How Gold Farming Works

Before you can talk about the origins of gold farming, you have to talk about the history of massively multiplayer online games (MMOGs) — they're the main marketplace for gold farming. MMOGs are games in which thousands, or even millions, of people interact simultaneously over an Internet connection. They got their start in the late 1980s, when networked mainframes were set up to run text-based games known as multi-user dungeons (MUDs) [source: Heeks]. Much like modern MMOGs, MUDs were set in fantasy worlds and featured virtual objects like currency, weapons and armor.

Advancements in technology led to an explosion of graphics-based MMOGs by the late 1990s, including games like "Ultima Online," "EverQuest" and "Lineage." Such role-playing games (RPGs)— a type of MMOG in which players navigate characters through virtual worlds and perform tasks or quests — remain quite popular. Analysts projected the well-known massively multiplayer online role-playing game (MMORPG) "World of Warcraft" would boast 8.2 million subscribers at the end of 2015 [source: SuperData].

Gold farming has been a part of MMOGs from the beginning. Players of the text-based MUDs were the first to trade virtual currency and other items for real money, though not nearly on the scale it's done today. The practice really took off in 1999 when players began using the new online trading platform eBay to sell virtual goods. Winning bidders would meet the seller in the game, and the items would be traded in the virtual world. Soon, opportunistic entrepreneurs realized there was real money to be made in virtual commerce and set up businesses to create and sell video game wealth. And they've been quite successful: By 2009, these third-party transactions accounted for an estimated $3.023 billion [source: Lehdonvirta and Ernkvist].

Gold farming is an important part of the virtual economy. This term was first used to describe economies inside online games, because, just like the real world, fantasy worlds can contain finite resources that are subject to the laws of supply and demand. Gold farming expands this definition into the real economy, however, as it involves the exchange of virtual goods and currency for actual money.

So how does gold farming actually happen? First, gold farmers obtain virtual goods and currency by playing an online game and collecting them. They may be amateurs, meaning they do it as a hobby or as a way to make a little extra money, or they could be professionals, who do it for a living. There are some professionals who work alone, but the trend since the early 2000s has been toward businesses that employ multiple gold farmers, also known as gaming workshops. These operations are found in countries across the globe, including Mexico, Romania, Russia and Indonesia — though most are located in China. That country boasted an estimated 2,000 gaming workshops that employed some 500,000 gold farmers in 2007 [source: Heeks].

Next, gold farmers have to let players know about their services, and just like any business, they do this through advertising. To get the word out, gold farmers will advertise on fan sites or search engines and will even create characters that will go around and engage other players through the in-game chat feature. In one gruesome but creative example, "World of Warcraft" gold farmers spelled out their website's name using dead bodies.

Interested buyers then contact the gold farmer and pay real money for the virtual currency or goods that they need. This used to be done over sites like eBay, but the e-commerce company banned the practice in January 2007 [source: Dibbell]. Now, most gold farmers have websites where buyers can make payments through PayPal. Delivery then happens in a couple of ways. Either the buyer can meet the gold farmer in the game and exchange the virtual goods, or, in some cases, the trade can be made using an in-game mail function.

How many players actually use these services? Surveys indicate between 22 and 25 percent, depending on the region of the world [source: Lehdonvirta and Ernkvist]. That's surprising, especially because gold farming doesn't have the best reputation.

If gold farming seems a little shady to you, you aren't alone. Many players have a negative view of the practice because of how it affects the game. Even human rights activists have called into question the labor practices in gaming workshops. Still, there are defenders who have some surprising arguments for keeping gold farming alive.

Players dislike gold farming because of the way it changes the gaming experience. For one, it creates a whole class of characters who aren't really playing the game. Instead of interacting with other characters to complete quests and achieve a higher level, gold farmers simply wander through the game's virtual world to collect currency and goods or advertise their services. Some characters, known as bots, aren't even controlled by actual human beings: They're virtual players that gold farmers program to do the work for them.

Additionally, some players believe that gold farming creates inflation in the virtual economy. The thinking goes like this: Gold farmers focus so much on killing monsters and taking their gold that they're flooding the market with money. As a result, the value of the virtual currency goes down and virtual goods become more expensive and time-consuming to purchase. While some have questioned this belief – after all, gold farmers are simply collecting coins other players might have earned anyway – it remains a widely accepted theory in the gaming community [source: Heeks].

The other main criticism of gold farming is related to the working conditions. Workers at some Chinese gaming workshops live in on-site dormitories and must endure 12-hour shifts, seven days a week with few evenings off. Despite all this effort, the average worker made only an estimated $145 a month in 2007, leading some critics to label these operations "virtual sweatshops" [source: Heeks]. Some reports also suggest that Chinese prisoners are forced to play games for similarly long hours for no pay [source: Vincent].

Nevertheless, gold farming has its defenders, too. Some suggest that because earning gold the usual way is such a slow process, MMORPGs reward people who have a lot of time on their hands and punish those who have busier schedules. Gold farming helps to level the playing field. Others argue that it's also a good deal for the developing countries. Of the more than $3 billion gold farms generated in 2009, most of the money stayed in the countries that hosted the service. Compare that with the coffee industry, which, in 2002, generated $70 billion but contributed only $5.5 billion to the countries in which the coffee beans were grown [source: Lehdonvirta and Ernkvist].

After all this talk of gold farming, you've probably been wondering: Is it even legal? Well, yes, in the sense that it probably won't land you in jail, but ultimately no, because it violates many MMORPGs' terms of service, which you agree to when you enter the game. For these reasons, it's a bit of a legal gray area.

There's no disputing that gold farming violates the terms of service in many games. Blizzard, the parent company of "World of Warcraft," made this painfully clear in that game's terms, which state, "you may not sell in-game items or currency for 'real' money." However, this bit of remarkably understandable legalese has done little to stop the practice. Players in violation of the rule are actually quite hard to detect, and even if they're caught, the worst that usually happens is their account is suspended. In that case, they can just create a new one.

Still, the video game makers have enjoyed some legal victories. In 2008 Blizzard forced a settlement with gold-farming and power-leveling company In Game Dollar that required them to stop advertising in the game and selling virtual items for real money [source: Duranske].

Some countries have laws that place limits on gold farming. South Korea, for example, passed legislation in 2006 that was amended to ban the exchange of virtual goods for real money if those goods were obtained through a security vulnerability or the use of automated bots. Gold farmers can, however, still collect in-game items and currency through normal means. Developing countries like China have been more reluctant to place limits on the practice: While it's somewhat looked down upon, it's also been enormously successful [source: Lehdonvirta and Ernkvist].

One way you can get in trouble is by not paying taxes on your gold-farming earnings. Believe it or not, the U.S. Internal Revenue Service (IRS) has a web page that specifically provides guidance on the "tax consequences of virtual world transactions." It states that if you bring in more money from the virtual world than you spend, that money may be subject to taxation [source: IRS]. Local Chinese officials are also looking to benefit from the budding industry, sometimes requiring gold farms to register with the municipality and pay taxes on their earnings [source: Jin].