Social network and digital economy: A preview of what will be IMVU’s VCOIN
After obtaining from the SEC some limits in which to operate, the new token based on the IMVU block chain will be an important test case for a cryptomoney.
When the U.S. Securities and Exchange Commission gave its blessing to the IMVU social networking platform to launch its VCOIN token, it was a major leap forward for the acceptable scope of cryptomoney applications.
The implications for the type of projects the SEC considers a value are, in themselves, enormous. But part of the appeal of the VCOIN to the SEC is that, with its stable price and clear use case, IMVU has been able to demonstrate to the commission that the token is a means of making the platform a more real and fun digital world to hang out in.
For those who are not familiar, IMVU is promoted as „a social experience“. It is similar to Second Life in that users take 3D avatars with which to explore a world. In the case of IMVU, that world is mostly bars and clubs, 3D environments superimposed on the dynamics of a chat room. But people spend money on those things, and in the case of IMVU, they send money to each other.
We have the economy…
Using its existing credits, priced at 1,000 for every dollar, IMVU already has an economy with 27 million transactions per month totaling $14 million. According to John Burris, the „comprehensive virtual economy“ is worth about $45 million, and its existence is critical to IMVU’s SEC appeal.
Burris, who is IMVU’s chief strategist and block chain officer, recently showed the new platform to Cointelegraph, proudly pointing to an active Internet economy that owes much to social networking, chat rooms, massively multiplayer online games and, now, the block chain:
„This is VCOIN’s strategy: we have a massive virtual economy that is driven by our users. So the users are the ones who create all the virtual goods, all the virtual suits, furniture for their room, animations that their avatars can do, and they also create all the virtual services. They are the hosts of the night clubs on the platform or they can help you dress your avatar or they will run the bar where they are watching the Premier League soccer game. They are the ones who run all these experiences on the platform.“
The scale of VCOIN’s potential user base is unprecedented among SEC no-action letters, which basically certify that the commission will not consider a token as valuable if it complies with certain established provisions. The SEC has said that crypto currencies like Bitcoin and Ether are also not securities, but that’s because they don’t owe their success to any particular entity. In short, decentralization has certain legal benefits.
Centralized and Isolated
VCOIN is obviously a centralized IMVU project, and no one is making fun of it, but the no action letter is an acknowledgement that VCOIN is a utility token, with the internal economics of IMVU as its use case. While users will be able to remove their VCOIN tokens from the IMVU platform and deposit them in their Uphold wallets, the IMVU platform should remain their primary use. This provides the SEC with another beloved feature: isolated use.
Comparing VCOIN to, say, Facebook’s Diem (formerly known as Libra), there are similarities. Namely, an existing social platform trying to implement a token linked to trust money in its network. However, seven million users is obviously not the same as two billion, and the limits of VCOIN’s use case are largely within the confines of its virtual world. Despite the ability to extract value from the platform, there is no reason to expect massive use of VCOIN to move outside of your monetary snow globe. Facebook, on the other hand, with its Marketplace could only link Libra (Diem) with the ability to buy real homes, cars, or, if the Financial Services Republicans have their way, guns.
The global use within the snow globe, and where the KYC comes into play
One thing worth mentioning about the IMVU strategy is that users will be largely free to exchange VCOINs with each other within their snow globe environment without having to go through the Know Your Customer (KYC) identification. „We wanted no KYC, for most users; the ability to buy, spend, save, send to other users, pay with VCOIN without KYC,“ said Burris. There are certain countries where users simply will not have access to VCOIN, China being a notable example. But according to the team, users in 140 countries will suddenly be able to make transactions.
However, the KYC will be launched when those currencies leave IMVU’s jurisdiction and move to crypto wallets outside the platform, which is where they will actually operate in a block chain instead of the IMVU ledger. The traditional hurdle where KYC becomes essential for most crypto-currency companies is when a user seeks to convert a crypto-currency into trust money or back into crypto-currency again. This is another area where the limits of the IMVU platform help you go beyond normal compliance requirements.
Conservative Partnerships for Cautious Regulators
The VCOIN wallets, in turn, will be managed by Uphold, a US-based hot wallet provider in place of IMVU itself. This relates to another ongoing concern of U.S. regulators. Returning to the Libra storm, another area of concern was the Association’s affiliate, Calibra. Although it later changed its name to Novi, so it did not include the word „Libra,“ Congress correctly identified these organizations as linked.
The idea of launching a new currency dependent on a new wallet dependent on the development of the same company, and then giving that project immediate access to the two billion users of Facebook was a bridge too far. The partnership with an established crypto-currency company seems to be improving in the eyes of US regulators as the preferred alternative. That’s how, with the help of Paxos, PayPal got the New York City Department of Financial Services to sign off on its cryptomoney services launch in October.
And the speed? While what Cointelegraph was able to see was only a trial version of the final platform, the VCOIN exchange between users worked almost instantly as requested.
While all of the provisions that make IMVU attractive to regulators may upset cryptologic believers in the wrong way, Burris believes it is more about promoting the usefulness of cryptomontages to regular users than pushing the boundaries of what Blockchain technology can do:
„We think we’re launching something really special here. We know that we are for the game, the avatar, the social space, but even in crypto space. During the last two years, I met with all the great players in space and those who drive activities, great protocols, all looking for real applications. I think the DeFi theme has crushed it and I love that category, but I think we’re all looking for real use cases for this kind of experience.“
So, keep an eye on the launch to see if the system that IMVU has set up will satisfy both users and regulators. The IMVU snow globe market may end up being a blueprint for the next phase of digital economies.