Unstable Platform Rocks SL Markets?

by Pixeleen Mistral on 31/07/07 at 1:26 am

Bank run on Ginko Financial, Dreamland fingers Linden Lab for unstable grid

by Pixeleen Mistral, National Affairs desk

Dollars spent in Second Life – as tracked by Reuters

Residents who play the fictional financial markets in Second Life were hard pressed to decide if the precipitous drop in in-world spending since Thursday is a rational reaction to Linden Lab’s shiny new world wide gambling ban – or a reminder that even virtual commerce requires some stability in the world. Reuters’ charts of in-world economic activity suggested a serious slowdown since Thursday – but was this triggered by a gambling ban, or a combination of factors?

Benjamin Duranske reported Friday at the Virtually Blind site that an in-world “bank” – Ginko Financial – had suspended withdrawals – then re-instated them with a cap on how much money could be withdrawn from the “bank” after 1% of the Ginko Financial’s claimed assets were withdrawn over the course of two hours. Nicholas Portocarrero – head honcho of Ginko Financial is reported to have said the SL gambling ban had “caused a panic”.

Combine jittery citizens, a lack of transparency about the state of Ginko’s investments, and on-going speculation about ponzi-schemes, and nearly any shock the the SL economy has the potential for destabilizing Ginko. Hopefully Mr. Portocarrero has found some high-yield camp chairs to help replenish Ginko’s reserves – but the Herald was unable to confirm this – Mr. Portocarrero is not returning our calls. This is a shame – we’d like to ask how he manages to earn a good return on his investments when few individuals in SL have profitable businesses – only a few hundred earned over $5000 USD last month – before tier payments to the Lab.

Dreamland points fingers at LL

But is the gambling ban the only factor in play? With the weekend concurrent citizens topping 44,000, it was no surprise that even basic metaverse infrastructure was failing – to the point that Master Quatro of Anshe Chung’s retail virtual land organization sent this message to Dreamland residents:

“Second Life is very unstable right now. In the past 2 days we have had sims down for over 24 hours. One sim lost most of the owners’ objects. several searches have been turned off. I have been crashed by regions going down 4 times today. Please be patient. These are all Linden issues that affect the entire grid. The Linden Blog has some information, but as usual not enough.”

Where should you invest you time?

So – on a fine summer day how is your time best spent? Would you rather gamble on an unstable metaverse working well enough to let you run a search, and do simple things like log in, see your L$ balance, teleport? Or does a rational economic avatar looking to maximize the utility of free time simply go for a walk outside in real life? Despite all the brave talk about Second Life being the 3D Internet – or at least the 3D AOL – SL needs to be entertainment to attract and retain players. If you can’t place a few bets on the virtual slots and the world keeps crashing when you want to go virtual shopping – perhaps reading the new Harry Potter book is a better investment?

32 Responses to “Unstable Platform Rocks SL Markets?”

  1. Warspite Fackler

    Jul 31st, 2007

    Nowadays the question is not anymore “when will LL be able to fix this” but “when will LL implode with power users recognizing the joys of not shoving green paper down greedy lindex’ throat anymore”

  2. A couple of updates to this:

    - Ginko is entering day five of the bank run. ‘Nicholas Portocarrero’ (who we know know is a Brazilian named Andre Sanchez) does not have enough money to pay depositors. He admitted this in an interview on VB. This is not due to problems with the grid, but due to the fact that Ginko has paid 60% returns for two years with new depositors money, and haven’t made 60% returns on their investments.

    - Tonight, Ginko and AVIX (an in-world stock exchange) pitched a deal to a roomful of reporters and investors, where Ginko would buy AVIX with funds raised in an IPO on AVIX. This looked like a terrible idea to nearly everyone present, and a lot of very hard questions were asked. Though AVIX head ‘Investor Allen’ stood by the plan at the time, the deal was scuttled within minutes of the end of the meeting, leaving Ginko to sink or swim on its own.

  3. Bunny Kilby

    Jul 31st, 2007

    My business takings have probably been 10% of what they normally are over this past weekend. I’m more annoyed with one Linden update saying ‘everything ok, nothing to see here, people,’ quickly followed by a further announcement that the original problem still existed, or at least the tangible effects were the same. In the meantime a sizable transaction between SLExchange and my account has gone ‘missing.’ How can you confidently do business when the basic mechanisms for doing so are unreliable?

  4. Lewis Nerd

    Jul 31st, 2007

    The in-world spent cash has gone down because a) They managed to break “Buy” at some point, b) You couldn’t search for land for sale as search was disabled, c) SL was so slow people weren’t bothering to log in with all the things not working.

    It’ll fix itself. No need to add to the panic.

    I’m not sure where $5000 a month comes into the equation; I have a REAL full time job and only take home just over $2000 a month, so that’s the amount I’d need to make in SL to have given up a regular job. After all, it’s only a game, and if more people treated it as such, people wouldn’t be getting themselves so much in a fuss over making money.


  5. Inigo Chamerberlin

    Jul 31st, 2007

    Some good points there. I’ve spent little time inworld recently due to RL considerations that have demanded my attention.
    But, the annual Summer slump, combined with the usual infrastructure issues, and the removal of the gambling industry can’t be a good combination.

    I think Linden Lab may have completely underestimated the impact of removing the gambling industry from Second Life.
    Gamblers will leave, casino owners will leave, land, up to and including islands will be shed, cheaply and in quantity, and, as Ginko just found out, cash (L$ – the stuff that has value when LL want it to, and none when they don’t) is leaving in large volumes too.

    Still, the boat may be rocking a bit, but I don’t think the sky is falling – yet.

    What IS happening though is that Second life is contracting. Less people, less L$ flowing through the economy.
    Worse still, Second Life – never a sensible place to invest what you can’t afford to write off – has become an even less appetising prospect for investment.
    The lack of stability, both in infrastructure and in Linden policy has never been more apparent. Which more or less puts the brakes on – hard – for investment and growth in the near to medium future.

    Still, I have great faith in Philip’s ability to obscure all this with his usual smoke and mirrors at his future appearances.

  6. Mytwo Cents

    Jul 31st, 2007

    Ah, finally the Herald picks up on this. There has been a minor bank run on JT Financials as well that forced Arbitrage Wise to hold an urgent press conference at the very same day trying to calm down clients and pledging to meet any payouts demands even if it would cost him his own (real) money.

    Since JT seems to be still around, apparently this strategy worked. The whole incident might even turn out to be beneficial for Arbitrage since I would assume that a lot of residents will leave Ginko for good (whatever amount of money they actually can get out) and move their investments over to JT. And really, does an institution that calls itself a “bank” but folds at the first minor economic hiccup really deserve residents’ money at all? Just my 2c.

    Notwithstanding the above, I believe that JT’s investment strategy that Arbitrage illustrated at his press conference leaves a lot of open questions and concerns about how “banks” in SL think they can operate, and I have fundamental doubts about the prospects of any financial services operation in SL since I simply do not believe that the interest rates they promise are achievable on a continuous basis.

    And on a side note – thinking about the “legality” argument used to ban gambling: Doesn’t the State of California require you to have a kind of banking license to offer financial services?

  7. Darkraven

    Jul 31st, 2007

    I’ve been observing SL/LL for some time now, trying to figure out if they have the stuff to change the Internet. And for a while I though they did. But scalability troubles, the too easy to make products and in my opinion too much focus on development instead of stability has left SL shaky these last few month. Now they have outlawed gambling (seemingly without US goverment pressure), the SL exchange has suffered a mayor blow and a in-world bank is ready to tople. And above all that at this moment the grid is unstable and slow.

    Not so long ago several hundred people (including me) signed an open letter to LL to get there act together. It was one of the best community actions I have ever seen online. Clear and pricise, the letter pointed out what people want. And though LL responded quickly and correctly enough they now once more have seemed to have lost the conection with their residences. I wonder how long SL can continue at like this. I fear that soon the in-world economy will crash and SL (as we know it) will come to an end.

    I’m already looking for other world that can offer me the freedom of SL, both socially and scripting wise. Cause I think we are looking at the end here.

  8. urizenus

    Jul 31st, 2007

    I would have thought that a total ban on gambling would lower those figures even more than that. Recall our story from last December in which we speculated that 80% of the “dollars spent” was really just money moving back and forth in casonos (http://www.secondlifeherald.com/slh/2006/12/626000_spent_in.html). If those numbers still hold I would expect a total ban on gambling to bring the total dollars spent down below 500K per day.

    Of course this doesn’t really suggest a slowdown in the economy so much as it shows the effect of eliminating a false and inflating indicator of economic activity.

  9. shockwave yareach

    Jul 31st, 2007

    banking in SL:

    Anyone who thinks a bank in SL — created by a fellow user such as yourself — is going to be stable is fooling himself. I love user created content and find that’s one of my favorite parts of the game. But like any other business in SL, it could vanish tomorrow and there is nothing you can do about it. If the guy runs off with your lindens then you shouldn’t have given them to him. And while a real bank with real protections would be nice, they aren’t going to fart around with penny-ante stuff like our Lindens.

    Consider it for a moment. Let’s say an average person has 10000L they want to save. For the bank (which thinks in real money – funny how that works) that’s an account holding 37.60$. It isn’t worth a regular banks time. Even in RL, the banks are trying to ditch people with small accounts. So any bank ingame needs to be run by LL itself, which gives protection in that if the bank folds, so does LL and then it’s all pointless anyways.


    I’m surprised the numbers are not lower. All weekend, I’ve been unable to go to my home island, much less shop on the mainland. I’ve been unable to teleport. I’ve been unable to search for items. The game crashed over and over and over on me. Go shopping? I can’t even walk, much less shop! I don’t know what’s happening, but Friday was the last usable night I’ve had. Whatever the glitch, LL had better fix it fast or that number is going to plunge to near zero. Even an addict like me is considering not bothering logging in tonight and working on some RL projects instead. Give everyone a week of not being able to play in SL and they may go find other things to do and not bother coming back.

  10. Economic Mip

    Jul 31st, 2007

    Gasp, Uri chimes in.

    Yes, the state of California does require a banking license to
    offer financial services. I have had long discussions with the owner of SL Banks patiently explaining to him that “loan shark” would be a better description of his business. I have also repeatedly called virtual stock markets very risky investments, probably more so than third world countries. Oddly, I did not have much of a problem with the casinos. Most were run by new players expecting fast cash, and few made any real money after tier and payouts. The problem was you could not see if payout information was true or not.

  11. StallionSeven

    Jul 31st, 2007

    You know, weekend concurrency regularly tops 44,000. Most weekends it gets to ~48,000.
    So why should I expect any massive problems at the first level when I never see them at the second and higher level.

    Better analysis please.

  12. SqueezeOne Pow

    Jul 31st, 2007

    Reason #324 why depending on SL for your primary income is stupid.

    My business has all but stopped now that search is down again. I’m glad I stopped making purchases when I did and started saving up!

  13. janeforyou Barbara

    Jul 31st, 2007

  14. mootykips

    Jul 31st, 2007

    sorry we broke ur grid, here’s 20 bux

  15. Obscure Doodad

    Jul 31st, 2007

    Anyone ever count the green dots?

    Do they come near 44K? I don’t know. I do not believe you will find an entire employee base anywhere who want to go to work each day and lie to their customers, so whoever coded that concurrent login number probably did it honestly. I kind of believe the numbers are correct. 44K are indeed logged in during the day.

    The Meta Linden stats are probably also correct. There are many there, but I think it’s clear that the focal numbers are those showing how many residents earn a profit from NON LAND activities and PRE LL payments. Those handful of people making 5K/month almost certainly have entire islands of shops/condos, plural, paying them rent and 5K is their number PRE paying tier for their 10 islands. Also, as Meta recently pointed out in her office hours, the 5K influx in Lindens can’t show any RL outflux those folks may pay (to employees) via Paypal.

    In other words, there’s a lot of lying going on by residents claiming to be big SL economic hitters. Probably wise to take the total of such stories you hear and divide by 10.

    The whole thing . . . the entirety of everyone’s economic plans . . . revolve around growth. If SL can’t have a decent stable experience available to people logging in, how can they grow?

    And as for the folks that shake their heads and say that it’s just a game and not worth serious attention . . . well, it looks like it is probably the same game RL is. The object of the game of RL is to have fun and make money. The ordering of those two goals can vary, but both have to exist or you cannot “succeed”. This reality says . . . SL is a game only in the same context RL is — so if you insist on calling RL a game then SL is too. But if not . . . then SL isn’t.

  16. Exvocce Machina

    Jul 31st, 2007

    Everybody runnin’ round saying “Wow, I don’t know what they did to cause all these problems since Friday, but…”

    You know what they did Friday. Think back. I know you can. Let me give you a hint: Voice.

    But that *CAN’T* be the problem, the liars er I mean Lindens, said it would run smooth as butter – they even deployed it on a weekend and went home they were so sure of it. So that can’t be it.

    No, its probably griefers doing something you don’t understand in the shadows where you can’t see. That’s it, yeah.

  17. voice voice

    Jul 31st, 2007

    but voice has been here, on the main grid, for at least 6 weeks now…..

    nice try tho

  18. shockwave yareach

    Jul 31st, 2007

    If it was voice, we’d have seen it when voice was first introduced in the large scale. Bugs can lay hidden for a time, but such bugs usually don’t cause cascading problems – they can, but usually those happen early and are very obvious. I shuddered at the introduction of voice but it seems to have launched without difficulty. So it probably isn’t voice this time.

    It’s not a game? It’s just like RL? Errr… no. RL is where you live, work, eat and breath. SL is where you go to escape reality for a little bit. It’s no different than a Playstation in that it can be entertaining, but is not essential for living. You can have a RL without SL, but you cannot have a SL without a RL first, even if it’s a sucky RL. Saying it’s more than a game is understandable because it is a very different sort of game than the usual hack/slash/shoot/steal stuff video game that’s out there. But make no mistake, though it is a social game where some people can make some real money, it is STILL just a game. And with the current problems of reliability, scalability and griefers, LL’s dreams of being the core of the next internet are hopeless and it will remain a game.

  19. StallionSeven

    Jul 31st, 2007

    But that *CAN’T* be the problem, the liars er I mean Lindens, said it would run smooth as butter – they even deployed it on a weekend and went home they were so sure of it. So that can’t be it.

    No, its probably griefers doing something you don’t understand in the shadows where you can’t see. That’s it, yeah.

    Yeah, so much server side code was deployed then.


  20. Gaius Goodliffe

    Jul 31st, 2007

    SL has come to a grinding halt many times before without voice being in any way involved in it. If that’s the only possible cause you can think of for the problems, you have a seriously limited imagination.

    I made some script changes on Friday for some systems deployed on Dogfight Atoll. Since that’s when the problems started, obviously they are the cause. If the problem started the same day that those changes were made, that proves they were the cause, no? Pretty big coincidence otherwise. My apologies for bringing the grid down. :p

    P.S. I don’t work for Linden Labs. I don’t have access to their network to analyze the traffic on it, not access to their server logs. Given this, I’m not anywhere close to being stupid enough to believe I actually know what the cause of any problems in the world are. I might venture a guess or two, but it’d be utterly moronic to suggest the answer is in any way obvious. Answers are only obvious to people ignorant of the full range of possibilities. In general, the less you know, the more obvious the answer seems.

  21. Raideur Ng

    Jul 31st, 2007

    Just dont panic, they break the grid and do questionable things every Wedensday, nothing huge. The last thing everyone needs to do is start acting like worried chickens with no brains. Markets always go up, eventually.

  22. Heartun Breaker

    Jul 31st, 2007

    “Nicholas Portocarrero – head honcho of Ginko Financial is reported to have said the SL gambling ban had “caused a panic”.

    Reported where, or by whom?

  23. Second Lulz Vigilante

    Jul 31st, 2007

    To All Griefers Who It May Concern:

    Who needs lolcubes when we have LL fuckups of this magnitude? But hey if you want to waste a part of your weekend that you’ll never get back be my guest. :P

  24. janeforyou Barbara

    Jul 31st, 2007

    If you are not shure on what Secondlife are, read this : Its a world of fantasy were real ppl in real time can talk/chat/type, its a creation of fantasy that you cant do in RL.You can buye a Island, you can build a city, you can build castles, you can drive a RR or a Lamborgini, you can do any in SL,, the limit are in your mind.
    I dont know if i want to call it a game or a communety, i dont think its any of them.
    I think i just will call it my secondlife, i am in a other dimention,, its outside any in a RL world. The ppl are real tho,, us that sitting at a screen and use a kayboard.And, be carefull its wery adictiv.

  25. Kryss Wanweird

    Jul 31st, 2007

    Match the number to the correct letter:

    1- Child Porn Art
    2- Virtual Financial Expertise
    3- Ageplay Patrol

    A- Germans
    B- Brazilians
    C- Dutch

  26. Rock Ramona

    Aug 1st, 2007

    Ya know…I hate to say I told ya so….several months back I predicted all this and here it comes.Im having more fun watching it all than I amm inworld,mainly cuz i cant get inworld or when im there i cant search,or teleport.Havent spent a dime inworld for 2 months and im proud of it/me plays his fiddle as he watches SL burn…….

  27. Hiro Pendragon

    Aug 1st, 2007

    Considering the Herald has reported previously about how 80% of transactions are gambling-related and inflated, why is it taking the contrary standpoint and say it’s SL stability.

    It’s the gambling ban. Duh.

  28. urizenus

    Aug 1st, 2007

    I totally agree, Hiro.

  29. Nacon

    Aug 1st, 2007

    “Considering the Herald has reported previously about how 80% of transactions are gambling-related and inflated, why is it taking the contrary standpoint and say it’s SL stability.

    It’s the gambling ban. Duh.”

    Aye. In fact, I’m sure LL would be much happier to know that most of the money won’t be gambling as they tried hard to figured out what is on what part of their “Resident Transactions by Amount” Chart. Soon, you will see that chart being in well ordered by volume and share altogether.

    It dropped about 1,200k USD… so divide that by 459,793 people (when known for last 7 days) is about 2 bucks and 60 cents. Sound reasonable to me. Oh wait… it means the rental/lands are going to be so damn cheaper now… and the chart (just checked today) going back up again to buy those lands.

    Gambling is hardly any affect to SL’s main outcome. SL isn’t going to fail because of that.. that’s retarded.

    SL is, however, taking a wild trip now. Not sure what’s the hell is up with their network servers going offline. I’m sure it won’t be like that for another week or so.

    (didn’t someone say SL was gonna burn out and rot a year ago? pfft.)

  30. Hiro Pendragon

    Aug 1st, 2007

    “I’m sure LL would be much happier to know that most of the money won’t be gambling as they tried hard to figured out what is on what part of their “Resident Transactions by Amount” Chart.”


    “Gambling is hardly any affect to SL’s main outcome. SL isn’t going to fail because of that.. that’s retarded.”

    *nods emphatically*

    “SL is, however, taking a wild trip now.”

    More than just network issues, too. This is THE wild trip – we’re seeing how this virtual worlds platform is evolving. Technology’s changing fast, and the media is hyper-fickle as a result. The fact that even Wired Magazine, who makes its business looking beyond the cutting edge, is taking out their personal angst (for their lack of planning or things to do on their space) on the platform, rather than own up to the fact that since this is a rapidly evolving technology, it’s not the easiest thing to master.

  31. Second Lulz Vigilante

    Aug 1st, 2007

    @Rock Ramona

    “Havent spent a dime inworld for 2 months and im proud of it/me plays his fiddle as he watches SL burn…….”

    Been at least 6 months for me since I spent anything. Woot!

  32. Geoff's Blog

    Aug 7th, 2007

    What’s Second Life all about?

    I don’t think I really get Second Life. I’ve tried – I’ve had an account there for a few weeks now, and I’ve logged on lots, but I just don’t get it.
    This is normally a sign that I’m missing something. But since I’m missing it, I’m not s…

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