Understanding the Mechanisms of Gold Farming

As the last rays of orange light from the setting sun stretch across a quiet Midwestern town, dusk descends. Inside a modest apartment, Ben, a young man, sits hunched over his computer, his eyes fixed on the screen, where the soft blue glow reflects off his face as his fingers move in rhythm with the game.

His weary gaze tracks the elfin avatar he controls through a desolate, orange-hued world filled with gnarled trees and strange, mystical creatures. From time to time, Ben's character encounters an adversary, which he swiftly defeats before collecting its loot — precious virtual coins. After 10 straight hours of gameplay, Ben has accumulated quite a stash. These coins are vital for purchasing armor and weapons that will help him progress further in the game. "I'd be a level 100 if it wasn't so time-consuming to gather these coins," Ben muses, before his mind drifts back into his gaming fantasy.

Now, in a cramped office across the globe in China, dozens of workers sit at long tables, each in front of a computer, bathed in the harsh light of fluorescent bulbs. Upon closer inspection, there's an unexpected sight: they're all playing the same video game as Ben. The distinction, however, is that while Ben is playing for pleasure, these workers are doing so for a paycheck. And the virtual coins they collect are not just part of the game — they're converted into real money based on how much they gather.

So why are they putting in so much effort to play a video game? It's all for the purpose of selling virtual currency to players like Ben who are eager to get ahead. Welcome to the realm of gold farming, a practice where players collect virtual goods and currency to sell them for real money to others seeking a shortcut through the game.

A Brief History of Gold Farming

To understand the roots of gold farming, we must first explore the history of massively multiplayer online games (MMOGs), as they are the primary setting for gold farming. MMOGs are games that allow thousands, or even millions, of players to interact simultaneously over the Internet. These games originated in the late 1980s with networked mainframes running text-based games called multi-user dungeons (MUDs) [source: Heeks]. Like modern MMOGs, MUDs were set in fantasy worlds and included virtual items such as currency, weapons, and armor.

With advances in technology, graphic-based MMOGs began to flourish by the late 1990s, including titles like "Ultima Online," "EverQuest," and "Lineage." These role-playing games (RPGs)— a subtype of MMOGs where players control characters exploring virtual realms and completing quests—remain immensely popular. Experts predicted that the well-known massively multiplayer online role-playing game (MMORPG) "World of Warcraft" would attract 8.2 million subscribers by the end of 2015 [source: SuperData].

Gold farming has been a part of MMOGs from their inception. The players of early text-based MUDs were the pioneers in trading virtual currency and goods for real money, though it wasn’t nearly as widespread as it is today. The practice gained serious momentum in 1999 when players began using eBay, the new online marketplace, to sell their virtual possessions. Buyers would then meet the sellers in the game to complete the transaction. Soon, savvy entrepreneurs recognized the profit potential in virtual goods and set up businesses to manufacture and sell virtual wealth. Their success has been remarkable: by 2009, these third-party exchanges were estimated to be worth $3.023 billion [source: Lehdonvirta and Ernkvist].

The Economics Behind Gold Farming

Gold farming plays a crucial role in the virtual economy. This concept was first introduced to describe the economic systems within online games, where, just like in the real world, resources are finite and governed by the laws of supply and demand. Gold farming extends this idea into the real world, as it involves the exchange of digital goods and currency for actual money.

How does gold farming work in practice? Gold farmers start by collecting virtual goods and currency through gameplay. Some may do it casually, as a hobby or a side income, while others are professionals who make a living out of it. While some professionals work solo, the trend since the early 2000s has shifted toward gaming workshops, businesses employing multiple gold farmers. These workshops are spread across the globe, from Mexico and Romania to Russia and Indonesia, with the largest concentration in China. By 2007, China alone had around 2,000 gaming workshops, employing an estimated 500,000 gold farmers [source: Heeks].

Once they’ve collected their virtual goods, gold farmers need to promote their services, much like any other business. To do this, they use advertising methods such as posting on fan sites or search engines, and even creating in-game characters who approach players via the chat function. In a particularly morbid yet inventive example, gold farmers in "World of Warcraft" once spelled out their website's name using the bodies of slain characters.

Once buyers express interest, they reach out to the gold farmer and pay real money in exchange for the virtual currency or items they desire. This used to happen through platforms like eBay, but the site banned such transactions in January 2007 [source: Dibbell]. Today, most gold farmers operate their own websites, where customers can make payments via PayPal. The delivery process can be carried out in a few different ways: the buyer may meet the gold farmer in the game to exchange goods, or in some cases, the transaction is completed using an in-game mail system.

How many players actually use gold farming services? Surveys show that between 22 and 25 percent of players, depending on the region, rely on these services [source: Lehdonvirta and Ernkvist]. This is surprising, especially considering the less-than-ideal reputation that gold farming has.

Gold Farming: The Pros and Cons

If gold farming seems questionable to you, you're not the only one. Many players view it negatively because of the impact it has on the game itself. Even human rights activists have raised concerns about labor conditions in gaming workshops. However, there are some unexpected supporters who make compelling cases for allowing gold farming to continue.

Players generally dislike gold farming because of how it alters the gaming experience. For instance, it creates a separate class of characters that aren't truly playing the game. Instead of collaborating with others to complete quests and level up, gold farmers simply roam the game's world to collect currency and items or promote their services. Some of these characters, called bots, aren't even controlled by real people: they're automated virtual players programmed by gold farmers to do the work.

Some players also believe that gold farming leads to inflation in the virtual economy. The theory goes like this: gold farmers focus so much on killing monsters and collecting their gold that they flood the market with money, causing the value of virtual currency to decrease. As a result, virtual goods become more expensive and harder to acquire. Although some have questioned this theory – arguing that gold farmers are merely collecting coins that other players could have earned – it remains a widely held belief within the gaming community [source: Heeks].

Another major criticism of gold farming centers around the working conditions. Workers in some Chinese gaming workshops live in dormitories on-site and are forced to work 12-hour shifts, seven days a week, with few breaks. Despite the long hours, the average worker earned only about $145 per month in 2007, prompting some critics to call these operations "virtual sweatshops" [source: Heeks]. There are also reports suggesting that Chinese prisoners are coerced into playing games for similarly long hours, with no pay [source: Vincent].

Despite its critics, gold farming does have its supporters. Some argue that because traditional gold farming is such a slow process, MMORPGs tend to reward players with lots of free time while penalizing those with busier lives. Gold farming helps to level the playing field. Others suggest that it benefits developing countries. Of the over $3 billion generated by gold farming in 2009, most of the revenue stayed within the countries hosting the service. This is a stark contrast to the coffee industry, which generated $70 billion in 2002 but only contributed $5.5 billion to the countries that produced the coffee beans [source: Lehdonvirta and Ernkvist].

Rules and Regulations for Gold Farming

After all the discussion about gold farming, you may be wondering: Is it even legal? The answer is yes, in the sense that it likely won't land you in jail, but no, as it breaks the terms of service for many MMORPGs that you agree to when you sign up. So, while it may not send you to prison, it's still a legal gray area.

There's no denying that gold farming infringes on the terms of service for many games. Blizzard, the company behind "World of Warcraft," makes this very clear in the game's terms, which state, "you may not sell in-game items or currency for 'real' money." Despite this straightforward legal language, the practice persists. Players who break this rule are often difficult to catch, and even if they are caught, the worst that usually happens is a temporary account suspension. In such cases, they can simply create a new account.

However, video game developers have seen some success in the legal realm. In 2008, Blizzard reached a settlement with the gold-farming and power-leveling company In Game Dollar, which forced them to cease advertising in the game and selling virtual items for real-world money [source: Duranske].

Some nations have enacted laws to limit gold farming. South Korea, for example, passed a law in 2006 that was updated to prohibit the exchange of virtual goods for real money if those goods were acquired through security loopholes or automated bots. However, gold farmers are still allowed to collect in-game items and currency using standard methods. Countries like China have been slower to impose restrictions: While the practice is somewhat frowned upon, it has proven to be highly profitable [source: Lehdonvirta and Ernkvist].

One potential legal pitfall is failing to report your gold-farming income to the tax authorities. Believe it or not, the U.S. Internal Revenue Service (IRS) has a dedicated page that explains the "tax consequences of virtual world transactions." According to the IRS, if you earn more money in the virtual world than you spend, that income could be taxable [source: IRS]. In China, local officials are also trying to capitalize on the growing industry, sometimes requiring gold farms to register with the local government and pay taxes on their profits [source: Jin].