David Delseray

The currency is always at the center of all economies. But what exactly is a currency?

If we go completely to the base of the definition, a currency is an item that is universally (among the participant of the system) recognized as a unit of wealth.

What does that mean?

It means that if we all collectively agree on the fact that a rock is worth something, I will be able to trade that rock for something that we estimate to be of equal value. We can therefore decide collectively that a 10g stone has the exact same value as 1kg of rice, I can now exchange this rock for 1kg of rice. I know it’s a bit basic but bear with me.

Now we can extrapolate this rock and rice situation to any economy. Basically our entire monetary system is relying on the trust that we have towards our institutions and the common acceptance that whatever we use as a currency is worth something. We are all manifesting the value of our currency as we trade pieces of paper that allow us to buy food and a house. Yes, the studies of economics tend to make people deeply cynical and teaches us a lot about the collective hallucination we are all living in.

What are the uses of a currency?

A currency has mainly 3 main uses:

• It is a medium of exchange
• It stores value
• It is a unit of account

We can group up these 3 points into 1 sentence : Currency is used as an equivalence system that facilitate the exchange of goods and services.

“Medium of exchange” means that people trade a currency for other things. Remember? Rock for Rice, Paper for House.

“Value Storage” means that people use currency to save their wealth in order to use it later. This one is a little tricky so I will explain a bit further. Basically, if today I catch some fish (yeah I don’t know either why I went back to caveman economy today) and I try to trade it with you but you do not have anything that I need right now (like a steak or a nice pointy stick so I can catch bigger fish), you can give me some currency so that I can trade the value of the fish later. I can use that money later and with someone else as a substitute to the value of the fish.

“Unit of account” means that people use money as a standard to evaluate something. If I am sold a fish for 3 gold coins, I will automatically compare it to what other items I would be able to purchase with 3 gold coins. In the same way, if I want to sell something, I will use my references in term of other items that I have seen to try and estimate the value I want to give to my item. That’s, in essence, the reason why we are all screaming when we see that a dozen eggs costs more than what a 1kg of beef used to cost 10 years ago.

Characteristics of a good currency

This one is gonna be a bit tough and is mostly here as a support to the rest of the notions presented below but I will try to make it as clear and lean as possible.

There are in total 14 attributes to the perfect currency but I believe we can reduce the list to 3 when it comes to creating a currency for a game.

Why remove the 11 other characteristics? Simply because these are much more important for physical currencies. Things like Ease of Transport or Durability of the currency or even its Flauntability are parameters that are largely moot in video games. Though it might be interesting to create currencies that do not follow these characteristics as a game mechanic.

A good currency is Stable

That means that the value of 1 unit of currency will pretty much remain the same.

If today I can use 1 gold coin to buy 1 Health Potion, I should expect that tomorrow 1 gold coin will still buy me 1 Health Potion.

Inflation and Deflation are not the sign of a stable currency and damage its value because people loose their trust in it. We will develop the subjects of Inflation and Deflation in a later chapter.

A good currency is Fungible

That means that one unit of currency is as valuable as any other unit of the same currency. That is pretty much safe with digital currencies but it has created problem in history when people would use natural resources as currencies. Nature is rarely exact when it comes to the replication of a rock or a sea shell.

It could be used in a game if we introduced, for example, a currency that would expire.

A good currency is Valuable

That means that people can use that currency to purchase things. That’s important because that means that if the value of the currency falls too much, people will turn to other type of currencies such as commodity currency (when people trade a specific item instead of the official currency).

A good currency is useless

« David, mate, that’s the 4th characteristic. How do you expect us to trust you if you can’t count to 3? »
I know, I said 3 characteristics. All the characteristics presented above have been listed by official economists and other of smart people. This one is from me, it’s not official though it should definitely be if you ask me.

What do I mean with « useless »? Basically, the object of the currency shouldn’t have any other use outside of being a currency. Don’t use nails as currency because you can also use them for construction. The reason why it’s important is simply to ensure the control over the quantity of currency in circulation.

If we get back to the example of nails, it’s going to be a nightmare to track the number of nails that are currently in circulation if half of the people use them to hang pictures of their dog in the living room. Given the fact that the value of a unit of currency is directly linked to the number of unit of currency in circulation, that’s a pretty big deal.

Metro 2033: The example of a non-sensical currency

As much as I love the gameplay of Metro 2033 and its universe, the currency they use doesn’t make sense.

To give you a brief summary, the game takes place in a post-apocalyptic Moscow where humanity is surviving in the metro tunnel network where they have to fight all sorts of nuclear monsters. In this charming situation, the currency that is universally used by the survivors is Military grade ammunition.

You are using ammo to pay for your soup in a world where the rats have mutated to a comfortable size of 2.5m and seem hellbent on removing your face from your skull.

Why is that a bad currency? Well if we take a look at the 3 (4) characteristics listed above, Military Grade Ammunition fit only 1 of the requirements.

They are not fungible. Sure thing a brand new bullet is just as valuable as another brand new bullet. But ammunitions have all sorts of conception defects that can render them unusable. On top of that, ammunition expire. With time, a bullet might rust or the powder might get wet which turns a deadly bullet into an oddly threatening paperweight. In a world where you have no means whatsoever to create new Military Grade Ammo, that’s a stupid choice of currency.

We can give that to them, they are valuable. People of subterranean Moscow collectively decided to manifest the value of bullets, good for them.

They are not useless, actually they are pretty useful. In the game, you can, at any moment, load your gun with your Military Grade Ammo to shoot at the nearest monster (and cause even more damage than with your regular ammo). First of all, how does it work that all your guns can accept the same Ammo? But even beyond that, if anybody can use these ammo at any time, how do we keep track of the number of ammunition in circulation? How do we know if there is still a million Military Ammo out there or if there is only 10? As previously said, there is no way to create new Military Ammo so every time you shoot one of them you are increasing Deflation. And because of that, they are not economically stable, their value keeps constantly changing.

I understand that, from a thematic standpoint, it’s cool to use ammo as currency but from an economic point of view, that’s bullshit of the highest order.

Fallout tackled this question way better with their use of capsules. Capsules are useless once you have drunk the soda from the bottle, they barely deteriorate, you have ways of knowing how many capsules there are going around. Way better choice.

Commodity Currency

If the official currency of an economy fails, the people who are parts of this system will turn to other form of currency.

Fallout presents it quite well (even though it’s only narrative). People dropped the dollar as a currency and turned to capsules because that became the currency that everyone recognized.

This is a small parenthesis to the whole subject of Currencies but yeah if we start seeing people pay each other with mushrooms and seashells, that means that our currency has failed and this is not good.

This can happen in cases where there has been so much inflation that the main currency is virtually worthless.

There actually was once an instance where players started trading horse shit as a high value currency. The thing was that there was a limited amount of horse shit lying in the world and that people could pick it up. The currency, on the other hand, was limitless and was introduced through unlimited faucets (quests and loot). Once the currency had reached a low enough point, players started trading horse shit. That happened in Ultima online.