Monetising Game Play on Social Network Sites

Jon Matonis

31 March 2011

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• 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

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Revenue Shift Away from Advertising

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Virtual Goods Revenue Increasing

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The Entrance of Facebook Credits

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Social Gaming Beyond Facebook

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• 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

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• 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

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• 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

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• 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?

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• 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

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• 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

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• 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

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eGaming Sites Currently Using Bitcoin

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Map of Bitcoin Nodes

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Total Bitcoins Issued Over Time

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

Future Implications

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• 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

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

The Dawn of the Cryptocurrency Economy

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• 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......

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• 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