For a persistent world to maintain a stable economy, a balance must be struck between currency sources and sinks. Generally, games possess numerous sources of new currency for players to earn. However, some possess no effective "sinks", or methods of removing currency from circulation. If other factors remain constant, greater currency supply weakens the buying power of a given amount; a process known as inflation. In practice, this results in constantly rising prices for traded commodities. With the proper balance of growth in player base, currency sources, and sinks, a virtual economy could remain stable indefinitely.
As in the real world, actions by players can destabilize the economy. Gold farming creates currency within the game more rapidly than usual, exacerbating inflation. In extreme cases, a cracker may be able to exploit the system and create a large amount of money. This could result in hyperinflation.
In real world entire institutions are devoted to maintaining desired level of inflation. This difficult task is a serious issue for serious MMORPG's, that often have to cope with mudflation.