Lets reuse Scenario 2, but now the system is open, meaning the credits can be resold (the way IMVU operates now). Lets also assume that IMVU sells credits at 1,000 for $1. And lets introduce Real Money Trading or as we call it at IMVU Reselling. If we believe that everyone is rational, then Creators will always want to sell their excess off, to make money, and Resellers are always going to want to sell any excess they buy, so they can make money.

So in Month 1 of our scenario, Creators sell off their 600 credits to the Resellers (They got 60% of the 1,000 Credits spent on products). Creators wanting to make money now, sell their credits to Resellers. The Creators and Resellers negotiate and Creators sell off their 600 credits for $.25 per 1,000. The Resellers in turn price the credits at $.50 per 1,000 and sell the 600 to the Non-Creator Users. When the next month comes, our 11 Users (6 Non-Creators & 5 Creators) have to buy imvu credits from somebody. Of the 11 Users, they buy 600 credits from the Resellers (at $.50/1000), and the remaining 600 from IMVU at $1/1000. The 600 credits bought from the Resellers plus the 500 bought from IMVU equals the total 1,100 credits needed (remember each of the 11 users needs 100 credits to spend). Some Users got a deal, some Creators made money, and some Resellers made money. IMVU makes less money (thats ok for now), and everyone is happy.

Now in month two, the Creators earn 660 credits (remember 1100*60%). Resellers buy the 660 credits, but this time they do it at $.24 per 1,000 because they are buying more supply than they necessarily need. The reason they do this because of something called Supply & Demand. Essentially if there is more Supply (excess credits) and Demand is less than the Supply, then a rational person will pay less for something if there is lots of it on the market. In this case Resellers dont necessarily need the 660, but just in case theyll buy them, but they want to hedge their bets so they will only buy them for less than before. Typically pricing in the market doesnt move that fast, but this is an example.

In the short run this building up of supply of credits isnt in a big problem, but eventually it becomes a very serious problem when the build up doesnt stop, and the value of the credits keep falling. If nothing changed in this scenario the credit supply would keep building, and the credits value would drop to nothing. This causes Creators to not make any money, and they are unhappy. Users are happy because they can buy credits cheaply, but unhappy because Creators have slowed making new products. And IMVU isnt happy because it isnt making money, which threatens the very existence of IMVU.

This is pretty much where we find ourselves today, and this is the problem we are facing