Cryptocurrencies have taken the concept of money to its next logical evolution. As money has gone from being actual metals, to cash, to numbers on a screen, the need for localised currencies has become less obvious. Cryptocurrencies such as bitcoin are attempting to take economies into the future. But you may also have heard of closed virtual currencies, and might be wondering what that refers to.
A closed virtual currency can be defined as a digital currency which can be used only within a specific virtual community or setting. Therefore, whereas open currencies like bitcoin can be traded and transferred, closed virtual currencies cannot.
One of the most common (and earliest) uses of closed virtual currencies is in the online gaming field. For example, many smartphone apps now give you the option of buying coins that you can use for specific boosts. These currencies are closed, since they only have use within the game. Once you’ve bought these currencies, you usually can’t trade them for any other currency.
Closed virtual currencies usually work according to their own rules. Because of their very specific usage, you’re tacitly agreeing to follow these rules by buying the currency.
Gaining traction in today’s age is the gamification of real life. This refers to programs and apps that reward you for completing tasks in the real world.
A great example is Discovery, a South African health insurance company that has gamified activities that improve your physical health. Going for yearly assessments earns you points, which lead to discounts on anything from gym memberships to movies to flights. Most recently, they initiated a program which gives you rewards for meeting fitness goals on a weekly basis. These rewards include small things such as free smoothie vouchers, and your monthly payment on an Apple Watch.
Since these points only have use within Discovery’s realm, they can be considered a closed virtual currency.
More and more organisations are jumping in on this idea. Loyalty programs in restaurants and stores are much easier to manage when using a virtual currency, rather than coupons and the like.
While closed virtual currencies are, by definition, limited in usage, many have opened up to some extent. This is often the case with partnership programs, where companies allow customers to use points at affiliates.
Closed virtual currencies are thereby advancing the potential of decentralised cryptocurrencies, such as bitcoin, by bringing in new users. Bitcoin users have traditionally been technologically minded, at the least. On the other hand, users of closed virtual currencies often know almost nothing about technology.
Virtual currency is likely the next step in the evolution of money. Bitcoin has made inroads in the field, but closed virtual currencies are actually helping advance the cause.