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?