Economy Problems/Solutions

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• Introduction
  

Over the last week of me returning I have watched the price of diamonds go from 130, to 50. Not only that but I have found it hard to spend MTC as it is difficult to get it, I understand you can vote to get MTC, however that's only 150 per vote per day. As I see it now, we are returning to the economy we saw at the end of classic main. The following forum post is just a few problems I have noticed and possible solutions.

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• Problem:
  

Diamond Value
Over the last week Diamonds have dropped significantly in value, from 120 to 50 in under 48 hours. I believe this has happened because not only is it hard to obtain a lump sum of MTC, but diamond has no true value unless used as a money backer, I mean you can only make a select few things from diamonds. But when it is used to back MTC not only does it give it more value but it keeps its value relatively high and stable.

Solution:

Make diamonds the item that backs MTC by creating a "bank" of sorts that allows a player to convert Diamonds into MTC. Now only will this keep a minimum price for shops to sell diamonds at but it will increase the value in Diamonds and give players a way to make MTC through labor, instead of just voting.

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• Problem:
  

MTC Earning/Obtaining

Currently it is relatively hard to obtain MTC as the only way is to either sell items to market owners, or vote. Seeing as no market/shop owners buy items, they only seem to sell them. It not only diminishes the value of many marketable resources but it limits spending, with limited spending comes high market competition resulting in the total loss in value of many items. Currently the richest person is TweelingJack with a balance of 117,916 MTC as of the making of this post. His main source of currency, as of this moment is his shop and voting. In his shop he only sells items, He does not buy them, meaning that he is accumulating MTC without loosing any resulting in a economic fluctuation. Now it is not his fault, people are scared to buy items in their shops as either one of the top money makers will buy them out, or they will not sell at all.

Solution:

Make MTC easier to obtain, and back MTC with a material such as Diamonds. Encourage at least 2 signs in the server market. That way you eliminate the monopolistic shops and create a more balanced market.

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These are only some of the economy problems, and some of the possible solutions. I hope that you can find a way to implement some of these solutions soon.

Please feel free to point out any other problems or other solutions you may have!

Thank you for taking your time to read,

I agree completely with these points.

The issue with voting backing the economy is that it allows an unlimited amount of MTC into the system, given enough time. If diamonds backed the economy, this problem would be solved. Given that a world limit is in place, there are only a set number of diamonds that can be obtained. If the world limit scales according to the active player count, so will the economy.

I also liked when Deer mentioned that a diamond backed currency "gives players a way to make MTC through labor, instead of just voting." I believe that this system works best because it gives players a reason to actually be in the game and play actively. With voting, they can log on, vote, get their money, and leave. With diamonds, they are required to actually mine for them, meaning they spend more time on the server overall. This also means that players still get the full Minetown experience, including the economy, entirely ingame. There should be no reason to punish players, i.e. not allowing them a way to obtain credits, simply because they do not wish to visit the website. (I understand that players can sell things to other players and at the market, but as Deer said, not a lot of shops buy things.)

As Deer said, having an officially sponsored place to trade in diamonds, such as a bank, would allow players to use diamonds they find in the wild as currency. In a video explaining why America should abandon the penny, John Green said, "Money is used to facilitate the exchange of goods and services." Diamonds currently do not do that, and MTC only does to an extent. Currently, I'm working on a large project that requires a lot of wool. To get this wool, I can make my own farm, yes, but I would rather make use of already established wool farms. To do this, I have to vote to obtain MTC, buy the wool, and then wait 24 hours to get more MTC to buy some more wool. With diamonds, if I ran out of money, I could go mine some more diamonds without waiting 24 hours to only get 900 MTC.

While this situation in definitely complex, I wholeheartedly agree that it could be solved, at least in part, by creating an official server bank that allows players to exchange diamonds for MTC. I would even go as far as to say that voting should not give credits, but should instead give other rewards that cannot be used as currency. This way there is still a reward for voting, but not one that causes inflation.

EDIT: I've been talking with Hayden775, and we agree that Emeralds would be a better backer for the economy. If a bank was put in place, emeralds could be traded for MTC, and in turn, a large amount of diamonds could be exchanged for emeralds. This is simply because emeralds are a lot rarer in the world than diamonds. There are still problems that will arise from this, yes, but using emeralds would mean that these problems would be delayed for as long as possible.

(Also emeralds are already established as a currency in singleplayer for use with Villagers, so new players may be acquainted with seeing them as currency.)

400321
It happened because of me.

Economic standpoint & explanation:

Diamonds become worthless as the market naturally becomes saturated with supply. Diamonds are a limited resource and they are used for the top tier items in the game. Ultimately, if supply outstrips demand, the saturated market causes a natural shift of the price.

Your "solution":

Assuming this bank buys diamonds at $100 and sells at the same price, then you have a different problem. Then, MTC becomes meaningless and will become saturated. Market prices overall will plummet as MTC becomes oversaturated and the value of MTC against the diamond increases artificially. The voting factor compacts this, MTC becomes worthless and diamonds become freely available at a fixed rate of $100 from the bank at any time. Ultimately, you end up with main 2.0 (where people have 10m MTC sitting in their accounts) and it means nothing.

MTC is already too easy to obtain. 150 MTC per day is a lot (3dia at today's rate) therefore in a month you have 90 diamonds equiv. of 4500 MTC. MTC becomes saturated, diamonds become worthless, diamonds and MTC become worthless simultaneously.

Sell sign regulations will not work. Why? Because all you need to do is put a sell sign for something as ridiculous as an elytra for 100 MTC and voila, you don't actually have a viable sell sign.

You are looking at this in totally the wrong way. The problem is that the natural supply of diamonds is causing a shift in its price towards a downwards trend. The lack of need for these diamonds is a contributing factor and causes there to be an abundance, causing a panic sell or price drop as people compete for the lowest prices. Backing diamonds with another worthless currency accomplishes nothing. Instead, you need a way of taking both MTC and Diamonds out of the economy at a rate that exceeds the supply increase from them being mined. In order to do that, you need to create a way of siphoning money away from people. Taxes! There are numerous ways of doing this:

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• /warp tax - a certain amount of MTC is taken on a weekly basis to maintain whatever /warp(s) you have
  
• market tax - a certain amount of MTC is taken on a weekly/daily/monthly basis to maintain the market
  
• VAT (Value Added Tax) - a certain percentage of whatever sales you make using and signs is taken
  
• income tax - a certain portion of users' MTC is taken on a monthly basis (e.g. 10%)
  
• land tax - land tax is self-explanatory. More claimed land = more tax to pay, more siphoned money
  

What does this accomplish?

The above taxation system means people value diamonds more than MTC as MTC is taxable. Therefore, you artificially increase the demand for diamonds (and therefore balance the demand/supply deficit) as people need to convert their MTC to diamonds as fast as possible otherwise they face taxes on their expenditures.

Note: Tackling the need to pay - all tax needs to be a percentage. If a user has 0 MTC left in their account, they should not lose their privileges if they are unable to pay.

I agree with Pred's tax idea as well. Money enters, yes, but it needs a way to leave, and the tax system is a perfect way to do this.

The bank would only need to exchange diamonds for MTC not MTC for diamonds, thus creating a Diamond sink reducing the amount of diamonds in the circulation, both increasing the value of not only diamonds but also MTC. This is what the United States Fed does, when the US dollar is becoming less valuable they start selling bonds, reducing the amount of money in circulation in return slowly increasing the value of said dollar. Not to mention if the bank buys diamonds at 100 MTC, it would set a "Server Minimum" for Diamond sales. As if a shop sells diamonds for below the minimum 100 no-one will buy from them as they could sell their diamonds for more to the server, meaning people would start competing for a better sell price to compete with the server and other players.

In doing this, MTC would become non-existent as people would just convert to a resource based economy to avoid paying a tax, I could see something as a market tax, or a VAT tax working, as its optional to buy from the market or sell on the market, but taxing for things such as protecting your land may cause too much influx.

Overall great points, from both Luca and Pred. Thanks for taking the time to read and reply!

Incorrect! Totally false man. The value of MTC would fall rapidly and the value of diamonds would skyrocket. There would be a shortage of diamonds and eventually the world would run out of diamonds.

You can't use real life examples here. It doesn't apply. These governments have tangible items that they can move and other expenditures that create natural monopolies which are utilised by groups e.g. the army, the navy, the airforce, trash collectors. The system works because of taxation, not because of currency stabilisation.

That wouldn't happen. MTC would and always will be an abundant resource because it is virtual and can be gained from voting. The tax system would work totally fine with any of the tax systems I mentioned if executed properly. Too much tax people will scramble for diamonds. Too little they'll just sit on their MTC. There needs to be a middle ground for it. MTC would certainly not become non-existant, though. It would just mean that the turnover rate of MTC would be higher instead of people sitting on fat stacks.

The Administration team will be having our second economy discussion within the next couple of weeks. When originally setting up prices for sellhand, market lots, etc, we decided to let things play out on its own before actively getting involved.

Great ideas from all of you, we'll definitely talk about these points during the meeting.

Thank you for letting us know! However I strongly think you should push it from a few weeks to a few days, as the way its going it may not be fixable in a few weeks... Just my opinion.

having tried to fix the econ on classic and agharta with these various means...straight conversion from mtc to diamonds results in flood of MTC market which drops price of everyuthing and then we get multi-billionaires in about a week.

Is there a list of items and their worth when it comes to /sell hand?