The new founded Cyber Reserve will over see all banking in second life by issuing bank charter licenses for banks. Avatar Crevon Ashbourne, [Brandon Mathews] self appointed CEO of Cyber Reserve has struck a deal with super mall MSM. MSM is a banking engine used that powers Mainstreetmalls, an online shopping mall. MSM has agreed to the purchase of 100 000 trust tokens from Cyber Reserve, giving Cyber Reserve use of the MSM software for 5years. This move will allow CEO Crevon Ashbourne to set up an umbrella bank called Endeavour. Endeavour will call upon all the failed banks to reorganize so that the Cyber Reserve can pay back all dept to players. So anyone that has lost money will get it back. This move by Cyber Reserve is to buy back the faith of players under a new and regulated banking system. Crevon will ask that the ATM’s can stay in place if they are branded under Endeavour, they will in no way be offering interest but will be a convenient gateway to join the bank to recoup lost money.

This is how it will all work:

Cyber Reserve will be the main power house of the banking network. The failed banks will receive a temporary license to resolve their depts. All there customers will be transferred into the Endeavour Bank. Each failed bank will retain all there clients and effectively become managers of there old banks under the umbrella of Endearvour Bank. So every bank will change there name to Endeavour Bank and the branch name will be the former name [ABC BANK] once the bank has resolved its dept they can drop the Endevour Bank branding and go back to their original name. They will still however be within the Cyber Reserve bank engine and have to abide by the charter rules. Any Bank that fails to operate under the strict rules of the charter will lose their license.

Cyber Reserve will Float 1000 000 trust tokens to pay back the bad debt. In the interim all lost linden currency will be converted into Cyber Reserve Ounce. This is a new currency that will allow the players to carry on trading in the game and later be able to withdraw gold tokens from Cyber Reserve. This will keep the currency accounted for and be traceable by Cyber Reserve. When the bad debt is absolved Cyber Reserve will issue 24ct Gold ounce coins for players to cash out or allow the ounce to be transferred back into linden dollars.

The trust tokens used to raise funds to solidify the Reserve will be certified and tradable and Cyber Reserve will display the buy and sell prices. For those that have lost funds or have a failed bank and would like to work toward a solution can contact in life avatar Crevon Ashbourne or email cyberreserve@gmail.com

Is it because you think SL is so cool that it should be more? Is it because the product name contains the word “life” in it? Is it because some aspects of the technology might be leveraged to be of use for real corporations? Or is it because too many of your friends are cartoons?

In short, you are still mixing up a product with a currency. The Lindendollar is a product. If you don’t like to bite into my apple example, feel free to think of something of more longevity that is harder to chew (and if that doesn’t help, try to understand what an “illustrative example” is …).

As for your “12 million people” supposedly attributing value to the Lindendollar: There are about active 875,000 users that play in SL regularly, and another 500,000 that seem to be casual users. Engaged in Lindendollar transactions are less than 350,000 of which only about 100,000 spend more than L$5,000.

If you look at it from your “economy” point, only about 50,000 players have more L$ in their account than they spend and for less than 10,000 players this amount is more than 50 US$ in real money – and even that is before you deduct tier costs.

Numbers are taken from the economic statistics on the Second Life website; not sure if you are aware of them.

So, basically there might be the population equivalent to that of a tiny village (or the top half of a large office skyscraper) that *may* think that the Lindendollar might be something like real money in their heads. Sounds to me that you would also view tokens for communal washing machines in a large complex of apartment buildings as being real money as well.

Trust and reputation are behind what we call “money”. Historically, of course, it’s governments — through their use of force to stamp out fraud; through regulation to keep those banks legitimate and reputable; through their citizens and their productivity, to give some value to it — that define what “money” is and how it can be used and employed. But “money” is valuable just because people believe it is valuable, nothing more and nothing else. If I give you a banknote for a thousand Cuban Pesos to pay for tier on your land, you will very likely not accept it — because you don’t trust the Cuban equivalent of the FED to back that banknote up. Cuban Pesos, for you, are just “play money”. They have no value at all (outside of Cuba, that is).

Linden Lab, to cover their tracks, have no choice but to call the L$ “limited license right available for purchase or free distribution” or something. They have no choice: “printing money” is a federal crime in the US. But in a sense, they’re right. It’s not Linden Lab that backs up the L$ (although they certainly have a saying in how it is used). It’s the SL economy that gives it value. I think that in your mindset you can only label that as “collective hallucination”, in the sense that we’re all pretending that the L$ has any value. Well, wake up to real life: money is, indeed, the most widespread virtual concept ever devised by the inhabitants of Planet Earth.

As for your “apple” example, watch the SLCN show on banking. They use “fish” as an example and come to the same hilarious conclusion as you do. A particularity of anything being used as “money” is that it can be reused over and over again. I hope you realise that our (earlier) use of gold as money is that gold is incredibly adequate for that purpose (it never rusts or degrades, it is quite hard to chemically combine it to anything else, and thus it maintains its properties for millenia). Bank notes, of course, degrade over time, but you can always replace a ripped bank note by a new one. In this age where the majority of money in circulation among the Western countries is stored in digital form, “digital money” is even better than gold: it “exists” and can be reused indefinitely without degradation.

The L$ does have that property of resilience (it’s digital money) and unlimited reuse (unlike, well, apples or fish). It is an universal medium for bartering and transfer of content in SL. And, well, perhaps less technically, but just philosophically, it has the value that 12 million people attribute to it — and that’s lot of value!

Really, once more, as time goes on and on, long-term, I can only see LL’s survival as the “leaders” (not “owners”) of SL so long as they can escape the constant bickering of lawyers and government to use all pretexts to shut them down. I believe it’s just patriotism that makes them remain in the US and take all that is thrown against them. At this stage, with an economy that exchanges 1.2 million US$ per day, and regulatory agencies and lawyers greedily after LL’s skin, I’d just switch operations to the Cayman Islands or any other “safe” and unregulated place. The US is just stifling LL’s growth and expansion of SL under silly pretexts. Where did the spirit of “the land of opportunities” go? LL, out of nothing, created an economy that grows 1000% annually and transacts 1.2 million US$ daily. Isn’t that positive? Isn’t that something to be proud of? Sure, there are scams and frauds, but can’t those be dealt with? Why has LL to constantly “Disneyficate” SL in order to comply with outdated laws from a past century? What, indeed, is so terrible about a company that just wants to make honest money?

I think the question will remain open for a few more years. Let’s see the advent of many interconnected grids using the same protocol, grids that won’t be subject to quirksome and paranoid ‘government controls’, and we’ll see what happens then.

Second, some of this will be covered in future articles once more background is laid, but I wanted to point out Katie’s comment.

“If you read the forums, the biggest problem for business is too many Lindens and LL failing to raise their trading limits to allow them to exchange all of their excess for US$.” Which supports my thesis that Supply Linden is revenue. Granted, Supply Linden cannot buy Lindens to keep the exchange stable, so trading limits need to be enforced. But consider that in December 07, there was over L$227 million in Supply Linden sales, or about $843,000 US. so why should the Lindens consider raising the sell limits and lose revenue?

Cai – great analysis – Gwyn also.

Nonsense. Second Life “currency” is a limited license right available for purchase or free distribution at Linden Lab’s discretion, and is not redeemable for monetary value from Linden Lab. Regardless of terminology used, Linden Dollars represent a limited license right governed solely under the Terms of of Service, and are not redeemable for any sum of money or monetary value from Linden Lab at any time.
(Linden Lab Terms of Service, Section 1.4)

When you convert US$ into L$ this is not a currency exchange, but a purchase; similar to you using money buying an apple in the real world, here you use money to buy a token (or “licensing right”). The mere fact that you can go and sell the apple to somebody else and get money back for it does not make the apple itself being money. It also doese not make the apple, the supermarket selling the apple and the apple farmer subject to banking and currency laws for that matter. The same goes for the Linden Dollar.

Some people just want to believe that Second Life is more than an entertainment product…

So what do you do? Prey on those that do not use credit cards? For those that do, click the button and instant L. I’ve also purchased L from Anshe at one time. I’ve never waited more than 10 seconds for any amount of L through LindeX. Never more than 30 minutes via Anshe and Paypal either.

At any rate, I think Linden has made a completely successful assessment of this matter. I believe they acted in the best interest of SL as a whole.

TW

Money is the most “virtual” thing that we humans have invented. It’s solely based on trust and reputation — citizens trusting that what the Government prints out is, in fact, legal tender; and that people will use that money mostly with legal intentions, and that the agencies controlling the flux of money have a good reputation. It should be pretty obvious by looking at any currency exchange how this trust is measured — if some Government loses their reputation or is mistrusted by the citizens of the world, its currency devaluates (compared to other currencies), and vice-versa. Sure, day trading on the foreign currency exchanges will stabilise currency, but if you cheat too much (ie. removing too much currency from the international market to make that currency artificially scarce), people will not go for it.

Well, so, what makes the L$ worth what it’s worth? It’s a microcurrency mostly based on Linden Lab’s own reputation. 12 millions residents trust LL to have a reasonably good reputation, that they aren’t going all away and buy an island in the Caribbean with the money, and that they do positive interference in the economy (by adding and removing L$ through Supply Linden; by adding “just enough” land; that they don’t interfere much on resident-to-resident transactions, etc) to make it stable.

So long as a vast majority of residents trust Linden Lab to keep up the good work so far, the L$ has indeed “value”. Not “intrinsic value” (as said, no currency in the world has intrinsic value since the 1970s), but just “value” based on trust and reputation.

Perhaps this was also one of the reasons LL was ‘forced’ to shut down the fraudulent ‘banks’. By doing so, they’re sending out a message: “sorry, guys, but we won’t allow you to scam the residents using our currency”. In some circles this will mean that some people will continue to trust LL to keep fraudulent transactions using the L$ at a minimum. And that makes the L$ a “valuable” microcurrency!