The best-known form of the electronic transaction is the purchase of goods. The ability to select from a wider variety of music, books and even electronics has seized the imagination of shoppers across the world. This form of transaction is particularly relevant as it gives retailers access to niches and smaller markets which would not otherwise have made sense due to the high cost of physical operations paired with low returns.

The second form of transaction is the service transaction in which a service is acquired and managed over the internet. There are a vast number of possible transactions. These remote services can be delivered online or their aspects can be transferred online. Think of administration and logistic system support for online delivery, or skills acquired on a project basis in terms of transfers.
The third form of transaction is the movement of money through conduits, with various banking applications. This has particular impact in the tourism market, but is also inherent to many physical and online transactions.
Most of these services materialise with physical results. However a second class of transaction, data licensing, has emerged. This entails transactions that license use of data on various terms, particularly software and music, which can be acquired online in transactions that involve transfer of the data and enabling of the application. For instance, a programme can be downloaded, but for full functionality, a serial number must be purchased to unlock full functionality for a stated period of time.
Now a third form of transaction, an economy on its own, is emerging: virtual property. Virtual property has been driven by gaming. In the most basic form users purchase virtual property for virtual use: this can be in the form of characters known as avatars or accessories for their avatars: weapons, clothing and other items.
But this use has evolved into virtual worlds, where space can be bought, rented, traded and sold.  Virtual real estate in a 3D world has generated a booming online economy in which hundreds of millions are obtaining virtual property and using it as mirrors of their real existences. Naturally, the aggregate figures lead to large dollar sums.
The interesting point is the term ‘mirroring’. A number of large organisations are mirroring their real products and services in these virtual worlds. So a large clothing brand can and do offer mirrored products in the real world and the virtual world, but with the implication of real currencies at play.
The question is becoming, to what extent will the virtual and real physical economies impact one another. It has also been noted that some economies have virtual economies as significant elements of their national economies, for instance eastern European countries where internet pornography and virtual artefacts are major foreign currency earners. In one case, a tiny Pacific Island by the name of Tivalua generates a vast proportion of its GNP through lease of its domain name, ‘.tv’. In fact aside from this domain, stamps and transfers from abroad it has no other significant economic sector.
Virtual transactions are becoming a major force in global economies. The question is, to what extent will they impact on the physical economy. Unfortunately, only time can tell.
Next: Virtual centralisation, decentralisation, costs & cost benefits
Box:The Emergence of a Virtual Economy: Linden Dollars and Second Life
In late 2006, a ‘relatively’ small virtual world, Second Life, developed by Linden Labs in 2003, came to the attention of internet users, who signed up in droves.Linden Labs rents land and regions in Second Life. Land is rented on a piecemeal basis, however users have the option of buying regions and paying a monthly maintenance fee.
Additionally, Linden Labs provides a set of tools for development in Second Life, as well as a currency, Linden Dollars (L$), which are exchangeable for Dollars, Euros and Australian Dollars. The Linden Dollar trades in the region of US$ 8 – US$ 9 for L$ 1,000.
Second Life is currently being populated by larger brands as well as smaller enterprises. The forms of activity are virtual brands which mirror physical brands, various services, real estate, virtual artefacts and entertainment. In the latter field, events featuring real music artists are popular, as are virtual nightclubs.
Second life has produced its first USD millionaire. It also has its first embassy, that of Sweden. The main activity of the embassy is tourism promotion.
Visit Second Life: www.secondlife.com – note that you will be required to register and develop an avatar (free). An ADSL connection will provide optimal performance.
Find out more about Linden Labs: www.lindenlabs.com
Find out more about Linden Dollars, its economy and real estate transactions: www.slexchange.com