BITCOINS: A VIRTUAL CURRENCY
Submitted to- Professor Dilip Thosar
Submitted by- Chidansh Choudhary
Date of submission: 24th December ‘13
Virtual currencies are increasingly becoming a part of not only the virtual world but also in the real world. There are various problems associated with virtual ...view middle of the document...
This system was effective and efficient for trading large amounts of money. Today we use fiat money which is by definition a ‘legal tender designated and issued by central authority’. This money is a common and accepted medium of exchange as it is entrusted with the central authority. The three main characterises of fiat money which makes it functional is it acts as a medium of exchange, it has a common base for measurement of value of different goods and services and also it can be saved for future.
The number of internet users has grown from 361 million in 2000 to 2261 million in 2011 which are about 33% of the global population. With increasing usage of internet being used as a social platform for various activities has led to the formation of virtual communities. These communities have been formed on the basis of people’s interest. Virtual communities have created their own virtual currencies for exchange of virtual goods and services they offered creating a new form of digital money. But the definition of virtual currency has been questioned because of its usage to buy real goods and services.
By definition a virtual currency is a type of unregulated digital money which is issued and usually controlled by its developers and used and accepted among the members of a specific virtual community. However this definition is subjected to change due to extension of its usage in real world.
We used secondary sources such as books, published research papers, and reports for our information.
TYPES OF VIRTUAL CURRENCIES
There are three types of virtual currency
1. Closed virtual currency: this is a type of currency which is only used in the virtual world for only buying virtual good and services. Users pay subscription money to get virtual money and this virtual money is used to procure online goods created for the games. Sometimes the virtual money can be supplied by the game based on user’s performance. This is why it is also called ‘in game only’ currency. It is also to be kept in mind that these virtual goods and services cannot be traded outside in the real world. For example Farmville which is role playing game which requires the gamer to set up their farm and keep it working to earn coins, which are used to upgrade the farm, buy goods for it such as tractors, ploughing machine and seeds.
2. Unidirectional flow of virtual currency: this type of virtual currency can be purchased using the real money, at a specific exchange rate to buy virtual goods and services and in some cases also to buy real goods and services. However this type of currency cannot be sold in exchange for real money. For example Facebook credits which is the currency used to buy goods and services only in its virtual application could also be bought by real money. These could also be gained through special promotions on online purchases. However in July 2012 Facebook announced that the change amount could be converted to local...