[Merged] How is gem exchange rate determined?
Since the whole thing goes through Anet, a party with an interest in keeping the conversion ratio high, we can come up with all kind of conspiracy theories till the devs lock the thread for some such reason.
Likely, they keep the gems2g value lower to keep inflation within tolerable limits. If people were able to inject gold into the game for negligible amounts of cash, prices on the Tp would spiral out of control and the game really would become pay2win.
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Yeah in fact i would actually like to be able to see some supply, demand and volume indications to be able to forecast when is a good time to exchange !!!
Mesmers Shall Rule Tyria!
Yeah in fact i would actually like to be able to see some supply, demand and volume indications to be able to forecast when is a good time to exchange !!!
Won’t happen. It all goes through anet, the same force the generates gems. They could generate an infinite number of gems and charge whatever they want in conversion. I’ll assume they have a complex algorithm running to simulate a dynamic market but so far the only rule to live by is the gem:gold ratio is progressively getting smaller with time.
Unless the majority of the player base stops buying gems this likely won’t ever change. Higher gem2gold ratios keep up with inflation so it’s always an attractive option for some easy gold and higher gold2gem ratios make sure people can’t just bypass the only revenue generating element of the game by throwing ingame wealth at it.
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Supply and demand.
Over the past two months or so the cost to buy gems with gold has gone up roughly 3 gold per 100 gems. However, the price when selling gems for gold has only gone up about 2 gold per 100 gems. So, this is my question: why are the gems in my pocket increasing in value at a drastically slower rate than the gems in Anet’s pocket? Less valuable overall I can understand, maybe there’s a conversion fee of some percentage, but that doesn’t explain the two different rates of growth. I’m probably missing something, but this doesn’t make sense to me.
EDIT: I’m moving this up into my initial post since the explanations so far seem to be misunderstanding what I meant by the rate of growth.
If the gap is a constant then the value of our gems should be increasing at the same rate as the Anet gems. Example: let’s say the gap is 30%, and Anet has a starting value of 5 gold. That means ours should be 3.5 gold to start. We then have a couple months of growth: Anet’s 5 gold value becomes 8 gold. So, ours should be worth 5.6 gold (70% of 8 gold). Now, Anet’s growth: 5*X=8, X=1.6, so 60% increase in value. Our growth: 3.5*X=5.6, X=1.6, so again 60% increase in value. As long as the fee is a constant percentage, our gem value should be increasing at the same rate as Anet’s. But over the past two months that’s not what has happened, Anet’s gems have increased in value at a greater rate than ours have. Two months ago it was roughly us: 4, them: 5. Now, it’s roughly us: 6, them: 8. Us: 4*X=6, X=1.5, 50% increase in value. Them: 5*X=8, X=1.6, 60% increase in value. So, again, why are the Anet gems getting more valuable more quickly than ours are? Aren’t they all the same commodity, except Anet has more of them?
(edited by veldrenor.1469)
Working as intended. They put a gap (~30%, correct me if I’m wrong) to make it so that it would be harder, longer, and less profitable to try to make money using the conversion rate. Not exactly a fee, just a gap.
Except, if the gap is a constant then the value of our gems should be increasing at the same rate as the Anet gems. Example: let’s say the gap is 30%, and Anet has a starting value of 5 gold. That means ours should be 3.5 gold to start. We then have a couple months of growth: Anet’s 5 gold value becomes 8 gold. So, ours should be worth 5.6 gold (70% of 8 gold). Now, Anet’s growth: 5*X=8, X=1.6, so 60% increase in value. Our growth: 3.5*X=5.6, X=1.6, so again 60% increase in value. As long as the fee is a constant percentage, our gem value should be increasing at the same rate as Anet’s. But over the past two months that’s not what has happened, Anet’s gems have increased in value at a greater rate than ours have. Two months ago it was roughly us: 4, them: 5. Now, it’s roughly us: 6, them: 8. Us: 4*X=6, X=1.5, 50% increase in value. Them: 5*X=8, X=1.6, 60% increase in value. So, again, why are the Anet gems getting more valuable more quickly than ours are? Aren’t they all the same commodity, except Anet has more of them?
(edited by veldrenor.1469)
They went up by the same percentage. The Gem to Gold rate is roughly 72% of the Gold to Gem rate.
Fine, let me grab some data off of GW2Spidy. Can’t quite get 2 months so lets try six.
May 31st: Gd->Gm = 3g17s70c Gm->Gd = 2g29s52c
Nov 30th: Gd->Gm = 8g28s Gm->Gd = 5g98s
So 2.60x with Gd->Gm and 2.60x with Gm->Gd.
Looks right to me.
Oh, and the ratio between the two rates is 0.7225 or 0.85 × 0.85.
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(edited by Behellagh.1468)
They went up by the same percentage. The Gem to Gold rate is roughly 72% of the Gold to Gem rate.
Fine, let me grab some data off of GW2Spidy. Can’t quite get 2 months so lets try six.
May 31st: Gd->Gm = 3g17s70c Gm->Gd = 2g29s52c
Nov 30th: Gd->Gm = 8g28s Gm->Gd = 5g98sSo 2.60x with Gd->Gm and 2.60x with Gm->Gd.
Looks right to me.
Oh, and the ratio between the two rates is 0.7225 or 0.85 × 0.85.
Based on gw2spidy it does look like the numbers are working out. Thank you for the more concrete data.
I thought about the this a while ago in our german Wartower forum
and I made some sort of hypothesis (or educated guess) about how the gem and gold prices are determined.
Here is a translation/summary of my posts: [I apologize for my not-so-financial-english, since this is not my primary language. I also apologize for the wall of text – feel free to skip…]
I thought a while about the pricing and the mechanics behind the gem exchange, and in my thoughts I assume it strongly follows mathematical rules and algorithms. I assume no human “adjustments” of prices. My conclusion comes down to:
“The price is the ratio between gold amount and gem amount in the gem exchange”.
Here is my hypothesis:
[I again apologize if this is already common knowledge and has already been documented. I only frequented german forums until now, so I don’t know how the international community sees this]
First some definitions:
- b is the buy price in copper per gem
- s is the sell price in copper per gem
- p is the current amount in the gem pool
- g is the current amount of copper coins in the gold pool (money pool)
- i is the initial amount of gems in the gem pool (at game launch)
- j is the initial amount of copper coins in the gold pool (at game launch)
Regarding “gold pool” and “gem pool”: I assume there are 2 pools in the gem exchange. One is filled with gems, and one is filled with gold. John Smith indirectly hinted about this in this post: https://forum-en.gw2archive.eu/forum/game/bltc/Who-sets-Gem-prices/705345
I get from this: whenever a player buys gems for gold, he gets gems from the gem pool and the money goes into the gold pool. And whenever a player buys gold for gems, he gets the money from the gold pool and the gems get into the gem pool.
Observations about b and s:
- there is a relation between b and s, which is:
s = t * b
and t = 0.7225 = 0.85 * 0.85
This means you buy gems always at a price with a factor of 0.7225 lower than you sell gems. It’s a constant between the two prices that never ever changed. Verifiable with the gem price statistics at www.gw2spidy.com.
So I always use b in the next calculations, since s = t * b.
More Observations:
- the more gems p in the gem pool, the lower the buy price b
- the more gold g in the gold pool, the higher the buy price b
- it was possible at game launch to immediately buy gems for gold
- it was possible at game launch to immediately buy gold for gems
- the buy or sell of 1000 gems adjusts the price by perhaps 1 copper, or less.
Assumptions/postulations:
- the amount of gold in the whole game must not change due to the gem exchange. It is not possible to generate gold out of thin air within the gem exchange.
- the amount of gems in the whole game must not change due to the gem exchange. It is not possible to generate gems out of thin air within the gem exhange.
- to be able to report the amout of gems that exists in the whole game, it must be known how many gems exist in the gem pool. This is called p.
- to be able to report the amount of gold that exists in the whole game, it must be known how much gold exists in the gold pool. This is called g.
Hypothesis about the inner working of the gem exchange:
- whenever a player buys gems for gold, p is lowered by the amount of gems the player gets, and g is raised by the amount of gold he pays.
- whenever a player buys gold for gems, p is raised by the amount of gems he pays and g is lowered by the amount of gold he gets.
- p and g was prefilled with some amount of gems and money to let players use the gem exchange from day 1 since launch in both directions
What should happen if a pool gets empty:
- if gems are constantly bought more than sold, p gets empty. The price must go so high that the last gem cannot be bought. If the gem pool really gets empty, you spend infinite amounts of gold, but get 0 gems in return.
- if gems are constantly sold more than bought, g gets empty. The price must go so low that in the end you could buy all of the gems in the gem pool with the last copper in the gold pool. You spend infinite amounts of gems but get 0 gold in return (since the gold pool g is empty)
This leads to the Hypothesis about the relationship of b, p and g:
“The price is the ratio between gold amount and gem amount in the gem exchange”
As formula:
b = g / p
The buy price b falls, if the gem pool p increases, and it raises, if the gold pool p raises.
After a transaction, new pool sizes are computed:
g_new = g + gt (gt = gold transferred during the transaction)
p_new = p + pt (pt = gems transferred during the transaction)
About the initial prices at game launch and development of prices:
Assumption:
- the initial amount of gems i in the gem pool be 10000000 (10 Mio) ($80000)
- the inital amount of copper j in the gold pool be 250000000 (250 Mio (25000 Gold))
(I guessed these values. They must be so high that single transactions don’t change the gem price significantly, and must have a ratio of 25 – the initial gem price)
Then at game start:
b = g / p = 250000000 / 10000000 = 25
And about 25 copper was the initial price at game launch.
If you now buy 1000 gems for 25000 copper, the price adjusts:
(250000000 + 25000) / (10000000 – 1000) = 250025000 / 9999000 = 25.005
And we got the values for the next transaction:
g = 250025000
p = 9999000
b = 25.005
If we buy gems for gold, there is a fee involved: Only b*0.7225 is actually put into the gold pool of the gem exchange. The rest (0.225) is destroyed (removed from the game). The money is not destroyed within the gem exchange, it is destroyed before it enters the gem exchange. Within the gem exchange, nothing is created or destroyed.
This way, neither gold nor gems are created out of thin air. No transaction does this.
The generation of gold only happens in the PvE part of the game with loot drops and event bounties. Not within the gem exchange: here the gold is pulled from the money pool instead.
The generation of gems only happens in the gem store if someone buys gems with real money. Not with ingame money: if someone buys gems with ingame money, they are not created but pulled from the gem pool instead.
This is all. In my original post, I also gave a little Perl script to simulate the development of prices, but I think the above is enough for now.
There is some proof from John Smith to confirm the basics of this hypothesis. The intial pool values will always be a guess of course, but you see the general idea.
There seems to be some confusion:
The currency exchange has a supply of Gems and Gold.If players are converting Gold to Gems, then the Amount of Gold player will receive for their gems goes up.
If players are converting Gems to Gold, then the amount of Gems players receive for Gold goes up.The exchange rate changes based on the scarcity of each supply. You cannot inflate it, it’s an exchange rate. As players purchase in one direction, it entices purchases in the other direction.
He writes “The currency exchange has a supply of Gems and Gold” and “The exchange rate changes based on the scarcity of each supply”.
The combination of “has a supply of Gems and Gold” and “each supply” means that there is some kind of pool (“supply”) for gems and gold, and that more than one pool exists (“each”, not “the”). We have 2 items to exchange (gold and gems), so we have exactly 2 pools. 1 for gems, 1 for gold. As far as I see it,, he describes exactly what I propose.
He writes: “The exchange rate changes based on the scarcity of each supply”, that means the exchange rate bases on something: the availability of something in the pools. Therefore, the exchange rate isn’t changed directly, but is determined by the amount of gold and gems in their pools.
He avoided to say directly that a transaction will change to amount of gem/gold in their pools (one gets bigger, the other one gets smaller). But he said in which direction the exchange rate goes if something is bought, which is indirectly determined by the amount of things in the pools. All this leads to the conclusion that a transaction changes the size of the pools and the new exhange rate is determined by the new pool sizes.
(edited by Silmar Alech.4305)
I postulated that a transaction will change the size of the pools exactly by the amount of items bought/sold – a simple addition/substraction operation. And that the exchange rate is the ratio (quotient) of the 2 pool sizes. Of course, we cannot verify if this is the exact formala used in the game, so this keeps being a hyothesis.
But I think my formula and transaction rules are simple enough and describe the development of the gem exchange rates since the launch of the game with an error margin not too high. Unfortunately, it is not possible to do experiments to determine how much the price actually changes with large transactions – the gem exchange is too big to see valid numbers, and probably nobody would pay hundreths of dollars to verify a simple formula.
Regarding no-creation of gems in the exchange, John says this:
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.
This confirms that no gems are created out of thin air within the gem store or destroyed.
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.
This one confirms that the amount of gems to buy from the gem exchange is finite. The pool can get empty, and players fill or empty the pool with their transactions. Gems are only created if someone buys them with real money.
(edited by Silmar Alech.4305)
Just because I’m a simple guy, I an going to guess that the implementation of the gold / gem conversion is also pretty simple.
The easiest way I can think of doing it is you create a large supply of gems and a large supply of gold and set an initial exchange rate (say 300 gems = 1 gold). You populate the market with 300m gems and 1 m gold (for example).
when someone wants to buy gems 300 gems it costs them 1g + tax, or 1.15 g. when someone wants to sell gems 300 gems gets them 1g – tax (.85g).
From them on, the cost is based on the ratio of the number of gems in the pool to the amount of gold in the pool. So if there are 200m gems, and 2m gold then 100 gems = 1g. If there are 100m gems and 4m gold then 100g = 4 gold etc…
Of course, as the number of gems depletes the cost for gems rises increasingly quickly.
The benefit to this scheme is that the size of the pool determines how elastic the price is. So, if you feel that the gem / gold ratio is spiraling out of control you can just add more gold and more gems at the current ratio to decrease the elasticity. If you feel that the price isn’t moving enough you can decrease the number of gems and gold in the pool (again using the current ratio, so not as to affect the current price).
edit: reading more carefully, I think that this is pretty much what Silmar Alech said above. But I’m not completely sure.
Anything I post is just the opinion of a very vocal minority of 1.
(edited by TooBz.3065)
That’s a long explanation Silmar but pretty much on the money. The one thing I did think of months after my version of that post was that ANet may actually add gold to gems to the exchange when a new account is open, at the same initial ratio when the game went live. So little gold, metric ton of gems at roughly the 30s per 100 gem ratio. This way the market is seeded for the total number of accounts whenever they were created.
We are heroes. This is what we do!
RIP City of Heroes
RIP City of Heroes