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Further reflections on Second Life Economics
Submitted by Aldon Hynes on Thu, 01/10/2008 - 10:17What does the change in banking policy mean for Second Life? It is a question a lot of people are asking and no one seems to know. One person was told by a Linden that companies will not be able to provide dividends on their stocks. Another person was told that companies will still be allowed to make loans, which pay interest. Exchanges are still waiting for official feedback from Linden Lab.
The bigger question is how do we understand the “currency” of Second Life, which Linden Labs describes as “a limited license right available for purchase or free distribution at Linden Lab's discretion” Can or should banking regulatory agencies be expected to regulate the borrowing or lending of such rights? If so, then these rights should not be controlled at Linden Lab’s discretion.
At 11 AM, SLT, today, Metanomics, together with the Investment Education Team will hold a special event to address Linden Lab’s ‘a radical shift in policy’ regarding banks. I expect it to be a lively discussion and I hope many people attend. Details can be found here.
The Future of the Second Life Economy
Submitted by Aldon Hynes on Wed, 01/09/2008 - 18:05Linden Lab is finally attempting to reign in the abuses of unscrupulous banks within Second Life. This is long overdue and if done right will help grow the economy in Second Life. However, I have numerous concerns about their approach. They seem to be seeking an approach focused on imposing rules, that may be self contradictory instead of engaging the technology and community, which is core to Second Life, to address the underlying issue.
Second Life Banking Policy
Submitted by Aldon Hynes on Wed, 01/09/2008 - 10:46I was away from the computer much of yesterday and will be away much of today as well, which is unfortunate, because yesterday, there was very big news. Linden Lab announced a new policy concerning in world banks.
As of January 22, 2008, it will be prohibited to offer interest or any direct return on an investment (whether in L$ or other currency) from any object, such as an ATM, located in Second Life, without proof of an applicable government registration statement or financial institution charter.
Plenty of people are writing about this already. Vstex's post is here. DFC's here, CSL here, AVC here, SLCapEx here and here. Benjamin Duranske provides commentary here. Nobody Fugazi has his comments here. SLNN has this op ed up, and SL Reports has a long list of articles.
With all of that, on top of my limited connectivity, there isn't a lot that I can add at this point, other than a few questions. The first question is what is meant by 'Direct Return on an investment'. While this is aimed at in world banks, will dividends be considered a direct return? If so, it has a profound affect on many companies in Second Life. What does this do to exchanges? To investment companies? The other important question is what Linden Labs will consider 'an applicable government registration'. Does simply forming an LLC or registering a company count? AVC and Wise Metaverse LLC have posted information about their incorporation, but registering a company is very different from a financial institution charter. In addition, Linden Lab has not provided a mechanism, at present, for reporting which institutions have met their criteria to continue banking activities.
So, what does this mean for financial institutions in Second Life? Short term, there is likely to be plenty of volatility. To the extent that the exchanges can keep trading orderly with minimal use of shutdowns, trading halts or automatic circuit breakers, the markets should do fine and should provide some good investing opportunities. To the extent that Linden Labs policies are not excessively strict, those companies that are providing real services can only benefit from this, but building more confidence in the financial markets. The risk at this point is determining which companies are in fact providing real services that will be vetted by Linden Lab.
TNW joins the Grid Race
Submitted by Aldon Hynes on Sun, 01/06/2008 - 19:55Yesterday, Lex Fitzcarraldo of TNW Designs and Real Estate (TNW) announced their successful test of their own grid. They said that they ran fifty regions from an existing server. In the discussion, they confirmed that they are running OpenSim and discussed having custom work done to handle issue s like currency, which OpenSim does not yet support, or the importing of assets from other regions.
How will this compare with the efforts of Central Grid which is focusing on bringing Second Life businesses into alternative grids? How will this relate to DeepGrid? OpenLifeGrid and people running their own personal grids?
Back in September, I wrote 1994 all over again about the emergence of new grids. Now, they are emerging and the new grids need to demonstrate their unique selling points. It will be fun to watch what emerges. To keep track of emerging opensim based grids, keep a close eye on the OpenSim Grids wiki page.
More Second Life Stock Market Turmoil
Submitted by Aldon Hynes on Sat, 01/05/2008 - 10:48Disruptions abound in the Second Life Stock Markets. The World Stock Exchange, (WSE) is shutdown for software upgrades. At this moment, the AnCapEx's DNS servers appear to be offline and the exchange is unreachable. I had hoped to lead with 'AnCapEx surpasses WSE in volume", but that isn't the case.
Over at the L and L Bank and Trust, LLBT, I checked to see how their brokerage is doing. Over 42,000 shares of BNT have been traded there over the past week. It would seem like LLBT might be a good option for trading shares of companies on exchanges that are currently inaccessible. However, LLBT has suspended trading in BNT, as well as ten out of the thirteen companies they make markets in. At first glance, it looked like they were suspending trading in stocks on the WSE and AnCapEx, but looking closer, they've suspended trading in YEP which is still actively trading on SLCapEx and in MED which is still actively trading on VSTEX.
Meanwhile, Second Life Newspaper is reporting that three non-executive directors have resigned from WSE, at Luke's request and SL Reports has written about LLBT acquiring 8 Dragons bank.
So, VSTEX and ISE have now joined SLCapEx in surpassing WSE in volume, and if AnCapEx can address their technical problems, they may do so to. WSE may gain back some of the volume when they come back online, but their reputation is further tarnished.
