Digital currencies have had a rough road. Beenz and Flooz are commonly named as prominent failures from the early days of e-commerce, but even more widely known currencies like Bitcoin have had trouble hitting the mainstream. A recent promotional Bitcoin event tied to Black Friday succeeded mainly in attracting Bitcoin devotees instead of new users.
By contrast, "closed-loop virtual currencies, outside of a vertically-integrated firm like Microsoft, don't work because there are too many points of friction for the developers and too little value for the consumer," Schmidt says.
Microsoft Corp.'s Microsoft Points, used for purchasing games and other media on its Xbox 360 video game console, is one of the few digital currencies that works, he says. Microsoft's system is comparable to a stored-value account, allowing consumers to purchase Microsoft Points on cards in stores the same way they would purchase a prepaid card. In recent years, Microsoft has expanded Xbox users' payment options, such as by adding PayPal acceptance.
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