Guild Wars 2

Understanding Macroeconomics for those who are Not Economists can be somewhat daunting, myself included. So I was wondering:

Gold can come into the game in 2 ways

1. Thru normal progression of the game. This would be an infinite supply of constantly stamped coin as everyone is making money if they do almost anything out in the open world
2. Buying Gems with Cash and converting to gold

Gems on the other hand come into the game via

1. Buying with that infinite supply of ingame gold
2. Buying Gems with Cash and NOT converting to gold

Now there are 2 types of sinks in the game

• Gold sink (i.e Thermocatalytic Reagent purchases)
• Gem sink (i.e. Gem Store)

What I am pondering is:
Does the Gold sink = the Gem sink?

Is gold coming into the system faster then gems or the sinks taking it out? Now I do understand the exchange rates in the BLTC show that the conversion rate though minutely dynamic is under a long term trend upward since the start of the game.

Are we to resign ourselves to the hypothesis that the prices on the BLTC for items and or gems will always increase over time or will ANet put some restrictions on the market to stop the continuous price increases?

Have at it Macro-Economists and Arbitragers.

People used to sell blues and greens. Champ boxes nerfed. Incredibly high sinks like you mentioned + the blue/Green mats going into tp circulation instead.

I would heavily doubt theres that much gold coming into the game right now. It had to be a lot worse before.

Yalora Istairiea.6287:

Gold can come into the game in 2 ways

1. Thru normal progression of the game. This would be an infinite supply of constantly stamped coin as everyone is making money if they do almost anything out in the open world
2. Buying Gems with Cash and converting to gold

No. 2 is wrong because the gold you get for your gems was put up there by a player that earned it doing No. 1.

Wanze.8410:

Yalora Istairiea.6287:

Gold can come into the game in 2 ways

1. Thru normal progression of the game. This would be an infinite supply of constantly stamped coin as everyone is making money if they do almost anything out in the open world
2. Buying Gems with Cash and converting to gold

No. 2 is wrong because the gold you get for your gems was put up there by a player that earned it doing No. 1.

If you could find a source for that, it would be appreciated, because while it seems the intuitive assumption, the gem exchange just isn’t a symmetrical player-to-player market like most of the TP is. For the easiest example of this in action, imagine at the start of the game, when the first player tries to buy gold/gems. There’s no way to put up an order for them for someone else to fill, so they had to have their purchase filled from the imaginary coffers of the Black Lion Trading Company itself. While currency exchanges made do have an effect on the rate of exchange, it’s not a one-to-one exchange.

Redenaz.8631:

Wanze.8410:

Yalora Istairiea.6287:

Gold can come into the game in 2 ways

1. Thru normal progression of the game. This would be an infinite supply of constantly stamped coin as everyone is making money if they do almost anything out in the open world
2. Buying Gems with Cash and converting to gold

No. 2 is wrong because the gold you get for your gems was put up there by a player that earned it doing No. 1.

If you could find a source for that, it would be appreciated, because while it seems the intuitive assumption, the gem exchange just isn’t a symmetrical player-to-player market like most of the TP is. For the easiest example of this in action, imagine at the start of the game, when the first player tries to buy gold/gems. There’s no way to put up an order for them for someone else to fill, so they had to have their purchase filled from the imaginary coffers of the Black Lion Trading Company itself. While currency exchanges made do have an effect on the rate of exchange, it’s not a one-to-one exchange.

https://forum-en.gw2archive.eu/forum/game/bltc/Currency-Exchange-Inflation/first#post3158181

Redenaz.8631:

Wanze.8410:

Yalora Istairiea.6287:

Gold can come into the game in 2 ways

1. Thru normal progression of the game. This would be an infinite supply of constantly stamped coin as everyone is making money if they do almost anything out in the open world
2. Buying Gems with Cash and converting to gold

No. 2 is wrong because the gold you get for your gems was put up there by a player that earned it doing No. 1.

If you could find a source for that, it would be appreciated, because while it seems the intuitive assumption, the gem exchange just isn’t a symmetrical player-to-player market like most of the TP is. For the easiest example of this in action, imagine at the start of the game, when the first player tries to buy gold/gems. There’s no way to put up an order for them for someone else to fill, so they had to have their purchase filled from the imaginary coffers of the Black Lion Trading Company itself. While currency exchanges made do have an effect on the rate of exchange, it’s not a one-to-one exchange.

I would think that Redenaz would be correct.

• On day one, minute one, you could have gold either thru your first minute of adventuring or paying cash for gems and trading for gold. As gold exists in a hypothetically infinite supply.
• Gems on the other hand at that moment in time could Only exist thru cash purchases as there was no way to Earn Gems in the game.

Yalora Istairiea.6287:

Redenaz.8631:

Wanze.8410:

Yalora Istairiea.6287:

Gold can come into the game in 2 ways

1. Thru normal progression of the game. This would be an infinite supply of constantly stamped coin as everyone is making money if they do almost anything out in the open world
2. Buying Gems with Cash and converting to gold

No. 2 is wrong because the gold you get for your gems was put up there by a player that earned it doing No. 1.

If you could find a source for that, it would be appreciated, because while it seems the intuitive assumption, the gem exchange just isn’t a symmetrical player-to-player market like most of the TP is. For the easiest example of this in action, imagine at the start of the game, when the first player tries to buy gold/gems. There’s no way to put up an order for them for someone else to fill, so they had to have their purchase filled from the imaginary coffers of the Black Lion Trading Company itself. While currency exchanges made do have an effect on the rate of exchange, it’s not a one-to-one exchange.

I would think that Redenaz would be correct.

• On day one, minute one, you could have gold either thru your first minute of adventuring or paying cash for gems and trading for gold. As gold exists in a hypothetically infinite supply.
• Gems on the other hand at that moment in time could Only exist thru cash purchases as there was no way to Earn Gems in the game.

by a small technicality you are wrong on your second point gems can be earned in game through achievement chests, I believe at a rate of 400gems per 5000 achievement points, not great but still and option.

Two things are slightly wrong in the OPs analysis. Both dealing with the exchange.

Gold and Gems from the exchange. The exchange was seeded at launch with a bit of gold and a gigaton of gems. The exchange doesn’t create or destroy either of them, it “exchanges” them based on a rate determined by the ratio of the two items in the exchange. At launch the ratio was around 25s per 100 gems. As players buy gems with gold the amount of gold in the exchange goes up, the amount of gems go down so now each gem is worth more. If you buy gold with gems the opposite happens.

Yes the Gem Shop is the Gem sink, that’s where gems get removed from the game but the exchange simply holds them and any gold used to buy them.

John Smith described this a while back.

https://forum-en.gw2archive.eu/forum/game/bltc/Who-sets-Gem-prices/705345

Wanze.8410:

https://forum-en.gw2archive.eu/forum/game/bltc/Currency-Exchange-Inflation/first#post3158181

Darn that John Smith and his interesting-but-cryptic answers. I’m afraid all that post confirms for me is that the exchange rate is affected by the demand both ways, which we already knew. It doesn’t tell us whether or not there is a particular number somewhere that represents the Black Lion’s store of “gems available for gold exchange,” or another for their store of “gold available for gold exchange.”

Edit: Let me stop me right there. Between me writing and me posting, Bellagh linked to this post by John Smith, which does answer my question a lot more neatly than the “Exchange Inflation” question does. I’m leaving the rest of what I had written in a spoiler as a thought exercise for anyone who’s interested in how the system could be designed, but that’s all it’s good for now.

Infamous Darkness.3284:

by a small technicality you are wrong on your second point gems can be earned in game through achievement chests, I believe at a rate of 400gems per 5000 achievement points, not great but still and option.

When you say “your second point,” I can’t tell if you’re referring to the original post or to the post you’re quoting from. That technicality doesn’t apply to the quoted post, since Yalora is discussing the opening day of the game, and achievement point rewards weren’t available until Bazaar of the Four Winds, half a year later. At launch, the only way to get gems was to buy them with cash or exchange gold for them.

(It does apply to the OP, where it’s a small oversight.)

Infamous Darkness.3284:

/snip

• Gems on the other hand at that moment in time could Only exist thru cash purchases as there was no way to Earn Gems in the game.

by a small technicality you are wrong on your second point gems can be earned in game through achievement chests, I believe at a rate of 400gems per 5000 achievement points, not great but still and option.

Not that it really matters but I did bold and italic the key phrase…“at that moment in time”

There were no Achievement chests when the game started

Edited – it seems Redenaz beat me to the punch but that is my point exactly, I was speaking from a snapshot moment in time so as to keep with apples to apples.

Behellagh.1468:

snip…
John Smith described this a while back.

https://forum-en.gw2archive.eu/forum/game/bltc/Who-sets-Gem-prices/705345

So if I am reading John S’s post correctly:

• Then the Gem Exchange is a Closed system and the amount of Gold and Gems in the system is finite?
• So it is more like a bubble level, we don’t actually add more of one or the other we just tip the level slightly to one side and move the price bubble accordingly?

Yalora Istairiea.6287:

Behellagh.1468:

snip…
John Smith described this a while back.

https://forum-en.gw2archive.eu/forum/game/bltc/Who-sets-Gem-prices/705345

So if I am reading John S’s post correctly:

• Then the Gem Exchange is a Closed system and the amount of Gold and Gems in the system is finite?
• So it is more like a bubble level, we don’t actually add more of one or the other we just tip the level slightly to one side and move the price bubble accordingly?

Yes … I think. The gold and gems that come out of the exchange is finite, only increased if exchanged for it’s opposite at the exchange. The vast majority of the gold at the exchange is now gold that has been provided by the players when they bought gems.

The exchange rate is based on the notion that the amount of gold in the exchange is equal in value to the amount of gems in the exchange, so their ratio sets the base rate. The only twist is the gold to gem rate is 1/0.85 of this base rate while the gem to gold rate is 0.85, giving you the gap between the two rates. The assumption is that 15% taken from either exchange is a gold sink. nom nom nom

So yes to your next question, the exchange can run out of gems. But as that gets closer the rate shoots up hopefully making buying gems with cash to convert into gold irresistible to more and more players which will drive the price down while at the same time make exchanging gold for gems a pipe dream for most players which also stops it from rising.

Infamous Darkness.3284:

Yalora Istairiea.6287:

Redenaz.8631:

Wanze.8410:

Yalora Istairiea.6287:

Gold can come into the game in 2 ways

1. Thru normal progression of the game. This would be an infinite supply of constantly stamped coin as everyone is making money if they do almost anything out in the open world
2. Buying Gems with Cash and converting to gold

No. 2 is wrong because the gold you get for your gems was put up there by a player that earned it doing No. 1.

If you could find a source for that, it would be appreciated, because while it seems the intuitive assumption, the gem exchange just isn’t a symmetrical player-to-player market like most of the TP is. For the easiest example of this in action, imagine at the start of the game, when the first player tries to buy gold/gems. There’s no way to put up an order for them for someone else to fill, so they had to have their purchase filled from the imaginary coffers of the Black Lion Trading Company itself. While currency exchanges made do have an effect on the rate of exchange, it’s not a one-to-one exchange.

I would think that Redenaz would be correct.

• On day one, minute one, you could have gold either thru your first minute of adventuring or paying cash for gems and trading for gold. As gold exists in a hypothetically infinite supply.
• Gems on the other hand at that moment in time could Only exist thru cash purchases as there was no way to Earn Gems in the game.

by a small technicality you are wrong on your second point gems can be earned in game through achievement chests, I believe at a rate of 400gems per 5000 achievement points, not great but still and option.

Achievement rewards were not there at release, so at that point in time gems from Massive Achievement boxes were not possible.

Yes those boxes are a source of new gems being injected into the game. But if they are simply spent at the gem shop or sit in a player’s inventory they don’t affect the exchange rate at all.

ah didn’t realize you were talking about the start of the game lol I shouldn’t have been skimming, TY for the correction.

The easiest way to understand the exchange is to think of it like a big pot, with a divider down the center. One side of the pot has Gems, and the other side has Gold. If you put in one, the pot gives you back the other based on the ratio of the two.

If there are more Gems than Gold → if you put in more Gems, you get back less Gold

If there are more Gold than Gems → if you put in more Gems, you get back more Gold

Yalora Istairiea.6287:

Is gold coming into the system faster then gems or the sinks taking it out?

In the long run, yes, though the difference between the rate of gold generation and gold destruction should approach zero over time.

Yalora Istairiea.6287:

Are we to resign ourselves to the hypothesis that the prices on the BLTC for items and or gems will always increase

No, in fact there has been ample evidence thus far that prices do not always increase. I can’t think of any endogenous reason to assume that prices will always increase.

I honestly can’t find too much reason to convert gem to gold. Since I can’t find any use of gold. That is probably one of the problem because people simply arn’t converting gem to gold.

So that keep the gem price high. So Anet probably loss out on making money from people converting gem to gold. On the other hand, if gem price is high. More people will be inclined to spend real cash instead of farming gold for cashshop item.

laokoko.7403:

I honestly can’t find too much reason to convert gem to gold. Since I can’t find any use of gold. That is probably one of the problem because people simply arn’t converting gem to gold.

Well you could always do gem→gold in the cases where you want to bypass the RNG and get what you want directly from the TP. Time gated dyes comes to mind if the TP price works in your favour.

laokoko.7403:

I honestly can’t find too much reason to convert gem to gold. Since I can’t find any use of gold. That is probably one of the problem because people simply arn’t converting gem to gold.

You may not find much reason to convert, but this graph makes it clear that others have different preferences than you. Every time the chart dips, that’s more people selling gems than are buying them. (caveat, IIRC there are some established reporting glitches for Spidy’s gem price data) There’s very clearly quite a few people buying gold with gems.

laokoko.7403:

I honestly can’t find too much reason to convert gem to gold. Since I can’t find any use of gold. That is probably one of the problem because people simply arn’t converting gem to gold.

So that keep the gem price high. So Anet probably loss out on making money from people converting gem to gold. On the other hand, if gem price is high. More people will be inclined to spend real cash instead of farming gold for cashshop item.

Keep in mind that, from a revenue perspective, ANet doesn’t care why a player is buying gems as they receive the money either way. While the gem → gold exchange provides ANet with another reason to encourage gem buying and also serves as an gold sink for the economy, for ANet to actually profit there needs to be desirable goods and services in the gem store so that people will buy gems with either RL or in-game currency .

Astraea.6075:

laokoko.7403:

I honestly can’t find too much reason to convert gem to gold. Since I can’t find any use of gold. That is probably one of the problem because people simply arn’t converting gem to gold.

So that keep the gem price high. So Anet probably loss out on making money from people converting gem to gold. On the other hand, if gem price is high. More people will be inclined to spend real cash instead of farming gold for cashshop item.

Keep in mind that, from a revenue perspective, ANet doesn’t care why a player is buying gems as they receive the money either way. While the gem -> gold exchange provides ANet with another reason to encourage gem buying and also serves as an gold sink for the economy, for ANet to actually profit there needs to be desirable goods and services in the gem store so that people will buy gems with either RL or in-game currency .

To an extent I think they do. (though it’s not important)

A higher gold value for gems encourages gem sellers to buy gems now to convert to gold when it’s at it’s highest peak.

Let’s say, for example, Anet comes out with an insanely popular armor set. However, I don’t like it. I may not buy gems to buy that armor set, but everyone else is willing to buy it (with gems or gold). As a result, I may be inclined to take advantage of this peak by buying gems with the sole purpose of converting them.

@Vol: I agree that ANet wouldn’t completely ignore the revenue stream from gem → gold buyers, but even that revenue stream is affected by the desirability of the gem store’s offerings as your example shows. The introduction of new desirable items pushes up the gold → gem rate, and that encourages more people to buy gems with cash to convert to gold.