Guild Wars 2

Dear all,

I understand the “supply & demand” concept.
I don’t understand how it applies to gems in Guild Wars 2;
Is not the supply of gems unlimited? i.e. Anet can ‘create’ as many as they like.

I just don’t get it—how the gold to gem ratio can change. Please help.

Sincerely.

It actually isn’t. According to John Smith, when you convert Gold/Gems, and Gems/Gold, you’re actually subtracting/adding to a limited stash of gems. The supply of gems then affect the exchange rate.

Well in that case, I want to know how many gems are available as supply.
Without this knowledge, and knowledge of how the gems come into existence the whole shebang is a farce. And what about when you buy gems with real money?—is the number of gems purchased subtracted from the supply pool on this occasion as well?

It’s like governments printing money whenever they like. I smell a big, dirty rat.

Pure Heart.1456:

Well in that case, I want to know how many gems are available as supply.
Without this knowledge, and knowledge of how the gems come into existence the whole shebang is a farce.

It’s like governments printing money whenever they like.

No, it’s actually not. It’ll be like government printing money if Anet was creating gems out of thin air. But they aren’t. There is a limited supply of gems that is subtracted/added to/from whenever players make Gems/Gold and Gold/Gem and Cash/Gem transactions.

Ursan.7846:

Pure Heart.1456:

Well in that case, I want to know how many gems are available as supply.
Without this knowledge, and knowledge of how the gems come into existence the whole shebang is a farce.

It’s like governments printing money whenever they like.

No, it’s actually not. It’ll be like government printing money if Anet was creating gems out of thin air. But they aren’t. There is a limited supply of gems that is subtracted/added to/from whenever players make Gems/Gold and Gold/Gem and Cash/Gem transactions.

This is exactly why I needed to post on this topic in the first instance;
No offense Ursan, but you are not answering my questions.

How did they create any gems in the first place?
How many gems were created in the first place?
How do you know Anet aren’t creating gems out of thin air?

Pure Heart.1456:

Ursan.7846:

Pure Heart.1456:

Well in that case, I want to know how many gems are available as supply.
Without this knowledge, and knowledge of how the gems come into existence the whole shebang is a farce.

It’s like governments printing money whenever they like.

No, it’s actually not. It’ll be like government printing money if Anet was creating gems out of thin air. But they aren’t. There is a limited supply of gems that is subtracted/added to/from whenever players make Gems/Gold and Gold/Gem and Cash/Gem transactions.

This is exactly why I needed to post on this topic in the first instance;
No offense Ursan, but you are not answering my questions.

How did they create any gems in the first place?
How many gems were created in the first place?
How do you know Anet aren’t creating gems out of thin air?

1. They most likely had a certain stash at the beginning of the game. Cash/Gems (or specifically, Cash/Gems/Gold) adds to the supply.
2. Don’t know, don’t care. Why does it matter?
3. Because John Smith said so.

When government prints money out of thin air, it significantly devalues the currency they are printing. If Anet is creating gems out of thin air, it should also follow the same trend and devalue gems. If this happened, the ratio of Gold/Gems should decrease, as Gems would lose value in relation to gold. But you don’t see that. Gold/Gem ratios have steadily increased since the beginning of the game.

Pure Heart.1456:

This is exactly why I needed to post on this topic in the first instance;
No offense Ursan, but you are not answering my questions.

How did they create any gems in the first place?
How many gems were created in the first place?
How do you know Anet aren’t creating gems out of thin air?

1) There game, their gem supply.

2) All that John Smith has said is the exchange was created with a fix size pool of Gems and Gold that are allocated to the exchange, the ratio between the two is used to set the exchange rate. The pools are sufficiently large enough that market high jinx would be practically impossible for players. Gems are only added to the pool only when players exchange Gems for gold and subtracted when gold is exchanged for Gems. Opposite is true with the gold portion of the transaction.

3) We don’t but they say they aren’t.

The idea as described is as the exchange rate goes up, players who buy Gems with actual cash will be enticed to exchange them for gold and the rate will then move down. It’s just after six months we haven’t reached the point where Gems are flowing into the exchange in similar quantity as flowing out, thus the exchange rate has been moving up over the long term.

This sale on bank and backpack slots was simply so attractive to so many players that there was a run on the exchange, enough to spike the exchange rate roughly 20%.

You can search John Smith’s posts to find the ones discussing the exchange.

1) “Their game, their supply” you say;
“Oh no! The gem supply is running low! Must convert all my gems to gold before the gems run out!”

The thing is, we don’t know/can not know how many gems there are. Also, the gem supply will never run out. Anet wouldn’t/couldn’t let it happen. Which means the whole concept is a farce. I don’t get it.

While theoretically possible, it’s nigh impossible for gems to run out. If the supply of gems were to get that low, the cost of converting Gold -> Gems (what takes gems out of pool) will be tremendously high, while the rewards of converting Gems -> Gold (puts Gems into pool) is very high. Hence if a situation like that were happen, it’s highly unlikely the people who convert Gold -> Gems outnumber the people who convert Gems -> Gold.

So if gems will never run out, the SUPPLY is (virtually?) unlimited.
Which means, the amount of gems needed to convert to gold should be extremely high because things that are in unlimited supply should effectively be worthless.
But they’re apparently not worthless.
Which should mean the supply is limited.
Or if they are unlimited, the supply of gems is being manipulated to bring about a desired exchange rate—Fraudulent.

I don’t get it.

Pure Heart.1456:

So if gems will never run out, the SUPPLY is (virtually?) unlimited.

I didn’t say that.

If the supply of gems become incredibly small, the Gold -> Gem ratio will be very high due to the tiny amount of gems, and the Gem -> Gold ratio will be very high for the same reason.

That means it’ll be a lot better idea to convert Gems -> Gold that Gold -> Gems in that case.

For example, say somehow the gem pool becomes very small and it takes 10000 gold to convert to 800 Gems. While it takes $10 to get $800 gems, with which you can get 8500 gold. The majority of the player population will take the latter, because it’s just a much better deal.

This is why I say it’s nigh-impossible for gems to run out. Not because they are unlimited, but because their scarcity affects prices, and when prices are that high it becomes very unlikely people will continue to purchase it with Gold.

Which brings us back to the original issue, which is that we don’t know how many gems there originally were, are now, nor can we even speculate as to how many there will be.

Which means we are completely at the mercy of Anet who can tweak either the gem supply itself, or their algorithm to bring about their desired price.

I have one final question;
When players buy gems with real money, does the gem supply increase?

Pure Heart.1456:

Which brings us back to the original issue, which is that we don’t know how many gems there originally were, are now, nor can we even speculate as to how many there will be.

Which means we are completely at the mercy of Anet who can tweak either the gem supply itself, or their algorithm to bring about their desired price.

Then it’s a matter of trust. John Smith has stated that it’s only the player’s actions at the exchange that affects the price.

I have one final question;
When players buy gems with real money, does the gem supply increase?

In the world yes, in the exchange no.

Let me have a crack at explaining this.

When people convert their Gold into Gems, the exchange rate gets worse. It could go from (1 gold = 80 Gems) to (1 gold = 74 Gems) to (1 gold = 68 Gems) etc. etc. The more people who exchange their Gold, the less Gems you get. Another way to view it is the less Gems there are in the pot, the more expensive they become.

On the opposite end, when the above example happens, Gem to Gold rates get better. So we could have (100 Gems = 1.50 gold) to (100 Gems = 1.72 gold) to (100 Gems = 2.04 gold).

Theoretically, the Gem pot could empty. But that will never happen, because there will always be players who are willing to buy Gems with real money, and convert them into Gold when the rates are good, thus refilling the supply in the pot.

Note – there is an artificial spread in the difference between Gold to Gems, and Gems to Gold. This is meant to create a buffer to prevent people from treating the in game exchange like a currency market.

ps – I could care less about how many Gems are available at any given time.

Meh. Companies need a product or service and money to exist. In this case they look at their chart and peg it to where they think they will make the most money without alienating the entire fanbase. The best I ever saw it was 1 gold to get sixty gems, now I see 1 gold for forty gems. Trend should continue with this business model.

“As a quick aside. Gems in the currency exchange are finite. You may buy gems with real money to your hearts content, but if you don’t put any of them gems into the currency exchange the currency exchange’s stock of gems never changes.”

“Think of it this way. The government can print as much money as they want, that doesn’t mean your bank account has access to that money. The currency exchange does not have access to gem creation. It has a limited stock that players add and subtract from.”

Both quotes from John Smith in a different thread.

Sound like there is a finite number of gems in the gem/gold market which directly effects that market.

But you can purchase with real money any amount of gems you wish. Until these gems are put into the currency exchange system, they don’t effect the system.

So it sounds to me as if the supply of gems is in reality infinite. But until someone puts them into the gem/gold market (exchanging them for gold) they will not effect the conversion rate.

Question I did have.. if gems bought with real money don’t count towards the gem total in the gem/gold exchange market until someone cashes them in and puts them into the market, does spending gems for TP purchases remove gems from the gem/gold exchange market?

Or is the TP market considered part of the gem/gold exchange market?

I always thought there was an infinite number of gems/gold but they were keeping track of a percentage of how much gems were being bought/sold.

Mad Rasputin.7809:

“As a quick aside. Gems in the currency exchange are finite. You may buy gems with real money to your hearts content, but if you don’t put any of them gems into the currency exchange the currency exchange’s stock of gems never changes.”

“Think of it this way. The government can print as much money as they want, that doesn’t mean your bank account has access to that money. The currency exchange does not have access to gem creation. It has a limited stock that players add and subtract from.”

Both quotes from John Smith in a different thread.

Sound like there is a finite number of gems in the gem/gold market which directly effects that market.

But you can purchase with real money any amount of gems you wish. Until these gems are put into the currency exchange system, they don’t effect the system.

So it sounds to me as if the supply of gems is in reality infinite. But until someone puts them into the gem/gold market (exchanging them for gold) they will not effect the conversion rate.

The exchange has a finite amount of Gems it can sell for gold. This is what we mean by finite. It may have started with a huge amount of Gems, like a trillion but even that is finite.

Mad Rasputin.7809:

Question I did have.. if gems bought with real money don’t count towards the gem total in the gem/gold exchange market until someone cashes them in and puts them into the market, does spending gems for TP purchases remove gems from the gem/gold exchange market?

Or is the TP market considered part of the gem/gold exchange market?

Think of it this way. There are the Gems that the player base has currently on them and there’s the Gems that are allocated to the exchange. Two separate pools of Gems. Only the ones in the exchange matter when it comes to setting the exchange rate.

If buying Gems for cash is the only way Gems are created in the world then it’s logical to assume that spending Gems at the Gem Shop is the only way they get destroyed.

See my crudely drawn flow chart.

The gem exchange market is made up of players buying and selling gems with gold. When we say that the supply of gems is limited it is referring to the number of gems in actual circulation(gems being held by players) who want to sell it for gold. With no outside influences this supply will continually diminish because of trading fees that ANet has put in place. As supply goes down, prices for gems will go up. The only way to increase the supply of gems is to have players pay real money to buy gems and this will inject new gems into the gem supply. Any currency is a store of value. Players trade the value in their real money and transfer that value to gems. Now the gems have value and can be sold to other players for gold. Gold’s value, on the other hand, comes from time. You need to spend time in game to gather gold. So now you have two parties in this market. The first that has gems whose value comes from real money and wants to trade it for something that saves time in the form of gold. The second has gold whose value comes from time and wants to trade for something that saves real money in the form of gems.

The issue that people seem to be confused about is ANet’s ability to create gems. Yes, they can create an unlimited amount of gems but this does not affect the gem supply because it is not in player circulation unless they buy it with real money. You can think of ANet being the central bank of a country. They have the ability print unlimited amounts of money but since it is not in circulation for citizens to use, it does not affect prices of goods in that country.

Sorry for the long post. As an economist, this stuff is fascinating. MMO economies are actually being studied by economists because they mimic real world scenarios.

I think the truth is the gem price is set at whatever maximize Anet’s profit.

The supply/demand model make sense. And I’m sure that is what Anet is doing.

I’m just saying there is probably some fine tuning.

John Smith.4610:

The price changes pretty often, how would I have time to post on the forums?

Make to show up automatically in the TP.

You didn’t answer the other questio,though: when I buy gems with dollars, do they substract from the supply (I guess not, but no word about this at all)? The opposite, when I sell the gems that I bought for dollars, are they added to the supply?

At one point, the gems from dollars must be added (or must have been) to the stock of gems to exchange for gold, or there would never been any gems in there.

John Smith.4610:

The price changes pretty often, how would I have time to post on the forums?

This must obviously be your special supervillain super-power.

~MRA

Kind of a random idea that came to me, maybe theres a max amount of gems available to be in the market like they say. say its something stupid like 500 trillion or some extremely large number that stops it from having massive shifts but smaller controlled one. Well when you buy gems with gold it subtracts from that total, and then when you buy gold for gems it adds to the total, unless that total is maxed out(which is highly unlikely ever to happen) resetting the price to release price. The closest way ANet get to manipulating the market is by putting new things into the gem market they know will sell, discount bag and bank slots, the kitten quaggan back pack, discount character slots, things like that, that get a lot of peoples attention. Then people are spending their gold on gems and usually excessive gems because the smart people know that the price will climb as more and more people notice the item/sale. We control the price, it just plummeted probably due to people who bought gems at 50-90s and at almost 1.7g figured its worth while to clear their stock before someone else beats them to it.

So, to the OP, the supply is not unlimited it is just so large that currently it doesn’t matter. You aren’t about to have everyone sell all their gems, and have enough gold even at minimum price, buy them all to find out how many they use as a maximum. The price is how many is in the exchange, not the world, you buy some price goes up because theres less supply in the exchange. So people sit on their gems until their paid price is nothing compared to get from selling. The base amount of gems is/was so large that they don’t need to create more, when someone buys gems and exchanges for gold, if it was at maximum capacity the gems they bought and exchanged would just disappear.

Tallis.5607:

John Smith.4610:

The price changes pretty often, how would I have time to post on the forums?

You didn’t answer the other questio,though: when I buy gems with dollars, do they substract from the supply (I guess not, but no word about this at all)? The opposite, when I sell the gems that I bought for dollars, are they added to the supply?

I will answer for you since it is just blatantly obvious.
- If you buy gems with dollars, they are “printed” out of thin air. All prices remain the same.
- If you then convert them to gold, they are added to the exchange supply. This influences the exchange rate.

At one point, the gems from dollars must be added (or must have been) to the stock of gems to exchange for gold, or there would never been any gems in there.

Indeed and that happens when you convert gems to gold. Not any sooner.

Pure Heart.1456:

Well in that case, I want to know how many gems are available as supply.
Without this knowledge, and knowledge of how the gems come into existence the whole shebang is a farce. And what about when you buy gems with real money?—is the number of gems purchased subtracted from the supply pool on this occasion as well?

It’s like governments printing money whenever they like. I smell a big, dirty rat.

This is something I’ve always wanted to challenge as well. Without us seeing the Gem supply – it’s impossible to predict market value, quantity or if ArenaNet aren’t just rigging it.

Having come from Eve Online, I wanted to see Gems similar to their PLEX system; i.e physical items on the market to allow you to see just how many there are.

Gems can’t exactly be compared to currency because currency is kinda like energy (except for the fact that energy cannot be created) whereas it is transferred (currency is only destroyed if they’re old and should not be circulated anymore, then new munny is printed for it, printing munny for no reason will devalue it). Gems on the other hand can be destroyed (through you using it to buy in game items where it goes back to the source). So how exactly are gems being generated if we destroy it? Well simply, people who buy gems with dollars and convert to gold are the supplier of the gems. Why is gem price so high now as compared to the start of the game. That is because at the start of the game, not many people bought gems and also not many people converted, the pool of gems available was relatively big. Nowadays, the demand for gems is a lot higher and is more than the supply (people who use money to buy gems) so the price remains high due to a smaller pool.

I think i’m somewhat in the right track

Lewis Burnell.2493:

Pure Heart.1456:

Well in that case, I want to know how many gems are available as supply.
Without this knowledge, and knowledge of how the gems come into existence the whole shebang is a farce. And what about when you buy gems with real money?—is the number of gems purchased subtracted from the supply pool on this occasion as well?

It’s like governments printing money whenever they like. I smell a big, dirty rat.

This is something I’ve always wanted to challenge as well. Without us seeing the Gem supply – it’s impossible to predict market value, quantity or if ArenaNet aren’t just rigging it.

Having come from Eve Online, I wanted to see Gems similar to their PLEX system; i.e physical items on the market to allow you to see just how many there are.

So what exactly do you think Anet could be rigging?

The only thing Anet cares is people are buying gems. And they didn’t kitten too many people off to quit with their cash shop.

And rigging don’t necessary meant bad, it’s like the goverment printing out cash analogy. Well governement is doing the right thing. That is needed to stabalize the economy.

If Anet find any need to add more gems in the market. Let them do it, keep the rate low. If Anet think the rate should be higher so maybe more people will buy gems. Let them do it. Either way if Anet dont’ make enough money, the players are the one getting punished in the end.

The thing to me is I dont’ know if Anet would step in to stabalize the market. But if they do, I might have to say thank you.

I think… it works like this:

When you buy gems with real money, they’re created of thin air.
So now the game has 1000 gems.

This player then puts the 1000 gems in the currency exchange (currently with 0 gems) and he gets 1000 gold for it (this is a price ANet must’ve decided on before hand, and they created this gold of thin air).

Now the currency exchange has 1000 gems, and each one costs 1g. No one is buying. Prices remain the same.

Another player do the same as above, and now the currency exchange has 2000 gems. Each one costs 50s now.
As players buy more gems with gold, and gems gets depleted, their price increases closer to the original price of 1 gem = 1 gold. As players put more gems for selling, their price decreases.

The values are just assumptions but I think you get the idea… so they could rip if they wanted by adding/taking gems out since no one but them have access, but let’s believe they’re not doing this.

This would be the same as trying to check if some product’s from real life is priced correctly with taxes included just to make sure you’re not getting ripped off. No one does this and we all believe prices are just.

Pure Heart.1456:

How did they create any gems in the first place?
How many gems were created in the first place?
How do you know Anet aren’t creating gems out of thin air?

They won’t, ultimately gems are bought with real money and they’re not likely to ‘print’ them as that would reduce their income. The more gold needed to pay for gems, the more likely people are to buy them with real money, or trade the gems they bought for real money for gold to buy stuff in game.

Two thoughts:

a) John Smith actually does not have time to post on the forums because he is indeed micromanaging gem prices on a bi-minute level. A complex algorithm was designed to post more or less frequent automatically on his behalf.

b) John Smith has a jar full of gems on his desk – most likely made of glass, but that is pure speculation at this point.

Other than that I would rather like to know if there is a trend visible in terms of the exchange, are more people trading gems for gold now then six months ago, is it rather stable. My guess would be that a sort of equilibrium is still a bit farther out there.

Edit: A glass jar engraved with the GW2 logo – now I wish I could make that.

Ursan.7846:

No, it’s actually not. It’ll be like government printing money if Anet was creating gems out of thin air. But they aren’t. There is a limited supply of gems that is subtracted/added to/from whenever players make Gems/Gold and Gold/Gem and Cash/Gem transactions.

They do make gems out of thin air. When people purchase gems with real money:

John Smith.4610:

As a quick aside. Gems in the currency exchange are finite. You may buy gems with real money to your hearts content, but if you don’t put any of them gems into the currency exchange the currency exchange’s stock of gems never changes.

The bolded text states that buying gems with real money has the same effect as creating gems out of thin air.

John Smith.4610:

Think of it this way. The government can print as much money as they want, that doesn’t mean your bank account has access to that money.

No, but you can’t argue that it has an adverse effect on the money in your bank account. Inflation taxes hurt like a B.

John Smith.4610:

The currency exchange does not have access to gem creation. It has a limited stock that players add and subtract from.

Except when they buy gems with real money and exchange it for gold. If gems are created with cash and put into the exchange, the pot gets bigger. Right?

There’s only two ways in the game to get gems, exchanging gold for them or buying them with money. As you’ve stated, one creates gems, the other does not. In order to keep a finite amount of gems in the pot without it going bankrupt you’d either have to have a steady inflow of gems that were NOT already taken from the pot, or have the spent gems go back into the pot.

The question then, is when people spend them on gem store items, do the spent gems go back into the currency pot? It would have to be the only way that pot is kept fluctuating outside of people purchasing gems and exchanging them for gold.

If the spent gems are not going back into the pot, what you’re then saying is that people are buying gems and exchanging them for gold SO much that the amount of gems available is visibly fluctuating hour-to-hour instead of just consistantly going up as people buy gems from a fixed source. I find that hard to believe. Not saying its impossible because it clearly isn’t, its just very hard to believe.

1) When the game went live the Gem Exchange was stocked with a Gem reserve and a Gold reserve. Transactions with the exchange with either remove or add to these reserves. This means that the exchange doesn’t create either gems or gold.

2) Gems are only created in the world, since the Gem Exchange’s founding, by player cash purchases. Unless these gems are sold to the exchange, the exchange’s supply doesn’t grow. If players don’t buy Gems from the exchange, the exchanges’s gold reserve doesn’t grow.

3) It’s the current sizes of the two reserves at the exchange that sets the exchange rate. Whether it’s a simple ratio or a more complicated formula, the current size of the two reserves factor heavily into calculating the exchange rate. The amount of Gems and gold that the entire player base has on all their characters do not factor into the equation.

4) I will assume that spending gems at the Gem Shop destroys gems, removing them from the world. It’s a Gem sink.

5) What’s unclear to me is whether the gap in the two exchange rates acts as a surcharge/fee or not, a gold sink. The reason this is important is if parity transactions are made, the same number of Gems sold and bought from the exchange so the amount in the Gem reserve didn’t change and if the difference is not a surcharge/fee, then the gold reserve at the exchange grows. That would introduce a small amount of inflation to the exchange rate. However if the Gold reserve at the exchange does grow because of this, at worse it only helps making selling Gems to the exchange more attractive sooner than later.

Redscope.6215:

The question then, is when people spend them on gem store items, do the spent gems go back into the currency pot? It would have to be the only way that pot is kept fluctuating outside of people purchasing gems and exchanging them for gold.

If the spent gems are not going back into the pot, what you’re then saying is that people are buying gems and exchanging them for gold SO much that the amount of gems available is visibly fluctuating hour-to-hour instead of just consistantly going up as people buy gems from a fixed source. I find that hard to believe. Not saying its impossible because it clearly isn’t, its just very hard to believe.

There is no overall Gem/Currency pot. When you make a Gem purchase with real money, it gets created. The pot that we’ve been talking about is the “Exchange Pot”.

Please see Behellagh’s post above, as he provides an illustration of how it works:

https://forum-en.gw2archive.eu/forum/game/bltc/Help-I-don-t-understand-gem-supply-concept/first#post1530154

The Gem store is separate. Gems used there just disappear.

Real world money supply is not based on what the government can print but on what is actually in circulation in the hands of people and banks.

The gem supply is the same. It is not based on how many ANet can create, but on what is actually in the hands of players. The gem market is between players selling gems and players buying gems.

I was exchanging 12000 gems for gold lately and the price for 6000 constantly jumped from ~99g up to ~102,5g. There’s a lot of fluctuation in this market, seems it’s either relatively small or there are huge transfers happening.

John Smith.4610:

Think of it this way. The government can print as much money as they want, that doesn’t mean your bank account has access to that money. The currency exchange does not have access to gem creation. It has a limited stock that players add and subtract from.

It’s still a completely arbitrary system. And it’s easy to see why too, when there is a shock to the market it largely favors gem demand and Anet’s bottom line (for example a sale for a popular items screws over anyone that doesn’t pay $ for gems).

A fair(er) system would place a % of gem’s spent in the shop back into the exchange (I assume it doesn’t do this, correct me if Im wrong), or just throw the exchange concept out the window and fix the the gold cost of gems to an average trade post value of a basket of commodities (T6 mats, ectos, etc).

roamzero.9486:

It’s still a completely arbitrary system. And it’s easy to see why too, when there is a shock to the market it largely favors gem demand and Anet’s bottom line (for example a sale for a popular items screws over anyone that doesn’t pay $ for gems).

A fair(er) system would place a % of gem’s spent in the shop back into the exchange (I assume it doesn’t do this, correct me if Im wrong), or just throw the exchange concept out the window and fix the the gold cost of gems to an average trade post value of a basket of commodities (T6 mats, ectos, etc).

Fairer for whom? While your suggestions might help those players who obtain gems using gold instead of money, it could negatively affect the exchange rate for those who wish to exchange gems for gold.

roamzero.9486:

John Smith.4610:

Think of it this way. The government can print as much money as they want, that doesn’t mean your bank account has access to that money. The currency exchange does not have access to gem creation. It has a limited stock that players add and subtract from.

It’s still a completely arbitrary system. And it’s easy to see why too, when there is a shock to the market it largely favors gem demand and Anet’s bottom line (for example a sale for a popular items screws over anyone that doesn’t pay $ for gems).

A fair(er) system would place a % of gem’s spent in the shop back into the exchange (I assume it doesn’t do this, correct me if Im wrong), or just throw the exchange concept out the window and fix the the gold cost of gems to an average trade post value of a basket of commodities (T6 mats, ectos, etc).

Why is that fairer? Cash sale of Gems is what keeps this game going. ANet needs the cash flow since this isn’t a subscription game like WoW. Servers aren’t going to stay up or pay devs to develop content and fix bugs on rainbows and sunshine.

The fact they provided a mechanism for players who don’t have the money to spend on Gems at all is a plus. They didn’t need to do that. Also providing a way to convert cash into gold via Gems and the exchange helps provide a legitimate way for players who have cash but not time acquire gold. Black market gold sellers bring nothing but hacked accounts and credit card fraud.

The only player that isn’t helped by the exchange are players who don’t have either the money to spend on Gems or the time to play the game to earn gold.

The exchange makes sure that the pendulum doesn’t swing to far to fast either way. If there was a flat rate for Gems to gold, inflation would happen way faster as gold floods the game. With the exchange rate dropping as more Gems are converted to gold acts as a brake because when it drops too far it loses it’s appeal. On the other side of the equation as the cost of Gems go up as more players convert gold to Gems, it encourages players who really want something at the Gem store to pony up actual cash.

Bottom line, if you really want something in the Gem store right now, spend the money. If you are willing to wait, convert a little gold every week and save up.

There is no shortage in gems. Anet “makes” when people buy. But they put a prize on gems from start, and if people trade gold for gems then the price for gems rise (price/demand). If alot of people buy gems then anet lets the value sink a little so people with gold can get more chance to be on pair. Thats the mechanic behind it all.

I agree 100% with Behellagh`s post also.

So what we can draw from this is that as time gets by and more players can get gold, more then they need and save it, to buy gems then the price for the gems will rise. Also the price for Uber items will rise, since more people can afford them more easily.

At least thats how i see it.

You might buy $10 worth of gems, but then you spend it on keys or something and then its handed back to the store’s supply. There is no way to delete them and hence there is no way to create them.

It would be interesting to see a large conglomerate of players buy up a large quantity of gems…

Gems don’t come from a “store”, they are created when you buy them with cash or transferred from a preexisting large reserve of Gems (that was created when the game went live) for gold. They are destroyed when spent on items at the Gem store. They are not “recycled” back into the game.

As the Gem reserve at the exchange shrinks, the exchange rate goes up. This makes it more attractive to sell Gems to the exchange for gold, thereby help to replenish the reserve as well as make buying Gems with cash the more attractive alternative than spending the additional time it’ll take to earn additional gold needed.

However the gap between the Gold→Gem and Gem→Gold exchange rates are such that it’s only practical to sell Gems for gold with Gems purchased with cash. Sure you could buy Gems with gold and hold onto them waiting for the Gem→Gold exchange rate to rise past the point where it would be profitable to sell them back to the exchange but that may take months if at all. That’s tying up your gold for an unknown period of time.

It’s a pretty simple system to me.

Case A:
Players sell Gems for gold.
What happens:

• Players give gems to the Gem Exchange, Players get gold.
• Amount of Gems in stock increases.
• [Gems -> Gold] yields less gold. The price of Coins increases.
• [Gold -> Gems] gives more gems. The price of Gems decreases.

Case B:
Players buy gems with gold.
What happens:

• Players take Gems from the Gem Exchange, Players Get Gems
• Amount of Gems in stock decreases
• [Gems -> Gold] gives more gold. The price of Coins decreases.
• [Gold -> Gems] gives less gems. The price of Gems increases.

- ArenaNet/John only put several key things in the formula: For the exchange to be a gold sink, and they can change the volatility. (The amount of change that happens when someone uses the exchange.)

Gold to Gems > Gems to Gold; so it costs the “community” more to re-buy the gems they put in the exchange. (Roughly 25% more)

• You can check this now:
  Trade gold for Gems: To get 100 gems you need around 2 gold.
  Trade Gems for gold: Trading in 100 gems gives you 1 gold, 50 silver.

Note that the amount of gold in bold goes up for both exchanges when more people buy gems with gold. (Inflation of Gold is pretty common in MMOs, which clarifies why the price has been going up since the beginning)
From Case B:

• [Gems -> Gold] gives more gold. -> amount of gold goes up per 100 gems.
• [Gold-> Gems] gives less gems. -> amount of gold needed to buy 100 gems, increases.

You could say, it balances itself out. When ALOT of people buy gems with coin, like with an interesting addition to the BLTP such as quaggan backpacks: More people buy gems with coin, than people will buy coin with gems. Which means Case B happens times alot. Which clarifies the huge spike you see every time the BLTP is coming out with new stuff. Which quickly balances out as the amount of gold you can get with the same amount of gems quickly rises making it more attractive to sell your gems for gold.
Which then automatically means , in order to rebuy the gems, your community spends 25% more gold.

What you don’t see, is the amount of gems bought with real money, and then spend on anything in the BLTP. As John said, they don’t enter the Gem Exchange gem stock.
Anything in the exchange comes from people who buy gold with the gems they have.

Disclaimer:
I think. xD

They have a currency peg system. gems for gold and vice versa. Areanet acts as a de facto central bank selling or removing gems so that the gem/gold exchange gets high and vice -versa. There is a probably a band they would like to keep the gem;gold exchange rate within. In real life places like Hong Kong have a currency pegged with the US$. The range is 7.75 to 7.85 for one US$. If the HK$ hits the low end of the range (ie getting stronger), the central bank will step in and SELL HK$ so that the rate weakens and stays within the band and vice versa.

John Smith has repeatedly stated that ArenaNet hasn’t adjusted the amount of Gems or Gold reserves at the exchange since it was initialized when the game went live. Only player actions at the exchange, buying or selling Gems and how it adjusts the exchanges reserve of Gold and Gems, is used to determine the exchange rate.

Unless I understand wrong, the amount of gems+gold in the exchange is continually growing due to the tax on exchange.

If I start with 100 gold and turn it into gems. Then take all those gems and turn them back into gold, then I’ll have ~70 gold. The exchange is now 30 gold “richer”. And a tiny, tiny bit more stable due to having a larger pool

True but the amount of gems haven’t changed. And if more players convert gold to gems than the other way around the amount of gems at the exchange shrinks and the exchange rate moves up.

Gems that players buy with cash aren’t part of the exchange until they sell them to the exchange. Gems that are used to buy an item at the store are destroyed.

@Spifnar: That’s assuming that the “taxed” difference is still added to the pool, however. I have a feeling that the difference between gold > gems and gems > gold is simply discarded; it’s yet another gold sink to help control inflation.