New World Notes

Should Libra Be Legal? Here's Why Congress Should Ask Linden Lab to Testify

Congress is currently debating the status of Libra, the cryptocurrency backed by Facebook, with one bill proposed to ban it and other cryptocurrencies like it outright:

Called the Keep Big Tech Out of Finance Act, the bill would apply to any company with at least $25 billion in annual revenue that offers “an online marketplace, an exchange, or a platform for connecting third parties.”

Covered firms would be banned from creating and operating digital currencies, a provision clearly targeted at Facebook’s Project Libra. But the measure’s broad parameters could also effectively outlaw financial products offered other major tech firms.

Companies subject to the bill — which appear to include Facebook, Google and Amazon — would also be banned from offering a slew of financial services such as banking, investment management, securities exchanges, financial advice and money transmission.

Lawmakers and regulators in both parties have expressed fears about Libra and Facebook’s ambitions in the financial services industry. Even so, the proposed bill would likely face substantial opposition from Senate Republicans concerned about regulatory overreach in the financial sector. 

This might be a good idea, but the problem is that the wrong people are talking about it in the public arena.  Treasury secretary Steven Mnuchin may have serious concerns about Facebook's Libra, but he's seriously ill-equipped to express any opinion on virtual currency. But for that matter, the top executives at Facebook and the other big tech companies also have little to no direct experience with virtual currency.

Which is really why the people Congress should be talking to executives at Linden Lab, creator and publisher of Second Life. Here's why:

Philip Rosedale on What Libra & Bitcoin Can Learn from Linden Dollars

Above: Philip Rosedale's 2009 Slideshare for turning Linden Dollars into global currency

Great Medium post for cryptocurrency geeks by Philip Rosedale, who reveals his slide deck from 2009 -- back before hardly anyone knew about Bitcoin -- explaining his plan to turn Second Life's Linden Dollars into a global real world currency. As I never get tired of pointing out, Linden Dollars are still used for more daily transactions than Bitcoin, so Philip's analysis of that plan is worthwhile for crypto advocates -- and perhaps even more relevant to Facebook's plans to create a global cryptocurrency called Libra.

For instance, he talks about how Second Life's very international userbase shaped his approach, and compares that to the direction Libra is now taking:

High Fidelity's Stable, User-Friendly Blockchain-Based Cryptocurrency Now Exchangeable for US Dollars

Philip Rosedale's been talking about it for years, and now it's finally here -- the blockchain-based cryptocurrency for his social VR world High Fidelity can now be exchanged for US$:

High Fidelity users can now convert High Fidelity Coin (HFC) into U.S. dollars. This opens the possibility for people to earn real money creating and selling virtual goods and services within High Fidelity. We see this as a vital step in the emergence of a thriving High Fidelity economy: the flywheel of innovation and creativity in any marketplace starts when creators have positive incentives to contribute to the growing body of content for sale. In time, we hope creators will be able to support themselves by selling items in the Marketplace, charging for the experiences they create, and offering useful in-world services to other creators and performers.

This is noteworthy for at least a couple reasons. Unlike most (all?) other blockchain-based cryptocurrencies, HFC is tied to the US dollar (the rate is fixed at 100 HFC = 1 USD), with supply tightly controlled by High Fidelity the company, to prevent inflation. Also noteworthy that this is among the first (only?) blockchain-based currency connected to a seamless consumer experience. As Philip told me last year:

Philip Rosedale Advocates Blockchain-Verified Identity as Alternative to Facebook

With news that many are leaving Facebook or using it much less in the wake various controversies, this new essay from Second Life/High Fidelity founder Philip Rosedale is particularly well-timed. Very briefly summarized, Philip is proposing that Internet users transition away from Facebook and other identity-oriented services toward a blockchain-based system for verifying identity:

Allowing Facebook (or any other company, for that matter) to own and control your identity on the Internet certainly isn’t safe, but fortunately, new technology means it also isn’t necessary. Using a public blockchain to store your identity, you can login just as easily to different places, can’t get hacked, and you stay in control of who knows what about you... In this new process, the ‘notary’ is the identity service, and the ‘registry’ is the public blockchain. This is a one-time thing, and the identity service can throw away the data after they inspect it for you. Several startups like uPort and Civic, as well as big companies like Microsoft and IBM are either building or have solutions. Note that the identity service isn’t the same service (social network, etc.) that you are ultimately going to be using, and therefore won’t know anything about which services you later use, or what you do there. 

There's a lot more to this idea which I hope to delve deeper into soon. Before doing so, I'd recommend this recent VentureBeat post by Adam Frisby, raising serious concerns about blockchain, and Philip's response to those concerns.

Philip Rosedale Defends Use of Blockchain as Social VR Payment System

Philip Rosedale's online social VR world High Fidelity famously uses a blockchain-based cryptocurrency for user-to-company and user-to-user payments, so understandably, Philip strongly disagreed with this recent VentureBeat post by Adam Frisby, lead creator of Sinespace (full disclosure: a sponsor to this blog), who pointed out some concerns with blockchain, especially as a payment system for online worlds, but also for many other payment services. Philip just sent me a thorough reply to Adam's guest post, which for the sake of clarity, I'm running alongside the passages in italics he's responding to -- beginning with the more general challenges that Adam raised on VentureBeat:

For most consumers, losing a password to an online service is a mild inconvenience they’ve grown accustomed to, since typically, it’s quickly fixed by requesting an email reset, say, or talking with customer service. Blockchain wallets and their passwords, by contrast, are tied to a file on a user’s hard disk and are absolutely critical to users trying to access the blockchain. By their very nature they have no recovery mechanism. “You lose your password, you lose everything” is an awful user experience for mainstream consumers and a nightmare for companies attempting to build their service on a blockchain.

PHILIP ROSEDALE: Yeah, it's inconvenient to lose your password, but you know what's really inconvenient? When Equifax gives away all your information to hackers, as they just did! At least with the blockchain, YOU have a choice. If you want, you can use a separate service that stores your password for you and will give it back if you need to reset it. For example this is what people using Coinbase do - you can recover your passwords. And because you can use a separate service that hackers probably don't know is associated with you, you are much less likely to get information stolen. But the security choice is up to you, not Facebook or Google or Equifax.

Blockchain adds frictions to an already seamless process... Most public chains have settlements measured in minutes — unless you’re willing to pay high transaction fees. Compare that to the 2-10 seconds for a saved credit card transaction customers are accustomed to in the age of fast mobile interfaces and instant gratification.

PR: [This] is true for the current public blockchains, but several newly proposed public blockchains (including our own) achieve high speed and low costs by shortening the list of blocksigners, something I've covered in detail in our [High Fidelity] blog post. Our blockchain is up and running and has 2 second settlement times, for example. 

Philip also went into detail defending blockchain specifically as a payment system for online virtual worlds, something both he and Adam have experience in. (Frisby ran a couple large online businesses within Second Life during its heyday, which of course Philip founded.) Adam's concerns first:

Three Points John Oliver Should Make in His Next Cryptocurrency Segment

This is of course a hilarious and wild ride through the euphoria that is crypotcurrency and blockchain, though my strong sense is John Oliver and team decided to pull their punches -- to the point where most Redditors in the very Bitcoin subreddit he mentions in the segment don't seem to be re-considering their life choices. This being among the top-upvoted comments in a thread on the segment:

This was a good piece. It said the benefits. Said how it is basically gambling and a speculative place. Basically, do you research and don't just jump on the bandwagon. Only invest what you can afford to lose and realize that there is a lot of unregulated bullshit and scams you have to be careful of.

This is all true... but only scratches the surface of the problems inherent in Bitcoin/blockchain. On the off chance Oliver's researchers are lucky enough to read this post like you are, here's three points they should consider adding in the inevitable follow-up segment: 

Three Reasons Why Blockchain May Not Be the Best Solution for Online Game Payments & Protections

"Why blockchain isn’t ready for primetime" is a new VentureBeat guest post by lead Sinespace developer Adam Frisby (full disclosure, an NWN media partner), whose skepticism is significantly based on his experience helping manage virtual currency payments in Second Life (where he once ran a large community/animation brand) and other virtual worlds:

My background is developing virtual worlds similar to Second Life — MMOs where users create, build, and usually sell their virtual wares to other users. In principle, blockchain should be my holy grail, enabling user-to-user micropayments without a middleman. But it’s not that now, and it probably won’t be for a long time.

I've long been an admirer of blockchain's potential as a technology, but Adam raises some really strong points I've not considered, or seen discussed elsewhere:

Infographic: Survey of Gamers Suggests Strong Ownership of & Interest in Using Cryptocurrency Across Game Worlds

Here's a noteworthy infographic from Wax.io, a virtual assets service, based on a survey of 1000 gamers. (Click to embiggen.) Key points: 55% of the millenial gamers surveyed own a cryptocurrency, while 3 in 4 of the gamers surveyed want a means for exchanging their virtual goods in one game for virtual currency they could use in another.

"The survey was built on SurveyGizmo and then distributed through Amazon's Mechanical Turk," says Salvador Ingram, who helped create the infographic for WAX. "To participate in the survey, respondents had to consider themselves gamers (an avid player of video games and frequenter of online virtual worlds) and buy/trade/sell virtual items on occasion."

Notably, 87% of the gamers surveyed say they've never actually used a cryptocurrency within a gaming community -- unsurprising, as most cryptocurrency owners rarely use it to purchase goods and services, preferring instead to sell it to others for real cash.

Here's the breakdown of cryptocurrencies mentioned by the survey takers, with Bitcoin predominating, but several others showing significant usage:

Salon Becomes First News Site to Monetize Through Cryptocurrency Mining

I pretty much started my career writing about virtual worlds and related topics for Salon, so it's a uniquely personal irony that the pioneering news and opinion site is now giving readers the option to block ads in exchange for letting Salon leverage the reader's computer to mine virtual currency:

How does Salon make money by using my processing power?

The demand for computing power across many different industries and applications is potentially very high. We intend to use a small percentage of your spare processing power to contribute to the advancement of technological discovery, evolution and innovation. For our beta program, we’ll start by applying your processing power to help support the evolution and growth of blockchain technology and cryptocurrencies.

The specific cryptocurrency being mined isn't mentioned, possibly because more than one are involved, or perhaps, that Salon as a left-leaning outlet has been highly critical of Bitcoin -- asking just a couple months ago if Bitcoin is enabling right wing extremists, or pointing out that it's a threat to the environment. Which, you know, puts Salon in a somewhat awkward place.

In any case, while other media sites (such as Showtime) have got into the business of leveraging users' computing power for cryptocurrency, this is the first general news site I'm aware of to do this, and as an alternative for monetizing through ads. Which is noteworthy, though I can't possibly be more ambivalent:

Dell Stopped Accepting Bitcoin Payments Last Year But the Bitcoin-Euphoric Press Barely Noticed

Hey remember that nice infographic showing the 100+ major companies and organizations which accept Bitcoin as payment? Important update via a comment from longtime NWN reader Laura Pevehouse, who works for Dell:

Dell's pilot with Bitcoin ended last year. As I noted in an update to our original announcement, we demand was too low to make it viable in the long run.

Evidently, Dell's processing costs didn't outweigh the revenue Dell was getting from Bitcoin. I'm somewhat surprised, because it at least makes a little more sense to buy a $3500 gaming laptop with Bitcoin than spend Bitcoin to buy, say, a $50 game from Steam. (Which also recently discontinued Bitcoin payments.) I deeply suspect other companies besides Dell have discontinued their experiment with Bitcoin.

I'm sorry I missed Dell's original discontinuation notice, but then again, Googling "Dell discontinued Bitcoin payments" shows little or now media coverage -- even though Dell is one of the biggest companies to attempt trading in Bitcoin.

Why so little coverage? Probably because media outlets are still publishing stories like this one: