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>Can anyone explain what the point of a pegged cryptocurrency is? What was the point of arcades taking your quarters and issuing you tokens for the machines?

>Can anyone explain what the point of a pegged cryptocurrency is? What was the point of arcades taking your quarters and issuing you tokens for the machines? Why not just allow the machines to take your quarters? The idea is for the issuer to take real money from you and issue you Monopoly money which the issuer can track and control. In a worst case scenario the issuer can make up new rules (change their terms and conditions on you) or declare bankruptcy/dissolve and not honor the redemption of your stable coins at all.

mc32 7y ago
And importantly the tokens can be unilaterally devalued without having to change the slots or recalibrate. So instead of 25¢ and next step being 50¢ if using the same config, they can charge you 27, or 48 or 50¢ for the token and not have to reconfigure the machine one bit.
- chabes 7y ago
  So, there’s obvious benefits for FB. What are the benefits for users? Are people actually going to want to use this?
  - will_brown 7y ago
    Probably have to wait for the whitepaper to come out to give a fair opinion/analysis (rather than an article about the future release of the whitepaper). Once the actual use case/function of the token is know then one could answer if there is a benefit to users and if a Blockchain token makes sense over a database.
  - bitreality 7y ago
    For users, the advantage would be an easy to use stable-coin, that is more accessible to the average person. Right now, most crypto currency has plenty of complexity to it. FacebookCoin will probably work more similarly to CashApp vs. Bitcoin. It means most people using it won't even realize it's a Blockchain token. It'll be like "Facebook Bucks". But then it also offers the flexibility of a blockchain token to more advanced users (withdraw to your own wallet, send to an exchange, etc).
    - acdha 7y ago
      This is the same reason why cryptocurrencies haven’t seen general adoption: none of that has any inherent value to someone who isn’t already a convert. Things which would matter are “can transfer real money to a friend with less markup than Apple/Google/PayPal”, “can sell things online at better terms than PayPal”, “can make transactions at a low enough rate that a business model requiring micro-payments is viable”, etc. Facebook has a few wrinkles where that could be interesting - micropayments for games and content in particular - but it’s unclear what a blockchain adds to that since you’re already centralized on a single massive company which negotiates on take-it-or-leave-it terms.
      - rkagerer 7y ago
        I agree, but [more general] cryptocurrencies do already check a few boxes: - is cash you can email - prevents hostile monetary policy from stealing your wealth (inflation, negative interest rates, haircuts, etc) - keeps working when you travel (unlike Paypal / credit cards which often get frozen) - uncensorable transactions that ignore borders - can send large $ amounts anywhere for ridiculously cheap - more vertigo than a theme park If none of those excite you, crypto isn't for you today (just like the internet wasn't for you back in the 90's) and you should wait another 10 years until it's mainstream.
        acdha 7y ago
        “cash you can email” may be a cool-sounding bumper-sticker but it's not how I'd describe something which requires operating a complex multi-party system. Similarly, “large amounts for ridiculously cheap” has historically not been true and given how much highly-visible and easily blocked infrastructure a blockchain requires to be online in order to operate, “uncensorable” is more of a hypothetical aspirational goal than a given (an envelope of USD is much safer). “hostile monetary policy” is especially dubious in this context where it's supposedly pinned to the USD but even in other cases it's a hard sell for most people: do you a) put your money into a bank account, investment, or other asset you expect to do better than inflation or b) put everything into a complex system with no guarantees that it'll be operating in 5 years, fraud protection, etc. and hope that the conversion fees you pay on both sides will be lower than the difference? “keeps working when you travel” could potentially be an area where it could match the credit card system except that it either means that you're traveling with a ton of cash and no recourse if someone steals it or, if like most people you use a managed service somewhere else, hoping that you don't trip the same kind of security measures which banks use for the same reasons. Given that most people do not travel that frequently and most travelers do not have significant issues using credit cards while abroad, it's unclear to me that this will be enough of a compelling advantage.
- kannanvijayan 7y ago
  It also allows for the possibility of selling at discounted rates for volume. $1 for 4 tokens, but $10 gets you 50 instead of 40. There is _some_ inherent value in this. Decoupling the currency rate from a unit of time play provides an entrypoint for the store to incorporate value models that aren't captured by currency alone. In the volume discount case, this allows them to incorporate fixed overhead models into the pricing scheme for game time. I don't dispute the point, however, that the model does allow for abuse along other lines, and is often used that way in practice.
  - arisAlexis 7y ago
    impossible for stable coins. I am awed by the level of ignorance here
  - dmix 7y ago
    Plus the regulatory checks can be limited to cashing out and converting the coins to fiat. Instead of within each geographic or existing regulatory boundary within the network.
    - brokensegue 7y ago
      Is that actually true?
      - jsnider3 7y ago
        Depends on how good Facebook's lawyers are.
  - will_brown 7y ago
    >It also allows for the possibility of selling at discounted rates for volume. $1 for 4 tokens, but $10 gets you 50 instead of 40. I think at the point of discounts of a USD stable coin...a good arguement could be made that is an investment contract/security that needs to be registered. If that were true, it would highlight how SEC is treating cryptocoins differently than say gift cards (which are often sold with discounts). Of course either way FB could in theory probably register their coin with the SEC anyway without much difficulty.
- CydeWeys 7y ago
  And they also make money in seignorage (profit in undredeemed tokens). The tokens cost 25 cents to buy but certainly don't cost 25 cents to make, so that delta is profit. A lot of tokens are "saved for next time" but next time never comes, and then you discover those tokens in a drawer somewhere a decade later long after they're no longer spendable.
bduerst 7y ago
As many mobile app games have shown, you don't need a cryptocurrency to achieve this, just some arbitrary point system. I think GP was asking, "Why Cryptocurrency?" since the benefits of blockchain don't really translate to this system.
- PyroLagus 7y ago
  > "Why Cryptocurrency?" Because it's cool and everyone is doing it.
- andreygrehov 7y ago
  Well, cryptocurrency is a point system. Consider it as a specification to a point system, which allows points to be exchanged across applications.
- will_brown 7y ago
  Like most existing Blockchain projects, maybe no benefit over database to the users...but I don’t think it’s fair to say without knowing the actual use case/function/purpose of the token, so probably have to wait for the release of the whitepaper to form an opinion.
- bitreality 7y ago
  It allows for a tiered system. Average users will use the token entirely within the Facebook ecosystem. Advanced users will have the ability to withdraw their tokens from Facebook's system and utilize them on other platforms. Look at Paypal USD Balance. It's really just a "token" issued by PayPal, an IOU where 1 PaypalUSD = 1 USD Debt from Paypal. But PayPalUSD can only be used within Paypal.com. The only way to bring PayPalUSD outside of Paypal is to call in your debt to PayPal and withdraw the money to your bank. PayPal has always said that their success relies on people holding PayPalUSD. People who keep their money in PayPalUSD are the ones making PayPal bank. First of all, it costs Paypal next to nothing if that user sends their PayPalUSD to another user. Yet they collect transaction fees. Furthermore, PayPal can throw this money into low-risk investments and earn 3-4% on it. Facebook tokens are PayPalUSD 2.0. They can be used within the Facebook.com ecosystem. But on top of that, people can withdraw them and use them outside of Facebook.com. Basically, any website can start integrating these FacebookCoin. It means less people will need to cash out, and will instead keep their money in FacebookCoins.
JudgeWapner 7y ago
don't forget, they can "get hacked", and, "whelp, it's over guys. we promise to do whatever we can to recover the lost coins. the case has been turned over to law enforcement. We won't give up hope that someday they may be able to recover something."
InvisibleCities 7y ago
But that doesn't really answer the question being asked. If the cryptocurrency is completely controlled by a centralized authority who has absolute rights over the system, why bother with the technical and cognitive hurdles of using a blockchain? A standard ledger in a centralized database is more than adequate for that task, and much easier to maintain.
- espadrine 7y ago
  The main gain is in acting as a trusted clearing system. Clearing takes less time than FedWire or ACH. Settlement, on the other hand, still has to go through the Federal Reserve.
  - buzzerbetrayed 7y ago
    But using a database as a ledger would clear faster than even the fastest blockchain, wouldn’t it? Or am I misunderstanding what you mean by “clearing”. I’m assuming you mean how long it takes for person A to get money to person B.
    - steveharman 7y ago
      Can't a database be potentially breached and suddenly my account has all the "currency" copied I to it from yours? Until Quantum Computing comes of age, this is theoretically much harder with DLT / blockchains.
      - roywiggins 7y ago
        Blockchains can (and quite often do) have bugs in their implementation too, they're not entirely magic.
      - simias 7y ago
        All banks are effectively running a huge database at the core, yet that's not a common problem. They have procedures, they have backups and they have human oversight. The last element is key, if somebody manages to hack into the system and send all the money into their own account the bank's administrator can detect the problem and say "well, that's clearly not supposed to happen, let's roll that back". On a decentralized, trustless blockchain you have no such thing. So you either end up hard-forking like Ethereum did after their DAO debacle (but then are you a decentralized trustless system anymore?) or you continue normally and basically the people who lost their money are screwed.
r00fus 7y ago
Then why doesn't Facebook just go the Microsoft route and have "points"? (FB already has a credits system).
idlewords 7y ago
The point of arcade tokens is to prevent people breaking in to machines, feeding them slugs instead of coins, and reduce the number of employees with access to unlimited free quarters.
- BinaryResult 7y ago
  I would disagree and that the real point is for them to make their money up front on the token exchange. When you change $5 for tokens they don't care whether you spend them on games or use them as pogs, they have already made their $5 just as if you had pumped it all into the machines. If they change your $5 for just quarters there is no guarantee you will pump those into the machines, you might instead use them to buy a pack of gum or something and they never see that money. You can walk out with a pocket full of quarters and it will still be useful, this allows you to stop when you feel satisfied and they lose out on that money, a pocket full of tokens gains you nothing, might as well use them all up and then maybe you will want to keep going and convert a few more dollars. Very smart. Beyond that many also use it as a way to introduce inflation and take a cut right off the top so instead of $1 getting your 4 tokens they can say make it so $1 only gets you 3 tokens and most people don't even notice. Now when you start pumping tokens in the machines in your mind you still feel like you're spending 25 cents when in reality you're spending 33 cents. Instant markup for increased profit.
  - idlewords 7y ago
    So here's a rant on the topic picked at random, discussing loss rates to employee theft in this business on the order of 20% (and that's with tokens!): https://frank-thecrank.com/are-you-losing-arcade-business-game-revenue/ https://frank-thecrank.com/are-you-losing-arcade-business-ga.... The same rant puts the base level of 'walk-away tokens' (the condition you describe) at 0.5-1% of the total.
dbt00 7y ago
The point was to reduce the opportunity for insider cash theft while servicing machines?
bitxbitxbitcoin 7y ago
That is a beautiful analogy.

mc32 7y ago

And importantly the tokens can be unilaterally devalued without having to change the slots or recalibrate. So instead of 25¢ and next step being 50¢ if using the same config, they can charge you 27, or 48 or 50¢ for the token and not have to reconfigure the machine one bit.

chabes 7y ago
So, there’s obvious benefits for FB. What are the benefits for users? Are people actually going to want to use this?
- will_brown 7y ago
  Probably have to wait for the whitepaper to come out to give a fair opinion/analysis (rather than an article about the future release of the whitepaper). Once the actual use case/function of the token is know then one could answer if there is a benefit to users and if a Blockchain token makes sense over a database.
- bitreality 7y ago
  For users, the advantage would be an easy to use stable-coin, that is more accessible to the average person. Right now, most crypto currency has plenty of complexity to it. FacebookCoin will probably work more similarly to CashApp vs. Bitcoin. It means most people using it won't even realize it's a Blockchain token. It'll be like "Facebook Bucks". But then it also offers the flexibility of a blockchain token to more advanced users (withdraw to your own wallet, send to an exchange, etc).
  - acdha 7y ago
    This is the same reason why cryptocurrencies haven’t seen general adoption: none of that has any inherent value to someone who isn’t already a convert. Things which would matter are “can transfer real money to a friend with less markup than Apple/Google/PayPal”, “can sell things online at better terms than PayPal”, “can make transactions at a low enough rate that a business model requiring micro-payments is viable”, etc. Facebook has a few wrinkles where that could be interesting - micropayments for games and content in particular - but it’s unclear what a blockchain adds to that since you’re already centralized on a single massive company which negotiates on take-it-or-leave-it terms.
    - rkagerer 7y ago
      I agree, but [more general] cryptocurrencies do already check a few boxes: - is cash you can email - prevents hostile monetary policy from stealing your wealth (inflation, negative interest rates, haircuts, etc) - keeps working when you travel (unlike Paypal / credit cards which often get frozen) - uncensorable transactions that ignore borders - can send large $ amounts anywhere for ridiculously cheap - more vertigo than a theme park If none of those excite you, crypto isn't for you today (just like the internet wasn't for you back in the 90's) and you should wait another 10 years until it's mainstream.
      - acdha 7y ago
        “cash you can email” may be a cool-sounding bumper-sticker but it's not how I'd describe something which requires operating a complex multi-party system. Similarly, “large amounts for ridiculously cheap” has historically not been true and given how much highly-visible and easily blocked infrastructure a blockchain requires to be online in order to operate, “uncensorable” is more of a hypothetical aspirational goal than a given (an envelope of USD is much safer). “hostile monetary policy” is especially dubious in this context where it's supposedly pinned to the USD but even in other cases it's a hard sell for most people: do you a) put your money into a bank account, investment, or other asset you expect to do better than inflation or b) put everything into a complex system with no guarantees that it'll be operating in 5 years, fraud protection, etc. and hope that the conversion fees you pay on both sides will be lower than the difference? “keeps working when you travel” could potentially be an area where it could match the credit card system except that it either means that you're traveling with a ton of cash and no recourse if someone steals it or, if like most people you use a managed service somewhere else, hoping that you don't trip the same kind of security measures which banks use for the same reasons. Given that most people do not travel that frequently and most travelers do not have significant issues using credit cards while abroad, it's unclear to me that this will be enough of a compelling advantage.
kannanvijayan 7y ago
It also allows for the possibility of selling at discounted rates for volume. $1 for 4 tokens, but $10 gets you 50 instead of 40. There is _some_ inherent value in this. Decoupling the currency rate from a unit of time play provides an entrypoint for the store to incorporate value models that aren't captured by currency alone. In the volume discount case, this allows them to incorporate fixed overhead models into the pricing scheme for game time. I don't dispute the point, however, that the model does allow for abuse along other lines, and is often used that way in practice.
- arisAlexis 7y ago
  impossible for stable coins. I am awed by the level of ignorance here
- dmix 7y ago
  Plus the regulatory checks can be limited to cashing out and converting the coins to fiat. Instead of within each geographic or existing regulatory boundary within the network.
  - brokensegue 7y ago
    Is that actually true?
    - jsnider3 7y ago
      Depends on how good Facebook's lawyers are.
- will_brown 7y ago
  >It also allows for the possibility of selling at discounted rates for volume. $1 for 4 tokens, but $10 gets you 50 instead of 40. I think at the point of discounts of a USD stable coin...a good arguement could be made that is an investment contract/security that needs to be registered. If that were true, it would highlight how SEC is treating cryptocoins differently than say gift cards (which are often sold with discounts). Of course either way FB could in theory probably register their coin with the SEC anyway without much difficulty.
CydeWeys 7y ago
And they also make money in seignorage (profit in undredeemed tokens). The tokens cost 25 cents to buy but certainly don't cost 25 cents to make, so that delta is profit. A lot of tokens are "saved for next time" but next time never comes, and then you discover those tokens in a drawer somewhere a decade later long after they're no longer spendable.

bduerst 7y ago

As many mobile app games have shown, you don't need a cryptocurrency to achieve this, just some arbitrary point system. I think GP was asking, "Why Cryptocurrency?" since the benefits of blockchain don't really translate to this system.

PyroLagus 7y ago
> "Why Cryptocurrency?" Because it's cool and everyone is doing it.
andreygrehov 7y ago
Well, cryptocurrency is a point system. Consider it as a specification to a point system, which allows points to be exchanged across applications.
will_brown 7y ago
Like most existing Blockchain projects, maybe no benefit over database to the users...but I don’t think it’s fair to say without knowing the actual use case/function/purpose of the token, so probably have to wait for the release of the whitepaper to form an opinion.
bitreality 7y ago
It allows for a tiered system. Average users will use the token entirely within the Facebook ecosystem. Advanced users will have the ability to withdraw their tokens from Facebook's system and utilize them on other platforms. Look at Paypal USD Balance. It's really just a "token" issued by PayPal, an IOU where 1 PaypalUSD = 1 USD Debt from Paypal. But PayPalUSD can only be used within Paypal.com. The only way to bring PayPalUSD outside of Paypal is to call in your debt to PayPal and withdraw the money to your bank. PayPal has always said that their success relies on people holding PayPalUSD. People who keep their money in PayPalUSD are the ones making PayPal bank. First of all, it costs Paypal next to nothing if that user sends their PayPalUSD to another user. Yet they collect transaction fees. Furthermore, PayPal can throw this money into low-risk investments and earn 3-4% on it. Facebook tokens are PayPalUSD 2.0. They can be used within the Facebook.com ecosystem. But on top of that, people can withdraw them and use them outside of Facebook.com. Basically, any website can start integrating these FacebookCoin. It means less people will need to cash out, and will instead keep their money in FacebookCoins.

JudgeWapner 7y ago

don't forget, they can "get hacked", and, "whelp, it's over guys. we promise to do whatever we can to recover the lost coins. the case has been turned over to law enforcement. We won't give up hope that someday they may be able to recover something."

InvisibleCities 7y ago

But that doesn't really answer the question being asked. If the cryptocurrency is completely controlled by a centralized authority who has absolute rights over the system, why bother with the technical and cognitive hurdles of using a blockchain? A standard ledger in a centralized database is more than adequate for that task, and much easier to maintain.

espadrine 7y ago
The main gain is in acting as a trusted clearing system. Clearing takes less time than FedWire or ACH. Settlement, on the other hand, still has to go through the Federal Reserve.
- buzzerbetrayed 7y ago
  But using a database as a ledger would clear faster than even the fastest blockchain, wouldn’t it? Or am I misunderstanding what you mean by “clearing”. I’m assuming you mean how long it takes for person A to get money to person B.
  - steveharman 7y ago
    Can't a database be potentially breached and suddenly my account has all the "currency" copied I to it from yours? Until Quantum Computing comes of age, this is theoretically much harder with DLT / blockchains.
    - roywiggins 7y ago
      Blockchains can (and quite often do) have bugs in their implementation too, they're not entirely magic.
    - simias 7y ago
      All banks are effectively running a huge database at the core, yet that's not a common problem. They have procedures, they have backups and they have human oversight. The last element is key, if somebody manages to hack into the system and send all the money into their own account the bank's administrator can detect the problem and say "well, that's clearly not supposed to happen, let's roll that back". On a decentralized, trustless blockchain you have no such thing. So you either end up hard-forking like Ethereum did after their DAO debacle (but then are you a decentralized trustless system anymore?) or you continue normally and basically the people who lost their money are screwed.

r00fus 7y ago

Then why doesn't Facebook just go the Microsoft route and have "points"? (FB already has a credits system).

idlewords 7y ago

The point of arcade tokens is to prevent people breaking in to machines, feeding them slugs instead of coins, and reduce the number of employees with access to unlimited free quarters.

BinaryResult 7y ago
I would disagree and that the real point is for them to make their money up front on the token exchange. When you change $5 for tokens they don't care whether you spend them on games or use them as pogs, they have already made their $5 just as if you had pumped it all into the machines. If they change your $5 for just quarters there is no guarantee you will pump those into the machines, you might instead use them to buy a pack of gum or something and they never see that money. You can walk out with a pocket full of quarters and it will still be useful, this allows you to stop when you feel satisfied and they lose out on that money, a pocket full of tokens gains you nothing, might as well use them all up and then maybe you will want to keep going and convert a few more dollars. Very smart. Beyond that many also use it as a way to introduce inflation and take a cut right off the top so instead of $1 getting your 4 tokens they can say make it so $1 only gets you 3 tokens and most people don't even notice. Now when you start pumping tokens in the machines in your mind you still feel like you're spending 25 cents when in reality you're spending 33 cents. Instant markup for increased profit.
- idlewords 7y ago
  So here's a rant on the topic picked at random, discussing loss rates to employee theft in this business on the order of 20% (and that's with tokens!): https://frank-thecrank.com/are-you-losing-arcade-business-game-revenue/ https://frank-thecrank.com/are-you-losing-arcade-business-ga.... The same rant puts the base level of 'walk-away tokens' (the condition you describe) at 0.5-1% of the total.

dbt00 7y ago

The point was to reduce the opportunity for insider cash theft while servicing machines?

bitxbitxbitcoin 7y ago

That is a beautiful analogy.