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A Chinese Virtual Currency Challenges the Yuan
Posted by
Zonk
on Fri Mar 30, 2007 12:11 PM
from the now-buying-oil-in-wow-gold-thanks dept.
from the now-buying-oil-in-wow-gold-thanks dept.
Radon360 writes "A Wall Street Journal article reports that China's fastest-rising currency isn't the yuan. It's the QQ coin — online play money created by marketers to sell such things as virtual flowers for instant-message buddies, cellphone ringtones and magical swords for online games. In recent weeks, the QQ coin's real-world value has risen as much as 70%. It's the most extreme case of a so-called virtual currency blurring the boundaries between the online and real worlds — and challenging legal limits. A Chinese Internet company called Tencent Holdings Ltd. designed the payment system in 2002 to allow its 233 million regular registered users to shop for treats in its virtual world. Virtual currencies are in use in many countries — but nowhere have they taken root more deeply than in China."
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Games: Ask the MMOG Money Traders 239 comments
Late yesterday, Sparter Inc. announced the Gamer2Gamer virtual currency trading platform. The goal: to provide a secure currency trading environment for players of Massively Multiplayer Online Games. Rather than purchasing currency outright, the goal of the project is to cut out the middleman and (implicitly) the gold-farming consortiums that supply larger for-pay sites. We were contacted by a representative from the company before the release went out, looking to speak with the Slashdot community about the service. In his words, the folks at Gamer2Gamer "are devoted gamers themselves and are well aware that not everyone will like the idea -- but we think plenty of folks will like a world where Real Money Transfer is workable and unintrusive." And so, you get the chance today to put the hard questions to them. One question per comment, please, and we'll pass on the best of the lot to be answered as soon as possible. Update: 06/14 17:58 GMT by Z : Howzer points out that there is an extensive FAQ on the service, that you can use as a springboard for questions.
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You haven't been to Canada have you (Score:4, Funny)
Re:You haven't been to Canada have you (Score:5, Interesting)
It is fact that in the U.S. just about anyone can print currency as long as it's in Dollar denominations and $1 of your dollars is valued/redeemed at $1 USD. The fact that the Federal version of the Dollar is the one most widely accepted doesn't mean that another currency can't be valuable.
I wonder what US courts will decide when it comes down to treating virtual currency in regard to actual currency. Should you be able to buy $200 worth of virtual currency for $20 USD? Or will it have to have a redemption value ratio of 1:1?
This is obviously not the case in China.
Parent
Re: (Score:3, Interesting)
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Just to point out that the QQ dollar is worth what people will pay for it. Big deal if it isn't officially traded - the market is there and it's already being traded.
Since the virtual currency will never be traded on an open market, its impossible to value your assets correctly
Not true - it may trade at a discount because it's traded in a subordinate market, but that doesn't mean it's imposs
Is anyone else here thinking about Tulips? (Score:3, Insightful)
Not likely. (Score:4, Insightful)
Clearly, the barrier to development of this virtual currency market is that the Chinese Government (or any other government for that matter) doesn't want it. There are a few reasons, but the most obvious are loss of control, dilution of "real" currency, and inadequate backing of the currency. For example, the Chinese government has control over the supply of yuan (they print it), and back the yuan's value. QQ coins on the other hand, are only "real" in the sense that Tencent allows you buy things with them. While the Chinese government will always support the yuan, Tencent can't guarantee the QQ will always have value. If Tencent went bust, or had an employee suddenly issue billions of QQ dollars, the value of the currency would plummet.
Given the above, this currency will never be allowed to exist peacefully with the yuan. It will never be used for big business to business transactions, so we'll never see specialized markets for lending or futures.
Parent
tap the vein (Score:3, Insightful)
Re:tap the vein (Score:5, Interesting)
What's hilarious is that after you buy it, it's still in the game which actually makes it property of Blizzard, residing on their servers. Wouldn't it be an interesting world if this took off and you don't even own your own money anymore, and essentially have to use "disney dollars" for purchases. A nice way to go back to the Erie Canal model. I'm not saying this is what's happening, but it's an interesting concept.
Parent
Someday... (Score:5, Funny)
Re:Someday... (Score:4, Funny)
I, for one, welcome the new Slashdot cliche eradication squad, although i don't envy the size of your task.
Parent
Obilg. (Score:4, Funny)
In a sense... (Score:5, Insightful)
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Virtual Value is very similar, but in the case of
Who matters, not What (Score:3, Insightful)
In many ways I only deal with virtual currency by using my debit card. Virtual in the sense that I never actually saw that amount of federal reserve notes. However, I will not, ever use any virtual currency that is not backed by a real government with a sound monetary policy.
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The US Dollar is essentially a promise to pay by the US Government. Its not backed by anything other than trust in the government. This isn't as silly as it sounds, since the government can raise funds in hundreds of different ways, from raising taxes to printing more money.
Borrow "funds" then print and payback + interest (Score:4, Insightful)
If that doesn't shake your faith in US currency, nothing will.
Parent
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Gold Standard (Score:4, Insightful)
No. It doesn't have to be.
Post World War 2, Gold standard was replaced by the Bretton
Wood Monetory system, which was also based on Gold Reserves.
However, the US (under Nixon) totally shut off gold based
currency in 1971. Very few currencies are gold backed
currently.
Parent
Re:In a sense... (Score:5, Insightful)
Sarcasm, I assume? Modern currencies generally are not backed by precious metals at all. And in history, things besides gold have been used: the UK's pound used to be backed by silver before it was backed by gold (before it stopped being backed by anything at all), and there were gold-vs-silver debates (the details of which I've forgotten) in American history too.
Really, what's the significance of gold? What good would it do you or anyone else? Why does it have value? It's just mutual agreement and the faith that it has a value that gives it its value.
I could even imagine some sort of public-key cryptographic scheme used to assign value to magic numbers... Think Cryptonomicon.
Parent
Re: (Score:3, Insightful)
Because there is a finite amount of Gold, attempts to make [wikipedia.org] gold (until recently it seems) have always failed, even though the possibility of making gold is now feasible it is cost prohibitive.
This is why there wasn't a sand standard, or water standard... Precious metals are finite (without space exploration at least).
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One advantage of fiat money (I am not saying there aren't disadvantages) is that if suppliers of a few commodoties agree it has value, it essentially becomes backed by all of them. With a standard based on rare metals, you are subject to market collapse on discovery of large amounts of the ore. This happened som
Re:In a sense... (Score:5, Informative)
That's correct. It's part of the reason why they eventually went to a fiat system, actually. The thing is, the whole "gold-vs.-silver" argument was idiotic from the beginning. Their problem was simple: they tried to fix the price (exchange rate) between gold and silver (bimetallism). As an inevitable consequence you would rarely see both gold and silver used in exchange simultaneously. Whenever you have a fixed (or otherwise arbitrary) exchange rate "bad money drives good money out of circulation"; i.e. if 16 ounces of silver is worth one ounce of gold on the open market, but the law mandates an exchange rate of 20:1, then no one will pay for anything in gold (and visa-versa). This was a well-known principle at the time, since the same effect had previously been observed in Britain under similar circumstances. The decision to enforce a fixed exchange rate was strongly politically motived, and (as I recall) mainly driven by the silver manufacturers.
If they had just left the exchange rate "floating" according to the demand for gold and silver the most likely result would have been the use of silver for small transactions and the simultaneous use of gold for larger ones, which is emminently practical considering the relative "value densities" of silver and gold. At present prices, for example, silver becomes cumbersomely large when dealing with more than, say, $35 worth (about two troy-ounce coins in coin form, each about twice the diameter of a quarter), whereas gold becomes cumbersomely small for anything under about $55 (1/10 ounce, about the size of a dime). Amounts in the $35-$55 gap can be easily handled by simply making change in silver from a 1/10-oz gold piece according to the store's advertised exchange rate.
Of course it would be even more likely, given today's technology, that people would simply use some sort of electronic exchange system similar to our debit cards. Existing exchange networks, such as e-gold, permit online transfers of as little as 1/10,000-oz. (~$0.055), which tends to eliminate the need for multiple currencies. For such a system gold would probably be considered preferable for its small size (and thus ease of storage).
There are a number of industrial uses for gold: corrosion-resistant plating, wiring in integrated circuits, etc.; its use in jewelry, too, is partially due to its material properties (including appearance) and not just its price. It can even be formed into an aerogel and employed in supercapacitors and some kinds of filters.
In monetary terms gold has value (apart from its marketability) both because it has a naturally limited supply and because its alternate uses tend to set a floor on its value. Fiat currencies can be devalued without limit; their scarcity is purely artificial and they have no significant uses besides exchange.
The only reason we have a fiat system in the U.S. is that at one point in our fairly-recent history the government confiscated (stole) all the privately-owned gold (at that point the primary medium of exchange), banned its use, and replaced it with paper notes. People didn't really have a choice; they could either use the notes or revert to a primitive barter system. The ban on gold ownership/use was eventually lifted (within the last 35 years, I believe), but at that point the damage was already done -- and the stolen property was never returned. It remains to be seen whether the fiat system will remain now that it's no longer legally mandated; it took a few thousand years to develop the system we had before, and short of forcing everyone to switch yet again I wouldn't expect things to go back to normal in just one or two generations.
Parent
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That is not true, but I think I know where you're getting the idea. You should look up the "Gold Standard". Very few currencies (if any) are currently on a Gold Standard.
Perfect for MMOs (Score:2)
Virtual game.
QQ coin. [urbandictionary.com]
It's perfect for those chinese gold farmers.
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Behind the times? (Score:2)
Isn't all currency virtual? (Score:5, Insightful)
So, except for the legislative issues, is there really a fundamental difference?
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Almost no corporations are built to benefit the people, they are built to benefit the managers and owners.
Someone, at some point, will get greedy.
Re: (Score:3, Insightful)
Difference between MMO money and real world money is that there is nothing physical backing the MMO money. I admit, one could argue real world money is poorly backed itself, but at least they got some amount of gold stashed away somewhere.
Virtual money though? It's nothing but a mysql column.
Nope! All currency is a commodity... (Score:5, Informative)
You see if currency were really a medium which symbolised value, it wouldn't change much. Bread, coffee, gold etc would pretty much always cost the same, they would always have the same value throughout time. Instead what happens is that over time, everything becomes more expensive, inflation. What's happening is that the currency is losing it's value. It does that because there's more of it; supply and demand. When the government('s bankers) print money, all the existing money in circulation decreases in value because there is more of it around.
So, no, there's no fundamental difference between real and virtual money, just as there's no fundamental difference between real money and a kg of coffee.
Parent
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Actual stuff is different than money. If I am marooned on an island, I can eat bread. The money is useless.
What does "commodity" mean to you here? I understand that there's a market for money and there's a market for money, both of which are affected by supply and demand.
Why can't there be a market for a "medium to symbolize value"? What property of a commodity makes this wrong?
Re:Nope! All currency is a commodity... (Score:5, Insightful)
The intrinsic value of money is it's market value, which is why people get so confused over it's nature. It's still a commodity.
Parent
Re: (Score:3, Insightful)
What is it about being a commodity implies money cannot be a medium to symbolize value?
OK... It can symbolize anything you want it to. It can symbolize good/evil/philanthropy or whatever, you can make anything a symbol of anything but that's meaning which you are applying to it, it isn't meaning which is inherent in it's nature.
Money isn't inherently a symbol of value, the symbolisation of it in that way is something people add, and are encouraged to add by governments and banks. It's basic nature is that of a commodity; If everyone has a million dollars, then a million dollars is worthless.
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That's just plain stupid. Coffee has intrinsic value, money does not. Just because the "value" of money fluctuates, does not make money a commodity.
A currency is only as strong as the government that issued it. When the government that printed your money collapses, it instantly loses all its value and becomes paper again. It makes sense that nowa
Re:Nope! All currency is a commodity... (Score:5, Informative)
http://www.rampantscotland.com/know/blknow_money.
http://en.wikipedia.org/wiki/Banknotes_of_the_pou
Have a read:
http://www.mises.org/money.asp [mises.org]
Originally almost all money was privately issued, governments acquired the process because it allows them to create and spend money without having to tax the populace. Doing so devalues the existing currency and so is a subtle form of taxation. You've been taken in by your local government's propaganda over the nature of money.
Parent
Re: (Score:3, Interesting)
The "market value" of a bank note only exist because you have a reasonable certainty that someone will accept it at that value (usually a government provides that certainty). The intrinsic value of a bank note is the amount of paper and ink needed to produce it - usually much lower than the market value. I didn't say that only governmen
And that would be even more embarrassing (Score:2)
So, what would be even more embarrassing then our economy hitting a brick wall because the Chinese are pulling all their
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p.s. They have Europe, Japan and are developing their internal market.
It'll become worthless (Score:2)
Not surprising. (Score:2)
It would be like saying every 1 US dollar is now worth 2 US dollars and then gaging the growth of the EU currency as a sign of how stable and capable the EU is when their currency adapts to this force. When If they were all val
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Personally I think its a very poor currency policy, but there you have it.
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under, not over, valued (Score:4, Informative)
I think your comment on the stock markets is just a troll, but they're not overvalued either. The Chinese market is one of the fastest growing markets in the world.
Parent
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Re:Aren't most currencies virtual these days? (Score:5, Insightful)
Parent
The main difference being (Score:3, Insightful)
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