Monetising Game Play on Social Network Sites

transcript

Jon Matonis

31 March 2011

© 2010 KPMG LLC, an Isle of Man limited liability companyand a member firm of the KPMG network of independent member firmsaffiliated with KPMG International Cooperative ("KPMG International"), aSwiss entity. All rights reserved.

• Chief Forex Dealer at VISA International

• Director of Financial Services Vertical for VeriSign, Inc.

• CEO of Hush Communications, creator of encrypted Hushmail.com

• Editor of The Monetary Future blog on digital currencies

Overview

Social Gaming and Virtual Currency

Revenue Shift Away from Advertising

Virtual Goods Revenue Increasing

The Entrance of Facebook Credits

Social Gaming Beyond Facebook

• Credit card/debit card

• EFT wire transfer/eCheck/ACH

• Cashier’s check/money order

• Western Union/MoneyGram

• Proxy eWallet account (Click2Pay, Moneybookers, MyPaylinQ, Neteller, Ukash, Webmoney, etc.)

• Mobile payment

• Non-political virtual currency unit (Facebook Credits, Linden Dollars)

Types of Payment Choices for eGaming

• P2P capable

• Anonymous/pseudonymous

• Two-way convertibility

• Transactional non-repudiation

• Easily divisible

• Portable and offline capable

• Security and scarcity

• Frictionless (no transaction fees)

• Nearly instant deposits/withdrawals

Attributes of a True Virtual Currency

• Gold bullion cannot be molecularly transported across the Internet

• Emulating the anonymity features of physical cash or gaming chips is difficult

• Digital bearer certificates have to verify against a centralised ‘mint’ which creates a single point of failure

• Decentralisation opens up the possibility for double spending the digital ‘coins’

Previous Barriers to a True Virtual Currency

Bitcoin: A New Entrant

• One of the first implementations of a concept called cryptocurrency (circa, 1998)

• Does not rely on trusting any central issuer

• Relies on the transfer of amounts between accounts using public key cryptography (like PGP for money)

• Scarcity based on a reusable proof-of-work

• Double-spending prevented by a distributed time server implementing chained RPOWs

What is Bitcoin?

• Current size of economy (~BTC 6,000,000)

• Nodes connected (5,000-10,000)

• Trading turnover (equivalent $30,000/day)

• Decentralised confirmations

• Distributed nodes (peer-to-peer)

• Open source software (peer reviewed)

• Non-political unit of account

• Independent market-based exchange rate

Major Features of Bitcoin

• 31/10/08 Bitcoin academic paper published

• 11/01/09 Bitcoin v0.1 released

• 17/07/10 MtGox exchange established

• 06/11/10 Bitcoin economy passes $1.0m

• 09/12/10 Generation difficulty passes 10,000

• 28/01/11 Block 105000 generated, 5.25m/21m

• 11/02/11 Bitcoin reaches USD parity, $1/BTC

• 03/03/11 Bitcoin v0.3.20.2 released

• 27/03/11 First BTC:GBP exchange opens

Evolution of Bitcoin

• Bitcoin is ideally suited to the eGaming and online casino financial requirements

• Monetary properties and features emulate the physical gaming chips in a real-world casino

• Features correlate to the customer demand for a digital/virtual currency

Benefits of Bitcoin

eGaming Sites Currently Using Bitcoin

Map of Bitcoin Nodes

Total Bitcoins Issued Over Time

Bitcoin-USD Exchange Rate (Jul 2010 – Mar 2011)

Future Implications

• Google acquires Social Gold, a virtual currency platform (August 2010)

• Google acquires Zetawire to look after NFC payments (December 2010)

• Google releases BitcoinJ, a bitcoin client for Java (March 2011)

• Google now has 750 staff in payments division!

Google is the Player to Watch

“Digital cash is to legal tender as BitTorrents are to copyrights.” -- J. Matonis

The Dawn of the Cryptocurrency Economy

• Fundamentally alter the current hierarchy of central banking and banks

• Challenge traditional value depositories

• Cause KYC rules for certain transactions to become irrelevant

• Make monetary and taxation jurisdictions less important

The Dawn of the Cryptocurrency Economy

A Digital Currency Revolution will......

• eGaming companies that adapt

• Prepaid operators

(Transact Networks, IDT, Wavecrest)

• eMoney and virtual currency exchanges

• Cryptocurrency market-makers

Opportunities for Gibraltar Jurisdiction

Thank You

Jon Matonismatonis@hushmail.com twitter.com/jonmatonis

Monetising Game Play on Social Network Sites

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