EVE Evolved: ISK sinks and faucets

In EVE Online's player-run economy, the flow of ISK is a vital concept. While there are many ways to make ISK in EVE, most of them only move it around from one player to another. When you mine ore and sell it on the market, for example, the mining process doesn't introduce any new ISK to the game. Only a few game mechanics can be called ISK faucets, as the game mechanics actually create ISK from thin air. Similarly, the ISK sink mechanics destroy ISK or remove it from the game in some manner.

To the individual player, the difference between something being an ISK faucet or not is largely immaterial. When you sell something on the market for a few million ISK, or get the insurance payout on a lost ship, it doesn't really matter to you where that ISK came from. Where the concept really matters is in discussions on inflation and how the game chooses to reward us in PvE. Are ISK bounties and rewards always a good idea, or could their over-use eventually lead to runaway inflation?

In this week's EVE Evolved, I look at the various ways in which ISK flows in and out of EVE Online, and why we should care about inflation.

ISK faucets

Transactions or game mechanics that reward a player with ISK don't necessarily qualify as ISK faucets. To be an ISK faucet, a mechanic must generate the ISK out of thin air and not just transfer it from another player. The insurance system's payout mechanic a great example of an ISK faucet. When a ship is destroyed, a percentage of its insurance value is paid out to the owner based on the level of cover selected. The mechanism by which ISK is deposited in the player's wallet is an ISK faucet as it creates the ISK from nothing. It's still a faucet even if the payout doesn't cover the cost of a new ship, and the player who lost the ship has taken a loss overall after buying a replacement.

By far the biggest ISK faucet in EVE is the bounty system, which rewards players for destroying the NPC pirate ships in missions, exploration sites and asteroid belts. Interestingly, rogue drone NPCs don't contribute to this faucet as they drop refinable minerals instead of paying out a bounty. Although faction navy and Sleeper NPCs don't reward ISK directly for their destruction, they both still create a large ISK faucet as the tags they drop can be sold to NPC buy orders on the market. Although players sometimes buy navy tags to use in buying items in the loyalty point store, Sleeper tags have no practical use. When sold to an NPC buy order, the ISK they provide is created from thin air. Other ISK faucets include agent rewards for completing missions and any market sales made to NPC factions.

ISK sinks

To be considered an ISK sink, a process has to involve ISK being destroyed or taken out of the game in some way. A common misconception is the idea that ship destruction acts as an ISK sink. Although players who lose ships will undoubtedly spend ISK to replace their lost assets, no ISK is destroyed when the ships go down or new ships are purchased. Since no NPC corporations sell ships, all ship sales go to other players and the ISK from the sale is just transferred from one player to another. Similarly, buying a PLEX to use on your account transfers the ISK to the player selling the PLEX and isn't an ISK sink.

A lot of EVE's ISK sinks used to fall into the category of NPC-corporation sell orders, but over the years many products sold by NPCs have migrated to be produced by players. Items still sold by NPCs include skillbooks, original tech 1 blueprints and some trade goods. Probably the next largest way ISK leaves the game is via purchases made by mission-runners in the loyalty point store.

Other ISK sinks include sales tax and broker fees incurred from market orders, repair costs, CSPA charges from contacting someone, clone upgrade costs after being killed and the upkeep on nullsec sovereignty structures. Insurance also features here, because the payments made to initiate a new insurance contract are paid to an NPC corporation and taken out of the game. Most recently, Tyrannis introduced a few more ISK sinks in the form of planetary infrastructure construction costs and customs office import and export taxes. At the same time, however, it removed ISK sinks by converting many trade goods over from NPC sell orders to player-directed production.

Why should we care?

To the average player, the rate at which ISK flows in and out of the game seems to have little consequence on everyday play. In EVE's closed economy, however, the balance between ISK sinks and faucets sets the rate of inflation for the game, which in turn alters the buying power of ISK. If the faucets pour a lot more ISK into the game than the sinks can remove, the buying power of a fixed amount of ISK may start to drop.

With more ISK in the game, those tech 2 ships and modules we all love using or the price of an individual PLEX may increase significantly. Those hit hardest by this theoretical runaway inflation would be the average Joe who gets his income from mission-running, ratting or exploration. The bounty rewarded for killing a given NPC is a fixed amount of ISK, meaning any drop in the buying power of ISK would negatively impact these professions. This could even be done intentionally to devalue current revenue streams while introducing new, more lucrative ones. Players would just see a new mechanic producing more ISK per hour and wouldn't consider that the buying power of their current ISK-making method had decreased over time due to inflation.

Thankfully, long ago CCP recognised that issues like this might occur. Back in 2007, they hired a professional economist to monitor the EVE economy and in-game markets. Along with his team of researchers, Dr Eyjo scours the markets of EVE for data that might indicate problems. In addition to providing essential feedback on balancing supply and demand of goods with each major patch or expansion, Dr Eyjo and his team publish the EVEQuarterly Economic Newsletter. For those worried about the potential of inflation to destroy the value of their liquid ISK, 2010's second quarter issue came with a graph tracking ISK sinks and faucets over that portion of the year. The report indicated that EVE's economy is only experiencing a slight inflation, which is good news for most players.

Summary

The functioning of ISK sinks and faucets is an often-misunderstood topic. We might assume that things like ship destruction would cause ISK to flow out of the EVE economy and therefore slow inflation, but that isn't true. Although ISK flow doesn't mean much to players in their everyday gaming, inflation on the scale of the entire game economy is an issue that ultimately affects everyone. With CCP's lead economist Dr Eyjo on the case, however, the EVE economy seems to be in safe hands.