Virtual Coins – what will this mean for the payments space?
Forget £, $, €, or the whole host of other international currencies, the new kid on the block is virtual currencies; which live on the web and in our virtual wallets.
The latest to launch is Amazon Coins; used for app, game, and in-app purchases on Amazon’s app store.
But what are the advantages over standard currency? The main benefit for consumers is discounts. 100 “coins” on Amazon is equivalent to $1, whereas 500 will cost $4.80 (a 4% saving) with more gift cards getting sold which are locked to the company equalling increased profits.
A rising number of customers will primarily pay online using payment services such as PayPal and SolidTrustPay, whilst a few will already be living in the nearby future of paying using their mobile phone through technologies such as NFC and Google Wallet.
These are examples of the “virtual wallets” using our current currency systems, but what of the new era of virtual currencies?
The idea of virtual currency isn’t new of course, if you’re familiar with the Xbox for example; Microsoft uses the aptly-named “Microsoft Points” to pay for transactions, although are said to be moving away from this for the next console iteration.
Microsoft Points is a simple idea, as is Amazon Coins; what gets more advanced and has truly industry-changing potential is a currency you may have heard plenty about lately, Bitcoin.
Bitcoin is a virtual currency with its own stocks system; all running on a shared computer network. Transactions are anonymous and completely untraceable, which is why the government and security industries are in fear.
Many high-profile companies and services are already accepting this currency however, showing some amount of support, or perhaps just staying current. Blogging platform WordPress already accepts payments, as does dating site OkCupid. Even PayPal is considering migration.
Where this gets dark is the underground, illegal uses made available by Bitcoin. An online marketplace by the name of Silk Road is a market which accepts the currency and trades in illicit drugs and other products, said to be trading at $1.22 million per month. For a full in-depth explanation of how a Bitcoin transaction works, head here.
So how do you get “Bitcoins”? You can either buy on a “Bitcoin exchange” (currently $116 for a single coin), or alternately you can “mine” them using free software which can unlock small amounts of the currency – think of it like Folding@Home with less philanthropic efforts.
Before you do, you may want to consider the somewhat spurious origins of the currency, said to be first proposed by Satoshi Nakamoto in 2008 who has since mysteriously disappeared; even his name is said to be a pseudonym.
Of course Bitcoin has the backing of anarcho-libertarian groups such as Anonymous, who wants the abolition of the state for freedom rather than anarchy (this would be an anarcho-capitalist)
Either way, it seems that soon the days of carrying our wallets full of change will be gone – can’t say I’m too upset.
Have you invested, or plan on investing in Bitcoin? Do you think the future is in virtual currencies and/or wallets?
Find out more about key developments in the mobile payments space at Telecoms Tech World, in London on 26-27 November.
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