New World Notes

Libra Has Promise, Says Virtual Currency Expert/Blockchain Skeptic Adam Frisby, But Faces Adoption, Trust & Storage Challenges

Everyone in tech is talking today about Libra, the new blockchain-related cryptocurrency initiative led by Facebook in association with many major companies and organizations. (Read this detailed summary from Josh Constine on TechCrunch.) Assuming it isn't regulated to death by concerned government officials, can it live up to the utopian promises made in its promotional video (see above), while becoming a functional alternative to existing currency system?

"Biggest hole is just whether or not people trust it," virtual currency expert Adam Frisby tells me, in a chat today. "I think some will. Honestly, if it was anyone but Facebook pitching this (even if their stake is a minority one), it'd be way more likely to succeed."

As longtime New World Notes readers know, Adam has been involved as an entrepreneur in virtual world economies for over 15 years, and recently wrote a much-shared VentureBeat essay detailing his skepticism for blockchain. Libra, however, has promise, because (in his words) "it [s]olves a lot of the issues with blockchain, by not really being one."

One interesting point he raises: The industries with the greatest incentive to use Libra now are on the edge of the mainstream economy -- for instance, gambling, online gaming, porn, and the burgeoning legal pot industry in some US states. In my view, their rapid embrace will likely turn Libra into "Vice Coin" -- a brand association which might hamper Libra's adoption by the wider mainstream. (Which is probably not what Facebook and its partners were going for.)

On a technical front, Adam me, the heavy storage requirements may prevent Libra from becoming decentralized. Other challenges remain. For more detail, here's our lightly edited transcript:

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:

High Fidelity to Launch Virtual Reality-Based Cryptocurrency Exchange Where Users Can Convert Their Bitcoin, Ethereum, etc. Into HFC

Philip Rosedale just announced that his new High Fidelity platform is enabling user-to-user payments of HFC, its blockchain-based, centrally-managed cryptocurrency. To help spur the virtual economy, the company is also giving out free "grants" of HFC to early users of High Fidelity: "This means," he explains, "you can now do things like tip a virtual DJ during a performance, or in the future, exchange one cryptocurrency for another at a virtual foreign exchange office."

Yes, you read that right:

We have also created a server for the community called ‘BankofHighFidelity’, which can hopefully be an in-world hub for those offering services such as exchange between different cryptocurrencies and HFC, as well as being the location to receive the grants mentioned above.

I just e-mailed Philip to ask if that mean what I think it means: "For example, users can exchange their Ethereum for HFC?"

Philip Rosedale's reply: "It isn't up yet, but will be soon, and the answer is yes."

Impressively ambition move. When this exchange goes online, it could become a (relatively) seamless way for all variety of cryptocurrency owners to convert some of their holdings into a centrally stabilized cryptocurrency. (HFC is managed by the company to prevent wild fluctuations of value.) And in the near future, we should see exchange services that enable selling HFC for actual, cold, hard, backed by the US military, fiat cash.

Bitcoin Infographic: Look at All the Big Companies & Organizations Which Wasted Time Trying to Accept a Virtual Money Hardly Anyone Uses as Money

Market research firm 16 Best just sent me this beautiful and handy infographic showing all the major companies and organizations which accept Bitcoin as payment -- over 160 in fact! -- click here for the embiggenated version. With Bitcoin price wildly fluctuating while daily transaction volume stubbornly remains flat, it's really a case study in humility, and the hubris of libertarian thought experiments which run aground against reality: So many reputed firms with so many smart people, convinced despite all evidence to the contrary that Bitcoin was ever going to be used as actual money to buy actual (legal) goods and services. With Bitcoin's daily transaction rate at around 200,000 per day, it remains the case that Linden Dollars are still used more often than Bitcoin has been, or likely every will be.

Chia: Bitcoin's Green Competitor Must Still Compete With Inertia That Made Climate Change a Problem in the First Place

Bitcoin may require more energy consumption than a Trump fan with a McMansion and an SUV, but now, reports Josh Constine at TechCrunch, a talented coder has come up with a solution:

A bitcoin transaction wastes as much electricity as it takes to power an American home for a week, and legendary coder Bram Cohen wants to fix that. And considering he invented the ubiquitous peer-to-peer file transfer protocol BitTorrent, you should take him seriously. Cohen has just started a new company called Chia Network that will launch a cryptocurrency based on proofs of time and storage rather than bitcoin’s electricity-burning proofs of work. Essentially, Chia will harness cheap and abundant unused storage space on hard drives to verify its blockchain.

Pretty impressive -- though this just means Chia is facing the electric car problem on a micro level:

Bitcoin Users Are Hurting the Environment More Than Every Donald Trump Supporter Driving a Giant SUV

You think I'm exaggerating but turns out I'm probably not, as Vice reports:

That problem is carbon emissions. De Vries has come up with some estimates by diving into data made available on a coal-powered Bitcoin mine in Mongolia. He concluded that this single mine is responsible for 8,000 to 13,000 kg CO2 emissions per Bitcoin it mines, and 24,000 - 40,000 kg of CO2 per hour.

As Twitter user Matthias Bartosik noted in some similar estimates, the average European car emits 0.1181 kg of CO2 per kilometer driven. So for every hour the Mongolian Bitcoin mine operates, it's responsible for (at least) the CO2 equivalent of over 203,000 car kilometers travelled.  

...Since the average American household consumes 901 KWh per month, each Bitcoin transfer represents enough energy to run a comfortable house, and everything in it, for nearly a week. On a larger scale, De Vries' index shows that bitcoin miners worldwide could be using enough electricity to at any given time to power about 2.26 million American homes.

For the planet's sake, it's a good thing that Bitcoin usage in absolute terms is tiny and not growing, but that hasn't stopped the fervent Bitcoin mining and transactions among Bitcoin users who are hoping their numbers grow so they can cash out during the currency's artificially inflated bidding price. Another problem, as Vice's Christopher Malmo notes, is that high energy consumption is intrinsic to Bitcoin:

Despite Little Growth or Usage, Ethereum Founder Vitalik Buterin Claims Blockchain-Based Virtual Currencies Will Rival Visa in Two Years (LOL)

Here we go again: After years of hype over Bitcoin, little of which paid off while the virtual currency was beset by one scandal after another, Ethereum is starting to gain interest as a potentially better alternative. Unsurprisingly, it's also starting to generate the same level of hype, and the same implausible but unchallenged claims:

The mind behind Ethereum, Vitalik Buterin [believes]... with the right incentives, Ethereum can replace things like credit card networks. Right now the network is a bit too slow for most mainstream applications. “Bitcoin is processing a bit less than 3 transactions per second,” he said. “Ethereum is doing five a second. Uber gives 12 rides a second. It will take a couple of years for the blockchain to replace Visa.”

Remember how I kept pointing out for several years that daily Bitcoin transactions simply weren't growing, and were tiny in absolute terms? Let's look at daily Ethereum transactions:

After solid if not hockey stick growth over this year, daily Ethereum transactions peaked recently at nearly 500,000, and since then, have floundered between 350-450K transactions per day. And are no longer consistently growing. That's roughly the transaction rate of Bitcoin, which have also peaked.

OK, how's that stack up against Visa? Well, Vitalik, it's like this [.pdf link]: 

Decentraland Update: 1800+ Users Spent the Ethereum Value of USD $25 Million on Virtual Land Plots

Ari Meilich of Decentraland,, open standards-based social VR world, recently posted an update to last week's successful selling of USD $25 million worth of virtual land via Ethereum (ETH). He addresses some of the controversy over how tokens were released (excerpts in comments of the original post here), which is a bit too inside baseball for me to have an immediate opinion.

What's more interesting to me is how many people bought virtual land, and how much -- which you can see in this chart from the blog post: Just over 1800 users. And if I'm reading the chart right, most users bought virtual land plots for the ETH equivalent of USD $24, but on the high end, 32 people bought virtual land worth USD $7200 or more.

Which, you know, is pretty impressive:

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:

Enter the Sansar Dollar: First Virtual Currency With Real Money Value in New VR Era

Along with the creator preview video just out today, Linden Lab is releasing some interesting info about the Sansar Dollar, which operates very much like Linden Dollars, in the sense that their value is pinned to the US dollar, but fluctuates according to market demand. Unless I missed another example (and this is certainly the most prominent one), this is the very first virtual currency with real money value in the post-Oculus era of VR.

However, ending speculation among many SLers, no, it will not be immediately possible to buy Sansar Dollars with Linden Dollars, or vice versa:

Linden Lab: The exchange rate between USD and Sansar dollars will be floating and will vary according to supply and demand. The rate will not necessarily be equal to the exchange rate between USD and Linden dollars in Second Life (which is also floating).

To begin with, the exchange rate is about USD1 to S$100.

Road to VR: Can owners of Second Life currency transfer it to Sansar for use there?

Linden Lab: For now at least, not directly. At this time, Second Life users can sell Linden dollars for USD on the LindeX, and then can use those USD to purchase Sansar dollars.

In the future, we could potentially allow Second Life users to buy and sell Sansar dollars for Linden dollars, but because the two platforms will have different business models, fee structures, and exchange rates, we’d want to be careful not to set up a system that could be exploited.

That's very wise, and when it's spelled out that way, it makes me think there never will be an active exchange market between Linden Dollars and Sansar Dollars. Some kind of controlled "buyback" campaign, where users can exchange a set block of Sansar Dollars directly from Linden Lab for a set price of Linden Dollars, is probably the better way to go.

Speaking of which, Tom's Hardware raises a good question about the 500 people who are already in Sansar's early access program: