Although Bitcoin is the best-known virtual currency, it wasn’t the first.
1996: E-gold
One of the first virtual currencies, E-gold, founded in 1996, was actually backed by real, honest-to-goodness gold bullion. In essence, trading E-gold was basically the same as swapping gold ownership, but anonymously. At its peak, in 2008, E-gold claimed more than five million user accounts.The anonymous nature of the currency attracted many crime syndicates. This led the U.S. government to get involved. In 2008 the company’s management pleaded guilty to money laundering and operating an unlicensed money transfer business. The company itself closed its doors the following year.
1998: Beenz
A website called Beenz.com offered a currency called "Beenz" which can be earned by performing a variety of online activities, such as visiting certain websites or shopping online. The Beenz you earned could then be spent on various online goods and services. However, it had a very short life, closing its virtual doors in 2001. It was never able to convince users that it wasn’t all a big scam.
2002: Q Coins
An instant messaging service called QQ (by the Chinese Internet service provider Tencent) had its own internal virtual currency, called Q Coins, that customers could use to purchase various virtual goods and services, such as extra storage space, virtual pets, and online game avatars.Eventually, various non-QQ online merchants began accepting Q Coins for real-world goods and services. The currency becaome so popular it attracted shady dealings in the black market which led the Chinese government that it eventually cracked down on the real-world trading of Q Coins—although they’re still used today within the QQ service.
2003: Linden Dollars
The currency of the viirtual world of Second Life - Linden Dollars -developed by Linden Dollars (abbreviated L$) using U.S. dollars and other real-world currency on Second Life’s LindeX exchange, or from other users or independent brokers. Second Life and its Linden Dollar currency became so popular that tons of real-world companies, including American Apparel, Reebok, and Ford, established presences within Second Life. These companies accepted payment for both virtual and real-world goods and services in Linden Dollars. The growth in Second Life and its virtual currency eventually led serious investors to speculate in Linden Dollars. In fact, virtual investment banks arose to facilitate Second Life currency trading.
In 2007, Second Life virtual investment bank Ginko Financial collapsed, leaving users unable to retrieve approximately $750,000 worth of Linden Dollars that had been invested. This led to Linden Labs officially banning all virtual banks in Second Life, as well as removing all objects related to in-world virtual banking.
Over the next several years, interest in Second Life began to wane. Second Life is still around, but it’s a shadow of its former self. You can still trade Linden Dollars for U.S. dollars (and other currency), but you’d be hard-pressed to find many buyers.
2009: Facebook Credits
In 2009 Facebook began testing the concept of Facebook Credits, which could be used to pay for in-game goods and services on the Facebook site. Facebook Credits went live in January 2011, and users could purchase 10 Facebook Credits for one U.S. dollar. However, Facebook Credits never really took off. Facebook killed the project in June of 2012, converting all remaining Facebook Credits into standard dollar (or other currency) credits to users’ accounts.
Gold Farming
The concept of in-world or in-game virtual currencies is an interesting one—especially when you layer in the ability to trade online goods for real-world currency. Here’s what happens. Game players want to buy virtual things in their virtual worlds, but don’t want to (or can’t) build up the currency via normal in-world means. So they pay other players real-world cash for the in-game currency that the other players have built up by playing the game. In other words, if you want to level up, you can pay for some other player’s tokens that get you to that level. The problem comes when individuals or groups of individuals start doing this for a profit—that is, selling their in-game credits for real money. This is called gold farming, and it’s a real thing. (And a big enough deal that many games ban the practice.)
THEN CAME BITCOIN
Bitcoin has been around for only about a half-dozen years. It has been a short but eventful life, with the Bitcoin economy rising from nothing to close to $6 billion today.
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