Money Psychology: Horseshit and the Value of Digital Scarcity

The importance of digital scarcity can be difficult to understand. How can something that does not exist physically have any value at all and who cares if the quantity is limited or not? Nevertheless, it became clear in the late 1990s that scarcity is one of the most important factors for the economic value of virtual objects. We know this thanks to, among other things, very expensive digital horse poo.

The first virtual worlds

At the end of the 1990s, the first large-scale virtual worlds appeared on the internet in which thousands of people simultaneously shared one and the same virtual world with each other. One of these was Ultima Online , a 1997 computer game from the Ultima series by games pioneer Richard Garriott .

It was the first true Massively Multiplayer Online Roleplaying Game (MMORPG) . In a loosely England-based medieval fantasy world, players took on the roles of knights and other adventurers, as well as lumberjacks, bakers, miners, farriers and a variety of other supporting trade professions. The game was progressive and has had a great influence on thinking around virtual worlds and virtual economies.

Besides a computer game it was also a kind of socio-economic experiment. Never before had anyone tried anything like this on such a scale, and nobody really knew what would happen when the servers went online. So did not have the game developers see the example coming to the perfectly balanced ecological flora and fauna system of the game world, though it would collapse on the first day completely , because players against expectations not only monsters attacked but basically all massacred they encountered.

More remarkable and unexpected things happened, for example in the virtual economy .

Virtual inflation

It was basically based on gold: digital gold of course – gamers have known that concept for years. Most people earned it by adventuring or trading. In practice, however, that gold had little appeal for most players, because you could earn it indefinitely by defeating monsters and therefore everyone quickly had it in abundance. If you needed it, it was pretty easy to make more of it.

Gold inflation caused enormous growth skews between prices. Many items that you could buy in-game as standard, priced at a few gold pieces by the game designers, had little value for the players, who were almost all millionaires. Players also traded among themselves other items that were not for sale in the game as standard, but they were comparatively very expensive.

Horse dung

These were mainly rare objects that you could not easily get. For example, a magic sword, which could only be found on a defeated monster once in a while. They were difficult to find and slightly better than the normal ones. The strongest and rarest magic sword was therefore quite precious – so precious that most people rarely used it for fear of losing it. Yet its value faded entirely against the real treasures in the game, such as the coveted ‘horse dung’ .

horse dung - Money Psychology: Horseshit and the Value of Digital Scarcity

Horse shit: a black-brown pile of pixels on the screen where if you move your mouse pointer over it, a text appears indicating that it is ‘horse dung’. Besides taking it with you and proudly showing others that you owned it, you couldn’t really do anything with it. Those who had the ‘horse dung’ nevertheless belonged to the absolute top of the economic ladder.

That didn’t just apply to horse shit, but also to all sorts of other strange, random, and useless items that made you think they weren’t actually intended for players. Like a fishing net that didn’t work, a slightly longer candlestick than the normal kind, an unusable horse brush and a pile of hay strewn over the ground. They were the craziest things that were everywhere in the game world, but you could not normally pick up because they were tied to the game world. Probably because of bugs that happened to happen with these items. Sometimes they only appeared once when a server first booted and then never again.

They were called ‘rares’ and soon became marketplaces where people sometimes paid hard dollars for these digital treasures. A horse dung was worth several hundred US dollars at its peak. That was unprecedented at the time and for most people completely incomprehensible: virtual value already requires a considerable leap of thought, but digital horse turd was usually really a station too far.

The phenomenon is sometimes cited as an example in studies and professional literature.

Digital scarcity

It showed something remarkable: that scarcity is very decisive for the economic value of digital objects. Digital horse poo is of course interesting and funny par excellence, as it is almost a kind of antithesis to what should normally be wanted. Intrinsic value does not actually play a role. Nobody had thought in advance that players would want horse turds and that is why the game developers had not made them available to players. However, that unavailability made that one turd that you could own a special feature.

It wasn’t because horse turd is funny, because other rares were less startling but also very expensive. In addition, there were hundreds of other decorative items that could also be crazy or funny, but that were of no value to the players at all. Moreover, rares could drop considerably in value if it turned out that more of them existed than was thought. Sometimes they even lost almost all their economic value when an update to the game meant that they were now available in the game world.

Scarcity seemed to be the crucial factor for economic value, and what it was or what it served for was secondary. Insights such as these have contributed to game developers now assigning scarcity an integral role in their virtual worlds and economies.


Scarcity also plays an essential role in Bitcoin’s virtual economy. That is sometimes underestimated, but fortunately not by the Bitcoin developers. Scarcity is one of the core concepts from which bitcoin derives its value . And it is also why Bitcoin is so complicated, grand and complex: Bitcoin does everything in its power to guarantee that scarcity.

That is why the network must be decentralized and self-sufficient. That way, that scarcity can also be guaranteed in the future and then nobody can affect the scarcity like the game developers of Ultima Online could. Or as central banks can ( and do ) through money creation in our current fiat money systems .

There will never be more than 21 million bitcoins and almost everything in the design of Bitcoin is aimed at guaranteeing that as much as possible. Because despite all the other interesting features of Bitcoin; digital scarcity is essential for economic value. We have known that for years, partly thanks to the very expensive horse poo from Ultima Online.


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Bitcoin Maximalist and Toxic to our banking and monetary system. Separation of money and state is necessary just like the separation of religion and state in the past. Also, pro-local, pro-global and anti-national.

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