Have Multiple Currencies

In the real world, there are many currencies. If a price is quoted in one currency and you want to pay in some other, you have to sell some of the latter currency to get some of the former. I can’t give a taxi driver in Paris dollars and I can’t give a taxi driver in New York euros ¹.

Exchange rates between currencies fluctuate. In theory, this happens because of trade: If a country manufactures goods that lots of other countries want, those countries will have to acquire the currency of the first country in order to pay for the goods, which will lead to a rise in the exchange rate in the first country’s favor. If a country needs more capital to invest in its industry and infrastructure, it can raise interest rates, thereby attracting investors who want a guaranteed return; this will also lead to an increase in the exchange rate.

A virtual world can have multiple currencies, and exchange rates between them. This can act as a form of trade tax (because converting currencies will almost inevitably incur a commission charge) and it’s also good for limiting the spread of inflation (the more money of one kind there is in circulation, the less money of another kind it is worth). The number of currencies doesn’t have to be high: Gold versus silver coins can work; Simutronics’ game DragonRealms successfully runs three “local” currencies.

In practice, real-world currency markets are dominated by speculators. In virtual worlds, the fact that you can tax each and every currency transaction would immediately put a stop to this (assuming you wanted to).