It's still too early to say that any virtual currency threatens cash, but currencies such as Bitcoin, Facebook Credits and even the gold earned in World of Warcraft games have attracted a meaningful audience.
Twenty-one percent of social network users have earned or purchased a virtual currency, according to research published this week by Javelin Strategy & Research. Eleven percent earned the virtual currency, 5% purchased it and 4% have both earned and purchased it, the report says.
Consumers may spend or trade virtual currencies like real money, even when those currencies are not meant to be used that way. For example, Activision Blizzard prohibits World of Warcraft players from exchanging gold for cash, but "a recent Google search for sites selling WoW Gold yielded nearly 7 million results," the report says.
Virtual currencies such as Bitcoin were created as alternatives to real cash, and there are now businesses built around converting Bitcoins to and from government-issued currencies. As virtual currencies grow, they may serve a greater purpose as the world goes increasingly digital.
There is a "need for reduced friction in foreign currency markets," the report said. "A virtual currency could enhance global connectivity by virtue of its ability to act as a single currency that could transcend specific domestic markets, legalities and market preferences."
This was originally part of Facebook's reasoning for introducing Facebook Credits. Merchants could set prices in Credits, and Facebook would handle the conversion from real currencies.
Facebook recently changed its approach, phasing out Credits and allowing merchants to set prices in different currencies.
"The recent demise of Facebook Credits was unexpected," the report said. "Facebook had been thought to be well-positioned to drive a globally accepted virtual currency."