Definition

virtual asset

A virtual asset is a representation of currency in some environment or situation. In this context, currency can be defined as either a medium of exchange or a property that has value in a specific environment, such as a video game or a financial trading simulation exercise. Monetary virtual assets are often called virtual currency.

Virtual assets may have an equivalent value in real world money. In Second Life, the popular 3-D virtual world, the currency is the Linden dollar (SLD), which characters use in all the familiar ways we use money in the real world. As of late March 2007, the Linden dollar was trading at an exchange rate of 267.97 against the United States dollar (USD). The company behind Second Life, Linden Labs, maintains an exchange called the "LindeX" which is reported to process approximately $230,000 (USD) in currency exchanges on a daily basis.

Virtual asset trading can lead to real-world fortunes. A Wired News article ('Virtual Cash Breeds Real Greed') quotes trader Kenneth Michael Merrill: "What I love the most -- and the idea that gives me chills -- is that I am buying nothing, and then selling nothing, for a profit." In 2006, Ailin Graef became the first real-world millionaire from dealing in virtual assets. Through her atavar, Anshe Chung, Graef grew an initial $9.95 investment into an equivalent $1 million (USD) in Linden dollars and other virtual assets, including shopping malls, chain stores and business investments.

Within the world of gaming, virtual assets also include tokens that give the player greater privileges or abilities, such as a special sword or a magic potion. Like the gold and money in games, these assets can be traded for real world currency. One of the sources of virtual assets for games is low-wage workers toiling in less advantaged areas of the world. In an article in The Observer, Tony Thompson writes about a so-called virtual sweatshop in Caracal, Romania where, at the time of writing, 10 hours of game-playing would yield the worker the equivalent of about $5.50. Through sources such as Gamersloot.net, players who want immediate status in a game can skip the time and work required to get to the highest level by buying a promotion for their character or buying a ready-made avatar.

In what has been termed "virtual mugging," unscrupulous players have sometimes used bots to defeat others and take their properties. Virtual assets have also been involved in real-world crimes, including fraud and murder. In China, a dispute over a dragon sabre in The Legend of Mir III led to the murder of gamer Zhu Caoyuan. His killer, Qiu Chengwei, was sentenced to life in prison. In another case, a vice-president and two accomplices of the company were prosecuted for copyright infringement for selling duplicated copies of rare items in The Legend of Mir II.

The cross-over of virtual assets to the real world is likely to become much more common: According to many analysts, it is only a matter of time before virtual assets become subject to real-world taxes.

This was last updated in January 2008
Posted by: Margaret Rouse

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