A good friend of mine came to me today and showed me this link to Metanomics a financial reporting news site for Second Life. The link is basically to a video about exchanges and banks in Second Life and their roles in the Second Life economy. This lead to a discussion about, "What is the Linden? Is this market real or a game?" It's a question that comes up often, I'm going to give my thoughts here in the blog, so I can simply refer folks to it when they ask this question instead of repeating myself.
The Linden is a game currency. It is not a real currency. It is a currency that is valid only within the context of Second Life. If you tried to sell your Linden to your local Grocer, they would laugh at you most likely. The only time that Linden, a product of second life, becomes real currency is when you trade it through Linden Lab or another player agent. Without this conversion, the linden you hold in your account is worthless. Whenever you put your USD into Linden, you are more or less buying assets within the game, nothing more, nothing less. Anything else is an over-glorified pipe dream.
That said, when you invest within Second Life, instead of believing you are investing in a real agency, corporation, or business you should keep the proper mindset. You are investing in a game. You are investing in a person within the game who you are trusting is honest enough to do their job and to hopefully return to you an in game profit. If you are lucky, this in game profit may be utilized to your own gain or even for conversion eventually into real USD. The difference between this and gambling, is that the people you invest in may seriously be out to attempt to improve the virtual community in which you play by adding functionality, adding new venues or real estate, improving aesthetics, implementing new ideas, creating new things to do within the game. Second Life is a platform that can support many game possibilities, from first person shooters, to strategy, to basic board games.. it can all be done if you have the skills to do so. Some of the businesses here will be out to do these things, some will be scams. You have to be careful. You have to do your research..
And for God's sake, if you are deluding yourself into thinking this market is an extension of real world securities markets and behaviors, please stop it. That's purely ego.
Appended 11/18/2007, 4:38 pm:
The more I thought about it, the more that Linden seemed like Company Scrip. I don't expect to many folks to be aware of what Company Scrip is unless you come from an area that was on the extremes of society for a while or where actual legal tender was scarce. If you look at the definition, it seems much more appropriate to the Linden. If you really want to become an expert on the subject matter you may want to check out this and other discussions courtesy of Wikipedia.
Sunday, November 18, 2007
What is the Linden?
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3 comments:
Good Post Maelstrom!
Thanks for the addition. I grew up in coal-mining country, and while it was well in the past, scrip was definitely well known. Probably the point of divergence is that scrip was rarely worth trading for legal tender while the Linden dollar has a fairly stable value against external currencies.
My personal viewpoint is that Second Life is akin to its own country with its own economic system and currency. It's not an extension of RL markets as you say but rather an addition. In many ways Second Life is an economic simulation in the mode of anarcho-capitalism. It will be interesting to see if RL economists study SL economics for applications elsewhere.
LL is essentially the sovereign creator of the world of SL, as such it is a de facto state, and controls the mint, and the patent office. The fact that they dont seem to do much else, and are rather pathetic at defending their nations borders against invasion by 16 year old kids with 5 meter penises is irrelevant to the fact that SL is operationally, a nation. The L$ is a currency, and while you can exchange L$ for other currencies, same as you can exchange Euros for Dollars at most banks, no grocer in the US is going to accept Euros unless he pays attention to currency spot prices.
Ergo, the Euro is as much "not a currency" in the US as the L$ is, same for the Yen, Peso, Pound, Yuan, Ruble, and Dinar. Yet all are currencies you can exchange for dollars at a proper exchange.
Secondly, there ARE locations outside of SL that trade in L$. SLX is a website, its not IN SL. Same with WSE, Capex, ACE, ISE, and VSTEX. Anybody with a website that trades in L$ is treating L$ as a currency in the real world not "in game".
So sorry, Mael, the claim L$ is just a 'game currency' doesnt wash. Calling it 'company scrip' is only valid if you totally ignore the aspects of sovereignty that LL exhibits inworld. Then again, in many a company town, the company is the goverment.
In the final analysis, money is what people decide is a medium of exchange, period. Not all money is currency, currency is specifically a legal term to describe some fakery that a government has declared is the same as money. The US currency, commonly called the dollar, but which is in reality a Federal Reserve Note (the federal reserve is not a part of the US Govt), is company scrip of the bank cartel called the Federal Reserve System, which congress has declared to be valid currency.
In most of the world, the US dollar is not a valid currency, however the public in those countries use it for money, sometimes rather than using their own official national currency. Goverments can declare what they want, its the market that decides what is and is not money.
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