Maybe stipend isn't why the Linden$ is devaluting

All of this info was taken from the https://secondlife.com/currency/economy.php page. Please let me know if my calcuations are off, etc.

Ok, so stipend gets paid regardless.

Based on that, maybe we need to rethink the question of how much the stipend is really affecting the devaluation of currency.

Residents Logged-In During Last 60 Days: 106,419
Total Stipend for April and May MTD: L$63,291,850

# of days for April and May MTD: 40 (to May 10)
Approx # residents in last 40 days: 106,419/60 = 1773.65; 1773.65*40 = 70946 users

Approximate total stipdend for 40 days: 63291850 / 70946 = L$892.11 per user

(I don't know the number of residents that are basic accounts like mine, versus premium accounts. If anyone has these figures, we can narrow it down.)

# of weeks in 40 days, 5.7. Round to 5 weeks.

Approx stipend per week: 63291850 / 5.7 = $L11,103,833.33 per week
Average stipend per player per week: L$892.11 / 5.7 = $156.51

So if my calculations are anywhere near correct, there is an average of L$156.51 being put into the economy by Linden Labs through the stipend for premium and basic players. That's not much.

Going on this, I would have to argue that stipend isn't really that *much* of a reason for devalution of the currency.

Can someone review my math and point out any flaws or make corrections/additons?

1) You spend all that time doing arithmetic only to end up saying "Going on this, I would have to argue that stipend isn't really that *much* of a reason for devalution of the currency." and completely throw numerical analysis out the window based on your personal interpretation of one metric that is not being compared to anything else.

2) You're incorrectly using the term devaluation when I think you meant inflation, unless this is more guesswork. Inflation can actually be measured by the amount of money going in to the economy and flowing out of it, which stipends are a part of. Devaluation would mean a devaluing of the Linden dollar in relation to a foreign currency such as the USD or gold. The correlation between the two is actually unproven in economic theory, and to show a correlation between inflation and devaluation in the SL economy you could run a regression of the money supply on the exchange rate. If you happen to have historical values for the money supply and exchange rate in SL you can use my free program called Visual Regression to look for statistical significance (shameless plug): http://www.jhurliman.org/visualregression/

Other than that the math looks good

One small problem you haven't allowed for: Premium members (unlike basic members) receive their stipend even if they don't log in. It's easy to script an item that transfers money from a Premium alt to a main account automatically without needing to log in (or, of course, to use that Premium alt to rez a few camping chairs or a money tree).

So you can't really used the number of logged in users as the basis for calculating the amount of stipend paid.

I'm not currently convinced that there is any way to effect the $L by schemes involving multiple accounts, stipends and trickle down money like trees and chairs. If we're talking about a small amount like stipends in the first place, a small effect on it ends up even smaller in the larger picture, right? Basiclaly a percentage of a percentage.

We'll just have to wait and see what the economy does three months after the last dwell payment is recieved. Until then, we all just pontificate and chew on our favorite body part.

~Lefty

I can't reach.

Ok, so does anyone have a recommendation on how you can approximate the number of premium accounts that aren't being used?

You can subtract the total unique logins from the total registered users, but then you have no way of knowing from the remainder who are 1 time accounts and which ones are premiums.

There were some stats released in a Second Life Answers post by Vasudha Linden a few weeks ago. Of 60,000 users that logged in during March 2006, 13,000 were premium and 47,000 were basic. I used these stats (combined with a few educated guesses) to estimate the total number of honest-to-goodness active SL users to be in the range of ~25,000-30,000.

It's not the stipends, it's the lack of a point.

If you come to second life to build or create, your don't need much cash.

If you come here for entertainment, you can find cheaper entertainment elsewhere.

A few people come here for the camaraderie, and that is pretty much free, too.

If the Lindens really want to attract and keep active members who will buy Lindens, they need to provide some content other that a few trees and textures. Every day the events calendar becomes more sterile, the world becomes more introverted, and it is harder and harder to find a sim with people actually doing anything in it.

OK, prove me wrong, tell me about some really interesting stuff happening.

Okay.

I come here to do the socialising. I find that interesting. Meeting new people from diverse cultures, learning about them, thier ways, and thier imagination here in SL.

I also drive around SL looking at all the new things. I find exploration interesting.

I build for hours, trading ideas with others. I find creation interesting.

Friends of mine script and talk about how to improve things through scripts. They find that creative outlet interesting, and I find the effects interesting.

Others soend time, and money, on thier avatars. Creating new ideas from RL and fantasy both. They find the imagination interesting.

There are whole sims devoted to specific genere. Worlds within worlds.

If you can't find anything interesting in a world as large and as diverse as SL, then you're not looking very hard.

~Jessy

So far so good.

Now figure the average amount in sinks that is generated by each premium and basic member, then weigh them against each other.

This is the barometer by which your basis should be formulated.

Jessica, I think the problem isn't finding interesting things to do as finding interesting things to do that are worth buying L$ for.

It's my shot at "acronym fame": CEM. That's "Consumer Experience Multiplier" - how enjoyable it is in SL to be a consumer of goods as opposed to a creator.

The CEM is important, because it ties the amount a consumer can be expected to pay for content (in US$) to the amount a creator gets charged in tier for providing that content. If I wouldn't get as much satisfaction (in my terms) from buying US$195/month of content as the guy or gal with a private island gets (in their terms) from using that money for tier and then providing content on the island, then I'm not so likely to spend that US$195 on content, because it's obviously worse value than something else. Essentially, you're competing with LL to say "how much better can you make the SL experience as a whole for me?"

( I doubt very much that anyone would actually spend US$195/month on content but you get my point. )

In fact, the CEM can be plugged into a formula to estimate the size of the market, but that's probably a bit controversial for just one post.

Exactly: the best things in Second Life are free. Therefore people don't need to buy Linden dollars.

You mean you can't open wide enough?

I do believe the correct term here would be depreciation. Could the depreciation not be caused by dynamic exchange rate expectations?

I did some calculations earlier today on another thread, that seem to agree with what Ricky Zamboni says:

/130/23/105700/3.html#post1031947

Why depreciation? Depreciation is generally an accounting/finance term used to adjust the value of an asset. In economics you can have depreciating capital stock, but one of the benefits of the SL world is a capital stock that never depreciates and grows linearly with the amount of active land.

I think devaluation really is the correct term to describe what people are worried about, the fall of the Linden dollar against the USD: http://en.wikipedia.org/wiki/Devaluation

The mistake is talking about causes for inflation (http://en.wikipedia.org/wiki/Inflation) and automatically assume there is a 1:1 correlation, where that's not necessarily the case as you pointed out where the beta factor of the L$ could be negatively impacting the currency.

Actually, what I find curious is that the L$ isn't deflating faster because of the stipends. What is keeping it so high?

Because its not the stipends but people undercutting eachother to sell fast...

Actually I think devaluation is correct because the big problem that is causing all the fuss is that the value of the $L is going down in relation to the value of the $US. At least according to your definition.

Inflation would be present if in-world prices were going up with every fall of the $L...which I really havn't noticed and I shop a lot! Though I am surprised it hasn't been going up.

I still think people need to quit blaming stipends and start blaming those who purposely set their prices low in order to sell first. Perhaps those $L purchases are being made out of "good deal" vs. acutal need.

I dont think stipends are to blame either if we blamed anything we should blame the people dumping their L$ due to the falling price because when people start dumping it others do it and the market stays at the rate we dont want like 309L per usd. Plus if there was a way to control the price of L$ mabey their would be less of a problem according to the LL stats. Anothet way to solidate the market is to limit the amount people are able ot put up for sale. Blaming the stipends is just an excuse for the mass chaos in the market

I'm here a little over two weeks, so I am now a qualified expert noob .

That being said, my first impression was that the stipend does play a big role in the devaluation, but after reading more, I'm less inclined to think that; the reason being that the stipend is not really free money. Ignoring the free accounts, they are only available through premium membership fees, meaning that it costs real money to recieve a stipend. There was another thread that did the calculations, but the exchange rate for an annual account is around 358L per dollar. Incidentally, any exchange rate higher than that will make preimium accounts a waste of money unless you need to hold land, which would translate to a loss of cash flowing into LL.

The more I read, and the more I watch, the more I believe the reason for the drop in the value comes from a few high end rich players who have an abundance of lindens, far more than they will even need in game, who are selling. For most of us, a few thousand lindens will get a lot of things, but for the uber-rich, it comes down to sitting on lindens or undercutting the best exchange rate to convert to USD. Once the undercutting starts, the cycle feeds on itself. There is nothing innatley wrong with this of course, but the solution to stablize the currency first has to address the real problems, if it is in fact, a problem.

I don't have any concrete suggestings yet, nor have I fully understood the entire situation either. But at this point, I can say that having more to buy for the very rich, that would somehow translate into "in game" benefits would help greatly. Having a stable currency the result of good game play will be far better in the long run than artificial rules to enforce what is essentially an arbitrary rate.

Disclaimer -
I reserve the right to change my mind as I learn more and continue to shed my noob skin. .

i think a good injection into this thread will be two questions for everyone: What content should we be charging for? Dont' we owe a huge obligation to the market to put our balls out there and start demanding the exchange of money for goods and services?

~Lefty

I can't tell you how sick the current club scene makes me. Ill, I tell you... Ill Scarcity of talent so no justification for fee. No fees so no new content. You get the picture.

I should clarify: I think the trinket, furniture and clothing markets should be applauded. I think some of the other, perhaps more complicated markets should get more into line.

~Lefty

Is devaluting the opposite of highfalutin'?