Idea: Give interest on L$ in user accounts

Could not have said it better. Sometimes the rich will make money at the expense of enjoying anything else...

If we had LL-provided interest in SL, then the value of the L$ would plummet drastically. We'd have hundreds of thousands of L$ being produced from.. what? From LL's bankroll, unless they continually devalued the L$.

The only way account interest works is if there is a counterbalance on that -- People taking out loans that pay the bank interest in return.

Otherwise, a bank could not exist. It would just be shelling out money to people endlessly.

The only way for a bank to exist in SL really, is for it to be run by a resident. A high risk, since there could be no actual legal enforcement. He could not demand a loan be paid back, since no one could force the debter to do so.

To that end, (and I'm sure this idea will be insanely unpopular), I think that removing the weekly stipend or lowering it to a nominal amount would be a good move. (rich or poor, doesn't matter). In order for the L$ to have any worthwhile value, the means to produce them needs to be more in-tune with direct purchases, not fabrication from thin air.

Ok lets discuss this a bit.

You are suggesting that people need to find a way to earn L$. I agree.

But

Whose stipends are you suggesting cutting? A brand new non-premium account gets 50L$/week. That is not even close to enough to start a business. Texture uploads alone can eat that in one day doing snapshots for sale boxes. Need a vendor? at $1000L it is going to take months to save for one.

Go out and play -ingo games? Maybe you get lucky and win a few L$ most likely not though.

Cut premium accounts stipends? Want to see how fast premium accounts get converted to basic try it. Maybe thats ugly but its the truth. Paying customers will not sit for a cut in their stipends for 1 moment.

You thought is a good one however the reality of SL makes it pretty impractical.

It's also true that things would drop in value pretty quickly with the removal of stipends. A vendor would no longer cost 1000L$ since no one would pay that. Besides, there are a lot of free vendor things around, or ones that are ultra-cheap. Heck -- there's a vendor available on the example script page.

The benefit of premium accounts would be the ability to own land -- as it should be. You have to pay tier to own land anyway, so people would buck up the premium cost without batting an eye.

It'd have some growing pains for sure, but people wouldn't flee premium accounts as you suggest. People would still want to own land, and thus, would still embrace that account type.

And it's those crazy costs of like 1000L$ that this method would battle -- without so much income, people would be more frugal. Demand would lower, and thus, prices would have to lower. The end result would be the value of the L$ being increased drastically.

This may sound odd, but I'm not terribly worried by any of this.

Allow me to explain why.




The $L really isn't currency. It only 'steps in' as currency-like when it has stable, worthwhile value and is sufficiently liquid.

Let's say the $L blows up and goes away tomorrow. What happens?

Well, things are a bit less liquid, but there are things of stable 'value', or at least expense. Tier, for instance. Perhaps all transactions would go through Ebay, but commerce will still be possible. We lose only one thing: convenience.


Another point. Imagine playing Diablo, or Lineage, or any number of games. After a while, gold pieces just don't cut it.

Some other commodity in the game - either valued items, or access to hunting grounds, 'ancient' gold pieces or some such then becomes the new 'currency'. People are very creative when it comes to this.


Let the $L find its stable point; and if it is being farmed or nerfed too much the Company will see that and eventually fix it. That's in their best interest, and they are well aware I'm sure.

L$ is very close to a real currency since it can be readily exchanged bidirectionally with real currency by the vendor themselves.

Also, without any sort of regulation about creation and destruction of L$, it will not reach a stable point until it's upwards of like 100,000 L$ per 1 USD.

At that point -- making money to cover tier costs in-game becomes nearly impossible, Owning land becomes undesired, and SL stops growing.



Conversely: People would have to either sell at 'extremely low' rates, such as 1,000 L$, for people who exist only on stipends to afford. Or those who exist only with stipends could simply not buy anything, with their horridly overinflated prices.

That then goes back to my previous post. Pardon me for using an english UK expression but lets call a spade a spade, and convert to real dollars.

I'd be all for that.

Regardless of using L$ or USD -- interest is economically unfeasible.
And in my opinion, stipends are too high.


Of course, I realize why the use of L$ is somewhat useful -- it makes people more willing to spend money in-game. If you had SL tied directly to real currency and called it real currency, people would be less willing to do that, I think. It's a subconscious conditioning thing.
Edit:
Another reason for using L$ is that it allows people to legitimately rent land for L$ instead of having to pay tier, without real money at all. It is a (possibly unplanned) economic practice that makes a lot of sense for people unwilling to tie SL to their bank account.

Further edit:

Though in reviewing the OP's suggestion further, it makes even less sense to me.

Pay the poor X amount for stipends, pay the rich Y for stipends, give everyone interest --- it doesn't do much besides make everyone get roughly the same amount every week, except those with a lot of L$, who would just get paid for doing nothing. No-risk interest from a company who has no method of making profit on that interest.

The only winners are those who have a lot of L$. The only losers are LL. Doesn't sound like it would make much sense from a business perspective. At least I don't have to worry about it being implemented.

I would guess that the Company won't let it get that far! But who knows?




Incidentally... who exactly would qualify for being 'rich' or poor anyway?

Would a person who makes $L 1M during the week but cashes out on Friday, qualify as 'poor' on Saturday?

Is the person who makes $L 10k a year, but leaves the balance in his account for twenty years 'rich'?

What about the owner of a lot of land?

What about the owner of a lot of land, that has NO income in SL and pays for it?

What about the owner of a lot of group land, holding it for charitable, non-profit reasons for others?

That's uhh.. exactly what the topic is about -- preventing it from going in that direction. As stated, the company won't let it get that far, which is why interest won't/can't be implemented.





'Rich' in the case of interest would be someone who makes a healthy chunk of change off their $L just via interest. The word should have no meaning in the context of SL, and won't as long as interest doesn't exist.
I am using the word 'rich' to refer to those people who would just be collecting a paycheck from LL every month by doing nothing more than hosting their money as L$.

You can only use the video game currency excuse so much. Eventually, if you handle withdrawals like a bank, take deposits like a bank, and pay interest like a bank.. they're going to throw their hands up in the air and finally say - who are you kidding, you are a bank.

I know where you're going with this, and I appreciate it (though I think my source is better than simply more sinks) but I would recommend getting away from language like "paying interest". No point in pushing the feds any more than we have to.

I suppose one downside i can see is the risk of hoarding. LL wants those linden dollars in circulation, not sitting around in accounts.

When someone sells currency on lindex, those L$ go to someone who wants to use that currency. It places that money immediately back in circulation. That is not a bad thing from LL's perspective -- I would imagine that it is one of their goals just as a stable exchange rate is a goal.


I think that the critical issue with the currency (separating out stipend farming, and i have no idea how much of a part that plays) remains the need to increase demand on the buyside, not trying to come up with ways to reduce the sellside.

Iron, to use another UK English metaphor......if it quacks like a Duck, waddles like a Duck, and flaps its wings like a Duck, you can be reasonably sure it IS a Duck.

Seriously Second Life is more than a computer game (although it can be used as one) and if there is reasonable commercial interest in using it as a business forum or market place then it makes sense to have a real stable currency. The US Dollar is still the world’s prime/preferred currency so a US dollar based economy would be best to achieve that aim.

The L$ is fine where it is, being a system for micropayments that a strict US Dollar-based SL would not have. See the "Complementary Currency" article on wikipedia.

The key, here, is to find a way to stabilize the value of the L$.

What is bad about the devaluation of the $L ?

If it's worth 250L = $1USD or 500L = $1 USD, I don't see a big difference.

If you are converting linden to USD to pay for your tier, you notice a big difference.

I convert quite a few $L.

If the $L were worth $500L/$1USD it would make no difference, we would just have to double our IW pricing. Instead of $5-10L per meter land, we would have $10-20L per meter land. Ultimately it is the same thing.

The people that would get hurt are those holding $L hoping they appreciate, and people who rely on stipends. The upside is the people who rely on stipends would have to purchase more $L on Lindex.

Would we have double the consumer spending though? No. The weekly premium stipend wouldn't double. That weekly stipend is a huge part of the weekly consumer spending in SL. So you can't just double your prices and hope to recoup double the lindens, because double the lindens won't be spent each week.

What I've bolded above is a big part of why the exchange rate has been steadily dropping for over a year.

Let's just reiterate: weekly stipend is a huge part of the weekly consumer spending in SL. Stipends. Free money. Not L$ purchased through LindeX. L$ distributed in such a way that it does not provide any support to the exchange rate.

As I've said time and again, the exchange rate will continue to drop until it becomes more economical (from a net cash+hassle total-return POV) to purchase through LindeX than it does to either (a) register another premium account and use the extra L$500/week to make in-game purchases, or (b) do without. Remember, unlike RL currencies, (b) is a totally viable option for each and every person that uses L$.

How can we expect the $L to maintain it's current valuation given the current monetary policy?

A basic user gets $50L per week for doing absolutely nothing. That is $2600L per year. I understand the reasoning for this, but this has to have a consequence.

A premuim account gets $500L per week for paying $9.95 USD/month. (alot cheaper if they pay for a year). This policy, given current exchange rates, makes it possible for one to have a premium account, own 512m2 of land, and just about break even. This too is going to have consequences.

Add to the mix alt farming, referal bonuses, and dwell. Also consider the massive amount of $L that have to be converted to recoup the expenses of bulk land purchases.

The $L will indeed find it's value, I suspect we may find that value is much lower than we hoped. LL can fight to maintain an artificial value, or just let the $L do it's thing.

Damn Ricky beat me again. Tell Uncle Zeppi that mom says hi.

I don't understand what this has to do with my point. You asked why is it bad if the linden devalues? I answered. I never suggested that the linden wasn't going to devalue, just that it would hurt people who convert those lindens to USD and use them for tier (or anything else for that matter).

This is true. You can run a profitable business with any exchange rate - if the exchange rate is stable.

As anyone who has experienced living in an inflationary economy can tell you, the problem with inflation is the ever falling value. That makes it hard to run a profitable business and makes living in such an economy hard for the consumer (or expensive in a virtual economy).

The Linden$ "true value" is hard to define. Just dividing the amount of stipends for a premium account by the price of that account in US$ seems a bit simplistic to me. As Forseti has mentioned above: it is the demand side that defines the exchange rate, too. Currently the supply side is strong because of the pressure LL added with the bulksales of land. As soon as the overheated market with all those wanting to cash out "at any price" has cooled down the exchange rate will stabilize again - that will be good for business.

I went off on a tangent....I tend to do that.

To answer more directly....


Why wouldn't we have double consumer spending?
If the value of the $L and the value of content in SL is truly worth what we are currently spending, should't the spending double if the value of the $L is halved? OR is it a inflated value that we are struggling to maintain?



If the weekly stipend doubled it would cause further devaluation. I understand that the weekly stipend is a major portion of consumer spending, it is not enough to maintain the current value of the $L. The fact that LL sells the premium stipends so cheap is indeed part of the problem. We need more people willing to spend more real money to purchase virtual goods and services if we hope to maintain the $L's value.


You would have to double your prices, and yes I would expect double the $L. If you have a superior product, you should too. Not everyone will be able to maintain their tier by the sale of $L, alot less than do so now I suspect.

I am forever cursed to wander the forums, dispensing economic wisdom for any who will listen.

I'll be sure to give Zeppi a big hug for you...