It's honestly not even the idea of the auction house itself existing that's harmful. I'm sure in some dark avenue that idea's existed for a long time. It's the fact that this auction house is in Diablo. Diablo's a game about going on quests with your pals, slaying monsters, collecting loot, and all of that awesome stuff. Trading was one thing, and even an auction house would be one thing, but to have an auction house where you can use real life money to buy not only equipment, but whole characters, is damaging to the very spirit of the game. To see Blizzard not only employing it, but using it as a source of revenue is nothing short of disheartening.
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Falcon Punch
http://www.youtube.com/watch?v=FFtw7qW7Vcw