In the video game, Team Fortress 2, an economy grew inside of it. It had its own currency and barter systems, and everything was running smoothly. But, in time, things started to get very strange. One of the currency types, keys, started to raise in value (the price of a key was originally at 2.33 refined metal (2 refined and 1 reclaimed), but it slowly went up to 2.66 and greater). Now, the value of keys have reached 15 refined metal (give or take), and the value of many other items have gone down dramatically. For example, a sub currency, called Buds, were valued at 16 keys, but through the rise of keys, have lowered to around 5-6 keys.
My question is, what caused this abnormality to happen, and will the TF2 economy ever be able to recover back to the values they started at (without the game creator's intervention)?
Before I go into how the economy works, I will start with currency.
The most basic currency is Refined metal. One can create a refined metal through crafting. I will explain it more in depth once I have gone over more currencies. Refined metal can be destroyed through crafting, where it and the pieces that make it can be used to craft hats and weapons.
Making up Refined metal are Reclaimed metal. There are 3 Reclaimed metal per Refined. They are obtained by crafting 3 Scrap metal together.
Scrap metal is created by crafting 2 weapons of the same class together (weapons are a common drop). For more on the drop mechanics, go to these Gaming SE questions.
Besides just weapons, both Hats and Crates can drop. Hats are the more valuable of the two, usually at around 2 refined, give or take. Crates on the other hand, have little to no value, albeit some are very expensive (some people would trade their first born for one of the rarer ones), and when a new one is released, it can have a high initial value, that decays with time.
All money used here is in USD, but the $ sign was causing errors when more than one was used.
Unlike how metal is created by users, Keys are purchased from the Mann Co store (this is the main in-game store. You can trade real world money for items here). A Key is valued at 2.49 here. There are also Hats and Weapons on sale here, but the community generally counts those as ridiculously overpriced, seeing that one of the Weapons that you can find (as a common drop) is valued at 9.99 by the Mann Co store. The Mann Co store is run and maintained by the game developers.
The main way of trading is through a barter system. Users search servers and forums for people who have the item(s) they want, and then try to trade with them. A good example of one forum made specificly for TF2 (and other game) trading is TF2 Outpost.
You might be thinking," If it is a barter system, why do prices exist?" The price part, comes from a community of people. This site, called Backpack TF is one of the (if not) biggest sites that give item value guide lines.
A link to it is here: http://backpack.tf/
The barter system still exists though. Outside of the people who do not use Backpack TF, many of the rarer items have to be traded through barter, because there are either not enough to try and create a price, or because they don't get traded enough. But, if someone gives the details on what the item was traded for, Backpack TF will try to make a price over time.
Now, time to go in-depth about crates. Crates can be consumed (along with one Key) to open it. Inside, you will find an item that was listed on content list of the crate. Most items inside of the basic crates start high, then drop down. The main type of item that does not follow this are the Unusual Hats. These rare items only have a 1% flat chance of being obtained from ANY type of crate, and event crates tend to have a rarer type. Some of these are valued at 8 Keys (give or take), while some have been in trades with more than 5000+ USD being traded for it, and even more in items.
Another way to get semi-rare items is through MvM, an extra game mode. If a player "Manns Up", they get bonus loot at the end of the mission, and a bigger reward at the end of a tour (set of 3-6 missions, depending on difficulty). These bigger rewards started expensive, but slowly dropped. The only one of any value besides the Pro-Killstreak and Austrailium items (better ones are valued like Unusuals, while lower ones are valued at 1-3 keys) is the Golden Frying Pan, which is valued at ridiculous levels.
A big part in trading is the Steam Market, which allows users to sell their items (only certain types) for real world money (that is still stuck in the Steam System). Users can also spend their money on items in a similar fashion. This is all user to user, much like trading.
That is a basic overview of the how the TF2 Economy works and how it is regulated. Outside of the Mann Co store, have little say in the economy. Its community is what creates the prices. Backpack TF probably creates the guide lines off of supply and demand, but because of how easily both can change, that might not be the only factor to the prices. I want to explain more of why things are priced the way they are, but I don't know the inner-workings of Backpack TF.