Accounting With Virtual Currencies

First published March 27, 2009 

One of the things I've got planned next week is to have a discussion with my accountant regarding bookkeeping issues related to virtual currencies.  
 
The basic approach I've been taking with is as follows: 
 
1. Members earn points for completing assigned tasks -- sort of our strategy for getting the most out of crowdsourcing. 
2. These points cannot be redeemed for cash, but rather can be redeemed for products and services.  
3. So, points that have been accrued but not yet spent represent a liability for us.  
4. In this way, our virtual money is being issued out of debt.  
 
The  “out of darkness comes light” motif that guides much of my entrepreneurial strategic decision making should be becoming more apparent now. In our current economy, the problem is that we have a central bank, managing a fiat currency (meaning one that is backed by nothing, and can be produced in infinite quantities) in which all money originates out of debt [27]. In the virtual world, we see the same things -- centrally planned economy, central bank, fiat currency, money out of debt system -- but instead of being tyrannical, it will be liberating; this is because users will have the freedom to switch to whatever central bank they like, and because these virtual economies can be created at virtually no cost. And so, the scarcity is not the central bank, but rather the individual, and the desires of the community. The key, which I've yet to add but am working on, is data portability -- the ability for users to take all their data out of one virtual world and into another, so that they are never locked in to one world.