What makes Bitcoin currency so appealing to its advocates are; unlike other online methods of payment, such as credit cards or Paypal– transactions made using the currency are virtually untraceable, almost like a digital version of cash. ~Whippman
Internet Currency: Creating currencies for the internet economy is a reality and a new multi-currency world is inevitable. Nobel laureate F. A. Hayek makes a powerful case that government involvement in providing a medium of exchange (money) is neither necessary nor beneficial. He argues that the best hope for sound money lies in competition between privately issued currencies.
More businesses are making virtual currency part of their business model. While the use of Internet (virtual) currency provides great opportunities, companies need to be aware of the emerging legal issues before using it as a means to build customer loyalty. Put simply, ‘virtual currency’ is any medium of exchange, other than real currency, used to facilitate Internet or other electronic transactions. Numerous companies are currently using forms of ‘virtual currency’.
For example, Apple provides iTunes users the option of buying prepaid iTunes gift cards, which contain credits that can be redeemed for music and movies. Many online games allow players to earn and purchase ‘points’, ‘tokens’, etc. that can be redeemed for virtual and real-world prizes. Facebook recently started a system of ‘credits’ that has a wide variety of applications apart from gaming, such as making charitable donations using a particular charity’s Facebook page.
Looking into the future, Google has announced that it acquired the start-up company ‘Jamboo’ and its proprietary ‘Social Gold’ virtual currency platform. There is industry speculation that Social Gold will be used to supplement Google’s current online payment system, Google Checkout. The bottom line is the use of virtual currency in e-commerce is on the rise.
This trend is due in significant part to the advantages that virtual currency affords to a vendor. Virtual currency platforms allow issuing companies to lower costs by eliminating the need for a third-party company, such as a bank or Paypal, to process each payment transaction. Further, a vendor has significant control over the value of, and authorized uses for, virtual currency. This control enables companies to realize higher revenues, cut costs, and build more-attractive customer loyalty programs.
In the article “Internet Currencies for Virtual Communities” by Bernard Lietaer writes: Budding cyber-economies should look beyond the limits of national currencies (i.e. dollar, euro, yuan, etc.) toward a richer variety of payment systems specifically adapted to the requirements of cyberspace. In parallel to national currencies; a specific Internet currency system could be implemented which would provide an alternative for use for Netizen (Internet citizen) who choose to do so.
After all, money is not a thing, it is simply an agreement within a community to use something (almost anything has been used historically) as a medium of exchange. Because Internet offers unlimited ‘space’ and transcends natural and cultural boundaries, the electronic marketplace need not be limited to one exclusive currency system; indeed, a ‘free market’ of different kinds of currency systems may benefit all of them. Virtual space provides indeed an ideal space for the coexistence and integration of different economic paradigms, because of its flexibility and non-exclusiveness…
In the article “Bitcoin, Ven and the End of Currency” by Stan Stalnaker writes: Digital currencies are really just online account books that measure and record transactions of financial value between nodes on the Internet. The first ones; Beenz, Flooz and others, arrived with the first wave of the Internet in the 1990s and failed. By the middle of the last decade, the virtual currency economy boomed on the strength of gaming systems: Linden Dollar in Second Life, World of Warcraft Gold, Entropia, and Tencent’s QQ in China encountered success with volatility.
Now Internet currencies are moving out of virtual gaming systems and into the global economy with; Bitcoin, Ripple, Ven, Flattr… and ‘local exchange trading systems’ (LETS) leading the way. The central differentiation between these digital currencies is whether they operate in a closed loop (Ven, Flattr, Amex Rewards) or open nodal architecture (Bitcoin, Ripple).
This distinction determines to a large extent their ability to be managed. By and large, digital currencies are changing what money can be, and widening the vistas for how our global society determines and trades value. We need to think about how the blurring of lines between currencies affects the world around us– relationships, economies…
In the article “New Internet Currency Bitcoin Grows in Popularity” by Charles A. Jaffe writes: The ‘Bitcoin’ digital currency differs from traditional currencies, and has become an increasingly prominent method of payment in the world of internet commerce. Traditional currencies are regulated by governments, but Bitcoin digital currency is only regulated by its value to users and its expected value in the future. This allows Bitcoin digital currency users to feel somewhat secure since no government can arbitrarily reduce the value of the currency.
Bitcoin digital currency receives further praise from users as transactions with Bitcoin digital currency can be made with more anonymity than traditional currencies afford. Bitcoin is like a foreign-exchange play with even less information on which to make currency calls; currency trading is no place for average investors, no matter how cool or cutting-edge the concept. Bitcoin, right now, has the feel of a mania, like tulips in the 17th century or Beanie babies in the late 1990s, where supporters appear ready to suspend rational thought to throw money into something that they desperately want to believe can maintain its growth.
Technically, Bitcoin is digital, person-to-person (peer-to-peer) currency. It doesn’t exist in any tangible form, and is not backed by any physical currency or commodity, meaning there is no promise in place that Bitcoins can be exchanged for some form of ‘real money.’ The issue is whether Bitcoin will ever be so widely adopted that it acts like a real, stable currency; right now, it acts more like a commodity with wild price swings on rumors, articles, anonymous chat-board postings, and well-publicized problems with theft.
According to Bruce Wagner “Bitcoin has three major problems; “Number one is security, number two is liquidity and number three is currency risk… There may well be a global financial role for this kind of currency going forward. But until the execution is as sound as the concept is cool, there’s too much risk of a total loss. For average investors, that makes Bitcoin a look-but-don’t-touch situation.
In the article “Internet Currency are Coming” by Milo Yiannopoulos writes: It’s clear that we are moving away from the era of real-world currency and credit card payments and towards virtual currency. The question is: which currency will it be? Digital money and digital payments will be a consumer norm in less than a decade; making the war between currencies and credits the single most interesting issue around the internet since its inception.
As contact-less payment and stored value systems become a major source of payment, most large companies will begin to roll out their own versions. This is happening already: American Express is experimenting with social currency and British Airways recently replaced ‘BA Miles’ with Avios. Digital wallets like Google Wallet will become the mechanisms for navigating the multiple currencies you’ll carry with you around the internet.
Your debit card will become redundant as your digital wallet will contain; dollars, euro, Bitcoin, Ven, and, possibly, Facebook Credits. Bitcoin, the currency you hear most about, worries economists. That’s because, as an anonymous, decentralized currency, it has attracted what the Federal Trade Commission (FTC) calls money laundering. Ven, the invention of Hub Culture chief executive Stan Stalnaker, is becoming a stable, respectable part of the global financial system.
In September 2011, it was the first to be added to Thomson Reuters, making it possible for banks and financial institutions to trade in it. At the other end of the privacy spectrum is Facebook Credits… Think of the entire internet as an ‘app’; circumscribed by a persistent Facebook login and punctuated with Pay icons as familiar to users, and as easy to implement, as retweet buttons…
The future of money is increasingly digital, likely virtual, and possibly universal. A globally accepted networked currency would reduce costs and alleviate many problems, but there are still many obstacles to such a system, reports the Organization for Economic Cooperation and Development (OECD).
In its report ‘The Future of Money’, OECD says; “The digitization of money could have far-reaching impacts, creating a system of peer-to-peer digital money that is network based, transparent, easy to use, and highly secure”. The report concludes: “The challenge for national policy makers is to accelerate the introduction of universally trusted and accessible peer-to-peer, instant clearing systems for all transactions throughout the entire economy. Information technology makes this goal feasible, but in the end only appropriate rules and institutions can make it practical locally and globally.”
Digital currencies transcend political borders and will facilitate a new era of international mercantilism while simultaneously freeing businessmen from national fiat currencies and the draconian controls that go along with them. According to Bob Hettinga; “digital bearer instruments are three orders of magnitude cheaper to use than book entry money.” Digital currencies, once they come to full maturity, will become world standard by virtue of the fact that they are the most secure, the most efficient, and the most inexpensive way to complete business transactions…
“There are certain things that we want from a currency: A medium of exchange, a store of value, liquidity, and security. No currency can have all of these features (although humans have used some pretty odd things as currency over the centuries; salt, gold, silver, and even pieces of paper with ‘dead presidents’ on them– surely the final lunacy) to perfection, but a currency which doesn’t have any of them in appreciable quantities isn’t going to last very long.” ~Worstall