When money gets under your skin - W.I.R.E - The Wire


When money gets under your skin - W.I.R.E - The Wire


N o 2 —2 011


IdeAS, fACTS ANd Fictions

Money is dead.

Long live money.

On the change in currencies and values

And other stories of

animal seismometers, mother’s milk ice-cream

and the three million dollar algorithm


Money is dead.

Long live money.

14 The origin and future of money

By Burkhard Varnholt

26 The economy of love

Interview with Eva Illouz

36 When money gets under your skin

By Duncan Jefferies

44 On the treadmill

Interview with Mathias Binswanger

52 Why we need to redefine wealth

By Nic Marks

60 On the value of flea markets

By Gerd Folkers

62 What Warren Buffett can learn from Britney Spears

By Albert Kuhn and Stephan Sigrist

70 Who deserves what he earns?

By Jan Amrit Poser

80 Forwards into the past

By Michèle Wannaz

90 Metamap

96 IdeAs

Innovation, trends and visions that form the spirit of the age

168 From Fiction to Science

174 Culture & Gadgets

188 Ag e n da

When money

gets under your


We may soon no longer need to pay in hard cash, but with a

blink or an implanted chip. But the virtualisation of money

also creates new income possibilities: you can use virtual

currencies from online games to turn time into money – and

into very real money at that.

By Duncan Jefferies

The future glimpsed in sci-fi films like “Minority Report, ”

where a person’s iris acts as their debit card, driver’s license

and ID, is on collision course with reality. Actually, the

bumpers have already met: Cairo Amman Bank recently

installed an iris scan biometric ID management system to

authenticate banking transactions for all its customers.

There are plans to install iris scan technology on mobile

phones too, removing the need for PIN numbers when

verifying payments. Other systems in development can

read the iris of a moving subject from ten feet away, and

process 30 people a minute. A person’s details captured,

compared and verified in literally the blink of an eye.

Our voices, faces and fingerprints can also be used

as payment methods. But the most advanced form of biometric

payment technology is an RFID chip implanted under

the skin. These tiny microchips – half the size of a grain

of sand – listen for a radio query and respond with a unique

Money is dead

Long live money

ID code. Most have no batteries, siphoning power from the

radio query to transmit their response. Long lifetimes

make them viable for human implantation. And once they

are installed in your arm or hand, you simply wave to pay.


All these biometric technologies have cultural and technological

hurdles to overcome before mainstream consumers

will adopt them. Yes, they could shorten checkout times, and

you’re unlikely to lose your eyes, voice or hands as you might

your wallet. But fingerprinting technology still has negative

associations with criminality. Privacy, accuracy and security

fears could also impede the take up of voice, face and iris

scanning systems – it’s easy enough to cancel a credit or debit

card if your account details are stolen from a company’s computers,

but body parts are a little harder to replace. As for having

a chip implanted under the skin? Well, one dreads to

think how gory muggings could become in future. Until our

bodies become walking wallets our mobile phones will have

to suffice. The next generation of handsets include near field

communications technology, allowing people to pay by

holding their phone near a terminal.

The way we borrow or raise funds is changing

too. Crowdfunding sites like Kickstarter and RocketHub

allow charities, artists and other creative types to access

pooled donations from thousands of people. Remarkably

large sums have been raised. For example, 13,000 Kickstarter

users recently stumped up 1 million US dollar to fund

the production of an iPod Nano wrist-watch strap.

Peer-to-peer banking is a slightly different prospect.

Loans are offered at substantially better rates than tra-


ditional banks, which act as an intermediary and must cover

their administrative costs. A group of lenders each

supply part of a loan for a set number borrowers, thereby

spreading the risk, and receive interest repayments accordingly.

Zopa, one of the biggest players in this emerging

field, has already processed more than 110 million pounds

in loans. Aside from greater access to capital, the appeal of

both P2P banking and crowdfunding seems to stem from

the same desire: a return to a more community-based form

of lending and investment.



Online communities have also driven the growth of virtual

currencies, which simplify web-based payments. No

one wants to be wrenched from an immersive game and

asked to enter their credit card details when buying a character

upgrade or other virtual item, and developers are

keen to avoid card transaction fees. Many persistent online

games and social networks therefore support their own

stand-in currency. Some games have evolved into complex

virtual economies with GDPs that rival those of real-world

countries. The developers of EVE online, a popular massively

multiplayer online game, even employ an in-house


The people shipping out to these virtual lands are

astonishingly diverse. There are virtual pioneers, eking out

profits from the rent or sale of land and products in second

life and MMOGs; fraudsters, spammers, hackers hoping to

make a quick buck; and gold farmers, 400,000 Chinese

workers who play daily in long stretches for around 77

pounds a month, accumulating virtual money and items

Money is dead

Long live money

that are sold on to cash-rich, time-poor Western players.

Estimates put the amount of money transferred into virtual

currencies each year in the billions, though other research

claims this could be the amount generated by gold

farming alone. Either way the figures are growing every

day. Why? Because the news is spreading fast. There are

fortunes to be made on the digital frontier.

Governments have begun to take note. The United

States IRS has expressed concern that virtual worlds are

a growing source of tax noncompliance, while China and

South Korea already tax their local trades in virtual currencies.

Soon, it seems, the orcs and elves of World of Warcraft

will be fighting a common enemy: the taxman.

Social networking economies are also centered

on the sale of virtual gifts or items. In a bid to claim some of

the profits Facebook has launched its own currency, Facebook

credits. Rival currencies have been purged from the

site and Facebook now takes a 30 percent cut of each transaction

from app and game developers’ coffers. As the combined

value of all these micro-payments could soon top

1 billion US dollar a year, 30 percent is ... well, a lot of money.

Bitcoin, launched in 2009, is the closest the web

has to a universal virtual currency. The authenticity of each

transaction is verified by the bitcoin peer-to-peer network

– so even if you don’t trust a buyer, you’ll know their bitcoins

are real. This removes the need for a middleman, i. e.

banks. Unlike national currencies bitcoin has no central issuing

authority. Their anonymous nature (similar to real

cash) makes them a popular means of paying for drugs and

other illicit goods, though many legal items and services

can be bought too.


Goldfarmer © World of Warcraft

As of June 2011 one bitcoin is worth over 14 US dollar. New

ones are “mined” by lending computer power to the network’s

transaction verification process – called the block

chain. To generate a block, and be granted bitcoins for their

efforts, miners must solve a proof-of-work puzzle. This requires

a hefty amount of computational power – serious bitcoin

miners use banks of cheap graphics cards to get the job

done quicker than their peers. A complex algorithm adjusts

the probability of a successful solution so that no more than

one new block is produced every ten minutes. Only 21 million

bitcoins will ever exist, with the last ones appearing

sometime around 2140. As Bruce Wagner, organiser of New

York’s bitcoin developer’s meet-up, recently said: “No banker

can control it. No evil dictator tyrant can print zillions and

destroy the value.”

Money is dead

Long Live Money

starbuck ©diablo2003.deviantart.com

So how popular could bitcoin and other virtual currencies

become? Online, their user base is rapidly expanding. But

at present they can’t be used in high-street shops or traded

on traditional financial markets. And should they start to

damage the value of sovereign currencies, governments

will probably try to ban them, no matter how difficult this


might be to enforce. The Chinese State has already taken

steps in this direction, prohibiting the trade of virtual currencies

for real-world items (though not the reverse, which

would kill the lucrative Gold Farming industry). For as all

government’s know, sovereign currencies share something

in common with bitcoins, second life’s linden dollars and

WoW gold: once people stop believing in their value, they

soon cease to exist.

Duncan Jefferies is a journalist who writes about digital culture,

video games and technology. After graduating from

university in 2005 he worked for several specialist technology

magazines. His articles have appeared in newspapers

including “The Guardian,” “Observer,” “Daily Telegraph”

and “Evening Standard.” He lives in North London and is currently

researching a non-fiction book on virtual currencies.



Editorial Staff

Simone Achermann

Editor in chief, Researcher W.I.R.E.

Daniel Bütler


Michèle Wannaz


Dr Stephan Sigrist

Head of W.I.R.E.

Dr Burkhard Varnholt

CIO, Bank Sarasin & Co. Ltd

Prof. Dr Gerd Folkers

Director, Collegium Helveticum

Editorial contributors

Florian Huber, Annina Coradi, Kristiani Lesmono


Kristina Milkovic

Head of Graphic Design W.I.R.E.

Graphic contributors

Patrick Kuhn

Subediting and Printing

Neidhart + Schön AG


Neue Zürcher Zeitung Publishing

Disclaimer: This publication is for information purposes only. Inasmuch as reference is made

herein to Bank Sarasin & Co. Ltd, this constitutes neither an offer nor an inviation by Bank Sarasin & Co. Ltd

to purchase or sell securities. The sole aim of this publication is communication. It should also be noted that

developments occurring in the past are not reliable indicators for developments in the future.

Picture credits:

Cover: © craigfoldsfives@q.com, craigfoldsfives.deviantart.com / Page 16: ©Grafisimmo/iStockphoto.com

Unless otherwise noted, the rights belong to the authors or their legal successors. We have endeavoured

to find the owners of all rights. Should we nevertheless not have succeeded in notifying any of the owners, they are

requested to contact W.I.R.E. www.thewire.ch

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