Tuesday, May 01, 2007

Real Virtuality: QQ Coins and the Quandary of Complementary Mercantilism


Real Virtuality: QQ Coins and the Quandary of Complementary Mercantilism

Coincidental emergence occurs when a new system or structure surfaces along side its originating system. Often this emergent world coexists as a complement to the original—much as an afterimage arises from a color—rather than as a replacement for it. The conventional approach to explaining this phenomenon, that I see green as an afterimage of red, is to rationalize the secondary system by cause and effect. However, once this emergent world is understood to have its own reality, its own rules, and its own function, the causal relationship is no longer relevant. The postmodern world is filled with such emergent virtual worlds: image is mistaken for the thing itself; simulacra abound; we think we are communicating through the internet when in fact we are messaging; we transact business through credit cards and ATMs and call it money. Names for things are designed to create the illusion of the familiar and known, when the facts contradict the implied connection. A complementary color is only an opposite in a world defined by polarities. The virtue of reality is that the world doesn’t really operate that way. It is multivalent, both-and, complex, and in constant movement through time.

Cause and effect are loosely linked through the non-rational as well as rational dimensions. If one follows the color experience, the afterimage itself has an afterimage, which in turn has an afterimage—each image a transformation of its predecessor. The color of origin becomes a distant memory, but the experience of each emergent image is just as valid as the original sensory one. By exploring coincidental emergences and by understanding their “unconventional” logics, the apparent rational and “conventional” world can become clearer.

It is in this frame of mind that I was fascinated to read a recent article in the Wall Street Journal (March 30, 2007) entitled “QQ: China’s New Coin of the Realm?” written by Geoffrey A. Fowler and Juying Qin with contributions by Lina Yoon. The story, as they reported it, is that QQ coins are an online virtual currency originally issued by the Chinese company Tencent Holdings Ltd. [an intentionally ironic name?] for users of its instant messaging system ICQ to “purchase” virtual flowers and other such niceties to send to correspondents. As with other virtual currencies used in video games, the virtual coinage serves as an incentive and has value so long as it stays within the boundaries of its own system. Any accumulated earnings can only be used up within the system. For me, the simplest example of this is something like “winning” an extra ball or new game playing a pinball machine.

The crux of the WSJ story goes like this: “Then last year something happened that Tencent hadn’t originally planned. Online game sites beyond Tencent started accepting QQ coins as payment.” In other words, the rules of one “virtuality” were co-opted by another “virtuality.” The QQ coins crossed the boundary of one system into another with a different though somewhat parallel set of rules. The authors cite the convenience of managing and accounting for petty transactions online as one of the primary motivations for the shift. Interestingly enough, the other online game companies recognized the essential value of the virtual QQ coins. Like real money they represent nothing more than an accounting system for which Tencent already had a structure that could be leveraged for the sake of efficiency. This is free market mercantilism at its best.

But the QQ situation quickly became more complicated. The subheader for the WSJ article reads, “Officials Try to Crack Down As Fake Online Currency Is Traded for Real Money.” The article spends much of its focus on the quandary the Chinese Government is currently facing. One result of free market mercantilism is that it can quickly generate a surplus. The article goes on to state: “At informal online currency marketplaces, thousands of users helped turn the QQ coins back into cash by selling them at a discount…Traders began jumping into the QQ coin market as an opportunity to make a quick yuan off of currency speculation.” Yet the authors never question how “real” the real currency is. Of course, once the QQ coins were pegged to conventional currency value, they could be used as a parallel system for real commodity purchases beyond the reach of government control and the tax system. And, with the advent of secondary exchange markets, transactions related to QQ coins can occur both within and between the virtual and real money worlds. The Virtual Economy Research Network [virtual-economy.org] calls these transactions of conventional currency for virtual property RMT’s or Real Money Trade.

Back to the pinball machine model. Provided the pinball game is online, there is now a mechanism to sell that extra game to someone else for an agreed upon price. That person can then use that game either to play online, or to sell for cash to someone else who wants to use it, or thinks they can sell it for more. One can see very quickly how many schemes could unfold. The WSJ article mentions a few such as “intimate private chats online,” and online gambling. For a government used to tight regulation, the open market and economically democratic invention of the online virtual world is a challenge.

One notable difference between conventional currency (yuan) issued by the government and the QQ coins issued by Tencent Holdings is their physical versus virtual realities. They are both monetary systems that stand in for an accounting of value, at least until they are sold as commodities. The government sets the value of the yuan, and, since the government stands in for the people, it represents, for better or worse, an agreement by which the citizens abide. What supports the value of the virtual currency is not just the supply and demand, as the authors of the article state, but also the quality of perception and what the currency makes possible. The QQ coins came into existence in order to enhance online communication, to add emotional value to an instant message. As superficial as that may appear, it is the motivating human emotion that makes the virtuality of the coins real. For a user to be able to operate in an “economic” life free of government control is itself a coincidental emergence.

Many virtual currencies are part of or attached to online games. And there is an aftermarket in RMT to purchase some of the virtual equipment used to play those games. One need only explore eBay to find them. This kind of trade is driven by the desire to profit from a willing market. It is based on the flawed assumption that what is virtual is real, like mistaking the image for the thing itself. The fictional Wizard of Oz was, of course, one of the modern masters of this kind illusion. His power lasted until the curtain was pulled back by Toto and he was revealed to be manipulating the machinery of deception, and all too human in his humiliation. But Oz was a dream from which Dorothy could awaken.

Virtual coins and virtual realities are not dreams, they are complementary systems that first emerged as a mechanical reflection of human consciousness. As a result, they exist as a kind afterimage alternating between the light and shadow of that consciousness. The Chinese Government has every right to concern itself with the QQ coins and their potential for creating economic chaos. Their goal would be to return QQ coins to their own self-contained system and thus sever any linkage with the conventional system. The real interest is in controlling the value of the “coin of the realm” by also controlling the perception that that value is controlled. What the QQ coins point out is that value is a spontaneous occurrence, and is drawn into currency by perceived need, convenience, and reduction of hindrances to the flow of human activity.

Tencent Holdings probably never imagined that QQ coins would flow over their intended boundaries. But neither does the company have an interest in stemming the flow. Tencent gains visibility and publicity as it demonstrates that a currency is only as vital as its social and economic efficacy. There are thousands of complementary currencies at work in the world solving important social problems that governments may not recognize as having economic interest or have the resources to meet. Where currencies arise out of a community’s interest, they tend not to compete with, but rather augment or fill the void of conventional currency. Where currencies are issued by for-profits to leverage their businesses, they will inevitably compete with governmental currency when those currencies become commodities. Open market or exchange currencies, as Tencent’s QQ coins are designed not only for competition, but also to capitalize on market-based efficiencies which leverage existing resources such as the yuan. What threatens any government is losing the authority or control over the emergent self-governing power of this profitable currency. But then the legal issues governing virtual online activities are yet another dilemma—whether the current body of national and international laws apply to a virtual world. The complement or afterimage of law would be chaos, because an absence of law would be socially inconceivable. In the case of QQ coins, chaos, at least, has real virtuality.

John Bloom
© 2007

[Note: I am appreciative of my colleague Gary Schick, COO of RSF Social Finance, for passing along this WSJ article. The image of the QQ Coins with Tencent Holdings logo penguin came from the The Virtual Economy Research Network website.]

1 Comments:

At Tuesday, January 31, 2017 10:08:00 PM, Blogger Coin Pedia said...

That's really useful, thank you
Coinpedia.org | currency encyclopedia | List your Coin


 

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