KPMG eGaming Summit 31 Mar 2011

1. Monetising Game Play on Social Network Sites Jon Matonis 31 March 2011

2. Overview Chief Forex Dealer at VISA International Director of Financial Services Vertical for VeriSign, Inc. CEO of Hush Communications, creator of encrypted Hushmail.com Editor of The Monetary Future blog on digital currencies

3. Social Gaming and Virtual Currency

4. Revenue Shift Away from Advertising

5. Virtual Goods Revenue Increasing

6. The Entrance of Facebook Credits

7. Social Gaming Beyond Facebook

8. Types of Payment Choices for eGaming Credit card/debit card EFT wire transfer/eCheck/ACH Cashier’s check/money order Western Union/MoneyGram Proxy eWallet account (Click2Pay, Moneybookers, MyPaylinQ, Neteller, Ukash, Webmoney, etc.) Mobile payment Non-political virtual currency unit (Facebook Credits, Linden Dollars)

9. Attributes of a True Virtual Currency P2P capable Anonymous/pseudonymous Two-way convertibility Transactional non-repudiation Easily divisible Portable and offline capable Security and scarcity Frictionless (no transaction fees) Nearly instant deposits/withdrawals

10. Previous Barriers to a True Virtual Currency Gold bullion cannot be molecularly transported across the Internet Emulating the anonymity features of physical cash or gaming chips is difficult Digital bearer certificates have to verify against a centralised ‘mint’ which creates a single point of failure Decentralisation opens up the possibility for double spending the digital ‘coins’

11. Bitcoin: A New Entrant

12. What is Bitcoin? One of the first implementations of a concept called cryptocurrency (circa, 1998) Does not rely on trusting any central issuer Relies on the transfer of amounts between accounts using public key cryptography (like PGP for money) Scarcity based on a reusable proof-of-work Double-spending prevented by a distributed time server implementing chained RPOWs

13. Major Features of Bitcoin Current size of economy (~BTC 6,000,000) Nodes connected (5,000-10,000) Trading turnover (equivalent $30,000/day) Decentralised confirmations Distributed nodes (peer-to-peer) Open source software (peer reviewed) Non-political unit of account Independent market-based exchange rate

14. Evolution of Bitcoin 31/10/08 Bitcoin academic paper published 11/01/09 Bitcoin v0.1 released 17/07/10 MtGox exchange established 06/11/10 Bitcoin economy passes $1.0m 09/12/10 Generation difficulty passes 10,000 28/01/11 Block 105000 generated, 5.25m/21m 11/02/11 Bitcoin reaches USD parity, $1/BTC 03/03/11 Bitcoin v0.3.20.2 released 27/03/11 First BTC:GBP exchange opens

15. Benefits of Bitcoin Bitcoin is ideally suited to the eGaming and online casino financial requirements Monetary properties and features emulate the physical gaming chips in a real-world casino Features correlate to the customer demand for a digital/virtual currency

16. eGaming Sites Currently Using Bitcoin

17. Map of Bitcoin Nodes

18. Total Bitcoins Issued Over Time

19. Bitcoin-USD Exchange Rate (Jul 2010 – Mar 2011)

20. Future Implications

21. Google is the Player to Watch Google acquires Social Gold, a virtual currency platform (August 2010) Google acquires Zetawire to look after NFC payments (December 2010) Google releases BitcoinJ, a bitcoin client for Java (March 2011) Google now has 750 staff in payments division!

22. The Dawn of the Cryptocurrency Economy “Digital cash is to legal tender as BitTorrents are to copyrights.” -- J. Matonis

23. The Dawn of the Cryptocurrency Economy A Digital Currency Revolution will...... Fundamentally alter the current hierarchy of central banking and banks Challenge traditional value depositories Cause KYC rules for certain transactions to become irrelevant Make monetary and taxation jurisdictions less important

24. Opportunities for Gibraltar Jurisdiction eGaming companies that adapt Prepaid operators (Transact Networks, IDT, Wavecrest) eMoney and virtual currency exchanges Cryptocurrency market-makers

25. Thank You Jon Matonis matonis@hushmail.com twitter.com/jonmatonis