Social networks and the digital economy: A preview of IMVU’s VCOIN

When the Securities and Exchange Commission gave its blessing to social media platform IMVU to launch VCOIN, it was a major leap forward for acceptable scope of crypto applications. 

The implications for what sorts of projects the SEC considers a security are, in and of themselves, huge. But part of the appeal of VCOIN to the SEC is that, with its stable price and clear use case, IMVU has managed to demonstrate to the commission that the token is a means of making the platform a more lifelike digital world that is more fun to hang out in.

For those unfamiliar, IMVU advertises itself as “a social experience.” It’s similar to Second Life in that users take on 3D avatars with which to explore a world. In IMVU’s case, that world is mostly bars and clubs — 3D environments overlaid onto chatroom dynamics. But people spend money on those things and, in IMVU’s case, send money to each other.

We have the economy…

Using its existing credits, priced at 1,000 to the dollar, IMVU already hosts an economy featuring a monthly 27 million transactions that add up to $14 million. According to John Burris, the “comprehensive virtual economy” is worth some $45 million, and its existence is central to IMVU’s appeal to the SEC.

Burris, who is IMVU’s chief strategy and blockchain officer, recently demoed the new platform for Cointelegraph, proudly pointing out a living internet economy that owes debts to social media, chatrooms, massive multiplayer online gaming and, now, blockchain:

“This is the VCOIN play: We have a massive virtual economy that’s driven by our users. So the users are the ones who create all the virtual goods — all the virtual outfits, furniture for your room, animations that your avatars can do, and they also create all the virtual I’ll call them services. They’re the ones who host nightclubs on the platform or can help you dress up your avatar or who will run the pub where they’re watching the Premier League soccer game. They’re the ones running all these experiences on the platform.”

The scale of VCOIN’s prospective userbase is unprecedented among SEC no-action letters — which basically certify that the commission will not consider a token a security if it abides by certain stated provisions. The SEC has said that cryptocurrencies like Bitcoin and Ether are also not securities, but that is because they do not owe their success to any single entity. Decentralization has its legal benefits, in other words.

Centralized and contained

VCOIN is obviously a centralized project by IMVU, and nobody is making any bones about it, but the no-action letter is acknowledgment that VCOIN is a utility token, with IMVU’s internal economy as its use case. While users will be able to take VCOIN off of IMVU’s platform and into Uphold wallets, IMVU’s platform should remain their primary use. This provides the SEC with another feature they hold dear: Siloed usage.

Comparing VCOIN to, say, Facebook’s Diem (formerly Libra), there are…