Philip Rosedale Tells Me About His Plan to Introduce Blockchain-Based Virtual Currency & IP Protection to His New VR World High Fidelity

Philip Rosedale of High Fidelity just made a major announcement that his new virtual world will use blockchain technology to coin its official currency, the HFC, and to manage IP rights to user-generated content:

 This currency will be a public blockchain with a consensus group made up of multiple parties, and ultimately independent of High Fidelity’s control. It will achieve the key goal of a virtual world currency, which is to provide an easy way to enable transactions between virtual world users who physically live in different parts of the world with different local money systems. HFC will be convertible to local currencies or to other cryptocurrencies at popular exchanges, enabling creators of digital goods and experiences to immediately start making money. In addition to providing the basis for in-world transactions, the HFC blockchain will also be used to store information about the ownership of digital assets in virtual worlds. We plan to use this aspect of the blockchain to provide an open way to protect intellectual property by embedding certification affirming item ownership into the blockchain.

Unlike wildly fluctuating electric currencies like Bitcoin and Ethereum, however, HTC will be carefully managed by the company to keep its value and exchange rate relatively stable:

The dream of a global digital currency that can be used for everyday transactions has been hampered by the speculative excitement around their rapid increase in value. But Second Life’s Linden Dollar, supporting an economy with a million or so people generating more than $500M in yearly transactions, demonstrated that price stability is achievable in a digital currency through active management that increases the available money supply as economic activity (e.g. users and transactions) increases. So rather than creating (or selling) a fixed number of ‘tokens’, we are going to design a system and policies that will gradually increase the amount of HFC in circulation . Because the currency will be created on a public blockchain with a federation of signers, we can use an open process, voting, smart contracts and other mechanisms to regulate the monetary policy.

Philip tells me that consumer-level users won’t see all this complex and obscure blockchain technology in their High Fidelity experience:

“In the client you will just have a simple 'balance' and an 'inventory' of things you own," he explains. "If you are asked to pay for something, you may have to enter a password. You won't have to do any fancy cryptocurrency things.  The differences with using a blockchain are behind the scenes, and not visible to a casual user.”

This is pretty big news. If High Fidelity can keep the currency value stable as well as Second Life's Linden Dollar (which has remained roughly L$ 250 to US$ 1 since inception) this may not only have a major impact on virtual worlds and social VR, but become a compelling alternative to Bitcoin and other virtual currencies. And while I just reported that indie project Decentraland is also using blockchain-based currency, Philip’s plan goes far beyond that -- and High Fidelity is a well-funded startup backed by some of Silicon Valley’s top VCs and leading lights.

Philip tells me he’s confident that they can keep the value of HTC stable, and isn’t worried about blockchain currency speculators glomming onto the currency:

“Because blockchains have 'smart contracts',” as Philip puts it, “there are things we can automate that can reduce management.  For example, you can make a smart contract that says 'when people buy Hats, pay a 5% extra dividend equally to everyone using HFC'  (this is not a good example of monetary policy, only an example).  So currency can be added in a programmatic, decentralized way.” 

I asked Philip: “Won't a stable exchange rate be a turn-off to digital currency fans who love the massive fluctuations of BTC, since they can gamble on profiting from them?”

“Yes, I think so, but you can't have it both ways: If you call something a 'currency' but make it scarce so that it is also a 'speculative investment', which is what has happened with Bitcoin and Ethereum, you end up with more of an investment or commodity than anything else. I think there is great value in a digital currency that has little (or no) speculation value, but a very stable exchange rate. No one else is doing this yet, so we are going to do it.”  

He’s open to adjustments, however: “It's also possible that down the road we come up with things that make sense as a scarce commodity - the blockchain we are building allows 'tokens' like what we see today on Ethereum. But for now we wanted to start with the most important thing, which is a stable currency.  We may be giving up the opportunity for short term gains (for ourselves and speculators) but this seems worth it to gain a stable trading currency.”

 Read more about his plan here.

Comments

[Just Say'n]

I wish him luck with the hope he addresses his alpha/beta testers concerns regarding meaningful improvements in the UI along with other complaints then it might be worth another try at a later point in time.this does however solve some of the two biggest issues users had. now they can sell content while having a safe way to protect it.

If anything this will in the long run put HIFI in the front of the race with Sansar with it's smaller fledgling worlds/spaces rivals.

[sirhc deSantis]

Interesting - stability would be a change.
But can we take '..Second Life’s Linden Dollar, supporting an economy with a million or so people generating more than $500M in yearly transactions..' as insider knowledge?

[Amanda]

The currency sounds good but the IP rights would be the really big change. Now if they'd improve the horrible looking avies.