sink to remove currency from circulation, combatting the abundance of currency that often causes inflation.

Content Rotation

Rotation of content or changes in the meta of the game encourages players to invest in areas of the game that otherwise might not have been attractive to them.

Games like League of Legends and Mech Warrior often give players the chance to play new heroes or characters for free, rather than unlocking them through in-game currency or IAPs.

These free trials can also be paired with changes in the game’s meta to refresh how unused characters or heroes perform, making them more attractive to players.

This system encourages players to invest time and resources into new characters or heroes, giving them a new sink through which to drain their resources.

By keeping the number of taps the same and increasing the number of sinks by having players run multiple characters, heroes, mechs etc, the game is able to reverse the effects of inflation caused by players only concentrating on one option.

Super High-End Items

One of the simplest ways to combat inflation is to introduce super high-end items at a ridiculously high cost. The cost alone will elevate their value in the eyes of the players because of their rarity.

One of the main pitfalls to avoid when crafting super high-end items is to avoid them having a substantially negative impact on the balance of the game.

While it might seem sensible to create an immensely powerful item for players to save up for, if gold can be bought with IAPs, you run the risk of being slapped with the ‘pay to win’ label.

Taxation

Depending on the design of your game, there are nearly always ways to tax players small amounts on most game mechanics, including the ones we’ve already mentioned.

If players want to stake money on PVP duels, the arena takes a cut. If they want to trade, the auction house takes a cut. If they die, there’s a small gold tax to re-enter their body.

Obviously, these taxes should be small enough that they don’t significantly disadvantage the player.

However, even taxation of smaller amounts, spread out over a player base of thousands or potentially millions, can remove significant amounts of currency from a game every day.

Overcoming Inflation With Game Design

Inflation can ruin your carefully calibrated in-game economy, cause a surge in the amount of a certain resource to the point where it becomes devalued beyond usefulness and is abandoned by your players.

This is bad enough in games that don’t rely on their in-game economy to make revenue.

For free-to-play games, however, the presence of inflation can significantly reduce the attractiveness of the IAP they use as their primary revenue stream.

Thankfully, there are ways you can both design your game to be adaptable to inflation and certain factors you can introduce that can help compensate for inflation by draining money out of your game.

By understanding and accounting for the possibility of inflation during the game development process, you won’t find yourself struggling to adapt when prices for simple items surge into the trillions or your players abandon your currency to start their own barter markets.