What is a Lindenbuk REALLY worth?

My question has two parts:

1. What is the RL value of a Linden dollar?

2. Besides Paypal - how else do you convert Linden dollars to any RL currency?

1. It varies from day to day. Usually it's around 270 Linden dollars for every 1 US dollar.

2. You can request a check, but this is slow and I think has a minimum and a fee. PayPal only takes a dollar.

1. Complicated question. A combination of:

- what someone is willing to pay for it,

- what 'value' it's measured against and when (in 2003, worth nothing at all)

- subtract conversion to RL currency costs

- times appraised risk of the Company folding, and taking all $L down with it

- times appraised risk of other things (declared unlawful, untradeable in your country due to lack of conversion instruments, things like that)

- and subtract applicable taxes from said 'income' upon conversion.


Some might say it's roughly $L 265 to the US dollar, but... no.

a) $L 265 x .965 (LindeX conversion) becomes $L 255.725
b) $L 255.725 x (1.00 - .030) becomes $L 179. (presuming 30% tax bracket)
c) pretend market is stable and appraised risk is negligible for the moment

So typically, you are left with about 70 cents for every supposed US dollar cashed out (your mileage may vary) or *even worse* depending on the country and RL banking systems.

* * * * *

2. You can convert to US currency by any manner whatsoever.

For instance, SLExchange or IGE or whatnot, or even barter stuff for $L and sell the stuff on Ebay. I've heard of lots of crazy things.

That's interesting. For every USD you invest in the game, you're actually losing value? If I buy a dollar's worth of lindens, then turn around and cash them out, I'll only get 70 cents in return? Hmmmm.

But in order to make use of any of the Lidens I make in SL, I need to go to a third party to cash them out, at whatever exchange rate that currency exchanger deems fair, no? Since there's no locked standard for the Linden - the currency exchange is basically fictitious outside the reach of LL? Since LL refuses to guarantee the currency, maintains total control over its value, and states that it represents merely a limited license to conduct transactions within the SL environment...the actual real world value of the Linden is basically...nothing?

Or worse...since you lose value when you want to cash out? Those are just a few of the things that make me scratch my head about the value of trying to do business in SL. Since everything depends on LL - and if they decide to mint some new currency, and completely eliminate the Linden (as unlikely as that is to happen...), everyone's pretty much screwed, aren't they?

The bottom line is that there is no guaranteed value to the Linden, is there?

You gain in wisdom, grasshopper.

Hard to guarantee value in things that don't really exist. When was the last time you held a Linden in your hand?

Limit buy at L$275/$1, then limit sell at L$265/$1 leads to a gain of 0.1% - 30 cents.

Using a $1 example is a bit silly since the L$ buy fee is 30 cents already so you get a warped result.

and yet some people make a living off of it....

after all, you make something once, resell copies, your $/hr has effectively no limit in gains (ok we aren't calculating for market saturation, advertising, and other limiting factors, but you get the idea)

I think most people just do it to get something out of what they already love doing, so risk is ~0, and profit is 100% regardless of taxes, fees etc

now the big names, that got in it for profit from the start? it's always puzzled me why they don't apply their business acumen and skills to RL... I'd imagine there's more profit in it

Its worth what people will pay for it.

If no one will buy it, its worthless.

Not even the issuer (LL) guarantees ANY value. Thats one big difference between L$ and real money.

I've often wondered why we [the residents] bother with the Linden at all. We all use our own hard currencies to convert into Lindens, which at some point down the line we convert out again into a hard currency. Of course LL make a buck or two out of it but I've also often speculated how much of their total income Lindens actually contribute to. I'm sure land sales and tier payments account for the majority.

Surely for all residents we are better off trading/selling/buying between each other in hard currencies? As a UK resident, I pay the transaction cost of converting UK pounds into USD for Paypal, then transaction costs of USD to Lindens and then reverse it all again for transactions back to my UK bank account.

Oddly enough if LL were to accept tier in Lindens then I would be immeasurably better off (well 17.5% measurably better off) but that's never going to happen.

So what is the benefit in using Lindens over hard currency or am I missing something blindingly obvious? Or, why can't I have an in-world USD balance to draw on instead of hopping over to SLX and buying an item in USD instead?

[Hope this doesn't count as derailing - sorry if it is]

Why would you buy and then cash out the same L$? The conversion to USD (or w/e you use personally) is mainly for those who have businesses and such and actually make money.. LL takes their commission out of the economy, considering it is their right to.. just as a bank would take a withdrawal fee or something.

EDIT:: Wow I looked like I coulda been drunk with that original post...

(Not wanting to derail the thread but, if the 17.5% refers to VAT, it wouldn't make any difference since VAT would still apply on L$ payments to LL. Zee addressed this at the town hall)

The place where it gets interesting is taxes.

This isn't your own little piggybank here.

It may *look* that way, but, if you get say, USD from a corporate entity like our service provider, guess what, that's miscellaneous income.

And money coming to you is taxed.

Not only that, it's worse. Most governments care HOW you make your money.

- If you work for it in the United States, you pay unemployment and such.
- If you get it as a dividend, there are capital gains taxes.
- &c &c.

Worst of all, even in the United States you are 'innocent before proven guilty' re: 'how you made it'. The first assumption is that you worked for it, and owe medicare, social security, disability, unemployment and often, state retraining program fees.

You have to *prove* you didn't work for it in most cases, to earn the luxury of 'merely' paying capital gains or other taxes. Which may exceed the wage taxes, depending. Fun huh?

Now maybe you only make 100 USD all year off SL. Odds are nobody's gonna care. But on such small amounts, you lost your shirt 'making' the money in the first place.

Of course someone will surely say: can't I *expense* my land tier, &c?

Sure, you go do that. You write on your IRS form an expense of 295 a month to a "video game" company where you sell pretend sex-toys. And that you deserve to be able to take this expense. Heh. Hope your tax auditor isn't some crusty old luddite, but if he is, you are toast.

Well, as I did find out, L$s aren't worth a dime. I was without internet for quite a while - even changed countries, so i was without a computer for a while. That meant I couldn't update my payment method, meaning I had a premium acc - without the means to pay for it. So, next time (a few months later) when I payed my 22 dollars of debt, logged back, found out that - according to the wonderful terms of service - Linden deleted my inventory and took all my lindens. Well, the the 10k of Lindens, if you sell it it is more than 30 bucks - but if Linden takes it - it doesn't worth a dime. You can't pay your account cost, or anything. So, in a way it is worthless.

I am glad this issue has been raised again albeit in a different context, of which hopefully will not cause forum moderator issues.

At present the Linden Dollar is both "fungible" and "liquid" up to around $5,000 (this sum being the standard limit you can sell out via the LindeX per month/per average premium account. This (at current rates of exchange) is around $L1,350,000.

"Fungible" means an intangible or tangible "thing" that can be "weighed" in terms of monatary value, this term being the UK Inland Revenues view.

"Liquid" means that reasonable amounts of the "thing" can be freely converted into other "things" of value.

In other words the Linden dollar is a type of fiat currency that is a means of transferring or expressing monetary value between consenting parties. A "fiat currency" is a mechanism designed by a Government, organisation, or other third parties, which has broad acceptance of transferability and convertibility into other vehicles expressing monetary value.

Ownership of physical gold is another example of which is both fungible, tangible, and liquid on what amounts to a worldwide basis, accepted by the vast majority of folks around the world

In the UK (UK BB members may back me on this) Marks and Spencer vouchers represent another type of fungible and liquid currency, albeit one that is issued by a private company rather than a Government. (US/EU BB members, Marks and Spencer is a department store with branches nationwide. The vouchers can be exchanged for a vast array of goods, services or in some cases cash, in any Marks and Spencer store.

World of Warcraft “Gold” is another type of currency that is used to purchase goods and services within WoW. It is an intangible and is liquid to a degree BUT is not truly fungible as it can (mostly) only be used within WoW. Direct convertibility is technically not allowed by Blizzard, although it does (discreetly) occur. If it cannot be "weighed" it is NOT fungibal

Historically there may be some parallels between WoW gold and the USSR rubal, of which both are/were currencies, designed to transfer monetary value, but are not freely convertible existing within a closed system, being lubricated by a “black market”

There are other countless examples of “fiat” currency throughout the world, which is an intangible means of transferring monetary value from person to person. For example in the USA I believe some credit unions have their own currency which may gain broad acceptance within various communities, in the Second World War (in the UK) food was used as a type of currency especially in the countryside – this being caused by UK Govs rationing of food, tobacco, drink, and clothes in a wartime environment.

Governments, companies, and other organisations can cancel or devalue all fiat currencies; food currency for example naturally devalues over time as it degrades by rotting away

On this point physical ownership of gold is more or less the only means of transferring monetary wealth between consenting parties that is truly totally fungible, liquid, tangible, and that DOES NOT exist as a debt on somebody else’s balance sheet. It therefore follows gold is also the only currency that is not fiat because it is not created out of thin (or virtual) air, it is mined by being dug out of the ground.

Finally the Linden dollar was designed by Linden Labs as a fiat currency to enable “micro payments” between consenting parties AND as a means of converting and extracting fungible value from a currency that they create themselves, being not dissimilar from any other Government or organisation creating fiat currency

Actually *much worse*, particularly when you are living outside US, because of the weak US$ at the moment and the higher taxes, mainly in the EU continent.

For the sake of simplicity (and to avoid negative cash out values) lets say that I want to cash out not 265L$ but 26500L$, i.e., 100US$, at LindeX limit Sell L$265 / US$1.00. Here are the various fees:

1. 3.5% Lindex Commission: $96.5
2. 1$ fee for cashing out to Paypal: $95.5
3. Conversion to EUR (at current exchange rate): 66 EUR
4. Conversion at *Paypal* current exchange rate: 64.7 EUR
5. 1 EUR Bank fee for cashing out from Paypal: 63.7 EUR

If you add to that the 45-55% income tax of many Western European countries, you are left with something like *30-35 Euros of your initial 100US$* cash out!

No wonder why I scrapped any ambitious extension/business plans in SL and I just focus to the fun/creativity of it.

It is, and always will be, play money.

Linden Lab has done a lot of work to assure the 'value' of their currency remains fairly stable thru the Lindex.

They have done this primarily so that big business can understand the 'value' of their investment in the platform.

But I've often wondered what the rate of exchange might be if LL hadn't fucked over GOM the way they did and had allowed the Linden dollar to be valued solely upon the tradings of residents with one another, instead of artifically stimulating the economy via Supply Linden.

Right now the answer to the OP's question is: Whatever Linden Lab wants it to be.

Defining a Linden as a "fiat" currency, I think is a rather mistaken assumption. While, on the one hand the term is used to denote a currency that floats free of any hard standard, I've always been told that a "fiat" currency was defined as a unit of currency, backed by a government, with the ability to settle legal obligations.

Since the Linden can't be used to directly pay off a legal debt...there's no way in the world it can be considered a true "fiat" currency. A game token, perhaps. A unit of microexchange, surely...but not one that has any direct value in RL.

Why not abolish the Linden altogether, if SL is meant to sustain and encourge RL business models? Why not just use real legal tender, and involve real banks?

I suspect because the inherent instability of the platform as it exists today, and the lack of an established body of any RL legal financial law makes banks look at SL and laugh.

I'd think the biggest reason not to abandon the L$ in favor of US$ is purely one of liability, on behalf of Linden Lab.

If your inventory all goes Poof one day, you're pretty much out of luck, since the inventory was not worth anything, because you bought it with 'worthless' L$. But if you have paid real currency, and thanks to the transaction history you have 'receipts', then when your inventory gets lost or whatever you have a case for demanding compensation. Missing inventory is only one example too... inworld fraud, devices that drain people's account after they mistakenly grant debit permissions... as soon as all these things are messing with real curency, it becomes a real issue that has to be taken a lot more seriously.

I could be way off here, but this is my guess. It may not be the only reason but I think it's at least some of it. As long as we trade in an imaginary 'currency' that has 'no value', it eliminates (or allows them to get away with eliminating) a lot of messy responsibilities, that the TOS could not shield them from if all inworld transactions used RL currency.

-Atashi

And perhaps that's the telling point. Our inventories are indeed, "worthless", since the only value they have exists within SL...whose "economy" is fueled by an imaginary currency, that holds no inherent RL value. If LL were to go out of business tomorrow...everyone's Lindens would become completely worthless.

Sure it can, Argent. I pay rent on my land every month in $L. I know, I know...it's in-game, not RL, but still, it's a real debt.

I shudder at the idea of abolishing the $L. Dealing in real currencies would raise prices of SL items astronomically. Also, all in-world transactions would become subject to currency conversion fees and taxes at the time of sale. That would be both an incredible headache for buyers and sellers, and a huge drag on the SL economy. As it is, these fees are aggregated and applied when someone cashes out a quantity of $L for RL currency.

The invention of the $L is a wonderful thing, and we should not be so quick to give it up...it's the first really viable microcurrency, a great idea that everybody on the web wants, but only LL has managed to actually implement. The Linden Dollar is, arguably, Linden Lab's greatest accomplishment.

Desmond, I have to take issue with your assessment. You've added in taxes in your calculation of the "value" of the $L. You're looking at it from the standpoint of a businessman, of course..."how much money did I make?" And for figuring that, you're quite right to take out the tax bite. But that doesn't have anything to do with the $L's "value". Its value is its cost to me...that $L265-to-$US1 figure.

LL allows you to pay your tier with Lindens? I didn't think that was possible.

What you may refer to is paying rent to another player who owns the land that you're living on. In that case...your debt is NOT a legal one (a legal debt is payable only in currency recognized as legal tender and has the backing of a RL government...someone correct me if I'm wrong).

Yes, I'm referring to paying my rent to my private estate landlord. He accepts payment in either $L or $US, but prefers $L.

I don't know if you're wrong in some legal sense, Argent, but I'd sure say that you're wrong in a moral sense. Of course my rent is a debt. I'm expected to pay for services rendered. And since my landlord accepts both $L and $US, I'd say that *he* considers $L a valid currency.

Furthermore, fiat currencies have a long history. Many banks used to issue their own currencies..."banknotes"...which were widely used as legal tender, although they were not government-backed. Many people preferred to use a currency backed by a solid bank rather than promissory notes issued by a shaky government.

Since I'm only concerned with the legal aspects of the Linden, let's just focus on those. Business has nothing to do with morality. It's an amoral proposition (notice I don't say "bad", that only concerns itself with profit and loss.

And as far as the speculation on "fiat" currencies is concerned, I strongly doubt any bank who began printing its own money in this day and age would see that tender recognized as "legal" by any stretch of the imagination. I could be wrong, of course...but I can't seem to find a single instance of that occuring in the last 50 years, or so.