5 Reasons Bitcoin is a Bad Idea for Virtual Worlds (Plus 2)

Maria Korolov goes where eagles dare and offers five reasons why the virtual currency Bitcoin is a bad idea for virtual worlds in search of a virtual currency to use. All of them seem on point -- There are no Bitcoin police, Bitcoin have no backers, Bitcoin are volatile, Bitcoins may attract regulatory attention, Bitcoins are unfair -- so it's interesting to read the angry, angry replies the post has generated, many of which seem to come down to, "Well, real money sucks too." Which is also true, but as with politics, it's not enough to prove the system is bad, if one can't also prove there's an alternative that's significantly less worse. So let me add two reasons to Ms. Korolov's thesis of Bitcoin being a bad idea:

Hardly anyone seems to use Bitcoin, and Bitcoin's reputation as a "free" currency is misplaced: Bitcoin can't be free from the powers that be, because it rides on rails that they control.

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[Edmund Edgar]

I wrote a not-particularly-angry response here focusing on the practical aspects of this for grid owners.

5 Reasons Grids Should Use Bitcoin (If I Ever Get Around To Finishing The Money Server)
http://edmundintokyo.wordpress.com/2012/07/04/5-reasons-grids-should-use-bitcoin-if-i-ever-get-around-to-finishing-the-money-server/

One thing that I thought was a bit unfortunate about Maria's piece is that rather than addressing the metaverse directly, which she knows a lot about, a lot of it was about big, abstract issues like whether it would be better for the world if your money was in a bank. This seems to have attracted the attention of the Ron-Paul-loving hoards, who to be fair do point out some genuine misunderstandings in her piece.

I'd encourage people discussing this to address the pluses and minuses of the specific options we have for a meta-verse micro-currency like running your own currency, using OMC or trying to hack something together with PayPal micro-transactions. The political aspects are important too, but shouting about those without first thinking through the specific use-cases seems to be generating more heat than light.

[CyFishy Traveler]

My thoughts on Bitcoin have already been summed up nicely on this T-shirt:

http://www.zazzle.com/bitcoin_t_shirt-235931357609862747

[Danielle]

Perhaps Maria and Wagner have not noticed that VirWox is exchanging L$ 5.4 million a day for bitcoins:

http://bitcoincharts.com/markets/virwoxSLL.html

If bad things are going to happen to people who use bitcoins, perhaps you should be worried for Linden Lab?

[Edmund Edgar]

Wow, that's quite a figure. It sounds like a substantial part of Linden's business may now consist of functioning as a roundabout way to buy Bitcoins with a credit card.

But more than worrying for Linden Lab, if these Bitcoin criticisms are correct you should worry for OMC. A regulatory attack on BitCoin would take down VirWox first, and taking down VirWox would take down OMC overnight.

Meanwhile Bitcoin would probably still function reasonably well. Despite slhamlet's stuff about "running on government rails", the regulators would be playing whack-a-mole with Bitcoin vendors. They wouldn't be able to keep all of them down all the time, and Bitcoin users only need one to be running at any given time.

[Danielle]

@Edmund - We don't know the direction of trades. It could be people buying L$ to pay tier, but as the ask price on VirWox is generally higher than the market rate for BTC what I think is going on is simply cashing out at a higher rate:

If you have a business in SL, and directly cash out to PayPal, you get a certain amount of national currency. If you go indirectly through VirWox and bitcoins, you can end up with more currency. That is only true sometimes, as the rates fluctuate, but the VirWox rate has been generally higher than the market.

Perhaps it should not be surprising that users of one virtual currency (L$) would use another. I will be on my 4th soon: L$, Blue Mars dollars, bitcoins, and soon Cloud Party money, once their market is functioning and I can sell items there.