Currency Design For Social Networks

Currency Design for Social Networks Jon Matonis Monetary Strategy Consulting Digital Payments ׀ Virtual Currency ׀ Central Bank Design themonetaryfuture.blogspot.com Gibraltar, March 2010

Overview
The Changing Digital Payments Landscape
Virtual Currency Opportunities
Central Banking Opportunities in Virtual World Environments
Monetary Strategy Consulting
Selected Projects
Contact Information

Digital Payments
Payments go mobile
Peer-to-peer is essential
Prepaid cards are a factor
In-world to real world convertibility
Bearer certificates as negotiable “tokens”
Anonymity and untraceability are drivers
Non-reversibility is a paradigm shift

Virtual Currency Opportunities
It's NOT just about the platform
It's about setting monetary policy
It's about creating a medium of exchange
It's about encryption and security
It's about negotiability and circulation
It's about critical mass and installed base
Viral design is the competitive advantage

Virtual Currency Design
Create a reliable and stable store of value
Select a unit of account for the real world
Leverage existing exchange infrastructure
Eliminate real-money trade (RMT)
Encourage outside circulation (viral)

Central Banking Opportunities
Customized design for social networks
Key functional areas mirror real world
Benefits unique to virtual currencies
Drive adoption rates
New revenue streams

Central Bank Design
Virtual world developers will rely increasingly upon in-house macroeconomists
Environments will require in-world central banks or that functionality will be outsourced
Envision the virtual economy having multiple non-governmental monetary authorities

Central Bank Functions
Provide a stable unit of account
Maintain convertibilty to “real” backing
Perform clearinghouse function
Act as lender of last resort
Guarantee overall system integrity

Central Bank Benefits
Promote brand outside of virtual world
Drive adoption rates of new users
Become the dominant trade currency
Attain reserve currency status which will solidfy status and provide issuance opportunities
Enjoy new revenue streams

Drive Adoption Rates
Currency unit of account is a pardigm shift that becomes the driver for the new “experience economy”
Benefit from both in-world and real world currency circulation

New Revenue Streams
Processing fees
Licensing and management
Seigniorage profits which is the difference between interest earned on purchased securities and costs to produce and distribute currency

Monetary Strategy Consulting
Expand transactional volume through increased payment options
Analyze e-money laws and jurisdictional issues related to transaction anonymity and traceability
Research new markets and prepare feasibility studies appropriate for that country or region
Structure the virtual central bank for maximum market penetration

Selected Projects
Sumitomo Bank - Eurodollar deposit platform (1985)
VISA International – Foreign currency trading and pricing model (1992)
VeriSign – Encrypted payment services product offering (1996)
SWIFT – Secure certificate hierarchy and server proposal (1996)
Hush – Launched HushMail 2.0 with OpenPGP compliance (2001)

Contact Information
Jon Matonis [email_address] linkedin.com/jonmatonis twitter.com/jonmatonis themonetaryfuture.blogspot.com

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Currency Design For Social Networks

by Jon Matonis on Mar 13, 2010

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