Microsoft Points Go Away

Microsoft announced that it is retiring its virtual currency, Microsoft Points. This follows Facebook abandoning Facebook credits. Companies are trying to figure when and where it makes sense to have your own currency. The thing about a rewards-type currency, such as Microsoft Points, is that it adds a click to the buying process. Put in your credit card, buy Points, buy games (or movies or whatever). MS is saying, why not have it be just: Put in your credit card, buy games. What after all is the point of having the virtual currency in there?

Perhaps we are laready moving beyond virtual currencies to the next innovation, for which I conjured the name "digital value transfer." The technology FB has developed allows it to instantly and costlessly translate value from one app to another. Currently FB funnels any such transaction through dollars (so it can take its 30% cut). But it doesn't have to.

Games like Path of Exile have many things called currencies and a back-end system for translating the player's holdings of X, Y, and Z into different things of value.

The thing that makes Bitcoin valuable isn't Bitcoin, its the DVT that allows you to exchange Bitcoins for other things.

An economy backed by DVTs doesn't make any distinctions between the virtual entities it is tossing around. They may be currencies, or assets, or resources, or even virtual goods such as movies. Files. The DVT just knows how much of one thing is needed to exchange with another. Imagine a vast traingular matrix listing every good in the world. Each cell says how much one good is worth in terms of the other.

Comments on Microsoft Points Go Away:

Bill says:

Could this by its very nature create a surge in demand, which may artificially inflate value? For instance, I use a credit card to purchase a new lawn chair set; my cost being $65.00. The term cost being loosely used in this discussion.

The sellers cost is $52.00. The clearing house awards me say a 2.5% cut (is that fair, or too high?). I eventually amass enough to purchase a $9.99 DVD, from Warner Bros.

This is just one consumer, not millions. Eventually, people have additional credits or dollars to purchase additional discretionary items. Would this not eventually over tax the system, either through the clearing houses or actual producers of goods and services?

I forgot to tell you that I live in the United States, but what about many that are overseas? I am taking a very geog-centric perspective here but, producers where ever they are have to ship their goods. This has an impact on what they have to charge customers.

If they have a surge in demand (sorry if I'm stating the obvious, but that is managements job), this impacts pricing.

Posted Jun 14, 2013 1:09:58 PM | link

Edward Castronova says:

Bill, I think that any change in the institutions of trade can be disruptive. The scenario you described looks like a Ponzi scheme to some extent, where the promises to fulfill demand are not backed up by any genuine production. Can such things happen? Yes.

Posted Jun 14, 2013 1:14:16 PM | link

chat says:

Thanks for sharing. Thanks from Turkey..

Posted Jun 15, 2013 3:09:30 PM | link

Rory Starks says:

Facebook credits seemed to be designed completely with Facebook and app developers in mind, not customers. I'm happy to see them go. Developers had an incentive to integrate FB credits into apps and games because Facebook dangled featuring and cross-promo deals in front of them, which was a no-brainer for anyone who wasn't Zynga. A centralized credit/point system would have been fine for Facebook but it was too little, too late. Imagine a potential first-time payer in a freemium game suddenly confronted with the process of paying money for Facebook credits that would be used to purchase gold bars (or analogous currency) which would then be used to purchase something else entirely. As a user experience designer this drove me up a wall. Free-to-play games have enough trouble with conversion as it is without the need for players to launder money through a half dozen imaginary currencies just so they can buy a fucking animated virtual barn animal.

Posted Jun 24, 2013 1:32:42 AM | link