Can Virtual Currencies Eclipse Real Currency?

EVE Online's ISK: The currency of the future?

From FarmVille Dollars to the Evony Cent, nearly every virtual world, multiplayer game and online environment seems to be adopting synthetic currencies - the little tokens we happily give our real money to acquire.

Virtual currencies each have their own exchange rate, from L$250 to $1 in Second Life to 50 Evony Cents for $5 and everywhere in between. But once successful virtual currency company now claims the success of a virtual currency has little to do with its price.

Pixels and Policy investigates Cellufun's claim that content - not cost - is the prime indicator of a virtual currrency's success.

Marketing Virtual Money

Cellufun V.P. of Marketing recently spoke with industry news site PocketGamer.biz about the success of its cell phone-based virtual currency and the state of virtual currency's evolution. Cellufun, which pulled in millions of dollars through "FunCoins" used to purchase cell phone games and special in-game items, holds that people will pay more for a virtual currency if the content it can purchase is solid.

From the article:

Ultimately it's not about the currency itself. It's about having content that people want to buy. This applies to any freemium model, but on the mobile platform you also have to ensure ease of transactions, offer a sense of security, and provide a tailored experience for mobile.

You can't just port a PC game experience over and expect people to like it. If you could, you'd see Zynga and Playfish doing games across mobile devices now rather than just one-off iPhone apps.

Content may be king for virtual currency purchases related to games, but how could these virtual currency systems be adapted to provide a service to consumers and non-gamers? PayPal already jumped into the mobile market with an iPhone app, lending a distinctly mobile flavor to buying junk from eBay. But could true virtual currencies ever make waves in mobile/digital consumer markets?

Though it's not likely that a virtual currency will ever replace our already virtual credit cards - one needs the other in order to survive - it could soon be the case that real-world purchases are made in virtual worlds using the currency of that world. 

Much like powering up a pre-paid card, virtual currencies can serve the purpose of both enabling purchases while in virtual worlds and restricting how much can be spent. If projects like Near London take off, consumers could spend more time than ever purchasing real-world goods with virtual currencies.

What About Virtual Content?

There are uses for virtual currencies beyond the standard graphical virtual world. Anyone who has ever added content to an XBox 360 game through the Game Marketplace is familiar with how easily we are already transitioning legal tender currency into another iteration of "game points."

But game points purchase more than mere in-game content. Users can purchase high definition movies, customizations to their XBox home screen, music and television shows. Interestingly, game points are not convertible back into legal currency - once redeemed in the virtual environment of XBox, the points remain purely synthetic.

This essentially traps the consumer into expending all of their points, but again, content rules the day. Users would not continue to purchase gamer points if XBox didn't provide enticing content to spend them on. How long until something as ethereal as "game points" move to the rest of the Microsoft network - perhaps your Windows 7 purchase could be done entirely in game points?

The online space fantasy game EVE Online already allows users to pay their $14.95 monthly fee with in-game currency. Players can even redeem their ISK for a 30-day membership extension and then sell that extension on the in-world market for even more ISK. The potential to then sell ISK on a secondary market makes EVE less a virtual economy than a real, albeit illicit, one.

What do you think? Will virtual currencies eventually make all of our transactions into a few clicks and automatic deductions? Will online gaming evolve to the point where non-game items (such as other products from the developer) can be purchased using amassed in-game currency?

Comments

[Doubledown Tandino]

pokeman cards, pogs, baseball cards, products, services...
everything is a currency...
even information.
One person wants something, another is willing to trade.

As I've said before, real currency is just as fictional as virtual currency.

The only difference (and this will never change) is that REAL currencies are accepted by REAL entities. REAL stores, REAL restaurants, REAL repairmen.. they take REAL dolla dolla bills y'all....
but next time my plumber comes over, I'm gonna offer him Linden dollars and see if he takes em.

[Troy McConaghy]

It used to be possible to buy real actual physical graphics cards from OnRez (or maybe it was still SL Boutique at the time). In any case, I'm pretty sure you could pay for the graphics card using Linden dollars.

[twitter.com/Lalo_T]

People like to invoke Neal Stephenson's "Snow Crash" when talking about virtual worlds... but I turn to his "Baroque Cycle", wherein I learned that 'currency' as a word for money is based on 'currency' to describe how up-to-date -- i.e., current -- your information is about what can be purchased with a given amount. In the time of Newton, the currency of your information could be measured in miles per day; now, it's measured in kbps, but the concept remains. Exchange rates between monetary systems -- whether maintained by sovereign governments or private corporations (see also: scrip*) -- still have the worth of a commodity as their grounding principle. It could be a unit mass of gold, a barrel of oil, or 512 virtualized 'square meters' of land in Second Life.

The point is: a medium of exchange is a medium of exchange. The only difference is (as Doubledown posted) the acceptance of a particular medium.

I pay all my bills online, using funds directly deposited to my bank from my employers, and I use a debit card for other purchases. No physical money is exchanged, whether it be paper, coins, or drops of crude oil. One could say I have earned 'game points' for satisfying the demands of employment, which I can then use to obtain real goods with "a few clicks and automatic deductions".

There are also people who are able to reap a virtual-world profit and purchase real-world goods and services with it. It takes an extra step to convert to a more widely accepted medium of exchange; not much difficulty there. In that indirect sense, your question is already answered in the affirmative.

However -- virtual worlds and games are owned and operated by businesses, not sovereign governments. They can fail (yes, governments can fail, too -- look at Zimbabwe -- just not as easily). *Direct* acceptance of their scrip as payment for real-world goods and services, without that intermediate conversion step, can only be an individual decision made by each provider. I don't see it becoming widespread.

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* http://en.wikipedia.org/wiki/Scrip