Live Gamer, an online marketplace for players to trade and buy video game virtual goods, has acquired microtransaction platform Twofish, in an effort to boost its virtual economy. The terms of the acquisition were not disclosed. In conjunction with game makers, Live Gamer’s platform lets online game players trade virtual goods they earn in games. The company’s latest move makes sense—as micropayments in the gaming world heat up, gaming marketplaces need to power their virtual commerce platforms.

Twofish is a startup that basically powers micro-transaction systems for gaming companies. The company’s flagship product, Twofish Elements, provides several layers of service. The first is an accounting and currency management system that takes care of a game’s virtual currency and its relation to real currency. The second is a catalog of virtual items that can be bought within a particular game. And the third is an analytics tool that lets publishers track the goods being bought within their games.

Live Gamer, which was founded in 2007, is looking to be an all-in-one marketplace for publishers to allow users to buy and sell virtual gaming goods. The company also recently acquired Korean startup N-Cash, a global microtransaction company. Clearly, Live Gamer is looking towards micropayments as the future of virtual gaming and is creating a powerful payments platform and economy within its marketplace.

Mitch Davis, CEO of Live Gamer, told us that the gaming publishers are demanding total commerce solutions and with microtransactions becoming the common payments system, these acquisitions help round out the company and keep a competitive advantage. Competitors to Live Gamer include PlaySpan (which also made a recent acquisition of a micropayments startup).

As we’ve said in the past, micropayments are hot these days, and the number of players are scaling quickly, especially as gaming and social networks intersect. Live Gamer, PlaySpan and other smaller startups are wise to boost their offerings as bigger players like PayPal, Facebook and MySpace consider making a move in the space.

A new gaming startup called TwoFish has announced a product called TwoFish Elements that it claims is the “first turnkey solution for powering a dynamic and realistic in-game economy.”

CEO Lee Crawford, who has worked on gaming infrastructure for the likes of Yahoo, Sega, Heat.net, and Shockwave.com, says that TwoFish is addressing the biggest opportunity the gaming industry has ever seen: the rapid emergence of casual, mass-market games. While casual games are becoming increasingly popular, they also draw people who don’t want to pay for games upfront. Publishers are therefore faced with the task of charging them for in-game virtual goods like swords, shields, cars and pets, as well as new levels and functionality.

TwoFish intends to step in and relieve publishers of the burden of developing the requisite micro-transaction systems in-house. TwoFish Elements is a server-side, open source platform based on Java, MySQL, and Linux that provides three layers of service. The first is an accounting and currency management system that takes care of a game’s virtual currency and its relation to real currency. The second is a catalog of virtual items that can be bought within a particular game. And the third is an analytics tool that lets publishers track the goods being bought within their games.

Crawford says that TwoFish Elements can be integrated into a wide range of internet-accessible game types, from lightweight HTML or Flash games to 500mb downloadable titles. While TwoFish itself is not a game publisher, it has been working with one for the past year to produce a proof of concept game called Edge Racers, an MMO for car customization and racing. The company is now soliciting other publishing partners who want to use its engine.

For more coverage, see VentureBeat and GigaOm.