An improved model of virtual-currency in social networking sites

Abstract

Virtual-currency has become an important service and brought a great profit to SNS companies in China. In this paper, based on some economic theory and algorithms, we systematically analyze the operation mechanisms of the virtualcurrency in China. Three models, the ideal model, the actual model and the improved model are given to illustrate how virtual-currency services bring profit to SNS service suppliers. Moreover, in the improved model we propose a novel withdrawal mechanism: unlike the other two models, the improved model allows the users using virtual money to buy real goods. This mechanism can bring more profit to the SNS companies. A survey among 859 SNS users of mainland in China is conducted to evaluate the feasibility of our proposed model. The results of the survey showed that SNS companies should consider the additional mechanism for users to exchange real goods with virtual-currency, a win-win situation for all parties in SNS development.