The problem

The popular massively multiplayer online role-playing game (MMORPG) World of Warcraft allows users to purchase in-game items with gold coin that must be gathered by defeating monsters and completing quests. The game's creators at Blizzard Entertainment have placed explicit bans on the trade of virtual goods outside of their virtual world. However, this has done little to curb the black market sales of gold and other items. "Gold farms," businesses that make money from the gathering and sale of virtual currencies, have sprung up around World of Warcraft, particularly in countries where labor is cheap.

The influx of readily available gold into the virtual world has had numerous negative side-effects, one of the most notable being the inflation of the virtual market. As in any real-world market, a sudden influx of currency will drive prices up, and recent years have shown that virtual markets are not immune. In addition, the ability to purchase what would normally require weeks (or months) of work, can significantly alter the balance of the game, particularly for those players who do not have sufficient real-world money to compete with other players. On several occasions, Blizzard Entertainment has taken action against suspected gold farms an players who use their services, but the problem still persists.

Blizzard's problem (and subsequent response) represents and antiquated approach to the problem of the external trade of virtual goods. Some modern virtual worlds have attempted to solve the problem by openly allowing real-money trading, often providing official ways in which to do so. The 3D chat/game program IMVU allows the exchange of their virtual currency through authorized resellers. There are several ways to obtain IMVU credits: purchasing them with real money, recieving them as a gift, or by earning them through content creation. Content creators design virtual goods (clothing, furniture, etc.) and sell them to other users. Good creators often find themselves with a surplus of credits; more than they could hope to spend, or more than would bring them any extra value from virtual goods. These creators can cash-out through IMVU authorized credit resellers. These businesses function like real-world currency exchanges: they buy credits from developers (for less than their actual value) and resell them to to other users.

While IMVU may have solved the problem of black market trading, there is still the issue of inflation and the inability to regulate RMT transactions. From a government's perspective, the only way to tax RMT is to have accrate reporting of a user's income. However, in the current state of virtual world, that reporting is still left to the user. The first challenge to establishing a regulatory body however, is the legitimization of virtual worlds as real economic entities.

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