Linden $ dropping, but from where?

There has been a lot of discussion about the drop in the value of the $L, and nobody can dispute that it is happening.

One thing I have not seen discussed is the starting point of the $L. For the long timers here, was the $L250 per USD just some arbitrary number, or was it somehow based on something?

If it was arbitrary, then why is any other exchange rate more or less valid?

It was arbritary. A starting point, for the players to decide value later.

It has been falling steadily for a long time. I think it started with a higher value than 250. If memory serves, it was even better than 200 for a short period. It is all recorded in the economics graph data. I don't think the slow decline is as big of a problem as the recent instability and rapid fluctuations. I posted some thoughts and proposals on this recently mainly focused on using the SL exchange as a flexible and transparent L$ sink to help stabilize the economy while maintaining enough flexibility to respond to supply and demand forces.

Here's a little history lesson.

For you newbies, L$ were first widely traded on Gaming Open Market. This was a true two-sided exchange (i.e. you could place orders to both buy L$ and sell L$) and, until Lindex was introduced (this is where the phrase "GOMed" comes from), we were *the* place where the valuation of the L$ was set. According to past economic data, at our peak activity roughly 1/3 of all transactions in SL were funded by a purchase through GOM, and almost half the payments to or from a vendor box were transactions with users' GOM accounts.

Anyway, when we first set things up, we dealt in many different game currencies, and each was sold in a standardized "block" (i.e. Second Life L$ purchases were made in multiples of L$250 -- you can see where this is going ). In order to make things easy for buyers and sellers, we chose our block sizes to be a small multiple of the typical starting cash for each game -- and in SL, that happened to be L$250. It just so happened that the other currencies on GOM typically traded around $1 per block. We also had several people trading between L$ and Therebucks, so the L$ eventually settled down in the L$250/US$ ($1/block) range. LL thought this value made sense, and the valuation of L$250/US$ has become the benchmark.

In retrospect, however, there are a few more fundamental points that L$ could be based on. Namely, the fair market stipend exchange rate for monthly, quarterly, and annual accounts. The last of these leads to the widely-quoted L$361/US$ "fair market value" of the L$.

Now, somebody else mentioned the all-time high trading value. This was in the range of L$170/US$ in the late summer of 2004, in the days of the great virtual land rush. Land was scarce then, and land barons reigned supreme. In September 2004, LL flooded the land market ("because we wanted to break the backs of the land barons" -- yes, that is a direct quote from someone at LL in a position to know). This was the first step in the declining currency valuations you see today.

Here endeth the lesson.

Thank you Ricky that really helps.

*wipes tear from eye*

ahhhhh, the good old days.

Wow, sounds dreamy!

Tell us more uncle Ricky

Damn right. I miss those good old days.

High L$ valuations and Free Starbucks.

*sigh*

The glory days of 2004... Land was L$20/m2 before LL swamped the market
with more new land. Sending prices into the toilet to where they are today...
And the land glut continues...

Reminds me of the Good old days of the internet boom.

Those were great time....$500 bottles of wine and all the stock options you could wipe your rump with.

I'm nostalgic.

Ohh yes.. Stock Options....Swiming in paper... Multi Million Dollar
Office parties for the hell of it.. New product, new party..
Need Money? Sell some Options for peanuts an reap the the windfall.

Thanks Ricky, that was very helpful.