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A Chinese Virtual Currency Challenges the Yuan

Zonk posted more than 7 years ago | from the now-buying-oil-in-wow-gold-thanks dept.

The Almighty Buck 183

Radon360 writes "A Wall Street Journal article reports that China's fastest-rising currency isn't the yuan. It's the QQ coin — online play money created by marketers to sell such things as virtual flowers for instant-message buddies, cellphone ringtones and magical swords for online games. In recent weeks, the QQ coin's real-world value has risen as much as 70%. It's the most extreme case of a so-called virtual currency blurring the boundaries between the online and real worlds — and challenging legal limits. A Chinese Internet company called Tencent Holdings Ltd. designed the payment system in 2002 to allow its 233 million regular registered users to shop for treats in its virtual world. Virtual currencies are in use in many countries — but nowhere have they taken root more deeply than in China."

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Big money (1)

NalosLayor (958307) | more than 7 years ago | (#18545601)

Big money goes around the world
Big money take a cruise
Big money leave a mighty wake
Big money leave a bruise
Big money make a million dreams
Big money spin big deals
Big money make a mighty head
Big money spin big wheels

Re:Big money (1)

geekoid (135745) | more than 7 years ago | (#18545721)

Hmmm where have I heard that before.....

Re:Big money (1)

BadMrMojo (767184) | more than 7 years ago | (#18547289)

Could have been anywhere. Big money has a mighty voice. . .

Re:Big money (1)

Stanistani (808333) | more than 7 years ago | (#18545973)

Hope you didn't Rush posting that...

Re:Big money (1)

bhsurfer (539137) | more than 7 years ago | (#18547211)

A peart of me really likes the idea of big money - it makes me geddy as a school girl - but you at some point have to get on with your life, son.

You haven't been to Canada have you (4, Funny)

jshepher (50026) | more than 7 years ago | (#18545629)

Canada has 2 official currencies - the dollar/loonie and Canadian Tire money.

Re:You haven't been to Canada have you (4, Interesting)

zappepcs (820751) | more than 7 years ago | (#18546015)

Not sure why you got modded as Offtopic? As pointed out, all currency is basically virtual. If Canadian Tire opened a SecondLife store maybe you would have been modded up? I know a kid that bought his bicycle with Canadian Tire Dollars.

It is fact that in the U.S. just about anyone can print currency as long as it's in Dollar denominations and $1 of your dollars is valued/redeemed at $1 USD. The fact that the Federal version of the Dollar is the one most widely accepted doesn't mean that another currency can't be valuable.

I wonder what US courts will decide when it comes down to treating virtual currency in regard to actual currency. Should you be able to buy $200 worth of virtual currency for $20 USD? Or will it have to have a redemption value ratio of 1:1?

This is obviously not the case in China.

Re:You haven't been to Canada have you (2, Interesting)

Hemogoblin (982564) | more than 7 years ago | (#18546201)

Well, if the currency was like any other "real" currency, the government would just use the exchange rate available on the currency market. The problem is that virtual currencies such as the QQ dollar are NOT traded on a currency market, and never will be. The Chinese government will never allow the QQ dollar to coexist peacefully with the yuan, since that would result in loss of control over the yuan. Since the virtual currency will never be traded on an open market, its impossible to value your assets correctly. That will cause a problem with taxation, but I'm sure governments would prefering losing some tax revenue over losing complete control over their currency.

Re:You haven't been to Canada have you (1)

AoT (107216) | more than 7 years ago | (#18547093)

The problem is that virtual currencies such as the QQ dollar are NOT traded on a currency market, and never will be.

to say that virtual currencies are not and will never be traded on a currency market is wrong. The point of the article is that informal currency markets sprung up to deal with the QQ. More than that, I find it very unlikely that there will *never* be a virtual currency traded on some sort of official currency market, it seems a bit of a naive assumption that things will remain as they are.

Re:You haven't been to Canada have you (0)

Anonymous Coward | more than 7 years ago | (#18546629)

Should you be able to buy $200 worth of virtual currency for $20 USD? Or will it have to have a redemption value ratio of 1:1?

Currency is bought and sold for more than its face value all of the time. Why, for $150 you can buy a whole sheet of 32 $2 bills! [vacationgadgets.com] What a steal!

Is anyone else here thinking about Tulips? (3, Insightful)

cyborg_zx (893396) | more than 7 years ago | (#18545631)

I wonder how long before we see future's markets in virtual worlds...

Re:Is anyone else here thinking about Tulips? (1)

Ayal.Rosenthal (1070472) | more than 7 years ago | (#18545759)

I like the idea, and I suggest even taking it one step further and creating an free, open, online stock exchange of virtual currencies. Hmmm, the cost of operations can even be subsidized through minimal advertising for relevant items, such as video games, with excess profits reverted to subsidize computer literacy in the third world, or directly to me :-)

Not likely. (3, Insightful)

Hemogoblin (982564) | more than 7 years ago | (#18546039)

As the article mentions (yes I did read it), there are already market-makers of a sort for the QQ currency. Essentially, they convert QQ dollars to yuan and back. Like all market-makers, I assume they charge a spread that allows them to earn a small percentage on each transaction.

Clearly, the barrier to development of this virtual currency market is that the Chinese Government (or any other government for that matter) doesn't want it. There are a few reasons, but the most obvious are loss of control, dilution of "real" currency, and inadequate backing of the currency. For example, the Chinese government has control over the supply of yuan (they print it), and back the yuan's value. QQ coins on the other hand, are only "real" in the sense that Tencent allows you buy things with them. While the Chinese government will always support the yuan, Tencent can't guarantee the QQ will always have value. If Tencent went bust, or had an employee suddenly issue billions of QQ dollars, the value of the currency would plummet.

Given the above, this currency will never be allowed to exist peacefully with the yuan. It will never be used for big business to business transactions, so we'll never see specialized markets for lending or futures.

tap the vein (2, Insightful)

bigwavejas (678602) | more than 7 years ago | (#18545635)

converting real money to virtual money is a huge business. look at all the people spending $100 dollars for some World of Warcraft gold for their level 70 mount or whatever. there's a fine line between hobby and sickness.

Re:tap the vein (0)

geekoid (135745) | more than 7 years ago | (#18545847)

And what is that line? How much money do you spend on your hobbies to make them easier/more enjoyable?

Re:tap the vein (0)

Anonymous Coward | more than 7 years ago | (#18545927)

My used underwear collecting hobby is just that! A hobby! I resent the suggestion that it's a sickness!

Re:tap the vein (4, Interesting)

danpsmith (922127) | more than 7 years ago | (#18546133)

converting real money to virtual money is a huge business. look at all the people spending $100 dollars for some World of Warcraft gold for their level 70 mount or whatever. there's a fine line between hobby and sickness.

What's hilarious is that after you buy it, it's still in the game which actually makes it property of Blizzard, residing on their servers. Wouldn't it be an interesting world if this took off and you don't even own your own money anymore, and essentially have to use "disney dollars" for purchases. A nice way to go back to the Erie Canal model. I'm not saying this is what's happening, but it's an interesting concept.

Re:tap the vein (1, Insightful)

3p1ph4ny (835701) | more than 7 years ago | (#18546191)

It's interesting you say that. I'm a gamer, but play mostly FPS games so I don't do the whole online currency thing.

I am, however, an avid outdoorsman. I probably have spent well over $10,000 if you combine my bikes, backpack & related gear (camp stove, etc.), sleeping bags, expidition food costs, gas getting there or whatever else. $100 seems pretty damn cheap for a hobby to me.

Re:tap the vein (0)

svendsen (1029716) | more than 7 years ago | (#18546891)

But you get way more out of the stuff you bought. And I mean things like exercise, knowledge (Camping skills for example), stuff you can give to your kids, stories you can tell, etc. I mean telling a story about a funny camping trip 30 years from now vs. a raid or something. Plus the stuff you buy has value. But wait you say virtual currency as value I can sell it. Tell ya what go ask your insurance company if they will cover the lost of virtual game money.

Re:tap the vein (1)

alexgieg (948359) | more than 7 years ago | (#18546817)

You're underestimating this. A level 70 epic mount goes for 5000 gold. At $15 per 100 gold, that means as much as $750.

Bad money... (0)

Anonymous Coward | more than 7 years ago | (#18545637)

Sounds like a case of Gresham's Law [wikipedia.org] to me.

Re:Bad money... (1)

Sean0michael (923458) | more than 7 years ago | (#18546085)

I'm not quite sure I follow your argument. Gresham's Law being more or less "bad money drives out good money." But Gresham's law applies to legal tender and the difference in face value and commodity value. The example he gave was of coins made of metals. If the value of the coin exceeded the value of the metal it was made of, the gov't would debase the currency through fiat or mixing it with alloys so as to avoid printing money at a loss. Then all the coins with more precious metal were horded by individuals and the ones with less precious metal were the ones that people circulated.

The thing about the QQ coin is that, as far as I know, isn't really legal tender. Each merchant is able to discern whether or not the QQ coin is valuable or not. Given the choice between the yuan and the QQ, the vendor will accept whichever is better for him. If he benefits more from using the QQ coin, he could very well refuse to accept the yuan. That may sound silly, but it's no different than using a currency exchange for hard currency, or selling WOW gold or Wii Points or something like that.

Just my two QQ cents.

Someday... (5, Funny)

SlashDev (627697) | more than 7 years ago | (#18545643)

... we will all be in debt to the Chinese, the virtual Chinese that is...

Re:Someday... (1)

Seumas (6865) | more than 7 years ago | (#18546811)

Spending real money to buy an image of flowers to send to someone online. This story only proves that an enormous number of people have more money than brains.

Re:Someday... (2, Funny)

PlasticArmyMan (967433) | more than 7 years ago | (#18547083)

I for one welcome our Chines*BLAM* *thud*

Less QQ (0)

Anonymous Coward | more than 7 years ago | (#18545665)

In Azeroth China, though, there is a constant cry for "Less QQ" and a call for the rise of "pew pew"

Chinese Currency, eh? (-1, Flamebait)

EveryNickIsTaken (1054794) | more than 7 years ago | (#18545681)

How long until the Chinese Gov't takes control of this and artificially inflates its value, just like the Yuan and the Chinese stock markets?

Re:Chinese Currency, eh? (0)

Anonymous Coward | more than 7 years ago | (#18545727)

How long until the Chinese Gov't takes control of this and artificially inflates its value, just like the Yuan and the Chinese stock markets?

How is this any different from any other government controlled currency? It's not like the USD isn't inflated being that it's not backed in tangible anything.

under, not over, valued (3, Informative)

Hemogoblin (982564) | more than 7 years ago | (#18545753)

You have it backwards. Many experts believe the yuan is undervalued, which allows Chinese manufacturers to sell their goods at low prices.

I think your comment on the stock markets is just a troll, but they're not overvalued either. The Chinese market is one of the fastest growing markets in the world.

Re:under, not over, valued (0, Flamebait)

EveryNickIsTaken (1054794) | more than 7 years ago | (#18546359)

Right..... The Chinese exchanges clearly are not [sfgate.com] href="http://www.resourceinvestor.com/pebble.asp?r elid=29511">overvalued. Try again.

Re:under, not over, valued (1)

EveryNickIsTaken (1054794) | more than 7 years ago | (#18546565)

I fail at hyperlinking.

Re:under, not over, valued (1)

Hemogoblin (982564) | more than 7 years ago | (#18546633)

disclaimer: I am not an economist.

Fair enough, the Chinese stock market are volatile and have been growing at tremendous rate for the last few years. Clearly there is the chance that speculation may be causing a bubble which means the market is overvalued. I was wrong about that in my original post. That said, the Chinese stock market isn't simply a hollow shell being propped up by the Chinese government, which was implied by the GGP. There is real strong growth in the country.

I still stand by my statement of the currency price being too low.

Obilg. (3, Funny)

otacon (445694) | more than 7 years ago | (#18545705)

In communist China currency.....oh wait.

In a sense... (5, Insightful)

mycroft822 (822167) | more than 7 years ago | (#18545711)

Aren't all currencies virtual anyway? Does it matter that one can be printed on paper and one can't? I know there is more to it than just that, but as long as people deem it as valuable does it matter?

Re:In a sense... (1)

blackicye (760472) | more than 7 years ago | (#18545751)

Well in Japan they have (or used to have) Yen and Pachinko balls.

Re:In a sense... (0)

SlashDev (627697) | more than 7 years ago | (#18545755)

That is incorrect, currency has to be backed by gold.

Re:In a sense... (2, Informative)

mycroft822 (822167) | more than 7 years ago | (#18545819)

I think you are a little off with that. It used to be true, but is no longer the case. [wikipedia.org]

Re:In a sense... (1)

Hemogoblin (982564) | more than 7 years ago | (#18545823)

No, not all currencies are backed by gold. The US Government left the gold standard in 1971.

The US Dollar is essentially a promise to pay by the US Government. Its not backed by anything other than trust in the government. This isn't as silly as it sounds, since the government can raise funds in hundreds of different ways, from raising taxes to printing more money.

Re:In a sense... (1)

SlashDev (627697) | more than 7 years ago | (#18545851)

I can't help but note a sense of sarcasm here, unfortunately.

Borrow "funds" then print and payback + interest (3, Insightful)

Dareth (47614) | more than 7 years ago | (#18545889)

Read up on the Federal Reserve Bank.

If that doesn't shake your faith in US currency, nothing will.

Re:In a sense... (2, Insightful)

rumplet (1034332) | more than 7 years ago | (#18545827)

Is fiat currency backed by gold then?

Gold Standard (3, Insightful)

Frankie70 (803801) | more than 7 years ago | (#18545881)

That is incorrect, currency has to be backed by gold.

No. It doesn't have to be.
Post World War 2, Gold standard was replaced by the Bretton
Wood Monetory system, which was also based on Gold Reserves.

However, the US (under Nixon) totally shut off gold based
currency in 1971. Very few currencies are gold backed
currently.

Re:In a sense... (5, Insightful)

TerranFury (726743) | more than 7 years ago | (#18546071)

Sarcasm, I assume? Modern currencies generally are not backed by precious metals at all. And in history, things besides gold have been used: the UK's pound used to be backed by silver before it was backed by gold (before it stopped being backed by anything at all), and there were gold-vs-silver debates (the details of which I've forgotten) in American history too.

Really, what's the significance of gold? What good would it do you or anyone else? Why does it have value? It's just mutual agreement and the faith that it has a value that gives it its value.

I could even imagine some sort of public-key cryptographic scheme used to assign value to magic numbers... Think Cryptonomicon.

Re:In a sense... (2, Insightful)

Some_Llama (763766) | more than 7 years ago | (#18546425)

"Really, what's the significance of gold? What good would it do you or anyone else? Why does it have value? "

Because there is a finite amount of Gold, attempts to make [wikipedia.org] gold (until recently it seems) have always failed, even though the possibility of making gold is now feasible it is cost prohibitive.

This is why there wasn't a sand standard, or water standard... Precious metals are finite (without space exploration at least).

Re:In a sense... (1)

donutello (88309) | more than 7 years ago | (#18546995)

Finiteness is only one of the qualities that a standard should have. Lots of things are finite. You also need intrinsic value. Gold's value is based on the same principles as a pyramid scheme or the 2000s .com stock boom. People value it, not because there's anything it provides, but because they believe other people will value it.

Gold was valued in ancient days because it had a lot of properties that were not available otherwise. With the advent of plastics and alloys, that is not true anymore.

Re:In a sense... (2, Insightful)

norton_I (64015) | more than 7 years ago | (#18547111)

For a monetary standard to be useful, it has to be both scarce AND widely desired. Spent nuclear power pellets are extremely rare, but almost nobody wants them so they would make a lousy currency.

One advantage of fiat money (I am not saying there aren't disadvantages) is that if suppliers of a few commodoties agree it has value, it essentially becomes backed by all of them. With a standard based on rare metals, you are subject to market collapse on discovery of large amounts of the ore. This happened somewhat with silver. Had aluminum ever been used as a monetary standard, it would have collapsed when electrolytic process for reducing aluminum ore was found. In a fiat money system, the price of those metals will drop when the supply becomes large, but it will not affect the rest of the economy as much.

Re:In a sense... (0)

Anonymous Coward | more than 7 years ago | (#18547287)

Paper fiat money gets it's value only from being able to use it to pay taxes. It's the only thing the government accepts, so it has demand. It would have no value otherwise.

Gold or other precious metals have special properties that make them useful, so they have intrinsic value. Whether or not the government accepts it for payment, it still is going to be worth something.

The problem with fiat money is that it means your ability to buy things is based on trusting the government, to not print/issue more money too fast and to stay solvent. The question you should be asking is if you trust the politicians that run your country.

In the US, the official unit of money is a dollar. But most people don't even know what a dollar is. A dollar is a specific amount of pure silver in the form of a coin. This has never changed. The paper money we use now are not dollars. They are bills of credit. The government accepts it in payment for taxes because they can use that bill to repay their creditors at the Federal Reserve (a private company). These bills are worth a fraction of what a real dollar is. Right now, one of these bills of credit that are denominated as one dollar has a market value of less than a tenth of a dollar.

Re:In a sense... (0)

Anonymous Coward | more than 7 years ago | (#18546075)

If not gold, an army will suffice.

Re:In a sense... (1)

Binestar (28861) | more than 7 years ago | (#18546083)

That is incorrect, currency has to be backed by gold.

That is not true, but I think I know where you're getting the idea. You should look up the "Gold Standard". Very few currencies (if any) are currently on a Gold Standard.

Re:In a sense... (1)

Fred_A (10934) | more than 7 years ago | (#18547121)

That is incorrect, currency has to be backed by gold.
Actually currencies are backed by confidence. Which is why sometimes things can get interesting on the financial markets.

Re:In a sense... (1)

DataBroker (964208) | more than 7 years ago | (#18546185)

You're exactly right that as long as people deem it valuable, it is. Consider how much a Furby/Elmo/BeanieBaby/OtherFad retailed for, then eBayed for, and then is worth now.

The problem that can easily occur is that the value is suddenly diminished (devaluation) and there is no way to convert out of it. This has happened when the tying of one currency's value to another is removed (google on Brazil 1999 and devaluation). It has also happened when faith in the issuer of the funds is lost (such as Confederate dollars when the South lost). In those cases, it involved government decisions.

In the case of a company-backed currency, then it only takes one bad decision by one person, be it the CEO having a bad day, or a developer futzing something up. Of course the opposite is true too. Value can be driven up very easily by the company and can lead to unethical decisions being made for the stakeholders' profit. With a company controlling so much, there simply isn't enough oversight to keep things in check.

Re:In a sense... (2, Informative)

Archangel Michael (180766) | more than 7 years ago | (#18546225)

Most currency has FIAT value, meaning its value is based upon what people can purchase for it, rather than intrinsic value. In the case of US dollars, a dollar can buy a certain amount of products or services and the FIAT value is what is generally agreed upon by both parties. The dollar has no "real" value or its real value is less than the FIAT value. The piece of paper that represents the value of the dollar is not worth what the paper represents in FIAT.

Virtual Value is very similar, but in the case of the QQ it is a currency that itself doesn't really exist, as there are no coins or bills that exist in reality. As soon as the QQ bank issues a certificate that represents a certain amount of QQ and that certificate can buy real items (eg a soda or a burger), it moves from the realm of virtual to Fiat currency.

The distinction is that FIAT currency has standard values based upon real products/services. A virtual currency only exists in virtual worlds.

Who matters, not What (2, Insightful)

Bill, Shooter of Bul (629286) | more than 7 years ago | (#18546487)

If virtual currency was backed by a government, it would be currency. But backing by a company, is different and as pointed out by the other responses to your post, inherently more risky.

In many ways I only deal with virtual currency by using my debit card. Virtual in the sense that I never actually saw that amount of federal reserve notes. However, I will not, ever use any virtual currency that is not backed by a real government with a sound monetary policy.

Perfect for MMOs (1)

bugnuts (94678) | more than 7 years ago | (#18545737)

Virtual coin.

Virtual game.

QQ coin. [urbandictionary.com]

It's perfect for those chinese gold farmers.

Re:Perfect for MMOs (1)

Otter (3800) | more than 7 years ago | (#18545929)

Heh, I liked (from your link):

The original name of QQ was OICQ (Open ICQ) when it was initially developed by Tencent Inc. in February 1999. However, because of the possible trademark infringement with another popular instant messenger (ICQ), and also the fact that neither the program nor the protocol is considered "open", Tencent changed its name to QQ.
Yeah, I can see where that might possibly be considered infringement...

Re:Perfect for MMOs (1)

sammy baby (14909) | more than 7 years ago | (#18546283)

And here I thought it had something to do with Quatloos [wikipedia.org] ...

Behind the times? (1)

travdaddy (527149) | more than 7 years ago | (#18545761)

The Chinese are selling virtual magical swords? Is their internet more free with their "Great Firewall of China" or is the article a little out of date [slashdot.org] ?

Isn't all currency virtual? (4, Insightful)

Max Romantschuk (132276) | more than 7 years ago | (#18545785)

Currency is just an agreement on a medium to symbolize value. A coin or a bill is just a piece of paper or metal, just as bits on a server are equally mundane until someone agrees they mean something more.

So, except for the legislative issues, is there really a fundamental difference?

Re:Isn't all currency virtual? (1)

daeg (828071) | more than 7 years ago | (#18545877)

Except when the company goes out of business, or starts adjusting the value of the money themselves for capital gain, or is hacked, or is ruled illegal, etc. I don't trust governments to handle money very efficiently, I expect even less of corporations.

Almost no corporations are built to benefit the people, they are built to benefit the managers and owners.

Someone, at some point, will get greedy.

Re:Isn't all currency virtual? (2, Insightful)

Xzzy (111297) | more than 7 years ago | (#18546103)

And it'll probably be a developer who's got some unmonitored access to the database and update privileges.

Difference between MMO money and real world money is that there is nothing physical backing the MMO money. I admit, one could argue real world money is poorly backed itself, but at least they got some amount of gold stashed away somewhere.

Virtual money though? It's nothing but a mysql column.

Re:Isn't all currency virtual? (1)

sholden (12227) | more than 7 years ago | (#18546851)

There's nothing backing your real world money either. And unless it's cash stashed under your mattress or in your wallet then it too is just a mysql column...

Re:Isn't all currency virtual? (1)

alexgieg (948359) | more than 7 years ago | (#18546951)

Unfortunately real world money is NOT backed by gold stashed away somewhere. This was the case until 30 years ago, then that was abandoned. Nowadays no country backs their money with anything. Or, rather, they back their own currencies on US dollars, which are backed by nothing.

Re:Isn't all currency virtual? (1)

mattkime (8466) | more than 7 years ago | (#18547185)

>>Virtual money though? It's nothing but a mysql column. ..and how do you think that differs from your checking and savings accounts?

Somewhat.. (1)

novus ordo (843883) | more than 7 years ago | (#18547203)

Actually there IS something backing MMO money. It's the fact that you can't get a bot or developers to do all this for you for a fraction of the price. Call it a "good faith" in the process of obtaining MMO stuff. As long as there's a faith in the stability of the process the price will be stable. As soon some developer starts adding more cash for real cash it will drop the MMO gold will be worthless since nobody will want to obtain something so cheaply gotten(X hours in office vs Y hours on computer).

It's not that different in the real world actually. If we find out that someone has been printing lots and lots of money--inflation. Reminder for inflation: currency value sinks. Your money now is worth less than a minute ago. Real money? It's just a number of bills in circulation. But nowadays it is also not much more than a number in a database.

As for gold backing...it didn't work out so well. If you don't remember, Johnson was printing money like a madman to fund a war(hmm sounds familiar). Don't want to ruin the story, but it happens that when you have the gold standard you can't just print more money than you have gold or people will make a run on the gold(once they find out) and all your wealth goes poof!

So what backs the dollar now? Good question. The answer: Oil. You can only buy oil in dollars at 2 stock exchanges, one in Britain one in US. If you want to buy oil you need lots and lots of money in reserve at your bank. That's why you haven't seen that much inflation even though oil price is up. All the foreign banks keep needing to have large amounts of dollars at hand so people can use them to buy oil. It's all pretty funny actually. If you really think about it, inflation is a sort of tax. Every time someone holds dollars and the Fed prints more money it goes down in value. That difference is what the Fed pockets as a sort of gimmie tax for printing more money. So relax, there really is something backing the dollar. Just hope it doesn't go poof!

Nope! All currency is a commodity... (5, Informative)

Colin Smith (2679) | more than 7 years ago | (#18546043)

Currency is just an agreement on a medium to symbolize value.
Common misconception, but one which governments are happy to foster. Actually, currency is a commodity in exactly the same way as coffee, bread, oil, gold, pork bellies.

You see if currency were really a medium which symbolised value, it wouldn't change much. Bread, coffee, gold etc would pretty much always cost the same, they would always have the same value throughout time. Instead what happens is that over time, everything becomes more expensive, inflation. What's happening is that the currency is losing it's value. It does that because there's more of it; supply and demand. When the government('s bankers) print money, all the existing money in circulation decreases in value because there is more of it around.

So, no, there's no fundamental difference between real and virtual money, just as there's no fundamental difference between real money and a kg of coffee.
 

Re:Nope! All currency is a commodity... (1)

bigdavex (155746) | more than 7 years ago | (#18546295)

Actually, currency is a commodity in exactly the same way as coffee, bread, oil, gold, pork bellies.

Actual stuff is different than money. If I am marooned on an island, I can eat bread. The money is useless.

What does "commodity" mean to you here? I understand that there's a market for money and there's a market for money, both of which are affected by supply and demand.

Why can't there be a market for a "medium to symbolize value"? What property of a commodity makes this wrong?

Re:Nope! All currency is a commodity... (5, Insightful)

Colin Smith (2679) | more than 7 years ago | (#18546517)

If I am marooned on an island, I can eat bread. The money is useless.
Cobalt is a commodity, how much use would that be marooned on an island?

The intrinsic value of money is it's market value, which is why people get so confused over it's nature. It's still a commodity.

 

Re:Nope! All currency is a commodity... (1)

glwtta (532858) | more than 7 years ago | (#18546307)

So, no, there's no fundamental difference between real and virtual money, just as there's no fundamental difference between real money and a kg of coffee.

That's just plain stupid. Coffee has intrinsic value, money does not. Just because the "value" of money fluctuates, does not make money a commodity.

A currency is only as strong as the government that issued it. When the government that printed your money collapses, it instantly loses all its value and becomes paper again. It makes sense that nowadays there are companies powerful enough to back their own currency (in whatever limited way); it's a little ironic that the best example of this is in China.

Re:Nope! All currency is a commodity... (5, Informative)

Colin Smith (2679) | more than 7 years ago | (#18546815)

That's just plain stupid. Coffee has intrinsic value, money does not. Just because the "value" of money fluctuates, does not make money a commodity.
It isn't stupid, it's the nature of money. The intrinsic value of money is it's market value, as the intrinsic value of coffee is it's flavour and high caffeine content.

A currency is only as strong as the government that issued it.
Nope... I live in Scotland, we have several notes, issued by private banks (not the government) which are accepted as currency, nobody even thinks about it.

http://www.rampantscotland.com/know/blknow_money.h tm [rampantscotland.com]
http://en.wikipedia.org/wiki/Banknotes_of_the_poun d_sterling#Scotland [wikipedia.org]

Have a read:
http://www.mises.org/money.asp [mises.org]

Originally almost all money was privately issued, governments acquired the process because it allows them to create and spend money without having to tax the populace. Doing so devalues the existing currency and so is a subtle form of taxation. You've been taken in by your local government's propaganda over the nature of money.

 

Re:Nope! All currency is a commodity... (1)

lancelotlink (958750) | more than 7 years ago | (#18547237)

When the government('s bankers) print money, all the existing money in circulation decreases in value because there is more of it around. I thought the Treasuries around the country kept tabs on the circulation of the money out in the wild and when there gets to be too much, they remove some from circulation and if there's too much put some back into circulation. If so, wouldn't that take care of the inflation based on your model?

Aren't most currencies virtual these days? (1, Insightful)

Anonymous Coward | more than 7 years ago | (#18545813)

They have little intrinsic value and few are backed by anything other than government hot air.

Re:Aren't most currencies virtual these days? (1)

$RANDOMLUSER (804576) | more than 7 years ago | (#18545863)

Too bad the parent is posted AC, he's "right on the money". Mod up.

Re:Aren't most currencies virtual these days? (4, Insightful)

AuMatar (183847) | more than 7 years ago | (#18545917)

THey're backed by the same thing everything, including gold, was backed by- the general population's willingness to accept it in trade. As long as I know people will take little bits of green paper, they continue to have value. Its no more silly than trading around little bits of yellow metal. Both are mutually agreed mediums of exchange.

The main difference being (2, Insightful)

Colin Smith (2679) | more than 7 years ago | (#18546153)

Gold has intrinsic scarcity. Paper doesn't. BTW, the US government have printed, 8 trillion dollars worth of paper which is currently being held off the market by national reserves.

 

Scarcity is relative. (1)

Rachel Lucid (964267) | more than 7 years ago | (#18546387)

ANY item of intrinsic scarcity can become a means of exchange then. If I roll up the Mona Lisa and sell it, that art has intrinsic scarcity.

We could make currency out of anything from jewelry to beanie babies, and it could be just as easy a standard as gold with the right belief behind it.

If you can hoard it, if it's rare, and if it's a means of exchange, it's currency. That's all there is to it.

Re:The main difference being (1)

Stewie241 (1035724) | more than 7 years ago | (#18546755)

But the paper with the special markings (i.e. the security features and design that most currency has) DOES have intrinsic scarcity. This is why our governments don't print currency using a regular photo copier but at the local office supply store.

Re:The main difference being (1)

RsG (809189) | more than 7 years ago | (#18546887)

Intrinsic scarcity isn't worth much by itself. I could name dozens of substances that are, or were, "scarce" the same way gold is, yet were never used as a medium of exchange. You have to have scarcity plus some other factor.

Gold, silver and the like were (and still are) valuable because they're shiny. I know that sounds silly, but it's nonetheless true; wealthy and powerful people, from kings to merchants, wanted gold for appearance sake. If iron pyrite were the pretty mineral of choice instead, we'd be calling fool's gold currency. Nowadays you can rightfully say gold is useful as well as aesthetic, but when it was being used as a medium of exchange the value came from appearance.

So really, the only reason gold coins were worth anything was because the people in power wanted gold, and were willing to accept it in trade. Everybody else followed suite. Gold, like paper money, was backed by the rulers of the day. The main difference between then and now is that money is minted rather than mined, meaning that the government can, whether by accident or intent, cause serious inflation.

And that would be even more embarrassing (1)

Glowing Fish (155236) | more than 7 years ago | (#18545849)

The United States has been running big trade and budget deficits for a while now, supported for a large part by Chinese investors and the Chinese Central Bank buying American stocks and bonds. And I think the consensus amongst economists (and, for that matter, simple logic) is that this can't go on forever, and that eventually the Chinese are going to want to invest their money elsewhere.

So, what would be even more embarrassing then our economy hitting a brick wall because the Chinese are pulling all their money out, is the Chinese pulling all their money out because they want to put it into a currency that can be used to by VIRTUAL FLOWERS.

It's a Faustian pact (1)

Bearhouse (1034238) | more than 7 years ago | (#18546073)

If the Chinese Gov. stopped investing their massive trade surplus in US Gov. bonds, the Yun would come under even stronger pressure (to rise against the $)and the US economy would implode. Nobody wants this, especially the Chinese, since their major export market would promptly evaporate. The US wants cheap imports, (a major factor in recent inflation-free improvements in standards of living) and China wants the increase in wealth that the conversion from an agricultural to industrial economy brings. Everybody knows the whole thing is going to end in tears, but in the meantime... On another note, the largest 'virtual' curency in circulation is not this stuff, it's airmiles. The Economist reported (in 2005 - later figures anyone?) unredeemed airmiles amounting to over $ 700'000'000'000...

Re:It's a Faustian pact (1)

Colin Smith (2679) | more than 7 years ago | (#18546211)

If the Chinese Gov. stopped investing their massive trade surplus in US Gov. bonds, the Yun would come under even stronger pressure (to rise against the $)and the US economy would implode. Nobody wants this, especially the Chinese, since their major export market would promptly evaporate.
They've already started moving their money out of US bonds. Only a few hundred billion though.

p.s. They have Europe, Japan and are developing their internal market.

 

It'll become worthless (1)

Colin Smith (2679) | more than 7 years ago | (#18545855)

The producers will just keep producing it and inflation will kick in. For some reason bankers just can't help themselves.

 

I am surprised... (0)

Anonymous Coward | more than 7 years ago | (#18546041)

...given that this is an online currency that nobody has mentioned yet how much QQ-ing is going to happen if it will be frozen/removed...

ISKs (1)

andrewd18 (989408) | more than 7 years ago | (#18546097)

I'm going to watch and wait until Inter Stellar Kredits [wikipedia.org] are a worldwide accepted currency. When that day comes, I will be a rich, rich man.

Re:ISKs (0)

Anonymous Coward | more than 7 years ago | (#18546791)

Nah, I'm holding out for the Triganic Pu. I found another Ningi down the back of the sofa the other night, too..

Re:ISKs (1)

SupremoMan (912191) | more than 7 years ago | (#18547217)

With devs makign the money for themselves and their cronies. No thanks!

Not surprising. (1)

sumdumass (711423) | more than 7 years ago | (#18546111)

The Chinese currency is artificially valued as it is. Some speculate that if the value was determined by fair market rules it would decrease significantly. This being said, it is no surprise that a "fake version of money" that is worth little in real world value, is competing with it.

It would be like saying every 1 US dollar is now worth 2 US dollars and then gaging the growth of the EU currency as a sign of how stable and capable the EU is when their currency adapts to this force. When If they were all valued in the same manor, the differences would be increasingly different and smaller and more reflective of how the country operates instead of how they want you to believe.

In the case of the Chinese online currency, it is competing in a fairly fair or open market were the Chinese real money is artificially valued. It only makes sense the value needs to adapt to the real money market when used outside this fake realm. And you will see jumps equal to the artificial value differences. This says more about how much the Chinese money is overvalued then it does about the value of virtual money.

I know with all the jumps in there, it is hard to follow. If someone can clean this up to be easier to understand then please do. The problem i believe, revolves around the real money having fake attributes to it which leads to a fake money with real attribute performing better when competing together.

Re:Not surprising. (1)

z4ce (67861) | more than 7 years ago | (#18546165)

Umm.. no.. actually relative to the US Dollar if it wasn't artifically deflated the currency would skyrocket. That's why they have nearly a trillion dollars in U.S. Government debt. They are trying to make the US Dollar stronger and their own currency weaker. Why do they want to do that? Because a weaker currency means your exports are cheaper.

Personally I think its a very poor currency policy, but there you have it.

Re:Not surprising. (1)

sumdumass (711423) | more than 7 years ago | (#18546335)

It's the same effect. Whether their currency is higher or lower, it has the same effects on artificially valued currency it move disproportionately in one way or the other or even both.

But yea, I see the point now, It is undervalued instead of overvalued when comparing it to real world real attributes.

Re:Not surprising. (1)

Hemogoblin (982564) | more than 7 years ago | (#18546403)

I'm not an economist, but it seems to me that these effects would only appear if the fake money was traded freely between currencies. Since the virtual currency is only used in China and is linked only to the yuan, would the real-fake effect you describe show up?

233 million registered users? (1)

fizzyl (205369) | more than 7 years ago | (#18546141)

Could it possibly be true that there are 233 million registered users with this company? That is roughly 1/2 of China's non-rural population (estimated at 40% of 1.3B)... roughly 1/4 of the entire internet (estimated at 1.1B)... approximately 4% of the earth's pupulation (roughly 6B)... is it a little creepy to anyone else that one company has the financial information of this many people? Can that number really be correct?

Re:233 million registered users? (0)

Anonymous Coward | more than 7 years ago | (#18546831)

It's 2:40am in china right now and there is about 10million QQ accounts online...
I'm not sure how many people are connected during the day as I'm working so~

Re:233 million registered users? (0)

Anonymous Coward | more than 7 years ago | (#18546945)

I believe that figure indicates users registered with their QQ messaging service and not actual internet service provision accounts.

According to a survey done by iResearch in 2005, 91.6% of respondents named QQ their
favourite instant messaging service, and 78.8% said that QQ was their most frequently used
instant messaging service. In addition to an active user base of 221 million as at the end of
March 2006, the new record shows that QQ's online community in China has become one of the
largest single culture communities around the world, and that applications designed to enrich
the "Online Life" of our Instant Messaging community will offer a lot of potential for growth in
future.
http://www.tencent.com.hk/ir/pdf/news20060603a_e.p df [tencent.com.hk]

Though that figure is old. Their latest quarterly report indicates the following:

Key platform statistics:
- Total registered Instant Messaging ("IM") user accounts increased to 580.5 million, representing a 1.4% growth QoQ
- Peak simultaneous online user accounts for IM services recorded over 24.5 million, a growth of 10.9% QoQ
- Active IM user accounts increased 5.1% QoQ to 232.6 million
- Peak simultaneous online user accounts of QQ Game portal (for mini casual games only) was 2.71 million, an increase of 5.9% QoQ
- IVAS paying subscriptions were 12.5 million, a decrease of 8.8% QoQ
- MVAS paying subscriptions were 9.9 million, a decrease of 2.0% QoQ
http://www.tencent.com.hk/ir/pdf/news20070321a_e.p df [tencent.com.hk]

From this I would gather that the figure of "233 million regular registered users" from the summary would correspond to the figure of "Active IM user accounts increased 5.1% QoQ to 232.6 million" from thier latest Quarterly/Annual report.

In fact, their IM service has 580.5 million registered users, 232.6 of which are active, with simultaneous users online peaking at over 24.5 million. Pretty impressive stats.

I wonder what the equivalent stats for MSN, YIM and ICQ are?

Re:233 million registered users? (1)

progprog (1016317) | more than 7 years ago | (#18547125)

Could it possibly be true that there are 233 million registered users with this company? That is roughly 1/2 of China's non-rural population (estimated at 40% of 1.3B)... roughly 1/4 of the entire internet (estimated at 1.1B)... approximately 4% of the earth's pupulation (roughly 6B)... is it a little creepy to anyone else that one company has the financial information of this many people? Can that number really be correct?

They don't handle the financial information of 233 million people (China has very few credit card users). Instead, they have alternative payment methods like tie-ins with the national mobile phone providers which deduct a certain amount from a registered phone number each month. Prepaid cards for QQ coins are also available.

In China it is inconceivable for anyone with Internet access to not have a QQ account. To not have one in the urban areas here means you are either a rural hick or a foreigner.

Blurry Lines (1)

adickerson0 (884626) | more than 7 years ago | (#18546171)

In the US our money is no longer tied to any sort of commodity like gold, our currency is tied to ENFORCEMENT. If you want to keep liquid assets safe be sure to use the standard of the biggest military around. History shows that countries that try to tie their currency to some sort of natural resource like coal or oil just end up get invaded. I am not saying this is justified but is rather a matter of fact. The private ownership of land and resources or even fertile young ladies will always stand in second place to firepower. If you want to play it safe be sure you deal with the devil. Guns have a way of guaranteeing that the almighty dollar is accepted at any bank in the world.

All currency is virtual (0)

Anonymous Coward | more than 7 years ago | (#18546419)

All currency is virtual. I see no point in making any distinctions.

Grain, I can eat; currency, I cannot. That is all that matters.

Just wait until Chinese Highlanders (0)

Anonymous Coward | more than 7 years ago | (#18546883)

declare there can be only Yuan.

troolkore (-1, Troll)

Anonymous Coward | more than 7 years ago | (#18546905)

This could be HUGE in a few years! (1)

abbamouse (469716) | more than 7 years ago | (#18546963)

One of the most powerful levers of economic control that governments have is the power to manipulate exchange rates. While some countries have moved to a free floating rate for their currencies, others still try to mandate exchange rates and enforce these rates by prohibiting the cross-national transport of large sums of currency. This alternative currency (and others like it) could really upset China's plans to manipulate the value of the Yuan (particularly keeping it artificially low) because if e-currencies like thjis become cross-national, then one could simply convert (under-valued) yuan into e-currency, convert e-currency into dollars or Euros, and then convert the hard currency back into Yuan for a tidy profit.

Now this obviously relies on certain things lining up correctly, but it is more difficult to stop than cross-border currency transfers. The key to undermining government control over exchange reates is having an e-currency that people all over the industrialized world value. We aren't there yet, but we might get somehting like it within a few years. That will certainly alter US-China relations, since one of our major gripes is the artificially low value of the Yuan.

That's Tencent, not to be confused with.. (0)

Anonymous Coward | more than 7 years ago | (#18547267)

That's Tencent [tencent.com.hk] , not to be confused with 50 cent [50cent.com] .
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