The Elephant In The Payments Room

By Jon Matonis
American Banker
Monday, April 29, 2013

http://www.americanbanker.com/bankthink/the-elephant-in-the-payments-room-bitcoin-1058703-1.html

The payments industry has been ripe for disruption for as long as I can remember. Historically conservative and non-experimental, banking and financial services always appear to be the laggard for any new technology. But none of that has stopped recent innovators from pursuing things like Square, Stripe, Dwolla, FaceCash, ZooZ, Affirm, MangoPay, and Balanced. The Internet and mobile payments gold rush is in full swing and venture capitalists are lapping it up.

The amount of money raised by a startup in the space can be staggering too, ranging from $3.4 million to as much as $200 million in the case of Square. But are venture capitalists truly funding disruptive "home runs" if licensed banks and legacy credit card networks are required for their so-called innovations? Also, most would agree that the states' money transmitter licensing infrastructure acts more like a barrier of entry protecting incumbents than providing any protection for consumers.

Doesn't anyone notice the elephant in the room? Growth rates of over 10,000% since inception, measured in transaction volume and amounts. Pervasive international market penetration with full digital and mobile platforms. A passionate and dedicated customer base.

Of course, I'm talking about the distributed payments network and cryptocurrency Bitcoin, which plays a dual role as a transaction confirmation network and independent floating unit of account.

It's easy to understand why certain venture capitalists might be timid about pulling the trigger on a Bitcoin-related investment. Regulatory risk (illustrated by the fallout from Fincen's recent guidelines in the U.S.), on top of typical execution risk demands a greater return from initial investment. While that return may ultimately be there, a skittish board or a wary risk-averse management team might be unable to navigate the onslaught of negative public relations and price volatility.

Any lesser technology with so many forces aligned against it would be unlikely to survive. Bitcoin's persistence demonstrates that we are witnessing something unique in money and payments. For those that do invest and successfully navigate the potential traps, the reward is a first-mover advantage for a new international monetary unit.

Here's the important part. Disruption in the unit of account is the way to disrupt the payments space.

National currency units come with many strings attached and they reek of favoritism and crony capitalism primarily benefiting the well-connected. With a nonpolitical monetary unit, many new possibilities become apparent structurally that would not have been contemplated before, such as: peer-to-peer mobile applications that don't require permission from legacy transaction carriers; global remittances that don't require high-fee currency conversion; merchant categories that are no longer disallowed due to fraud and chargeback risk; and merchant reach into countries that are not even on the map for Visa, MasterCard or PayPal.

It's very telling that, when WordPress announced its plan to begin accepting bitcoin, the blogging platform provider noted, "PayPal alone blocks access from over 60 countries, and many credit card companies have similar restrictions. Some are blocked for political reasons, some because of higher fraud rates, and some for other financial reasons."

Compared to conventional payments startups, the largest private equity raise by a Bitcoin-related company has been Atlanta-based BitPay Inc. which raised $510,000 in January to expand its lead in the bitcoin merchant processing space. Startup CoinLab also raised $500,000 in April 2012 and foreign exchange platform Coinsetter closed a $500,000 investment round this month. Coinbase, a provider of personal wallet storage and merchant processing services, raised $600,000, although almost half of that was through crowdfunding.

Those are just some of the Bitcoin initiatives with external funding. Many Bitcoin-related companies grow organically with a one- or two-person team, because the technology offers the most open platform for payments innovation in the world today.

The powerful Bitcoin open-source development funnel will begin to suck in greater and greater talent driving applications that will have the broadest overall impact in the payments sphere. Creative talent naturally gravitates toward the point where maximum societal impact intersects with maximum reward. This alignment of incentives for early adopters and a global "workforce army" cannot be matched with traditional employee stock option plans. Legacy and closed systems cannot compete.

Just ask Kevin McInturff, who recently left Global Payments – a processor of Visa and MasterCard transactions with thousands of employees – to join BitPay, where he is one of three full-timers. Bitcoin "offers the opportunity to change the way business is done," McInturff told PaymentsSource.

Email wasn't spawned by the post office as a way to drive efficiency for the U.S. Postal Service. File sharing technology didn't come out of a media headquarters' lab to test improvements for distribution. Disruptive innovation simply doesn't work that way.

Disruptive technology disrupts. That is its mission. It annihilates any substandard process or product in its path and it originates outside of the established paradigm. You don't see it coming. I get a chuckle out of all these investors trying desperately to attach themselves to something, anything, in the Internet and mobile payments space.

However, a payments startup that ignores Bitcoin in its strategic plan is like a publisher ignoring the Web in 1999. Certainly, innovators can design routes around Bitcoin and established players can dismiss it as insignificant, but that won't make the elephant go away. The savvy and true disruptors already know this.

Largest Bitcoin Payment Processor Raises $510,000 Angel Round

By Jon Matonis
Forbes
Monday, January 7, 2012

http://www.forbes.com/sites/jonmatonis/2013/01/07/largest-bitcoin-payment-processor-raises-510000-angel-round/

BitPay, Inc. announced today that they have completed a seed funding round of $510,000 from several angel investors demonstrating that bitcoin can attract the capital necessary to encroach upon legacy payment methods. Similar to merchant processors for credit and debit cards, BitPay is a Payment Service Provider (PSP) specializing in eCommerce, B2B, and enterprise solutions for virtual currencies.

Investors participating in the seed round include SecondMarket founder Barry Silbert, Spotify investor Shakil Khan, Jimmy Furland, Roger Ver, and other Internet entrepreneurs. Specific terms of the deal were not disclosed but co-founders Anthony Gallippi and Stephen Pair will retain majority ownership. Investors Silbert and Ver also participated in the April 2012 funding round for mining pool operator CoinLab.

CEO Anthony Gallippi says, "BitPay plans to use the funds to move the headquarters from Orlando to Atlanta and to hire additional developer talent for enhancement to the BitPay platform." With proximity to other financial technology companies and several leading universities, Atlanta provides an excellent base for expansion.

Gallippi added that the WordPress decision to begin accepting Bitcoin via BitPay for certain features is "what really accelerated this funding round because investors saw it as the ideal time to move forward." Since the November 2012 WordPress deal, BitPay has seen new merchants increase by nearly 50% to over 2,000.

The total dollar value of all bitcoin transactions processed by BitPay in 2012 was over $3 million, which represents average quarter-to-quarter growth of 50% over the past four quarters for transaction volume.

"With very little resource, BitPay has already taken the place as market leader in the bitcoin payment processing ecosystem, and along with the other investors, I am very excited to help the founding team scale up and take it to the next level," said London-based Shakil Khan, an early investor in Spotify and SecondMarket.

The value proposition to merchants is clear -- eliminate fraud and chargeback risk, accept transactions from any country in the world, and increase profitability by saving on processing fees and PCI Compliance costs.

"Credit cards were never designed for the Internet," stated Gallippi. Using a credit card over the internet is a situation known as card-not-present.  "It was never intended when credit cards were designed, and when we try to use them this way it carries higher processing fees and substantially higher risk. Payment fraud represents nearly 1% of our GDP [$100 billion] in the United States." Shockingly, the large majority of that is a direct hit to the retailers.

So far, BitPay's notable competition in the space is Denmark-based WalletBit and Colorado-based Paysius. Also, the proof-of-concept AcceptBit solution takes things in a different direction altogether with a trust-free payment processor.

Although BitPay is the worldwide leader now with payment plugins for the most common eCommerce shopping carts and multilingual support in over eight languages, they will have to continue innovating with superior features and expanded settlement currency options.

The overwhelming majority of BitPay merchants settle in U.S. dollars because the company does not yet offer direct settlement into other currencies. Furthermore, as almost all merchants start out converting 100% of their Bitcoin proceeds into U.S. dollars, the company acknowledged that the trend is heading towards 50% or less as merchants increasingly decide to maintain proprietary Bitcoin balances.

While that may be good for the future of bitcoin, it alters the business model for payment processors like BitPay because they are forced to rely more on the Bitcoin-only processing spread which is justified by customer support and user-friendly plugins. Also, they risk being seen as just an unnecessary intermediary.

In a bitcoin-only world for selling and buying without conversion to national fiat currencies, the line between processors and wallets becomes blurred. If the bitcoin payment processing industry is indeed headed towards sophisticated, feature-rich deterministic wallets and built-in risk management functionality, the leading processor should have a great advantage in steering the transition.

Payments Startup Balanced Innovates In Wrong Direction

By Jon Matonis
Forbes
Monday, November 26, 2012

http://www.forbes.com/sites/jonmatonis/2012/11/26/payments-startup-balanced-innovates-in-wrong-direction/

Under the maxim that there's no such thing as bad publicity, only publicity, the Balanced startup team will not mind this analysis of their uninspired approach to payments innovation. The explosion in collaborative consumption is indeed transformative, but Y Combinator-backed Balanced is a step in the wrong direction precisely because it extends and supports the legacy infrastructure rather than offering a true peer-to-peer payment solution.

Receiving an investment of $1.4 million from celebrity Ashton Kutcher, SV Angel, Airbnb CEO Brian Chesky, Reddit CEO Yishan Wong, and others, Balanced aims to empower the P2P marketplace movement by providing a two-sided payment platform for online marketplaces.

Balanced and Stripe both rely on the credit card giants for source of buyer funds; however, the target customer for Balanced is the marketplace whereas the target customer for Stripe is the merchant. Primarily, all other differences stem from that difference. Their main innovation appears to be the notion of offering disparate existing functionality on a locked-in platform.

In managing the funds collection and funds transfer, Balanced will maintain funds in an escrow account for the marketplace to settle with merchants and the marketplace will be responsible for any chargebacks and collecting information from merchants. To facilitate large-value transactions and to assist in returns and merchant chargebacks, Balanced intends to add an option for bank ACH credits and debits as a payment choice in the near future.

Available only to US-based marketplaces and sellers, Balanced charges 2.9% plus $.30 per transaction. They also charge $.25 per next-day ACH deposit to the seller.

Just imagine if this extraordinary flood of software development talent could be deployed in the decentralized digital currency space where it would lead to reduced transactional friction, shorter clearing times, massively lower processing fees, optional buyer anonymity, and finality of merchant payment.

Yann Rachere, the Finance Director of Anthemis Group in Geneva, Switzerland, thinks that the "current frenzy is temporary" because ultimately "P2P marketplaces need scale to succeed." He also emphasizes that controlling payments is a key component of the strategic plan for achieving scale as eBay and Etsy demonstrate. Control of the payment infrastructure and individual payment choices allows for competitive differentiation among online marketplaces. This is valuable.

On the positive side, I like that Balanced considers themselves an escrow agent in an agora setting. This is the lynchpin area for peer-to-peer marketplaces because it deals with trust -- either your real identity trust or your avatar identity trust. If one can learn anything from futuristic and successful peer-to-peer marketplaces like Fancy, Silk Road and bitcoin-OTC, the lesson is that reputations matter and exploiting the reputational component opens up breathtaking advancements in payments and P2P exchange.

On a reddit post, Stephen Gornick hints at the possible redundancy of the Balanced offering and the potential for bitcoin solution integrators:

"Each of Balanced's customers is a potential Bitcoin merchant. Zaarly is using Balanced to provide payments handling for its peer-to-peer task market. Instead of Zaarly having to build its own, it can used Balanced's API. With Bitcoin there is a little different flow. You can't pull funds from a Bitcoin user. Bitcoin is push only. But Balanced also handles the payout component. And that is a push transaction. Balanced could just as easily offer Bitcoin payments as it could ACH.

But Balanced shows what is needed by the marketplace -- a path that a Bitcoin variant could follow. Balanced is offered in the U.S. only. A bitcoin-variant could operate globally."

Bitcoin, without an intermediary, already solves P2P marketplace payment issues with a decentralized P2P digital currency that is both fair to buyers with optional anonymity and fair to sellers with finality of payment. What a global online marketplace operator needs more is reputation management APIs and bitcoin payment modules for a broad range of e-commerce shopping cart platforms. Certainly, that is functionality that a payments handling platform could provide. Reputation is how you decide who to business with -- Bitcoin is how you pay and get paid.

For example, leading marketplace and shopping cart software that is open source includes Magento, OpenCart, osCommerce, Spree, and Zen Cart. Extensions for multi-vendor support are usually available so building a proprietary marketplace platform for both buyers and sellers is not always necessary. Companies that are advancing the integration of the bitcoin payment choice into these popular e-commerce platforms are WalletBit, Paysius, and BitPay. Also, newcomer BitWasp is an open source anonymous marketplace built to leverage the features of bitcoin and lower the barrier to entry for launching an agorism-based marketplace on Tor or I2P. All could easily incorporate the escrow and reputation functionality.

Sadly, even though Balanced see themselves in an escrow role for buyers and sellers, that is where it ends because they still depend on transactions and chargebacks flowing through the monopolistic credit card networks. Balanced is merely a pass-through for the money. They do not leverage their potential as a reputation aggregator for buyers or sellers in an online marketplace and unlike Wordpress they ignore a vast swath of the world where banks and credit cards are simply unavailable.

I would like to conclude by saying that I wish Balanced much luck in their success, but I can't. I really hope that I never see any of these types of startups again. Overall they are detrimental to global payments innovation and they reinforce the paradigm of declining transaction anonymity coupled with increasing bank fees and restricted merchant segments. At best, they point out the ridiculous pricing and chargeback structure of the quasi-government credit card systems. At worst, they suck investment capital away from more promising projects and distract mind share from where it is most needed.

Update: Balanced has opened a github discussion on the topic "Support Bitcoin as a Payment Method."

My Answer To A VC’s Bitcoin Question

By Jon Matonis
Forbes
Saturday, August 11, 2012

http://www.forbes.com/sites/jonmatonis/2012/08/11/my-answer-to-a-vcs-bitcoin-question/

Fred Wilson is a venture capitalist and principal of Union Square Ventures. On his popular blog, he recently solicited feedback (for the second time) on the bitcoin cryptocurrency. I was tempted to reply directly on the blog, but with over 400 comments posted already I did not want to be lost in the scroll.

My reply is directed first at Fred for sparking the discussion but also to those many other investors pondering bitcoin deals. Throughout, I will refer to bitcoin investments as investment in bitcoin-related deals as opposed to a direct investment in the currency itself which an entirely different business proposition.

Let's get some basics out of the way. First of all, an investment in a bitcoin entity will be a gut-wrenching, difficult investment to make if a particular VC has an inherent fundamental belief in any of the following: (1) the cashless society as promoted by the anti-cashists; (2) capital controls enforced at national borders; (3) the appropriateness of any government monetary policy; and (4) the taxation of income.

For a VC, this can be a soul-searching exercise. But it does not mean that the decentralized digital currency is political by nature. It means that through its cryptographic nature bitcoin reduces the monetary Statist to irrelevancy. Bitcoin has some pretty powerful and disruptive byproducts.

With optional, user-defined transaction privacy, the use of money for purposes of identity linking falls by the wayside. True, it enables a paper cashless society but not with the attributes that the tax-efficient anti-cashists want. Without government checkpoints for financial institution wire transfers, bitcoin capital flows freely, without limits, and perhaps anonymously. The harmful tools of centralized monetary policy would also not exist. And finally, the taxation of income that began in the United States in 1913 would operate on the honor system -- the honor of the taxpayer, that is. This could be welcome news for some as a progressive income tax was a fundamental tenet of Marxism.

In his first post, Fred mentioned "the emergence of currencies that are not controlled by nation states in my lifetime." He clearly acknowledges that significant ramifications result from the "decoupling of currencies from governments," but I wonder if he has come to terms with what that actually means.

What sounds cool and hip because it is technologically advanced can also turn a lifetime of engrained political assumptions on its head. If a VC happens to believe that Greece's problems can be solved by eliminating anonymous paper cash transactions and that the taxation of income is morally justified, how does he reconcile that with bitcoin dominance?

Definitely not for the faint of heart, those skilled and experienced venture capitalists entering the arena will be
playing with fire. This is not a game of targeting an app and throwing seed money at developers located in Silicon Valley or Silicon Alley. Nor is it like catching the social media wave or jumping on the mobile payments bandwagon.

Bitcoin is the quintessential disruptor for not only does it disrupt established primary-level players in the field of payments, like VISA, Mastercard, and PayPal, but it disrupts the very nature of monetary authority.  Bitcoin is disruption within supreme disruption.

Failing to recognize this maxim, especially as a venture capital investor, can be fraught with pitfalls. Regulatory acquiescence will be tempting, but counter-productive. In a company's strategic plan, relegation of bitcoin to just another national currency type among equals fails to exploit its incredible transformative properties. The venture capitalist could become boxed in by the lack of courage to set legal precedent, by the unwillingness to go overseas, or even by the reluctance of the board. To be fair, there will be VC plays in the regulation-friendly exchange space and processor space but they won't be the home runs!

The home runs will be transformative and that just may not be possible for a NewCo in all countries. I maintain that it is more a game of multiple jurisdictions that leverages the relative strengths of competing legal jurisdictions for the best foot into the global infrastructure.

Gibraltar made an early, and deliberate, strategic decision to embrace and promote the online gambling business. They executed it brilliantly and Gibraltar is now home to the industry's leaders like publicly-traded bwin.party [BPTY:London]. Just as with online gambling, some jurisdictions around the world will be more bitcoin-friendly than others. Negotiating that outcome is the real frontier.

Many readers have commented and agreed that the investment opportunities will revolve around bitcoin-related services more than any type of client software play or attempt to control the mining and transaction fees. While I generally agree, I also think that a new company does not have to be bitcoin focused exclusively.

Also, keeping bitcoin value in bitcoin on the block chain will be the key. It may be an opportunity that moves significantly beyond an existing business model simply by having bitcoin in its arsenal. For example, a third-world e-commerce platform could bring massive shopping to the unbanked by leveraging the non-national and frictionless attributes of bitcoin. Or, asset vehicles could be designed that transfer inter-generational wealth without the need for trusts or trust administrators.

So, my advice to VCs seeking their piece of the block chain is study the FATF blacklist of 15 non-cooperative countries, go to airports you never heard of, and most importantly, surround yourself with management teams that mentally embrace bitcoin's powerful derivative byproducts.

For further reading:
"Sit down and shut up!", BLOGDIAL, August 13, 2012
"Cash Is Essential For A Free Society", Stowe Boyd, August 10, 2012
"Secure multiparty Bitcoin anonymization", Edward Z. Yang, July 20, 2012
"Nerdy Money: Bitcoin, the Private Digital Currency, and the Case Against Its Regulation", Nikolei M. Kaplanov, March 31, 2012

CoinLab Attracts $500,000 in Venture Capital for Bitcoin Projects

By Jon Matonis
Forbes
Tuesday, April 24, 2012

http://www.forbes.com/sites/jonmatonis/2012/04/24/coinlab-attracts-500000-in-venture-capital-for-bitcoin-projects/

In the first official venture capital raise for a direct investment in bitcoin, CoinLab secured $500,000 today from seed stage Silicon Valley firm Draper Associates and others, including Seattle angel investor Geoff Entress, former assistant treasurer at Microsoft Jack Jolley, and familiar bitcoin investor Roger Ver. Jolley will also join the company as its Chief Financial Officer.

Based in Seattle, CoinLab is an emerging umbrella group for cultivating and launching innovative bitcoin projects. Until now, they have been relatively quiet regarding their initiatives but they are credited with releasing a comprehensive Bitcoin Primer in January 2012. The founders are startup entrepreneurs Peter Vessenes, Mike Koss, and Tihan Seale, each with a strong passion for the broad advancements enabled by a decentralized currency.

CEO Vessenes said, "if there is a currency that can trade around the world, it's semi-anonymous, it's instant, it's not controlled by government or bank, what's the total value of that currency? The answer to that is, if it works, it's gotta be in the billions. It just has to be for all the reasons you might want to send money around the world."

Apparently, seasoned investors are starting to agree. Draper Associates partner Tim Draper explains the allure of the decentralized bitcoin, "The idea of a private currency has always been appealing to me as a way to diversify away from holding currency in irresponsible governments. It is more relevant now than ever." Hopefully bitcoin will maintain its current exchange value and appreciate, especially since this investment represents over 1% of the total $45 million worth of existing bitcoin in the world.

CoinLab intends to go into serious hiring mode as they build out their development team and launch new bitcoin projects. Although an SMS bitcoin texting service called Bitsent was announced briefly on their site, a greater focus has been on the concept of MMORPG mining, leveraging bitcoin to monetize players for the online gaming companies like World of Warcraft and EVE Online. Two companies have already agreed to participate in a beta for the CoinLab mining concept -- Wurm Online, an independent MMO that allows players to dig, flatten, raise and shape the land and create the frontier world they live in, and graFighters, the first online fighting game for your hand drawn characters.

The business model is clever. A few whales, or big spenders on virtual goods, make up the majority of gaming company revenue while the infrequent casual players constitute the bottom 10%. "CoinLab wants to grab that 80% in the middle," says Vessenes. They intend to accomplish this by offering a configurable app that players download from the gaming site which would allow bitcoin mining jobs to run on these beefy GPU-outfitted client computers.

Like DropBox, the CoinLab app will reside in the background so that the players are not even aware of the mining that occurs during the gaming session. To the gamer, certain virtual items or level upgrades would be obtained. This is a new revenue stream for online game companies as they monetize the free-to-play gamers via cluster compute work and a win for CoinLab as they convert the mined bitcoin to dollars or euros that are passed on to the companies after a tidy spread of course.

Vessenes doesn't want to refer to CoinLab as 'just another mining pool' because they have a distinctly different type of payout, but you can certainly imagine some non-gaming miner opportunities entering the CoinLab platform. After all, bitcoin miners and the mining pools collectively gain clout by virtue of the fact that a majority of miners is necessary to accept changes and slight variations to the protocol. It is easy to view the bitcoin mining pools as guardians of the free and open monetary system of the future -- powerful de-central bankers if you will.  CoinLab is poised to earn a seat at that table.

Virtual Currency Exchange First Meta Closes $466,000 Funding Round

By Jon Matonis
Forbes
Tuesday, April 10, 2012

http://www.forbes.com/sites/jonmatonis/2012/04/10/virtual-currency-exchange-first-meta-closes-466000-funding-round/

In a little-discussed announcement, First Meta took in nearly half-a-million dollars for the expansion of its multi-world virtual currency exchange. Singapore-based First Meta is unique in that they have consistently provided a two-way exchange service for virtual currencies that typically only see one-way activity. Why is this significant? For starters, it gives individuals the opportunity to cash out or monetize their virtual world activities just as I outlined in my previous article Virtual Currencies and Roach Motels. When it comes to Linden Dollars, IMVU Credits, Frenzoo Gold Coins, and other currencies, it is this two-way convertibility and getting the most out of your virtual assets that make the team at First Meta stand out.

The investment announced on March 29th came from Silicon Valley business accelerator Plug and Play Tech Center and Singapore’s National Research Foundation. The new capital will be used to build the next generation of its virtual goods and currency exchange and expand support to other platforms. First Meta was founded in February 2007 by Douglas Abrams and Aileen Sim who then had their early prominent business success in Second Life with MetaCard and virtual ATMs. It is important to note that the co-founders also have a background in banking, finance, and venture capital which could prove valuable as virtual exchanges encroach upon their more traditional trading house brethren.

Online virtual currency trading has close similarities to online forex trading so obviously it is a natural progression for the nonpolitical digital currencies. According to new CEO Autumn Radtke, "Consumers are being bombarded with virtual currency today like we’ve never seen before. As gaming becomes more mainstream so will secondary trading. We’re here to help the new generation of game companies and currency issuers participate in revenue and avoid the black market fraud problems associated with unsanctioned trading."

Unlike most third-party dealers of game currencies and virtual currency platforms, First Meta emphasizes the potential for publishers and game developers to open up their proprietary currency to player-2-player trading which gives users the much-desired liquidity and also introduces the currency to new users thereby exploiting the inherent viral nature of a currency. Citing new revenue streams for their partners, they claim to have the most robust player-2-player virtual asset trading platform in the industry. As they say: "Why let someone else profit from your hard work?"

Trades at First Meta may occur between two different virtual currencies or between the virtual currency and the US Dollar or Euro. This highlights what I believe is a growing trend for virtual world environments and MMO gaming -- namely the ability for participants to extract digital value from the virtual experience and convert it into real-world money.

Expected to be released on May 15th, Blizzard's Diablo III takes this value extraction to the extreme with their controversial real money auction house. Apparently, so much was at stake regarding the real currency trade that South Korean officials even persuaded Blizzard to remove the auction house feature from the local market version. Moreover, gold farmers are reportedly stunned as GamesRadar's Tyler Nagata observes:

"Traditionally, the black market for in-game items has been the elephant in the room that game developers just don’t talk about. That’s why the real money auction house for Diablo III marks a huge shift for how game studios handle player driven economies in online games. By taking the cash-for-item trades away from traditionally sketchy gold farmer sites and putting it under the official banner of its Battle.net service, third-party gold farming businesses and services may become a thing of the past if more online games adopt a similar business model to Blizzard’s moving forward."

We can expect more in the way of these types of strategic moves as virtual worlds collide and the twin mega-trends of grid portability and real money trading (RMT) accelerate. Virtual currency exchanges like First Meta will be there to provide trading liquidity and to expand the overall pie.