Y Combinator Challenge #17 - New Payment Methods

The biggest problem in this space isn't a transaction system, the coding, or even the idea. I highly doubt that companies are willing to 'share' their virtual currency since they work closer to gift cards. It's getting big companies like Microsoft and Amazon and Zappos to convert from their virtual fun bucks back into real money. The barrier to entry to work with those guys are HUGE.

The closest thing you can have is an automated system that keeps enough gift certificates from different places to allow exchanges for a fee. (ie. exchange $50 Amazon gift card into $50 Zappos gift card for a buck or so.) Even then, some places like the Xbox 360 points don't have any way of giving to people once it's on your account.

This doesn't even count the fact that some systems, like WoW gold, makes it illegal via usage contract to convert virtual money into real cash.

"Well, as my grandpappy used to say: “When life gives you lemons, make a consolidated online virtual currency gateway and payment system”. I never quite understood what he was talking about. Until today."

-------

Amusing

This is my favorite of these ideas so far. It's one of those inevitabilities - eventually, someone will build a virtual currency exchange.

This is really clever. Even if you could get just two large virtual currencies (where points win prizes) and exchange those, it would be beneficial. Perhaps even from the same publisher.

You could encourage the companies by offering to take a rake on the transaction and sharing it with them. It'd probably be against their T&Cs if you didn't ask permission.

Other posts about loyalty are true. But if the points are transferrable, people will trade them. Far better the publishers get control over it - but you'd have to pursuade them.

Ithaca, NY has a concept called "Ithaca Bucks" which are accepted by local merchants. I believe the purpose was to keep the money supporting local businesses instead of letting it leave the area.

It's been a while since I've heard of it but I recall the fact that this makes taxes difficult to keep track of since it becomes similar to bartering.

Anyone else have heard of this? I'm trying to find an article about this but am having some trouble.

The issues with virtual currencies are not technical, rather it is a social issue of trust. You trust that a $100 note will be accepted and exchanged for goods or services according to the note's face value in the general economy. This is backed up by laws and businesses must accept this as payment, hence "legal tender". So, our economies can function by exchanging these notes instead of each of us carrying around three pigs, a sack of wheat and some chickens to pay for goods and services.

I would never take my universally accepted "legal tender" and convert it into a less liquid form of currency that is not universally accepted in the economy, that is backed only by a company and not by law.

Even if it could get universal acceptance and was backed/supported by law, it would then be the same as our current system of currency, so why bother?

I have had hundreds of thousands of frequent flyer points disappear due to an airline collapse. This would be my biggest fear of adopting any virtual currency.

I was confused when I saw the title of the idea: "MyVC"

For some reason I think of MyVentureCapitalist rather than MyVirtualCurrency...