This is a story all about how the economy got flipped turned upside down, all thanks to a familiar-looking potato of a ship known as the Dominix. It’s a story of patch speculation, industry, currency substitutes, and debt. This is a humor article and uses a fair degree of exaggeration, but also points out an extremely powerful financial hack that has been employed by some of EVE’s elite. Those with a large degree of assets may still be able to capitalize on it, provided they know where to go and have the raw liquid ISK necessary to make it worthwhile. It is published now that some time has passed, as a courtesy for those ingenious enough to implement it. It’s not happening, so put the Doom Paul GIFs away.
We have known for some time that Odyssey was bringing a battleship re-balancing, with the additional knowledge that build costs on the first tier battleships would be going up. Certain ships receives sizable material cost increases when Odyssey launched. The current value for the Dominix is essentially double its Retribution value. This happened before with Skiffs, and a large number of players built and stockpiled the ships, hoping to make a fat return. However, due to the sheer over-production Skiffs appreciated very, very slowly and many frustrated speculators dumped them back onto the market. This held the Skiff prices at their pre-patch values for a long time, and there are still plenty stockpiled by very, very patient traders.
This is where the financial hack comes in. The Dominix is the gold bullion of EVE. Its value is essentially guaranteed to increase (with minor fluctuations) at a slow, predictable rate. This makes it the ideal item to use as an alternative currency such as loan collateral. Creditors are attracted to Dominixes as collateral, because even in the case of a default they will earn some form of interest on their good faith. The whole problem with this sort of speculation is that it ties up ISK, meaning any gain in the long run is economically nullified by what they could have made with the investment capital in that time. With a stock of items whose price is guaranteed to increase however, it becomes possible to play both sides of the coin for a small price.
Clever financiers borrowed against their stockpiles, using massive amounts of Dominixes to collateralize and solicit secured loans. The funds are used for trade and industry, bringing in profit while the Dominix stockpile continues to appreciate. The only cost involved is the interest, which has to be weighed against the projected gains of selling the Dominixes. EVE’s financial sector, especially in Jita, is responsible for facilitating a massive proportion of the game’s trade, industry, and contracted logistical services. Secured borrowing is rumored to make up a fair portion of trader liquidity, with the idea of borrowing against a speculative stockpile not being an unfounded one. The official Market Discussions forum has become something of a clearinghouse for solicitors and creditors to form secured (and sometimes unsecured) loans.
Indeed, community loans have made for some interesting stories and financial hacks over the years. In the case of a volatile good whose value tanks, a speculator can choose to default on his loan instead of taking the economic loss of “buying” his stockpile back with interest. Creditors have been forced to lower their average valuations of many item types due to such “scams.” It is also possible to manipulate the price of an item upwards, borrow against the inflated value of a stockpile, and then default on the loan when the market price corrects. This is difficult to achieve since creditors generally only want floor-capped (BPOs) and fairly stable items (ships) as collateral. Thus one would have to carefully manipulate a popular item, hold it at the new price, and then try to borrow against the stockpile. There is nothing insidious or underhanded about the Domonix trick though, meaning creditors are willing participants.
Of course, if CCP nerfs the Dominix in an Odyssey revisional patch, disaster could strike. While build cost would continue the upward trend, short-term balance change fluctuations could take the borrowing market for a spin, leading to widespread economic collapse. On the other hand, Dominixes dying drives the price up, so a major alliance announcing and stockpiling Dominix doctrine could spike the price. Since high-level trade is currently financed by the Dominix, changes in Dominix pricing affect trader activity which can raise or lower prices on everything from industrial goods to the prices of tech II guns. All of this means that to some degree, ISK has become a Dominix-backed currency. When you buy a new Bhaalgorn, you’re trading some amount worth of Dominixes for it since the ISK you’re using was probably financed by borrowing against someone’s thousand-ship Dominix stockpile. Welcome to the potato economy.