Bitcoin blew up this week with some new attention from Calacanis and his team. Now in a guest post on TechCrunch, Stan Stalnaker of Hub Culture talks about the recent history of virtual currencies and in particular Ven and Bitcoin.
Virtual currencies have been around as long as the internet and were mainly used in game environments. The exceptions were the egold systems that tried to gain acceptance in the late 1990’s. Stan takes us through more recent history and then talks about the current systems and the differences in each approach.
From the Techcrnch post:
The recent history of virtual currencies:
“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: the 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 Flattr (an electronic tipping currency), Bitcoin, Ripple, Ven 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.”
On the impact of small systems and massive social networks:
“Even if Bitcoin and Ripple do not become a huge force (which they will), it sets the course for more such distributed currencies, and sets the stage for a currency free for all: open markets, open currency, open chaos, and a cambrian explosion of value sets. The ultimate impact may come from Facebook, Google and other large social network currencies, which could have larger implied users than the Euro right from the moment of exchange trading.”
The future of real world fiat currencies:
“The idea of national currencies will become not just obsolete, but redundant, with no more currency meaning than the value of a “Like” or a banana or a reputation, which will all effectively speak to national currencies in a kind of common “mathematical language.” Eventually, all of these things will be equally and instantly interchangeable. It is tough to say how quickly or how slowly this will happen, but it is the single, inevitable consequence of the second phase of the Internet. The first phase being the P2Pization of communications, already well underway.”
The emergence of Singular Value:
“I don’t believe that the world will end up with a single global currency or a single reserve currency, but in the very near term a network of reserve currencies will allow humans to pick and choose new options for trade. In fact, they are already here, and those mentioned are just the first. In the long term, these currencies, along with everything else of value, will be measured and represented on a unified system—most probably the Internet itself. The result of this will be the end of currency and the emergence of Singular Value.
The rise of Singular Value implies more efficient capital markets and the potential for ongoing GDP expansion. It implies a hybrid of fixed asset values and the more efficient monetization of knowledge, which is continually expanding. This combination could lead to an expanding supply of value relative to hard assets, which are almost certainly subject to peak resource pressure in the coming period anyway. The tension between these two assets and their relative value will set the agenda for much going forward.”