WSJ on Web Money, scary thoughts.

So I was sent this link yesterday because of my love of Real Time Economics

http://blogs.wsj.com/economics/2009/09/09/the-currency-revolution/

It’s worth a read and discussion.  There discuss two different virtual currencies.  Two are mentioned- Serious, and Ven.

That, and I think web money is totally undervelopped ad a field.  it mentions one of the first two currencies actually developed for the web (the other being Linden Dollars)

Currently, the Linden Dollar is a floating currency.  What makes this article and video interesting, is the idea of attention money.  Clearly there is a need to attract attention, reputation, and intimacy, and then to measure it in an age where information and other harder goods are abundant.

Three problems: One mentioned in the video- too many currencies.  Right now, M1, M2 (and M3) can basically be measured in DEY (Dollars, Euros, Yuan or Yen- between all four, that’s about 80% of transactions in the world).  That says a lot of seemless of transactions.

The thinkers questions:  Clearly we need seamless transactions in all of this.  Right now, with the introduction of many social networks to do many things, what currencies survive if they are reputation currencies?  What do you peg them to? (Ven is pegged to the United States dollar, is that a smart choice?)  There are too many social networks out there currently, and more are being created.  Not all of them need to have individualized “attention currencies”  Should there be a “central bank” of attention/reputation currency- however you define that?  And how do you set the rate?  Time is measurable in the sense that it is regular.  Attention is not, because it relies on our perception of the amount of time to other objects, plus our perception of time is screwed up.  We could not notice an hour passing, while a second could feel like forever.  How do you peg a currency to those sorts of perceptions?

Is it even possible to speculate on reputation/attention- right now, you can buy contracts on the dollar versus other currencies in advance through Forex.  You also can speculate on more advanced derivatives at theice.com for or against the dollar (USDX).  Should you be able to buy derivatives of attention?  What would that look like.  A person is or is not likely to do something?  Should we even bother?

This totally radicalizes up yet goes back to the concept of what we use money for.

• Unit of exchange
• Unit of account
• Store of Value

What are we exchanging, what are we valuing, and what are we storing?  And How, and why?  Just total mindblow.   Because it is slightly different for everyone, and because we can’t have lots of little currencies And then how will you put it together so it works. (We screw that up often, I can imagine a world with hyperinflation or depression of Internet currency)

We need to start rethinking the definition of money, so we can rethink finance if we are going to go ahead and start creating these currencies.