The IT Law Wiki


"Depending on their interaction with traditional,'real' money and the real economy, virtual currency schemes can be classified into three types: Type 1, which is used to refer to closed virtual currency schemes, basically used in an online game; Type 2 virtual currency schemes have a unidirectional flow (usually an inflow), i.e. there is a conversion rate for purchasing the virtual currency, which can subsequently be used to buy virtual goods and services, but exceptionally also to buy real goods and services; and Type 3 virtual currency schemes have bidirectional flows, i.e. the virtual currency in this respect acts like any other convertible currency, with two exchange rates (buy and sell), which can subsequently be used to buy virtual goods and services, but also to purchase real goods and services."[1]

"There are several business reasons behind the establishment of virtual currency schemes. They may provide a financial incentive for virtual community users to continue to participate, or create lock-in effects. Moreover, schemes are able to generate revenue for their owners, for instance float revenue. In addition, a virtual currency scheme, by allowing the virtual community owner to control its basic elements (e.g. the creation of money and/or how to allocate funds), provides a high level of flexibility regarding the business model and business strategy for the virtual community. Finally, specifically for Type 3 schemes, a virtual currency scheme may also be implemented in order to compete with traditional currencies, such as the euro or the US dollar.[2]