ivanwalsh’s posterous

He does concede that there is are risks.

As with anything tradable, market forces come into play. The value of gold goes up and down. Prudent investors stay diverse. However, gold was one of the only assets to actually gain in value during 2008 and it has a 5000 year track record as a tradable commodity.

"We might be years from the point where you buy your coffee with a digital gold based transaction, but current economic indicators are not looking good - and gold’s historic role as a safe haven in troubled times makes it an appealing instrument of trade as well as a sound investment."

The ability to use GoldMoney as an IRA is equally appealing. 

Getting GoldMoney on for the iPhone

1. Open an account and trade with other account holders.

2. Put money in and take it out as you need.

In this respect it’s similar to Paypal.

Developers of epayment systems and virtual currencies should take a look at this CNN report in the transition of virtual currencies into the retail banking sector.

This license allows Mind Bank to be the first bank to directly incorporate real-money transactions with virtual-world activities.

Selling virtual assets directly between players for real-world cash has been strictly prohibited by most game publishers, which find themselves looped out of the profits.

This takes the exchange of virtual currencies into real monies to a new level.

While World of Warcraft and EverQuest users have engaged in "gold farming", i.e. gathering weapons and other status symbols, and then auctioning these off, usually on EBay.

Games publishers have started to monitor with mixed results. In response, PlayerAuctions have adopted a PayPal-like approach where it brokers the deals, acting as an open marketplace for player-to-player exchange of digital assets.

CNN interviewed Simon Newstead who explained: "The idea with dual currencies is that there is a paid currency [Gold Coins], which is paid for using real money and exchanged between sellers and buyers. In addition, there is a second currency -- a free or so-called 'earned' currency [Silver Coins] -- which is gained through activity and progression in the world or game."

"In this way," he continues, "the economy can recognize different forms of contribution, and in newer economies these can also be traded between each other. For example, people earning currency and selling it to people who have less time but have real money."

Virtual currencies in Second Life

Second Life's marketplace includes objects and services for sale, including real estate.

In 2008, over $100 million worth of Linden dollars (Second Life's currency) were bought and sold on its LindeX exchange.

"In Linden Exchange, the U.S. dollar part of the transaction is via PayPal, a well-known entity, so there's a certain amount of trust that comes with it," says Darrly Chang, co-founder of D&D Dogs, who sells virtual dog pets and avatars to Second Life residents.

CNN’s reports also discusses, GoldMoney, who launched a dedicated iPhone application allowing account holders to exchange gold and silver units within minutes.

This iPhone application let you manage your own digital gold like on other banking applications.

GoldMoney is firmly anchored to real-world assets, forbidding anonymous accounts.

This contrasts with E-Gold, whose founder pleading guilty to money laundering-related crimes..

How realistic is the prospect of a digital currency?

"It all comes down to trust," says senior economist Frederic Neumann. "We trust the government to guarantee our 'virtual' money for real currency. [With digital gold] the gold standard is guaranteed by a private company. Governments already have several hundred years of sovereignty engrained in people's minds, so that trust is very difficult to establish."

Learn more at http://goldmoney.com/ and http://secondlife.com/whatis/currency.php

What’s been your experience buying and selling digital goods, especially if it involved virtual currencies?

Steven d. Levitt reports in the New York Times that while the financial woes of Lehman, Bear Stearns, Washington Mutual may seem old hat, we may need to prepare for another round of bank failures in the virtual world.

In some respects, it’s already happened

Blame a character named Ricdic.

Ricdic is part of Eve Online, which has about 300,000 players. They all inhabit the same online universe and play games that involve trade, mining asteroids and the efforts of different player-controlled corporations to take control of swathes of virtual space.

Ricdic, who used to run a large virtual bank on Eve Online, stole virtual funds and traded them to other players for real money, making a down payment on a very real house and paid off medical bills.

The result of all this?

A huge run on Ricdic’s bank.

Mr. Levitt notes that there in some irony in Eve Online’s banking crisis. After all, Eve online is run by an Icelandic company and real Icelandic banks were some of the worst casualties in the financial crisis.

According to the BBC, one of the game's biggest financial institutions lost a significant chunk of its deposits as a huge theft started a run on the bank.

It reports that one of the bank's controllers stole about 200bn kredits and swapped them for real world cash of £3,115.

What happened next?

Just like in the ‘real world’, as news of the theft spread, there was a run on the virtual bank with many customers removing their virtual cash into ‘safer’ locations or converting their virtual monies into real dollar.

Reuters followed up this story.

"This character was one of the people who had been running EBank for a while. He took a bunch of (virtual) money out of the bank, and traded it away for real money," Ned Coker, of Icelandic company CCP which runs Eve, told Reuters.

The scandal is not the first to play out in Eve Online. In early 2009 one of the game's biggest corporations, called Band of Brothers, was brought down by industrial espionage.

What’s the response from EBANK?

EBANK were quick to address this on their site.

“There are a number of wildly inaccurate news stories floating around right now about EBANK. The most common one claims that EBANK had 8.9 Trillion ISK in deposits or that the Chairman committed the theft.”

Ricdic was the CEO, not the Chairman and at most, we've had 2.5 Trillion in deposits.

Also, the Bank run has ended for the most part and we have not been forced to tap other lines of capital infusions. We are very well capitalized at the moment and withdraws are being processed within our 48 hour SLA. More at http://www.eve-bank.net

In an interview with Massively.com, the directors of Ebank make some further clarifications.

"The run on the bank has come to about 600 billion ISK, which has been withdrawn. They add that it has deposits of about 105 billion ISK sitting in Sweep to keep it liquid. Currently the run seems to be mostly over with only a slightly higher withdrawal rate still, than deposit rate. That's to be expected, and in-line with EBANK's strategy to shrink to a more managable level."

EBANK has always been sound due to massive reserves. Checks and balances have proven themselves to work as a mitigation device and by having the reserves spread out over several directors, the embezzlement was kept to a minimum.

However, the run on the bank had the potential to do great damage to EBANK as people frantically made withdrawals to ensure they would not be caught if the bank ran short.

Massively: http://www.massively.com/2009/07/02/new-perspective-on-eve-onlines-latest-bank-embezzlement/

Annual Report: http://www.eve-bank.net/EBANKAnnualReport07-08.pdf

Regards,

Ivan Walsh

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