The Neopoint Sink - Explaining Inflation

No matter if your goal is collecting, battling or dressing up your pets, the use of these shiny points is abundantly clear. But just where do these points come from and how does it affect the economy? The Neopoint is a system of currency which may be gained in three kinds of methods; Primary, Secondary and Tertiary.

1) Primary

The primary Neopoint is the bulk of all profits in Neopia. Most Neopoints on the entire site originally came from a primary source no matter how many times they were traded away. The primary Neopoint comes from the people playing games, events or other contests. While contests may seem to the untrained eye to be a major primary source of income as 2mil given away in bulk may seem like a lot, this is a common misconception.

Take the game Kass Basher; when I originally wrote this article, it was 5:09pm NST and Kass Basher had recorded a massive 208,938 plays. Even if that is a daily figure and not a live updated one, let's take a moment to look at the maths behind that.

Sorry if this makes certain Kass Basher players feel a little insecure, but I am assuming that most players of the game played for 1000 NP. Even if we reduce the figure by 8,938 plays to account for those under 1000, that is 200 million NP being released into the economy by this game alone, most likely more if you look into the per day figures. Couple this with the thousands of people playing things like Food Club and shares which have massive payouts- and we can begin to see just how many millions of NP we are working with per day.

The most amusing thing about all this is that the people who gain this primary income are far from the richest on Neopia; in fact they make up the very bottom of our economic system on Neopets. That 2 million mystery pic winner does not seem so lucky now, do they? Primary Earners often have items like paint brushes, lab map pieces (they are saving up) or morphing potions.

2) Secondary

Secondary Neopoint income is very misleading when you consider what primary means. Unlike primary, these restockers are not contributing a single Neopoint into the economy via their secondary investments. But if that is the case, how are they making so much more? How is it a restocker can make 40mil a day in some very special and rather frightening circumstances?

Secondary Neopoint income is so high due to the fact that primary is so high. These people buy items from Neopian shops, and resell them at a higher price. This effectively leads to a very fair and balanced supply and demand relationship to every item actively traded in this way.

Restocks come in, they sell an item at a certain rate, normally low for the demand so another rebuyer comes in and buys it for use in his or her shop, sells it slightly higher. Then the primary Neopoint earners come in and buy their clothes or their food for use, effectively spreading that NP back to the original shopkeeper. The shopkeeper then buys from stores and other restockers. But if all the profits are just from primary, how does it go up the chain as it does? Simple, the primary people come in bulk.

A shopkeeper may own a shop with 100 pages and have hundreds of people buy from them daily. While alone these people make up very little, when clumped together these figures really add up. The money reaches the top, where bank interest reaches a point where the people can train their pets or do whatever they want without using basically anything, thus making a very rich group of people above made up mainly of the money of thousands of others. Item wise, these members may own high level R99/98 items such a Leaded Elemental Vial or maybe just a very large collection of NP and items.

3) Tertiary

This is where the money goes after it has reached the top. Things like a Bank account interest that is far beyond the rate of normal member. Maybe proceeds from a war that you could only fight because of your 40mil Thyoras Tear. Tertiary is a broad category that I could have most likely split into primary and secondary anyway; however, for the interests of this article the third concept makes sense.

Tertiary incomes are those incomes far out of reach of many Neopians, income that allows people to be on top and stay on top with very little effort. While the level of overall profit would still not match the primary or secondary lower levels, the numbers of actual members on this level is much fewer and thus still a smaller overall profit. The items members in this category may own include Smugglers Cove items such as attack peas or grapes of wrath, along with certain high end retired plot prizes that are rarely seen.

So as we can see the three levels of income types reflect greatly on the economy, with the lower end having on average less NP than those on the upper ends of the spectrum, even though their contribution is highest. This is not to say that is bad; in fact, it is natural for an economy to gain different levels. Without some way to fairly distribute items on Neopets, it would become a very difficult system. Assume for a moment that user shops were abolished along with everything but the auction house. Without this free market, no one would be able to get any items, and while item price should be decided by the public, it would be decided as a race to see who can get what first.

A free market allows for the items to be distributed by demand in relation to supply and by buying the items from the set price market restockers allow for a very complex and free market system. An item sold in the Neopian shops for only 50k may end up costing 2-3mil just because it spawns rarely and not nearly enough to reflect price.

Long ago TNT attempted to make a system in which items in the Neopian stores would be increased or decreased based on their current market price. This effectively allowed for a fluid market to start on-site rather than in the mind of restockers and purchases. This, however, did not work as expected, due to the fluid nature of an economy, which is far too liquid to be controlled by a script. If this script had remained on, it would have done horrible things for the economy. Assume an item was selling for 50k in the shop wizard, and then it rose to 50k in the shops too. Restockers would not stop buying the item; instead they would put their prices up to match the new margin and to help continue to manage demand.

If anything, restockers allow for the market to keep on moving. Without them, it would be impossible for Neopets to have such a powerfully interesting economy. The primary source of inflation is, unsurprisingly, the primary earners. TNT isn't just waving a magic wand and going, "HA HA- DRAIK EGG PRICES UP AGAIN". It is that primary earners are gaining enough money to buy the goods out; higher wealth means higher buying power. The higher the buying power, the more demands people have as the more wants they can fulfil. This is the essence of inflation; if everyone has something they can't expect to buy something at the same rate.

Let's imagine for a second something like a Morphing Potion. Let's say this item turns your pet into a MSP Poogle or similar. In the past, it has been sold for say, 120k. Three people come along and want to buy that potion at 120k; they have a million Neopoints, so it is nothing to them. So the seller gets an offer, 120k, so the next person says "I'll pay 200k!" then the third person says "I'll pay 500k!!!!" the first person not to be outdone says "I'll pay a million!" Now, if they ALL had exactly a million NP and wanted this item, chances are none of them would get it. If one did, the other two would be disappointed and most likely complain on the boards about how TNT is making Neopets too expensive for new players or something. But the fact of the matter is that it was their ability to pay in the first place which caused the problem.

Imagine that all three had different numbers, 1.2 mil, 1.5 mil and 2.6 mil respectively. The first person may offer 1.2 mil, then the next 1.5 mil, now naturally the 2.6 mil person could beat them but let's just say he re-evaluates and decides, "Hey, this item isn't worth any more than 1.5 mil." He bows out and the second person gets his potion for 1.5mil. From that point on, the potions will be sold at that point or around it. There is a limit to how much a person will spend that is often directly proportional to the value of the money. In this situation, the three people could have had 0, 300k, and 1.4 mil, and the outcome would have most likely been the same.

So as you can see, the main problem behind inflation is not the lack of supply, it is the overabundance of Neopoints fuelling demand. The cause is the increased number of players actually earning NP via games. These people are raking billions into the economy of Neopets per day and all have demands. Currency is just another product in the grand scheme of things, so the more Neopoints there are in the economy means the less Neopoints are worth. As supply rises along the demand curve, the value of a Neopoint decreases so that more of them are required in trade for other items.

So we know the cause of the inflation and we know how it works and even how it affects the end user. This however is far from the end of our tale. But now we need to discuss why it is so hard for us to expect TNT to be able to magically fix all our problems. For starters I will focus on general ways to improve but then will move on to what TNT has been doing.

During an inflationary period in real life, governments would raise taxes, interest rates would rise, and it would eventually either level out or be slowed down. However, on Neopets a lot of the normal government answers to inflation cannot be done as they will cause outrage and complaints on the boards.

On Neopets we blame TNT for basically everything and while that may be okay for certain things they can control, inflation is not one of these things. Let's look at some key ways TNT could help stop inflation and why implementing them would or wouldn't work.

1) Neo-taxes

Implementing this would require users to pay a percentage of their earnings back to Neopets. This would include everything from proceeds of sale to game income. While this would definitely solve the problem of inflation and the Neopoint would be more valuable than ever, what is the cost? This approach would fail as many Neopian users would complain despite the fact it is one great way to combat inflation. There is no way to implement the most powerful anti-inflationary tactic even using the lowest rates possible. Look at NeoCharge, the April fools day toll-booth tax system they introduced fake for one day for an example of reactions. In this system, players would have to pay differing amounts of NP for every page they visited. This would soon mount up and players would be forced to pay a sum of NP out to continue playing the site. As this was a simple April fool's day joke, all NP paid during the event was refunded.

Let us try and imagine how neotaxes would work, forgetting all that NeoCharge from earlier. The only way I can see TNT being able to possibly get away with this system is if users were able to designate their tax Neopoints to a certain world, thus improving that world based on the amount of NP taxed. While this would be the most beneficial way to implement these taxes, they would still be met with complaints and TNT would not implement them.

2) Neoschools

What better way to make a Neopoint sink than reviving the old concept of the Neoschool? This, in contrast to the taxes, is a more logical way to go about reducing inflation. By making courses cost NP, TNT could implement a whole extra range of neoschool related stat points, expanding Intelligence to not only that of literary intelligence but mathematical, historical and more.

By implementing this system, TNT would need to give these courses and stab points practical merits. For example, bonuses around site such as unique daily and places to use the new stat could be implemented to make the sink look more attractive. People could spend many NP on increasing their pet's new stats and over time there would be less and less NP in the economy.

3) Neo-Sinks

As explained in the previous Neoschools section, a Neopoint sink is the other major way in which inflation could be combated without causing too much strife. The problem with these sinks is, due to their nature they need to not affect any current area of the site or risk alienating current members and causing more complaints.

Possible NP sinks include ideas such as upgradeable inventory space, longer board posting lengths, guild upgrades, the re-implementation of something like theme parks or even a world upgrade system based on NP donations. Ideas that should be avoided involve things such as pay to enter worlds, random event item shops, or anything that affects already implemented activities.

Guild Upgrades means concepts like a literal guild bank/guild webpage hosting for the whole guild rather than the owners having side-account based banks, donation stores and websites. This concept would not only allow an NP sink but would also lower the ability for guilds to scam their members. By doing this, it would not affect the original running of the guild and instead focus on expanding it.

Theme parks may not have been of very much use years ago, but they were still a great NP sink. By making user based upgrade systems like this, people will always end up buying them. Look at the classic neohomes; you could upgrade individual parts of them in the perfect sink situation.

World based NP donations work off the idea of taxes above without forcing it on members. TNT would just have to set certain upgrade caps for worlds and make simple additions based on those caps. If users were told that Moltara would receive a whole new area along with a Battledome store and a new daily after collectively donating 1 billion NP to the world, people would do it. It is much like the concept of Tombola but on a much grander scale.

4) Create Alternatives

This has been a big favourite of TNT for a long time, as it directly undercuts the price and usage of a tremendously expensive item, effectively cutting all demand on that product and forcing the price down to a regular level. These introductions are one of the ways TNT can have controlled releases of items that people do not complain about.

One of the alternatives introduced last year is the armoured negg. With the price of Silver Knight Neggs being too high, TNT introduced a direct replacement that required fewer Neopoints to receive. However, older examples are also present, Leaded Elemental Vial to replace the Jade Scorchstone, Scarab Ring to lower the prices of 6 iconers being two major examples put forth.

These items can also be released as plot prizes, as seen in the most recent plot "The Faeries Ruin" in which Hanso's Charisma Charm was essentially a new version of the Ring of the Lost and was so cheap that most everyone could afford it.

Releasing items side by side is another way with items at the same rarity and price level to allow for a small increase in overall supply. This has been done with Draik Eggs. Releasing new colours and flavours of the eggs does not dramatically decrease the chance; it does increase the chance that one will spawn in a restock, thus lowering the price slightly.

Creating these alternatives allows TNT to effectively lower the price of the desired effect. Often this is because items which can be easily replaced are not sought after for being that item, but for the effect they bring to the end consumer. By releasing another item with the same effect, it is simple to lower prices with little complaint.

5) Lower or Change Rarity

Another possibility that will bring with it complaints is that of changing rarity. Now when I talk about the changing of rarity I don't simply mean changing an item to R180 retired, which in fact that is one of the exceptions to this changing rarity concept that does not help inflation. Changing rarity is the changing of an item from say, R98 to R92. This happens rarely in Neopia as the whole economy is based off these numbers.

The rarity is a figure which dictates exactly how often an item restocks in a certain place. The higher the rarity, the less likely it will stock anywhere. R1-100 all stock differently in certain Neopian stores, with R101-500+ all gained in special ways. By lowering an item's rarity, you are effectively increasing how many restock in the general stores, meaning a higher supply. Naturally higher supply means lower price but, often restockers get miffed at a change of rarity since they can tell it means profits will go down.

One item that could change rarity, however, is the Thyoras Tear, as they once had a poll on whether to make it a Hidden Tower item or not to control price. Though this poll was never acted on, it does provide a perfect loophole for the idea.

6) Revalue/Recreate Currency

Another idea sometimes used in the real world which would not work on Neopets. The idea of revaluing a currency means that it raises the value of the Neopoint directly. Assume that every single user on Neopets had at least 1000 NP; conceivably they could knock out the thousands and make 1000 NP = 1 NP. While a literal currency change would make a bigger change, say one million down to one thousand, this makes it easier to have an example.

If this happened, as above everything would change. Items that once cost 100,000 NP would now only cost 100 NP, however in saying that the max you could get from games would be 1 NP. While the literal figures would not change, the value of the Neopoint would increase and inflation would decrease. However, it goes without saying why this idea would have users complaining all the time. Ah yes, what a long game of Spinacles, time to go out and enjoy my... 1 NP? Fun, not.

While revaluing the Neopoint is out of the question, creating an entirely new currency seems all the rage of recent. Petpet Park, one of the side ventures of Neopets, is one example, which is a currency which in no way can be translated into Neopoints or Neopoint items. Items bought with PP, or park points, are even on an entire different rarity scale and as of yet cannot be sold to other users for any amount of NP, NC or PP. Neopets already has many currency sorts, more than expected. While the freely tradeable Neopoint and the restricted trade Park Point and NeoCash may seem like the only currency, this is not true.

Technically, a currency is the same as all goods in that it has a supply and demand, this being said allows the currency definition to grow among Neopets. Also classed as a currency are Dubloons, Codestones and the eventually to be traded Lutari Feather. All of them can be directly traded for both NP and a service or good. What makes these different than a ticket or another form of pass is that they are seen as currency.

While a concert ticket or an ice-cream coupon on Neopets may seem to be similar in nature, they are not. Dubloons are used all over Krawk Island as would I imagine codestones for non-tourists on mystery isle. It is this distinction that allows us to see these currencies for what they are. The currencies also have a conversion rate into NP and much like real life there must be someone wanting to sell the currency for you to be able to convert it.

7) Give away stuff

Ah yes, giving away stuff. Commonly misconceived as a way to combat inflation. This commonly used concept is not so much a way to combat inflation, but a way to deflate individual items. TNT often does this to items that are overly expensive for their rarity, or already cheap. When I say giveaways I do not mean advent calendar and other events that give unique items, I mean events that give away old items randomly, and often from a low rarity.

The problem with this, however, is that the item given out cannot be too cheap OR too expensive; otherwise it will cause complaints. Sure, TNT could give every single user on Neopets one million free NP, but all that would do is raise the prices of every item to make up for the influx. To give away too expensive an item would be detrimental also, as people would complain about the loss of value on said item.

As you can see that is a rather long list of possible solutions both good and bad to the inflation problem. Most of the list could not be even implemented by TNT due to the backlash, and to ever get any ideas through, they either have to be hiding the damage they are doing to the economy, or un-affecting of normal users. Really, all TNT can do is put a new Neopoint sink here and there and hope that the inflation does not reach a point in which new users are alienated and cannot reach higher levels.

So far, TNT has done multiple things to help try to combat inflation, Stores, avatars, events... all of which will be given a brief overview now.

The first major step implemented by TNT in the combat of inflation is the Abandoned Attic. The Attic is a store that works like a similar store called the Igloo Garage Sale. This shop, which allows for no haggling single click shopping, was seen as a cheap way to pick up lower rarity items that cost too much in stores. The original Igloo Garage Sale did not affect the prices very much as the amounts given out by the store corresponded well with the demand without making an excess of supply. The new attic is different, though.

The attic works in basically the same way, apparently using the KAD system of restocking to bring out Neopia's finest R92-99 items. Restockers are going wild over this, a way that everyone can restock and make a quick profit. An 80 million NP Club for 50k, score, but the effects of this are wider spread. A fair number of the items stocked in this new store are far outside the buyable range of most Neopians, which, considering that "most Neopians" includes the poorer primary producing Neopians, is unsurprising.

Another major event for inflation combating was the "Save the Wheels" event, in which users donated large sums of Neopoints for the benefit of multiple wheels. This event shows just how unpopular a Neopoint sink can be even if it is effective. In the end the event managed to siphon over 12 billion out of the economy. Amazingly, despite the top prize having a value of only 2 million, the richest Neopians donated hundreds of millions from their otherwise inaccessible wealth. This event, despite being met with scorn, allowed TNT to better shape future endeavours against inflation.

The next major Neopoint sink was introduced just recently. The event works on a monthly basis, re-releasing a single R101 stamp monthly via the auction house. Then users bid, and the highest bid gets the stamp. On first glance, re-releasing a retired item may seem illogical or unfair, but TNT has been very careful with his method of release. There are many retired R101 items like this that were released via plots or sponsorship events and some are essentially un-obtainable. I even talked about retired R101s in my previous article on retired item collecting. But what makes it fairer to re-release a stamp compared to say, the book 'quest spells' a 75 million Neopoint book?

Unlike books, or even weapons, stamps have a clear once off use. While it may be likely for users to possibly use a rare 75 million Neopoint book, it is more likely that they would simply choose a different book. Stamps, on the other hand, are needed to be used by avatar collectors to finish off their album and get the rare avatar attached. Most of the stamps that TNT will be releasing will not be found on the trading post, galleries or even the auction house. The reasoning behind releasing these is most likely that there are none left. Keep in mind that TNT does know how many of each item are left, and while some items are still actively traded despite their R101 status, some are literally gone from Neopets.

With stamps being gone, this effectively means gaining the avatar is impossible, and for avatar collectors this is not exactly a good thing. This event works on the fact that avatar collectors will need to finish their stamp collection for the avatar, and will pay through the teeth to get it. By releasing one item per month, TNT cannot only exploit millions of Neopoints from this need, but do so without affecting the market for these stamps directly. Unlike the attic, the supply gained from this method of distribution is low, so if there is already are a few stamps hanging around, one more should not affect the price. Also, chances are all stamps gained from Sloth will be used the moment they reach an avatar collector meaning that TNT can really take millions out without ruining anything.

With over a hundred million NP being taken monthly by this event, it is the perfect way to get at the largely unattainable wealth of the richer Neopians. The goal of this release is not to lower the prices of rare and unobtainable stamps, but to pull the Neopoints from the economy. Single item price drops can be easily obtained by simply giving out items which they wish to lower; there is a problem with this however. Due to the fact that the NP itself is still in the economy, there is more Neopoints for other items which will in turn rise in price.

TNT is being smart with this stamp release and appears to be sticking to a very intelligent and fair form of distribution. Over time, this TNT sink will remove millions from the economy, giving avatar collectors a second chance to receive their goal and lowering inflation.

Another recent sink released recently is the new avatar books. These books are the most blatant Neopoint sink yet. These books, which can be bought for 100k, 1mil, or 10mil offer three unique avatars as rewards simply for reading them; and provide avatar collectors and richer Neopians with an easy way to show off their wealth. The interesting thing about these books, is the fact that they are no-trade. This means that only users capable of the Hidden Tower discount loyal perk are able to get it any less than the amount requested. What is more intelligent is the fact they are books, and chances are at least some people will buy a second copy simply for their gallery.

The tiered nature of these books means that almost every Neopian from poor to rich can buy an avatar, and unlike the stamp sales will tap from all levels of Neopian. With TNT's perspective Neopoints sinks getting better and more frequent it will be interesting to see where they go next.

The last major Neopoint sink introduced is the 'Wheel of Extravagance'. This wheel is the most expensive of its kind, and with the promise of paintbrushes, stamps and rare items it is an enticing offer. Each Spin costs 100,000 Neopoints, and it can give out prizes with values in the millions. Some people say that this wheel doesn't act like a very good sink, as one good spin would easily pay out for a month of usage; however, this is not the case. While it is true that the rewards are often great, TNT has done a very crafty thing with this wheel.

Firstly, the highest prize is only 1 NP more than the spinning cost. When we look above, we can see that primary income is the most major source of inflation, but this wheel does a very clever thing. By giving out a max of 1 NP at a time, it is actually able to directly convert primary to secondary income.

Even if the paint brush a user wins is worth 8 million Neopoints, to sell it would mean another user would have to spend their cash. So even though the user is 8 million richer, the original 100k can never be brought back into the economy and would thus decrease the actual number of Neopoints in the economy. Since most of the items given out by the wheel are never sold in Neopets shops, it also means that it is not making restocking less value to the user. Nerkmids, Paintbrushes and Lab Maps are given out in a very limited sense through random events which adds the final way that this wheel helps combat inflation.

Over time, this wheel will decrease the cost of all items it gives out. Considering most items given out by this wheel are highly sought after, the increased supply will help stop inflation on these items, while the gamble of buying them means that the drop in prices caused by the wheel will be more gradual and less of a shock to the market.

This article helps users understand the movement of the Neopoint, and hopefully takes some slack off TNT on the matter of Inflation. By understanding the cause's users will be able to make a more informed input when suggesting changes to help inflation. I will be back to write more articles of many kinds, economic and otherwise. This article tries to lay the basics for future articles like it, and by letting people understand the economy I will be able to continue to write articles on the effect of more recent events on the economy to allow for users to better understand.