Money Laundering and your Local Auction House
The theory is that this type of model allows the developers to monetize players who are not willing to spend any of their own real money on the game. From the developers' perspective, it doesn't matter if I spend $10 on a horse or if someone else spends $10 on diamonds that I buy off them for gold and then use to buy the horse. There are a variety of potential drawbacks to this design decision, but the real problem that seems to have killed this feature is outright fraud.
For an illicit gold seller, this system offers a perfect opportunity.
- Use stolen credit card numbers (perhaps from former customers) to make an unauthorized diamond purchase from the game.
- Sell diamonds on the AH for gold.
- Offer to sell the gold for real money at rates that are significantly better than the diamond -> AH rate.
Passing the buck
Under the circumstances, you might figure that the logical solution would be to cut off the diamond trade entirely. Unfortunately, ROM's developers were apparently counting on this revenue stream, and are unwilling to consider this approach.
As a result, newly purchased diamonds that were paid for using online payment methods cannot be traded to other players (or at least cannot be traded for some amount of time, to ensure that any protests are resolved). Diamonds purchased through any sort of gift card program, where the retailer rather than the game's developers eats the losses if the charges prove to be fraudulent, can still be transferred to other players, but NOT via the in-game auction house.
This means that players must engage in completely insecure trades with other players, with no way of verifying that the other player has what they're promising to pay. It's not entirely clear from my vantage point as a player whether customer service will intervene when these types of deals go bad. Either way, the developers can't plausibly feign ignorance, as people looking to buy or sell diamonds/gold are constantly posting this in the global chat. More to the point, the devs don't WANT to lock down this trade, because they're counting on the revenue.
Will official gold trading solve the problem?
There's a rumor on the US forums (the developers and their official forums are in Germany) that the long term solution to this problem may involve the introduction of an NPC who sells gold for diamonds at some fixed rate. The developers have also already locked down the use of in-game mail to send gold to other players. Given the history of these things, it's not entirely clear that these steps will actually manage to eradicate the gold trade, but let's assume for the sake of argument that they do succeed. Will this be a good thing?
The effects on the economy are going to be a bit hard to predict. On the one hand, this move might cause inflation, as new gold would be introduced to the economy when players purchase it in this way. However, the current system also drives inflation in some ways, if players are currently willing to farm monsters to get gold to trade to players for diamonds. In any case, as nearly as I can tell, the developers' WANT inflation, as this would leave more players feeling that they need to purchase gold.
There's also a potential market among spendthrifts like myself, who CAN afford to pay for diamonds but CHOOSE not to when offered the option of handing over virtual gold instead. Meanwhile, I would speculate that the developers get less of the revenue from gift card sales compared to straight up credit card purchases, as there are more third parties involved (the gift card issuer, and a cut for the retailer). So, the effects on revenue are not clearcut.
On the other hand, the effects on transaction security for legitimate players would be dramatic. Players who want to obtain gold would not have to worry about finding a legitimate buyer for their diamonds. This change would most likely remove the ability to "gift" diamonds (realistically, I doubt that very many of these transactions are genuinely altruistic gifts without any form of compensation or scam involved), but at least then it would be official that there is no safe way to obtain diamonds without paying real money.
In the end, the developers have made a decision that they want to take money from players who are intending to convert diamonds into gold. In my view, this creates a responsibility to safeguard those transactions that trumps any other ill effects that official gold selling would have on the game.