Ex-Linden money chief creates new metaverse currency

By all indications, the hypergrid is hopping. As of mid-January, 68 percent of all active users, 75 percent of all public OpenSim grids, and 93 percent of all regions were on the hypergrid, and the number of hypergrid events and communities is exploding. The Kitely Market now delivers to more than 120 grids, Island Oasis is in the process of joining the hypergrid… the only thing missing is the metaverse equivalent of PayPal.

Christopher Colosi

Christopher Colosi

Now, Christopher Colosi, who used to run the Second Life Marketplace and the Lindex exchange, hopes to change that.

His Gloebit platform, now in beta testing, promises to provide a single virtual currency to any OpenSim world, video game company or new virtual reality startup.

Fully compatible with OpenSim viewers, the Gloebit system can be rolled out on a single region or throughout a whole grid, allows users to give currency to one another, buy content, sign up for subscriptions and rental agreements — all from a single account that works on any connected grid.

It is very similar to the way that PayPal works across many websites.

Except that the transaction fee is just 2 percent per purchase, with another 1 percent going to the grid or hosting company.

Most transactions can take place quickly and easily without even leaving the viewer. Riskier transactions — such as buying something on a grid for the first time, or signing up for a recurring payment — requires a second, web-based confirmation step.

Meanwhile, the PayPal-style Gloebit website offers an instant record of all currency purchases and in-world transactions, as well as the ability to cancel or restart recurring payments.

(Image courtesy Gloebit.)

The Gloebit is centralized, like the Linden Dollar, but cross-platform like Bitcoin. (Image courtesy Gloebit.)

Colosi’s experience with virtual payments dates back to several years before Linden Lab, when he helped found a video game company and build a video game engine. Then, at Linden Lab, he ran the marketplace for five years, where he was responsible for millions of dollars a month in virtual goods sales as well as relationships with merchants and customers.

After a run on the bank, he stepped in to handle the crisis, manage the LindeX and stabilize the Linden Dollar.

“When I was running the economy in Second Life, there was half a billion dollars — in real dollar equivalents — in user-to-user transactions a year,” he said. “That’s larger than some small countries.”

He now brings that expertise to the Gloebit payment platform, with one significant difference between it and Linden Dollars.

“Second Life uses the Linden Dollar, but they want most of their payments in U.S. dollars,” he said. “When there was a run on the bank in Second Life, that was a big issue.”

Gloebit, however, is set up to take most of its fees in the virtual currency.

“We’re invested the same way that everyone else is, and if there are too many Gloebits, we have a large pool of Gloebits that we can choose not to put into the economy. It’s a big difference from Second Life and an important piece of building a large, stable currency.”

Beta testing

During the coming month, while the platform is in beta, Gloebit will be testing to make sure that everything works on all grids and OpenSim versions, and to fine tune the fraud control system.

“And if we don’t catch something right away, we have all the audit records in the system and can reverse those transactions and give people back their money,” said Colosi.

To try it out, teleport to Hyperica at hg.hyperica.com:8022 and check out the vendor, right in the welcome circle, that offers a hypergate for 10G. Click on it and go through the steps of making your first purchase — don’t worry, during the beta testing period, it won’t actually take any real money.

A couple of other grids will also be participating in the beta testing. I’ll add the names once they are confirmed.

Gloebit is currently working with two hosting providers, Dreamland Metaverse and Zetamex, and customers of those hosting companies can ask them to set them up as part of the beta test. If you run your own grid, instructions for connecting to the system are here, or you can email Colosi at [email protected].

“If anyone is running their own grid, its a pretty simple setup,” he said. “We give them a DLL and a config file, they create a merchant account on our system and an app under that account, and take a couple of values out of that application and put it in the config files and run it and it works. You can run it on the full grid or on particular regions — you reset the system and the money module is available.”

The Gloebit module has already been tested with OpenSim 0.8.2 and 0.8.2.1, 0.9 dev — the latest development build — as well as one of the older versions.

“I’d be happy if people outside of those let us know what they’re running to see if we have any problems,” he added. “We have tested and run on a standalone grid, on Robust, on a Robust grid running hypergrid-enabled. We have run at the process level where we’re on every region, up to 16 regions, and we’ve tested where we’re only on a single region under that process.”

Each new grid has to be approved by Gloebit users on a Web-based confirmation page, similar to a PayPal confirmation.

Each new grid has to be approved by Gloebit users on a Web-based confirmation page, similar to a PayPal confirmation.

Gloebit has been working with Hyperica and Dreamland Metaverse since early December to ensure functionality, security and usability.

One remaining problem, Colosi said, is that the viewer balance doesn’t always update automatically when you buy Gloebits, but simply clicking on it is a quick temporary fix.

Payments

Gloebit currently takes PayPal and credit card payments to fund Gloebit wallets, and Colosi hopes to have Amazon payments and Bitcoin working by the end of the beta period, as well as more customer support tools.

There are no fees for customers using Gloebits to buy in-world goods or services, or to give money to friends.

For merchants who sell items for Gloebits, there is a 2 percent fee that goes to Gloebit, and a 1 percent fee that goes to the grid owners or hosting company that set up the system.

It takes money to manage grids and inventory servers, Colosi said. “They need to support the costs of that.”

So, for example, if a buyer spends 100G on a new pair of shoes, 100G comes out of their balance. The merchant gets 97G net, but can see the 100G payment and the fees that were taken out in their transaction records. Gloebit gets 2G, and the grid or hosting company gets 1G.

“We tried to keep it simple for consumers,” Colosi said.

Once the beta period is over, $1 will probably be priced at 250G, he added. There is a difference between the buy and sell prices of the currency. In addition, there is a cash-out fee for merchants who withdraw money, equivalent to the cost of that transaction. If there is a dispute with the credit card company, Gloebit covers the chargeback fees.

By comparison, the Second Life Marketplace charges 30 cents to buyers who use US dollars for the transactions, plus another 5 percent commission to merchants. Kitely also charges 30 cents to the buyer for PayPal transactions. In addition, the merchant is charged 10 percent for Kitely Credits transactions completed via Kitely Market — there is no fee for Kitely Credit transactions done in-world — and 20 percent for PayPal transactions. However, the Kitely Market does offer a great deal of convenience, with thousands of items available for instant delivery to more than 120 grids.

In addition, the Gloebit fees are for every in-world transaction, not just those on a marketplace.

Legal standing

There are several different ways to run a virtual currency, some of which are significantly more risky, from a legal standpoint, than others.

On one end of the extreme is the purely fictional currency. The gold coins in PacMan, for example, or the FarmVille coins exist solely within the game. Some grids use this kind of purely fictional money on their grids as play money, and there are no legal issues with this at all.

Some games allow in-game purchases, where players can spend real money to top up these in-world coins — but aren’t allowed to trade them back in for cash. Kitely, for example, takes this approach with Kitely Credits. You can buy them, you can use them for in-world purchases or to pay for land, but you can’t turn them back in for real money.

Then there are what’s known as “closed loop” currencies. You’re probably most familiar with these in the form of iTunes gift cards. You can buy the cards, and spend money on them, but Apple won’t give you a refund for your unused balance. However, the merchants that you buy songs from using your iTunes balance will get their cut of the money you spent. The merchants have to go through an approval process, however, have a business relationship with Apple, and provide tax information and other details.

Finally, on the other extreme, there are the fully-redeemable currencies, where any user can buy or sell the currency at any time, with few restrictions. Many grids take this approach, hoping that regulators will have other things to worry about, or use a third-party service provider to handle their currency for them.

Gloebit falls in the middle, right along the “closed loop” gift-cards and the Linden Dollar.

“It’s something that we pay attention to,” said Colosi, who said that Gloebit made sure to get legal guidance before setting up their payment system, including getting advice from a former state regulator.

There are policies in place for regulatory reporting, identification verification, taxes, and money laundering prevention, he said.

“Our currency is convertible, but we have controls in place,” he said. This helps shift the burden of responsibility for compliance away from individual grids, he added. “I want to be able to tell regulators that we’ve crossed our T’s and dotted our I’s, that we know who’s cashing money out of our system, that we have controls in place, and we have guidance from lawyers.”

But compliance is only one of the reasons a grid might consider replacing — or supplementing — its own currency system with that of Gloebit.

Each time a potential customer has to take some step before they can make their purchase, half of them will give up and go away.

“The hardest thing is to get someone’s credit card information on file,” he said.

With Gloebit, a customer only has to sign up once, with one single trusted vendor — and can then spend money on any associated grid without having to go through that process again.

“How much more would you make from selling items on your grid if visitors already have a hypergrid currency?” he asked.

In addition, grid owners who run their own currencies have to deal with fraud, with the technical costs of maintaining the system, and with other risks.

Item for sale on Hyperica with the Gloebits virtual currency.

Item for sale on Hyperica with the Gloebits virtual currency.

With a multi-grid platform, a new customer who signs up for Gloebits on any grid instantly becomes a customer for all affiliated grids.

It is true that some users buy a virtual currency, then leave a grid without ever spending it. This is churn, and typically accounts for less than 5 percent of revenues in the gaming industry, he said. Grids that give up their own currency do give up this money.

It’s kind of like being in the business of selling gym memberships that people don’t use, he said — and that’s not a business that he wants to be in. With a more broad-based currency, total spending is likely to go up overall, benefitting everyone.

“And you’re going to get your funds people people actually buy products, not when they buy the currency,” he said. “Can I get them to pay to rent this, to enter this VIP area, to buy this shirt? Now your revenue stream is much more aligned with where you’re producing value.”

Current alternatives

There are few good options for merchants right now looking for a currency supported by multiple grids.

There’s the Kitely Market, of course, but that only works for web-based sales, not for in-world stores.

And there’s the OMC currency from Virwox, which used by very few people. In fact, Virwox has stopped releasing its economics statistics, half the supported grids listed are long closed, and the mainstay of Virwox’ business — trading Linden Dollars — has been shut down by Linden Lab since last summer.

Grid currencies traded by Podex. (Image courtesy Podex.)

Grid currencies traded by Podex. (Image courtesy Podex.)

There’s also Podex, which currently trades currencies from Avination, InWorldz, ZanGrid, The Adult Grid, Lost Paradise, YrGrid, The Great Canadian Grid, My Virtual Community, DigiWorldz, YSLife Grid, Virtual Life, Virtual Life Brazil, Dreamscape, Virtual Beach Party, GreekLife, AviWorlds, Baller Nation, Utherworldz, Emilac and 4Addiction.

However, each grid that Podex supports is its own, unique currency — a customer who wants to shop on, say, two of these grids would need to have an avatar on each of those grids, and a currency account for each avatar. Podex makes it easier to move money from one currency to another, between different avatars on different grids, but doesn’t simply the actual process of in-world shopping.

DX Exchange also began providing currency services to OpenSim about a year ago, but the company seems to have since closed down in the wake of the Linden Lab decision.

Other in-world payment options include PayPal, which has relatively high transaction fees, and Bitcoin, which can be complicated for the average customer to use.

Beyond OpenSim

Colosi, who is based in San Francisco, is actively marketing Gloebits to game developers and to new virtual reality startups.

Many entrepreneurs would prefer not to have to build their own currency systems, he said, but to be part of a larger ecosystem.

“Showing them Gloebit working on hypergrid grids in OpenSim is a great example,” he said.

Watch a video below of a generic version of Gloebit use.

maria@hypergridbusiness.com'

Maria Korolov

Maria Korolov is editor and publisher of Hypergrid Business. She has been a journalist for more than twenty years and has worked for the Chicago Tribune, Reuters, and Computerworld and has reported from over a dozen countries, including Russia and China.

  • I presume this currency is US based, so any non-US grid would find themselves subject to US regulations and IRS reporting by adopting this currency.

    • Samantha Atkins

      IANAL but I don’t believe it works that way any more than your grid would be subject to US law in a substantial way from showing content on a prim from a US company. Many US companies have worked out how to not supersede foreign companies laws and regulations to offer their services in these countries.

      • First of all their terms explicitly says that:

        Choice of Law

        This Agreement is governed by and interpreted under the laws of the state of California, USA as such laws are applied to agreements entered into and to be performed entirely within California by California residents.

        For a non-US company this is a non-starter as every business contract you enter into must be handled by local law which is what the company in question will be subject to.
        A company providing a service must be able to turn around to a critical subcontractor (as the provider of the currency would be) and know they will back you by the same legislation as you are subject to. If not you might run a substantial business risk in a dispute with a customer or authorities.

        The other part is that registration for the currency by a company requires a US business ID and any income on this ID is subject to tax reporting to the IRS and potential taxation or automatic tax withholding. – Why on earth would a non-US company subject themselves to US tax reporting and taxation?

  • Merrie Schonbach

    This is very exciting, I’m so glad its being developed!

  • Ghaelen D’Lareh

    Very interesting. Sounds like it would allow integrated website and in-world sales for purchasing not just rezzable items, but also tickets, pdf files, etc. Or am I way off base about that last part?

    • We’ve already integrated with a few (sadly unsuccessful) web based games and we have a web game platform integrating our services. Our services can be integrated with a web marketplace or any product which can make http calls (as our api exposes RESTful http endpoints). So, you could absolutely use gloebits in a web marketplace for OpenSim products. You would have to do a bit of integration regarding delivery of those objects to someone’s inventory.

      You could absolutely use us to sell tickets or pdf files or other digital goods. We would love to beta test with an events host.

  • Talla Adam

    I’m in the UK so should I be filing US tax returns for my Linden dollar transactions in Second Life which is a US based currency? I don’t think so.

    • Talla In SecondLife you are not offering the service, but are from an EU legislation standpoint a consumer as LL does not even offer BTB or developer contracts (if you were a business.)

      If you are a business and you have a net cash-out from SecondLife that makes you a taxable object in the UK you should file the income (and outlays) on your income statement. You probably also pay VAT, and again, if a business, the VAT could be deductible on your income statement.

      If you are a consumer, IDK exactly how that works in the UK. The legislation here is that all proceeds in SecondLife is won in a game and therefore non-taxable.

      The REAL BIG difference is when you offer the service. Then all kinds of legislation kicks in.

    • FYI, in most EU directives Consumer is defined as:
      “consumer” means a natural person who, in transactions covered by this Directive, is acting for purposes which can be regarded as outside his trade or profession

  • Emerger

    The metaverse really needs a unifying currency, so I am really happy to see some development in this space! That said, I hope the hypergrid ultimately chooses an opensource currency (Bitcoin, NXT, or another), with all the auditability and fraud prevention that a blockchain provides. As the technology is now available, that seems to me a much better fit for a metaverse currency than one controlled by a privately held company. But I wish all the best to all who are adding options to the table.

    • I agree with you a crypto currency would be more suitable than a currency issued in a set legislative environment.

      The OMC will probably work on the European based grids because it is issued out of an EU country and therefore must satisfy the requirements of all the relevant EU directives. I don’t think the OMC will satisfy the formal US requirements. It swings the other way for US based virtual currencies.

    • I am a very interested in Blockchain technology and seeing what problems it will solve. For instance, I think it could be a great mechanism for transferring land ownership (could solve Detroit’s issues) or codifying contractual rights and transfer permissions on property. Personally though, I don’t think its a great solution for currency for a great many reasons. I won’t start that discussion here, but I’ll try to get a blog post out soon on this where you’ll be welcome to comment. Anyway, I’m happy to see excitement in the space, even if it isn’t always people rooting for us.

  • Frank Corsi

    This idea has been around for over 6 years now. The customers demanded a simple cash out option. Not being able to cash out can not be a welcoming option.

    • From what Colosi told me, the Gloebit will be a redeemable currency with low-cost cashouts. I’ve asked them for more details and exact costs of the cash-out process, and there will be some paperwork that folks would have to go through so that Gloebit will comply with tax and anti money-laundering regulations.

  • Area Fiftyone

    Who needs this crap when we have bitcoin ?

  • It happens that some days ago I placed on my site all the cases and requirements for money in virtual worlds.
    Search for “Actually There are three kinds of money:” in the page http://www.shedrupling.org/nav/shenav.php?index=30608&lang=en (please note that there is a lot of other stuff on this page, which would be probably off-topic here)

  • Samantha Atkins

    I think this could be big, especially if it spreads to various games as well. But I agree with the sentiment that a fast transation time blockchain type coinage would likely be more generic and better still. Bitcoin transactions are too slow currently and unlikely to get better any time soon. I would prefer something that is anonymous when one wishes to be though.

  • oopsee

    Don’t want it, Don’t need it … keep currency and commercialism out of opensim, stay in sl, inworldz and kitely. Quit trying to make opensim another crappy sl clone it is unique and nice without greed and commercial junk.
    Just another scheme to make money and all brought to you by a former Linden exec, go back to sl and stay there!

    • Agreed. Please leave OpenSim alone.

    • Well the reality is that when you travel to grids without a functioning economy most of the things you need to build your house or dress yourself are craptastic – or copybotted (aka stolen) from other places, buggy, and of inferior quality. The difference is night and day between grids with working economies and ones without. All of that Barney the Dinosaur fluff is nice when you’re like 4 but in the world of grownups, a functional economy is a must.

      If someone doesn’t want to buy or sell – they don’t have to. But don’t be a busybody and prevent others from bettering their OpenSim lives.

      • oopsee

        “Well the reality is” there are already grids with economies so fyi use them, secondlife, inworldz, kitely, digiworld, great canadian grid and many more. How many economy grids do you need to have gezzzzzzz.
        Dont need an economy or money in EVERY grid running opensim !
        Use kitely market if you have to have items to purchase … you do have options duh !
        I think your wrong about the “crappy” … travel to metropolis or osgrid and you will see quality content available for free and not stolen that rivals any content for sale in commercial grids. In fact I have seen that same free content stolen and for sale in commercial grids. Just because its free does not mean it is “crappy”.
        Think grids without an economy are “crappy” then don’t go to those grids Maddy, easy peasy.

        • Sorry but that’s not how it works. You might want to keep everyone in some backward Cuba or North Korea type of environment but not everyone feels the same way. Why can’t you live and let live instead of being a control freak? Let people buy and sell – no one is forcing you to take part. Instead what’s happening is that a lot of stolen mesh and other property is coming into these no-currency worlds, creating serious legal liabilities for those who own and control them. You may like the SL 2003 look but most people don’t. At least give them the chance to acquire it legally.

          • oopsee

            Yup, that’s exactly how it works, grids choose to have or not have an economy and nobody like you is going to change that. Deal with it … stay in your “crappy commercialism” grid and stay out of our free grids.
            FYI most theft is in and between commercial grids not in the free grids so get your facts straight. People steal to resell to others like yourself. I know for a fact you have stolen content in your inventory and are not even aware of it. Textures used by greedy commercial content creators without permissions for example!! Textures in content are the most overlooked stolen content in virtual worlds and yup guaranteed you have them in your junk. So get off your campaign stump about theft. Greedy little creeps are a result of commercialism by the way. Its not really your problem Maddy unless you are a content creator yourself. Any creator who is a victim of content/intellectual theft has legal rights to use against those who are guilty of theft and if they don’t boo hoo.
            What you seem to overlook is that commercialism brings with it a lot of undesirable side effects that are not part of the currency free grids so your argument about not affecting is well plain stupid logic.
            Really don’t see your problem, you have a plethora of commercial crappy grids already but wow, that’s not good enough for you? You need to make every grid in your image of “desirable”? Good luck with that hahahahaha.
            I wont reply to anymore of your nonsense posts so please feel free to have the last word cause I think that is your style to go round n round until you fall down.

          • oopsee

            1. that is how it works, grid owners choose to have or not have an economy despite your/my opinion. That is not going to change.
            2. I am not keeping anyone from anywhere. Many commercial grids are available running opensim, seems your the one trying to push money and commercialism where it is not wanted.
            3. I have no control nor wish any. I find this comment rather personal and offensive “Why can’t you live and let live instead of being a control freak?”
            4. no one forces you to visit or make an account in a commercial free grid. if it is not to your liking then don’t go there.
            5. you have stolen content in your inventory guaranteed. content creators steal textures all the time and sell them as part of the creation. also many creators sell in commercial grids but give their wares free in non-commercial grids. content creators have legal recourse for stolen content and if they don’t use what is legally available to them boo hoo. most stolen content is among the commercial grids re-selling it to people like you.
            6. don’t enjoy commercial free grids then don’t visit, no one makes you. as I mentioned before you have a plethora of commercial opensim grids to romp around in.

        • lmpierce

          Hello all. Two comments were deleted because a personal attack was included and the follow-up comment also referred to that attack. Important issues to be sure… important stay on topic and refrain from personal attacks. Thanks.

          • yes, but darnit, I got another new label to own “control freak”, I love owning new labels that have absolutely nothing to do with who I am in reality…I wish I “could” control some things freakishly, that could be fun-))))

        • Han Held

          Absolutely right, Oopsee. There already are commercial alternatives for those who want to use them, and they’re better supported as well. I’d rather buy from kitely market than from some no-name person on a standalone who will be gone the next day.

          Their dismissal of opensim as “barney fluff” is a huge clue that they both do not know the crowd out here, and do not WANT to know the crowd out here. And yet they hope to make a buck off us? Ha! -good luck with that.

      • methinks you need some lessons, for 1, go here: http://minethere.blogspot.com/2015/11/sl-regions-in-opensim.html and for 2 go here http://minethere.blogspot.com/2016/03/enjoying-hyperverse.html which should help you a bit if you read thru them and follow some links…there is tons more of course.

        re-reading those a bit, they have enough in them to keep someone busy who is interested.

        The fact is that there are many people in Opensim who create a lot of cool stuff…tho SL may have similar or even better in some cases, nobody in the commercial spaces do unless they are on the hypergrid and go get them. Here is one such:

        http://ainetutorials.blogspot.com/ amd of u browse her site you can find two items of especial notice (tho it all is really) that being her Club Danceball and her PMAC system, both fully written by her and given for free and better than even SL (the NPCs part SL does not have) but most certainly better than the SL clones…the PMAC system alone is worth its weight in gold.

        and oopsee here is another but is to humble, as most of them are, to say so.

        Before I would accuse anyone in opensim of copybotting, especially where there is no money to be made, which kinda defeats its main purpose, I would try to find out who the creator is, and contact them…there are many previously, and many still using, SL, who bring some of their things out to opensim, often by having an SL friend just asking.

        I have a lot of that stuff in my inventory.

        Then there is the Kitely Market as oopsee mentioned, growing all the time.

        https://www.kitely.com/market

        hi oopsee-))

        • That’s okay, I’ll skip the Kim Jong Un re-education camp. Stop being such a control freak and let people have an economy – no one’s forcing you to take part.

  • Alex Ferraris

    All this bla bla bla , cash out, single universal currency and alll…. Most OPENSIM grids are all FREE and the ones that are not ALL FREE have their own currency and will not give up control of it. Dont need to…OMC did not work too well remember? Its it not going to work and will not have many users. We can use PAYPAL and PODEX for the exchanges.

    • Podex and PayPal work just fine for me too. I don’t need or want some Megacorp BANK (especially started by someone from SL who played a key role in all this ‘charge people to death’ mentality so they are forced to live in tiny parcels of land the size of postage stamps) taking over the currency in OpenSim. When that happens I will stop buying inworld currency permanently.

  • We appreciate the feedback Tom. We’ll consider open sourcing before we come out of beta.