A treasure island that exists only as computer bytes within an online role-playing game has been sold for the equivalent of $26,500.

The island, located off a newly discovered continent on the planet Calypso in the computer game Project Entropia, was bought by David Storey, a 22-year-old player based in Australia. Storey outbid another player during an auction lasting several months and paid 265,000 Project Entropia Dollars (PEDs) for the property.

Project Entropia is unique among “massive multiplayer online role-playing” games (MMPORGs) in that virtual money can be exchanged for real cash and vice-versa through a currency exchange inside the game. This is the most anyone has ever paid for any single item in an online game, says Edward Castronova, an expert in the economics of virtual worlds.

“I intend to create a thriving, fully functional settlement for all to enjoy,” Storey says in a statement released by MindArk, the company behind Project Entropia. “The goal is to make Treasure Island the best it can be to serve the population of Calypso.”

The island consists of 6000 acres and includes a castle, a mine and fantastic beasts to hunt. “The owner has complete mining and hunting taxation rights and can also allocate parcels of land to sell to other players,” says Marco Behrmann, a representative of MindArk. “[Storey] sees it as an investment.”

More here.