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posted by CoolHand on Wednesday May 06 2015, @10:43AM   Printer-friendly
from the money-often-costs-too-much dept.

Thomas Kim has an interesting paper at PLOS one that analyzes virtual currencies in online games that have been voluntarily managed by individuals since 1990s to study whether the recent price patterns and transaction costs of Bitcoin represent a general characteristic of decentralized virtual currencies. Kim's conclusions:

We find that more mature game currencies have a price volatility of one-third of that of Bitcoin, at a level similar to that of small size equities or gold. The decentralized structure of Bitcoin does not seem to be the cause of the recent price instability, as game currencies are also managed by non-government entities. We observe a similar price instability from the game currencies that are launched around the time when Bitcoin gained much of its current public attention (around the year 2011). The contrast between mature and newly introduced virtual currencies indicates that the Bitcoin price may stabilize over time.

The transaction costs of virtual currencies are sometimes lower than that of real currencies. With more competition among virtual currency exchanges, the transaction costs may drop further making virtual currencies a lower cost alternative to real currency transactions. Economists agree that a properly functioning currency should include a method of transaction, a unit of account, and store value. Bitcoin may meet the criteria if it can combine its low transaction costs with more stable prices.

However, there are a few caveats for our projection. Bitcoin is the first virtual currency that is attempting to substitute the role of real currencies. Until this point, other virtual currencies, like game currencies, remain as auxiliary currencies that aid in transactions that real currencies cannot easily do, such as transactions within an online game. Game currencies currently have considerable trading volume, but their role is tied to the gaming industry. It is difficult to estimate how widespread Bitcoin will be. Also, our analysis does not justify that virtual currencies should have greater value. A large volume of Bitcoin trading in these days is speculative trading, betting on the possible appreciation of Bitcoin prices. Speculative trades are necessary to discover the reasonable exchange rates of Bitcoin, but it is unknown when the market will reach the equilibrium. As we demonstrate from the comparison of exchanges with varying degrees of competition, various regulations imposed on Bitcoin exchanges may be a dragging factor in the price discovery process.

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  • (Score: 0) by Anonymous Coward on Wednesday May 06 2015, @11:43AM

    by Anonymous Coward on Wednesday May 06 2015, @11:43AM (#179459)

    is somewhat like comparing a nuclear powered ice breaker to a kick scooter. A few caveats indeed!

  • (Score: 4, Funny) by Thexalon on Wednesday May 06 2015, @01:17PM

    by Thexalon (636) on Wednesday May 06 2015, @01:17PM (#179483)

    Online currencies rely on the people who control the server to play nice. The MMORPG companies have a motivation to play nice, since screwing over their players too much will cause their revenue stream to dry up.

    By comparison, Bitcoin has had multiple instances of those that control the server just taking the money and running, because there is very little to stop the owners from doing so. If a bank with a government-controlled currency and government regulation tried to pull that, some guys with guns would show up to explain to the management that they cannot in fact do that, and would ensure that depositors got their money back.

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    • (Score: 2) by darkfeline on Wednesday May 06 2015, @05:21PM

      by darkfeline (1030) on Wednesday May 06 2015, @05:21PM (#179591) Homepage

      Note that no one actually controls Bitcoin distribution, unless someone manages to obtain enough Bitcoins to take control of the blockchain. The problem with your analogy is that you are equating government=company=mt. gox whereas the proper analogy is government=company=bitcoin majority owner/math and banks=large trading guilds=mt. gox

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      • (Score: 2) by JNCF on Wednesday May 06 2015, @09:03PM

        by JNCF (4317) on Wednesday May 06 2015, @09:03PM (#179675) Journal

        Note that no one actually controls Bitcoin distribution, unless someone manages to obtain enough Bitcoins to take control of the blockchain.

        You might be thinking of hashing power. [learncryptography.com]

  • (Score: 0) by Anonymous Coward on Wednesday May 06 2015, @04:16PM

    by Anonymous Coward on Wednesday May 06 2015, @04:16PM (#179564)

    I can't really tell the difference between BTC, L$, and ISK.

    • (Score: 2) by tibman on Wednesday May 06 2015, @05:46PM

      by tibman (134) Subscriber Badge on Wednesday May 06 2015, @05:46PM (#179602)

      The exchange rates are different?

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    • (Score: 0) by Anonymous Coward on Thursday May 07 2015, @09:38AM

      by Anonymous Coward on Thursday May 07 2015, @09:38AM (#179824)

      A game currency is associated to a specific game. What game is Bitcoin associated with?

  • (Score: 2, Insightful) by deego on Friday May 08 2015, @05:01AM

    by deego (628) on Friday May 08 2015, @05:01AM (#180196)

    .. yet still one of the somewhat better "academic" articles on bitcoin.

    The authors state multiple times that unlike game currencies, bitcoin has yet to come up with a system to regulate runaway "farming" of bitcoin. Nothing could be further from the truth for anyone that has even cursory knowledge of bitcoin. Even though the authors mention "difficulty", it seems that they fail to understand it.

    Do you remember when some academics wrote an *academic* peer-reviewed article with great fanfare "discovering," zomg, that bitcoin is pseudonymous, not anonymous?