While the glories of a “universal” currency are appealing, I think this might be a “feature” that is in fact a negative.
First some questions:
- Don’t we already have a “universal” virtual currency called the US dollar (and the Euro)?
- Europe has been working very hard at the euro. Struggling with dissimilar economies that are only beginning to work together. Some countries had this tendency to spend to solve problems (Italy, Greece, Spain). Others were more conservative in their money printing philosophy (Germany). Working through these issues has been a constant source of tension. How will this be any easier between two different companies with different philosophies about how virtual currencies should be used?
Virtual currency companies should look at casinos and the collectible market instead.
Casinos issue casino chips for very good reasons. If gamblers use bank notes to place their bets then every bet becomes a purchasing decision: “I could place this $20 bill on Red 7, or I could buy a steak dinner”. Chips makes the purchasing decision happen only once. Redeeming chips has a “cost” — the gambler has to find the cashier. The cashier is not near an exit. The gambler then still has to escape the casino with the cash resisting temptation all the way.
Casinos also issue special chips that cannot be redeemed. These chips are billed as “Your first bet is free” chips.
Lastly, some casinos use chips as a branding, souvenir opportunity. A percentage of chips are never exchanged representing free money to the casinos.
Because casinos allow exchange out of their “virtual currency”, they have to spend a lot of time and effort on complying with money laundering regulations. By striving for universality, virtual currency companies will subject themselves to the same regulations.
Virtual currency companies should instead serve the same purpose as casino “first-bet” chips. Non-redeemable, can only be used to have fun, and to not make it obvious to the consumer that they are spending money.
A universal “Linden dollar” or “Lisa dollar” looks and feels too much like a “real” dollar to pay the real rent. The “currency” should stick to “toy/game-like” characteristics: “magic dust”, “gold”.
Virtual currency companies should steer away from “purchasing” words to “barter” words: “trade”, “exchange”, “collect”.
Additionally look at trading card companies like Topps, Upper Deck, and Magic: The Gathering. Very arguably these companies have been profitably exchanging unwanted dollars for valued cardboard for years. Trading cards were a virtual currency long before “virtual currency” was a buzz word. I do know that goplaynetwork.com is working on such a system.
Collectability is the direction that virtual currency companies should head toward — not universality.
Greg Berry also commented on Lisa’s Venture Beat virtual currency post. He touches some of the same themes as this post but he focuses more on the social aspects of virtual currency. He refers to : tuggl , twollars , openmoney and cyclos.