Closed Virtual Currency

Just like you can’t use a Macy’s gift card at any other store, a closed virtual currency can only be used in certain virtual “communities.”

Let’s back up for a minute and talk about virtual currencies in general. You've probably heard of cryptocurrencies. Bitcoin is the most famous, but there are many others like it. These cryptocurrencies aren’t backed up by gold or regulated by any government. But you can use them to buy real goods and services online with it. Also, an open virtual currency such as Bitcoin can be exchanged for real money (dollars, euros, etc.) using an online exchange system.

However, a closed virtual currency can only be used in certain environments after you have purchased the virtual currency with real money. These virtual currencies are closer to the gift cards we mentioned earlier than they are to an actual currency, setting them apart from the open varieties, such as Bitcoin. Technically speaking, frequent flyer miles, arcade tokens and loyalty points from your credit card are forms of closed currencies, as you couldn’t go out and buy groceries with your arcade tokens.

The main use of closed virtual currency is for online games such as Warcraft’s Gold and Entropia Universe’s Project Entropia Dollar. Players have loads of fun earning virtual currency and trading it for stuff in the game. But they aren't much good outside the game.