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Virtual Complementary Currencies

SLmoney.jpgThe real world/online game world mash-up continues.

The possibility of the government taxing the money you "earn" in online games (through killing dragons or whatnot) became much greater this week, as Second Life Boutique -- an online store that generally sells virtual world goodies for Second Life characters -- began to sell real world objects for Lindens, Second Life's in-game currency. The first item for sale, a video card, runs L$20,000, or about US$80 at the current L$250=US$1 conversion. In many respects, this is hardly a surprising development; after all, people can sell virtual objects for real money, why not the other way around?

The difference -- and why I began with a reference to the Internal Revenue Service -- is that what Second Life is doing by allowing this is setting up a complementary currency, one outside of the regulations and control of the formal financial system.

They're hardly the first ones to do so. We've posted in the past about the use of local currencies as tools for community empowerment, as well as about the use of transferrable mobile phone minutes as currency in Kenya. At the moment, the use of the Linden as a means to buy real world products bears more of a resemblance to the Kenyan phone currency than to a fully-fleshed-out complementary currency. That is to say, the purpose of the Linden was to facilitate an exchange within the closed system of Second Life; its use as an external currency was an example of the William Gibson dictum that "the street finds its own use for things."

I wonder, though, what it would look like if the Linden was instead thought of as a true complementary currency. There are dozens of alternative currencies in use around the world, and information sites like Appropriate Economics provide myriad case studies of how these currencies work. As far as I could tell, however, present-day complementary currencies with broad purchasing power exist only as physical money; the virtual currencies are all limited-scope exchange media, similar to frequent flier miles or grocery store buyer's points. If the Linden were to be structured as a real complementary currency that's only manifest as virtual money, it would be unique, or nearly so.

I'm quite honestly unsure of what the implications of this would be. It would certainly be a complex situation. How would Second Life deal with attempts to "launder" money using Lindens? Would the IRS (or taxation agencies in the other countries where Second Life is played) be interested? Right now, membership in Second Life is necessary for the payment in Lindens to take place, but what happens when someone without a Second Life account claims to have been paid in Lindens and wants access to the money? What would Second Life need to do to make its role as a "central bank" a key responsibility?

Of course, one item offered for sale does not a transformation make. It could be that this ends up little more than a stunt, or that the level of interest from Second Lifers is minimal at best. But this is yet another sign that virtual worlds are becoming ever more entangled with the real world in meaningful and hard-to-reverse ways.


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Comments (4)

For most MMOs, the items that people are selling and buying are all owned by the developers, absolving them of any legal (if not moral) difficulties. The same would presumably be true of this: legally, it's a swap and no money is involved, despite the name applied to one of the goods.

I don't know if Linden handle in-game ownership differently, though. Anyone?

Linden Lab’s Terms of Service agreement recognizes Residents’ right to retain full intellectual property protection for the digital content they create in Second Life, including avatar characters, clothing, scripts, textures, objects and designs. This right is enforceable and applicable both in-world and offline, both for non-profit and commercial ventures. You create it, you own it—and it’s yours to do with as you please.


Just gonna stick my nose in here to recommend the book "Cryptonomicon" for those who haven't read it.

Carry on...

That's for IP, Pathfinder, but what about money?


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