[Opensim-users] Bitcoin [was Re: Opensim-users Digest, Vol 51, Issue 3]

[Edmund Edgar]

OK, I think there's a bit of confusion in the Bitcoin bit of that
discussion, so it might help to run through what Bitcoin is and why it
would might be useful in the open metaverse. (But not for the OP, who
needs play money.)


- What is Bitcoin? -

Bitcoin is a decentralized, peer-to-peer electronic currency.

There is no central organization controlling Bitcoins. Records of what
money has been spend are stored all over the network, by the computers
of people who participate in it. Whether a Bitcoin is genuine or not
is judged by rules in the Bitcoin client software, which is free and
open source.

See http://www.bitcoin.org for an explanation of how it works, how
money is generated, and how the system prevents you from spending the
same money twice.


- Why are people interested in Bitcoin? -

Technology has made most kinds of interactions between people freer,
more open and more decentralized. The exception is money, which used
to be based on a decentralized, peer-to-peer model (people implicitly
agreed on a particular hard-to-obtain shiny metal to represent value),
and has gradually become more centralized and controlled.

The practical problem with that is that people like PayPal, who
control electronic tranfers, are very nasty to do business with. They
take a massive chunk of commission, they can arbitrarily lock your
account, and they can shut down people they don't like on a whim, or
due to political pressure. This last thing is what happened to
Wikileaks; They were easily able to work around attempts to shut down
their DNS and their server hosting, but the US government (without a
court order or anything like that) was able to stop payment processors
from transferring donations to them.

There's a lot that can go wrong with systems that need a central,
trusted authority, which is why people building the open internet have
tried to avoid them wherever practical.


- How could this work for the open metaverse -

The Linden model is that there's a trusted company that keeps records
of all the money. When you make a transfer or a sale, they move the
money from one account to the other.

We don't like that because it means we either have to trust a company
that keeps those records, or - even worse, for someone running a sim -
_be_ the company that keeps those records.

A better model, that is possible with Bitcoin, is to put everyone in
control of their own money. You'd keep your money on your own
computer, transfer it easily to another avatar when you want to, and
have some way of letting whatever system was in charge of storing
inventory that the transfer was happening. If we wanted this could be
integrated with the client so that you could make payments and
purchases seamlessly in-world, like you do on the Linden grid.

This is great for me, because I don't have to put my trust in somebody
running a money server, and it's great for people running sims,
because they don't have to baby-sit people's money, with all the
security and (potentially) regulatory issues that involves.

A harder question is how we get from our current software (based on
the Linden model) to there. There may be something we can do quicker
(like hacking Bitcoin integration into Fumi Iseki's money server) that
would get some of the benefits of Bitcoin without going to the full
decentralized model.

-- 
Edmund Edgar
Founder, KK Social Minds
Educational Technology for the Web and Virtual Worlds

ed at socialminds.jp
+81 090 3912 3380
Skype: edmundedgar
Second Life: Edmund Earp
Linked In: edmundedgar
Twitter: @edmundedgar
http://www.socialminds.jp