The popularity of massively multiplayer online role-playing games (MMORPGs) and virtual worlds have given rise to virtual currencies. Trading goods and services virtual money has become so popular that “in-game” monies are now used to trade real monies, goods, and services. This starts to blur the line between online and real monies—not an unusual phenomenon considering the modern society’s massive reliance of the Internet in their personal and business lives. The phenomenon caught the attention of the government and the business community, and many these institutions began discussing the future impact of virtual currency in our lives.

However, very few of these discussions have touched upon the definition of virtual currency and how it differs from real currency. Let us look at three main ways on how virtual monies differ from their real-world counterparts.

1. Generally, virtual currencies are not subject to inflation. Thus the Ven you got in Zynga or the coins you buy on World of Warcraft will not change in value in 6 months time from the date you purchased them; their value stays the same. Real monies’ values, on the other hand, fluctuate depending on economic and market conditions.

2. A virtual currency is controlled by the game/social networking site/virtual world developer and has no bearing in the real world. As of the present, no government regulators are monitoring the movement and status of virtual currencies. However, if online dollars begin to take traction and affect real world currencies, then the government may be forced to intervene.

3. In some systems, you can convert your in-game dollars to real ones. However, changing from one virtual currency either poses a problem or is deemed impossible. Compare that to real monies where you can easily change one nation’s currency to the other through forex.

Some people suggested establishing an online “clearing house” where traders can cash in and exchange their virtual money for another.

For now, there is no formal exchange rate for virtual currencies. However, this may change once Internet giants such as Google, Facebook, or Yahoo sees the potential and opportunity of controlling currencies in cyberspace. When that time comes, it is very likely that any of these giants will have greater leverage than the Federal Reserve!