N o 2 —2 011
ABST RAC T
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
Innovation, trends and visions that form the spirit of the age
168 From Fiction to Science
174 Culture & Gadgets
188 Ag e n da
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.
THE HUMAN PURSE
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.
OF ELVES, ORKS
AND VIRTUAL CURRENCIES
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
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.
Editor in chief, Researcher W.I.R.E.
Dr Stephan Sigrist
Head of W.I.R.E.
Dr Burkhard Varnholt
CIO, Bank Sarasin & Co. Ltd
Prof. Dr Gerd Folkers
Director, Collegium Helveticum
Florian Huber, Annina Coradi, Kristiani Lesmono
Head of Graphic Design W.I.R.E.
Subediting and Printing
Neidhart + Schön AG
Neue Zürcher Zeitung Publishing
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