Virtual CurrencyTrading Past and Future

How did it start?

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mid1990

s

1996

1997

199819992000

2001

2002

2003

MMO’s and Virtual worlds appear. Users begin to sell characters and avatars to other users.

Ultima Online becomes first large scale MMO. Black market arises almost immediately. Virtual goods auctions selling currency, items and characters on eBay.

Pressure from game companies force eBay to shut down virtual goods auctions. Virtual goods vendors immediately move on to other black/grey market platforms like IGE.

Virtual world Entropia Universe launches and fully supports RMT.

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2004

2005200620072008

2009

2010

2011

World of Warcraft launches and WOW gold quickly becomes the most popular traded virtual currency. Enter the gold farmers in China and other developing countries.

Korea’s supreme court passes law giving users “ownership” of virtual currency, including the right to sell them on secondary markets.

China government now requires a license for trading virtual goods.The most expensive virtual good (a space station in Entropia) was sold for US$635,000.World Bank publishes report valuing the secondary market atUS$3 billion.

• The global secondary market for virtual goods (RMT) today is estimated to be worth US$4 billion.

• This is primarily from MMOs and Virtual Worlds.

• Annual growth rate: 25% per year.

• Mobile and social are not factored in this data. We’re starting to see activity.

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What’s the current market for RMT?

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How does it work

The Exchange

Buyer Seller

Publisher Developer

Who are the players?

White Market B2B - served publishers

• Playspan• Livegamer• Sometrics• First Meta

Black/grey MarketB2C - served gamers

• IGE• 5173• ItemBay• ItemMania• Player Auctions

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• 20% of secondary market trading consists of virtual items.

• 80% of trades are “hard” currency.

What’s getting traded?

It happens.

•Approximately 10%+ of transactions are fraudulent.

•Common types of fraud in RMT include:– “Friendly fraud” or chargebacks.– Laundering: stolen or illegally obtained currency are

moved through the exchange.– Non-delivery (in black market)

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What about fraud?

Well, that depends.

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Is all of this legal?

United StatesNo actual legislation on virtual goods trading,so EULAs are the governing agreement.Game companies often pursue actionagainst traders and exchanges.

ChinaIn 2010, a law was passedrequiring virtual goodexchanges to get licensesfrom the federal government.

KoreaSupreme courtjudgement in 2009gives users ownershipof virtual assetspurchased or earnedin-game.

JapanRMT is illegal.

The forces of change

•Mass Adoption of F2P model

•Blizzard’s Diablo 3

•Bitcoin project

•More and more ways to pay

•Facebook credits

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What’s happening now?

2012 will be the year of Facebook credits

•Only 2% of Facebook users buy credits, but credit sales represent 15% of all Facebook revenue.

•Launched in 2009 but primarily used in social gaming.

•This year we will see offline brands and retailers rewarding shoppers with Facebook credits.

•Facebook will continue to “copy” Tencents QQ credits models, providing more premium services.

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What about Facebook credits?

The game(er) has changed

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Where’s all this going?

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Consumers are bombarded with Virtual Currency

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Transferability & liquidity will enter the market

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Thank you!