Banking System

Banking System

I went through all the information we have (official and not on NDA) on Chronicles of Elyria to gather what I needed to understand what can be done with currencies and banking systems. There’s not much. I visited organizations interested in some banking, but most want to keep information for themselves as a strategic advantage. I understand.

So, I decided to put my ideas here so that people can tell me if this is possible.

First, I’ll use the concepts of IOUs and fractional reserve. If you need, please lookup these terms so it’s easier to discuss. If I define them here, the post will be too long.

Now, let’s say I have a small bank. People come to me for deposits. In exchange, I write them IOUs that they put in their inventory. These IOUs can be exchanged in town for the value written on them (same as dollar bills). An IOU of 50 copper pieces or whatever the currency is can be used to purchase items in the community.

These IOUs can be redeemed at all time at the bank. IOUs can also be redeemed by anybody. There is no name attached to is just like there is no name on dollar bills.

If someone comes for a loan, I create a contract with an interest rate and I give them an IOU of the corresponding amount. Doing this, just like in real life in most countries, I create money for the community and make money for the bank from the interests.

The customer can now take the IOU and purchase whatever they want using it as money.

Normally, in real life, people won’t disappear. So loans are usually paid back. With this in mind, the reserve in banks is usually around 10% of the total money to ensure when people come back to withdraw their money, the bank can give it to them.

In Elyria, with 10% reserve, I think a bank or the economy would crash since too many players could borrow, transfer the IOU to an alt and never come back again. This would lead to an amount of reserve smaller and smaller and eventually, the bank wouldn’t be able to purchase the IOUs back. We could also restrict loans to knows characters and have credit ratings, but this is another issue. In real life, this happens too. Many people won’t pay back the loans and just declare bankruptcy. The laws allow it and most bank will get over it.

I think contracts will allow this in Chronicles of Elyria. Loan contracts should be in the game at launch. I also think scribes will be able to write IOUs. These are small paper and should not be too hard to craft. We now only need to know how legit crafters can sign for a banking institution so that people on the street just don’t copy them or create fake ones.

All this is possible from my understanding.

The next part is regarding a way to monitor the economy to ensure the value of the currency remains the same. Inflation is known to be an issue in MMORPG and the banks will probably need central banks to store money when inflation gets too high or lower the rates when the economy lacks money to grow at an interesting pace. I don’t want to go too deep into this, but if there is no tool to monitor the economy, I don’t think any banking system is viable.

(If you didn’t see the videos on inflation or hyperinflation in game economies from Extra Credits, now would be a good time!)

Usually, in-game economies are regulated with a third party currency usually known as premium currency. People buy these with real money and can sell them to players for in-game money. As the amount of in-game currency raises, so the price of the premium currency so there is a certain balance achieved if the laws of supply and demand works (which is not always the case, needless to day!) Since CoE will not allow these kind of things, the economy will need to be regulated from within. I don’t know if there is a central banker on the Soulbound studios’ staff, but this might be an issue.

Anyway, this is already too long. What do you think?

1/16/2018 2:32:09 AM #1

The Federal reserve is already the source of most of whats wrong with the world. If your looking to become a CoE Rothchild then I guess this is how you do it.

As a champion of liberty I would not condone this system. Goods and services should be traded between individuals for other goods and services, to include precious metals.

All efforts to create a centralized banking system, putting a select few in control of the economy, should be fought at all costs.

Upvoting and downvoting indiscriminately

1/16/2018 2:38:36 AM #2

I totally understand you. Being against it in real life is what brought me to studying it.
This being said, privately owned banks lead to Rothschild. Publicly owned banks could do really good if wealth is properly redistributed which is not granted, but can be hoped for in a game.

1/16/2018 2:58:48 AM #3

I think you will see something like this with guilds. I could see guilds having their own internal banks, sorta publicly owned by guild members but privately owned by the guild.

That I could see working, as it would allow access to real currency, but also freeing up the bank to invest with the shareholders ideals in mind.

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1/16/2018 3:58:19 AM #4

It will have to mortgage loan and bet. Your account mortgage or mortgage items in the game. I think this game better open the pawnshop. Since the degree of freedom is very high, if someone rob?

Looking forward to the game open that day

1/16/2018 4:26:51 AM #5

What you're trying to describe in your first paragraphs with a system of IOUs is a fiat currency. While it is hypothetically possible, I don't think we'll see one in Elyria, at least in the foreseeable future. For one, it's insanely hard to manage on a macro scale, especially in a game world.

More likely, we'll see a commodity currency, both for simplicity's sake and convenience.

1/16/2018 5:15:04 AM #6

You're worried about Rothschilds in a game that has Kings and Queens ruling over you? Will you be leading a revolution in-game?

1/16/2018 5:49:21 AM #7

The difference in what the Rothchilds are and what a monarch is can be measured. In short no, I have no plans for a revolution. But that does not mean corruption and oppression of the people will go unanswered.

I will champion freedom above all else, that includes ridding the world of those who would abuse its people for personal gain.

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1/16/2018 6:08:38 AM #8

Enlarging upon what Mickdude2 said...

What about monarchs being able to establish standard currency? The most basic form historically has been precious items or substance of some sort. In Europe and Asia this has often been precious metal. Monarchs put their imprints on standard-sized pieces of precious metal for two reasons: one to advertise the power of the monarch, the other to assert that the enforcement power of the monarch was behind the claim to the genuineness, hence value, of the substance in the coin.

Monarchs were able to get away with this because they were usually major purchasers of goods and services in their realms, and often the single major purchaser of such. If someone didn't want to accept the monarch's word via his imprinted substances, they would lose out on business, and might also attract unwanted negative attention from the monarch or his minions. People with personal stashes of precious substance that they had more trust in held onto it, and paid their own bills with the monarch's currency. This is a case of the adage "bad money drives good money out of circulation", where the monarch's "bad" money drives the "good" bullion (for example) out of circulation and eventually becomes the "good" money, as long as the monarchy is successful and the economy does not tank.

Paper currency originally started as a way to represent precious metal, or other substance, without having to carry it around. Bank notes were issued by banks as a promise-to-pay, but were worthless without people's trust in the issuing banks. Governments were capable of forcing people to accept paper currency when they had power, as in the case of the monarch's coins above, but when governments lost power, the paper currency became worthless, as in the case of CSA dollars.

Coinage actually made of substance that people regard as valuable will generally retain considerable value in the event of political collapse, whereas debased coinage or paper currency will not. In the former case, the recognized value of the underlying substance will be accepted in barter even if the issuing agent no longer exists. In the latter case, much or all of the value lies in the authority of the issuing agent, and will disappear accordingly should the issuing agent lose authority.

1/16/2018 8:02:41 AM #9

As someone in an economic based Duchy I have given a lot of thought to how a currency could be established and how it would work.

There is one BIG hurdle that you may not have considered. NPC's will need to accept and exchange your currency for it to be successful. That's going to take some pretty strategic contract laws to be created. Especially if the actual material worth of your currency is far less than the value stamped on it.

Ex. You've got to create a way for NPC's to accept a note, coin, shell, hide, or whatever that you mark as having a value of 5 bars of silver, and give you something worth that in return, and vice versa.

1/16/2018 8:47:55 AM #10

From what I remember there will already be a common currency. So the idea that we need to make a ...i guess "more common currency" is fruitless.

I am going to see any attempt to do something like that an assault on free trade.

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1/16/2018 8:48:15 AM #11


The notion of currency has to be built into the game mechanics somehow, otherwise everything would be strictly barter. The usual way most games do this is be defining the currency to be such-and-such. It would be ever so much more entertaining and realistic to allow government institutions to be able to regulate it. That would make one more way for governments to get themselves into trouble.

The mechanic I suggest is to allow monarchs the ability to define some definite kind of object -- e.g., a coin with a particular stamp on it -- as legal tender, as well as the ability to delegate that authority to their vassals if they wish. Not that they would usually wish to do so, except under duress, of course.

1/16/2018 1:00:17 PM #12

You guys have interesting points. One of them being regarding the NPC accepting the fiat money. This needs thoughts.

I also hear that people fear being screwed. I get that also. But we will get screwed. All items will be sold with benefits to compensate for the worker's time and skills. An armor being sold 100 gp is not worth 100gp of material ressources. Each crafter took their share and that's the way work goes. Same thing with banking. The difference is banking adds value by risk which is not the case with other works.

The banking system irl "works" because it has advantages over trading material things. With the inventory system, you might see a demand for light currency over burnedsome pieces of metal.

Also, loaning money to invest accelerates growth. People will try this over gathering ressources over time. They say it takes money to make money. I guess this will be true also in Elyria.

Last thing, nobody discussed a way to regulate inflation. I think this nees to be adressed or we'll end up with carriages of gold to buy swords so gold will be considered useless.

1/16/2018 5:40:38 PM #13

The thing is that one needs to have a substantional amount of currency or valuable materials to start a bank. That is either owned by the banker or collected for safe keeping from the population. Both of these require some wealth having been acquired in the region before a bank is possible. One cannot start making promises on paper from nothing. If everyone in the region wants to cash their papers at the same time, the bank has to have that cash for everyone! Otherwise bankruptcy and riots follow.

In real life banks work with a risk and they are big enough to assume that everyone will not take their money out at the same time. It would take lots of time to build something like that in Elyria. Elyria does not have telexes or internet. Money needs to be transported from one bank to another, etc.

I think you have to start from where the banks started irl. You have to convince people you can keep their money safe and get them to deposit their money to your vault(s). Don't start with thin speculations ;)

1/16/2018 7:14:21 PM #14

Posted By Kurko at 11:40 AM - Tue Jan 16 2018

I think you have to start from where the banks started irl. You have to convince people you can keep their money safe and get them to deposit their money to your vault(s). Don't start with thin speculations ;)

^^^ This. In a world where everything is expected to be instanced, from items to currency, and can be stolen, safeguarding your stuff will be paramount. Consequently, offering a safe, guarded place to deposit currency and store valuables would be very useful in CoE and a fantastic place to start a banking concept. The Templar Knights provided a similar service to pilgrims traveling to the Holy Land and it is suggested that this may have been the beginning of the modern banking system. YMMV.

Caveat: any player run system would need to be accessible 24/7. In most games, this just isn't feasible. With OPCs, it becomes possible, at least in theory. OPCs = ATMs.

1/16/2018 8:30:07 PM #15

Sounds like fraud would be a big issue, if it’s paper currency.

I’m not sure if the topic warrants much discussion at this time. But I’d be interested to come back to it once we have more information on game mechanics.

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