OpenSim payments 101
One of the most confusing parts of moving to OpenSim is figuring out how the commerce system works. Not as confusing, maybe, than than figuring out how to run the server software, learning how to hypergrid, picking a home grid, or finding a hosting provider, but up there.
There are four main payment options in OpenSim, each with a different degree of convenience and security.
If you are on a closed grid like InWorldz, SpotOn3D, 3rd Rock Grid, or, say, Second Life, then the most convenient payment option available to you is the local currency on your grid. It’s not usually the only option, however, and there are times when another payment system may be more appropriate.
Grid-based payments are normally limited to a single grid or, as with the case of SpotOn3D, a group of affiliated grids.
Convenience: Since closed grids usually control all the grid’s servers and limit access to the underlying infrastructure of the grid, transactions can often take place on the grid itself. In Second Life, for example, and many closed, commercial OpenSim grids, you click on an item, and you buy it. Quick and easy. The individual region owners can’t hack in and steal your money because they don’t have access to the underlying server — only the grid’s owners do. As a result, shoppers may not need to confirm their transactions on a pop-up webpage, as is the case with other OpenSim payment options.
Security: You’re at the mercy of grid operators. If they go out of business, you stand to lose all your money. Most grids have a Terms of Service agreement that specifies that they don’t have to give you a refund. In addition, start-up grids may not have the most thorough employee vetting procedures in place, and a bad hire might abscond with all your money. Grids with anonymous registration systems may also breed con artists and cheats.
Legality: Depending on the jurisdiction, grid owners may or may not be able to convert your virtual money into cold, hard cash. In many areas, the laws are vague on this point. Be prepared to see your virtual currency transform overnight into fictional “game tokens” that you cannot redeem for real money. At some point, virtual currency operators may need to acquire banking licenses or take other steps to become legitimate, regulated outfits. This will probably require regulatory action or new legislation, so it’s not likely to happen overnight, but is something to watch out for in the future.
Auditability: Sopme grid owners might not provide you with an auditable trail of your in-world purchases. The best you’re likely to be able to do is to keep track of when you make deposits into your virtual account, and when you make withdrawals.
Bottom line: Don’t keep more money in a grid-based currency account than you can afford to lose. If you’re a merchant, cash out whenever your balance exceeds that threshold. If you start having problems cashing out, switch immediately to an alternate payment process. Even on closed grids, there are options.
You’re used to using PayPal or Google Checkout on your website — but you can also use them on your grid. Just set up a payments page on the Web and send your customers to that page when they click on an object. Other popular options include PayPal Micropayments and Amazon Payments. PayPal Micropayments is particularly well-suited to grid commerce, with lower fees for small purchases. PayPal is currently in the process of improving this service to make it even more attractive to virtual world platforms.
There are a couple of complications, however.
The first is that Web-based payments, which are designed for medium-sized transactions, may be expensive. Grid-based payment systems, and the G$ and OMC multi-grid currencies don’t charge any fees at all for in-world transactions, and usually make their profits when the currency is bought or sold.
The second is that integrating these platforms with OpenSim can take a little extra work.
PayPal and Google Checkout will normally send you an email when you’ve received a payment. So if you simply send your customers to an online payment page, expect to have to spend time in your store manually giving your customers their purchases after you’ve received your payment confirmation. You can also hire a clerk, and have payment confirmations automatically forwarded to them, for those times when you’re asleep or otherwise engaged.
If you’re delivering physical goods, or offering Web-based downloads of MP3 files or e-books then you don’t need to worry about a payment confirmation making its way back into your OpenSim grid — your Web-based e-commerce platform will take care of the delivery.
If you’re delivering services instead of products, or using PayPal for large business-to-business transactions, then you might nott need an automated in-world delivery mechanism at all.
However, if you want instant, automated in-world delivery of virtual goods, then you will need to install a PayPal module to handle the payment confirmation and delivery part for you. Check with your hosting provider — many already offer this as part of their hosting services.
If you’re renting a region on someone else’s grid, check with the grid owners to make sure they have no problems with you using a Web-based payment system on their grid. Some grids try to discourage all commercial activities, and others may be trying to promote their own in-grid currencies. If you set up a PayPal payment system in violation of the grid’s Terms of Service, you may lose your regions, all your builds and objects, and your local grid currency balance as well.
Convenience: OpenSim doesn’t currently offer an encrypted messaging channel similar to the SSL encryption in your Web browser. As a result, for maximum security, payments made through services such as PayPal or Google Checkout normally require an extra step — confirmation of the payment on the payment service’s website. This may be inconvenient for some customers and may discourage shopping. Other customers, however, may be reassured by the extra security.
Security: As secure as it gets. In fact, PayPal is incorporated as a bank in many jurisdictions, so your balances are federally insured. Web-based payment services have years of history of successful operation. No payment system is 100 percent safe, and occasionally there are customer disputes or difficulties withdrawing cash in some countries but, for the most part, the biggest risk in keeping a large balance is that you’re not earning interest on that balance.
Legality: When PayPal first started out, they operated in a legal gray area. After they became successful, however, regulators stepped in to protect customers. Today, these services are fully legal, though the increased regulatory oversight is reflected in higher fees than available through some other payment systems.
Auditability: Most Web-based payment services are designed for the benefit of online merchants and offer excellent audit mechanisms. They let you track every single transaction, and some may integrate with your back-office accounting systems.
CyberCoinBank’s G$ currency
The G$ currency from CyberCoinBank is OpenSim’s oldest virtual currency, and is the most popular cross-grid currency in terms of total money in circulation. We’ve written about them before in several articles, but the main idea is that you sign up for a G$ account on their website, and then you can use the currency to buy things from any vendor that accepts it.
There’s an extra Web-based confirmation step, as there is with PayPal, to ensure security. You can access your G$ account from anywhere on the hypergrid — just teleport to another grid, and you can shop there. Merchants can sign up for a merchant account, get a free vendor, and install them anywhere they want. There is no fee on individual transactions. The big downside is that the currency is not convertible — it is a fictional currency. You can’t go back to CyberCoinBank and get your G$ exchanged for real money, though there may be third-party resellers available to take G$ off your hands.
In addition, individual grid owners may not want to have G$ on their grids if they already offer their own in-grid currency.
Convenience: Buyers have an extra confirmation step for every transaction. However, the G$ is very convenient for merchants, and the set up of the point of sale terminals, or vendors, is quick and easy. Free vendors are available on the Alpha Towne grid.
Security: CyberCoinBank is owned by Global Virtual Holdings, Inc. , a real company with real people behind it. However, it is not incorporated as a bank, and the company clearly states that the G$ is a “fictional currency.” There is no guarantee that any money in a G$ account can be converted to cash. As a result, it’s best for small purchases and casual shopping. Merchants should thoroughly investigate the third-party services that offer to trade G$, and be prepared to switch to an alternate payment mechanism if third-party conversions become unavailable.
Legality: By positioning itself as fictional currency, CyberCoinBank may be able to avoid legal liability. However, the case law on virtual currencies isn’t well developed yet.
Auditability: CyberCoinBank lists recent transactions on their website. However, the transactions are listed under avatar names, and not under company or customer names, which may pose problems for audits.
VirWoX’s OMC currency
The OMC currency from Austrian Linden dollar exchange operator VirWoX is the most popular option with OpenSim grid owners, and is currently accepted on 22 grids. The services has grown quickly since it was launched this past spring, as we’ve written about before.
The currency is fully convertible to the US dollar, the Euro, and to the Linden Dollar.
Like G$, OMC requires an extra Web-based step to confirm transactions, to ensure security. Like G$, the OMC works with the hypergrid — you can teleport from one grid to another, buying items at every stop, and bring everything home to your own grid.
Unlike the G$, however, the OMC is more tightly integrated with OpenSim. When you’re on an OMC-enabled region, your OMC balance shows up in the upper right-hand corner of your viewer screen. In addition, all standard Second Life payment scripts work as normal with the OMC.
The extra integration requires a special OMC currency module to be installed on the server running the individual regions where OMC payments will be accepted. And VirWoX manually approves grids before allowing OMC payments to be used there. If you’re on one of the grid already OMC-enabled, then using OMC is easy and convenient. If not, you will have to contact VirWoX to get your grid approved, and get and install the OMC payment module — or ask your hosting provider to do it for you.
The G$ and the OMC use two different systems and play well together — a grid can support both payment systems, and a merchant can offer buyers a choice of payment mechanisms.
Convenience: Using OMC is as convenient to shoppers as G$ or PayPal, in that an extra confirmation step is required, and the buyer must have an OMC account and some money in their balance. For merchants, it requires an extra installation step which may delay the rollout of the currency.
Security: The OMC is backed by a real company with real people behind it, and a history of successfully handling millions of dollars in currency trading.
Legality: The legality of this currency has not yet been tested. If the currency becomes popular, it may come under scrutiny from regulators, and VirWoX may have to get a banking license or take other steps to come into compliance with Austrian regulations.
Auditability: Like the G$, the VirWoX website shows a payment history with transactions listed under avatar names.