Back of the envelope calculations for our economy...

I'm not sure that would generate demand. You would generate demand by creating a must have widget that requires Linden$. Though I'm pretty sure the problem isn't demand, it's lack of consumption. There is certainly no consumption of Linden$...

L'et's look at this way.

1) Someone's selling a vehicle I want to buy for L$1000.
2) I go to GOM and pony up my $3.90 or so and get L$1000.
4) Now I give that to a vendor. What does he do? He takes the L$1000 I gave him and sells it on GOM.

So what's the problem with this? The problem is there is no step 3. What is step 3? That the vendor has to pay Linden Labs to create that vehicle. I'm not trying to punish builders. Maybe it could be he pays to turn on the transfer option so he can transfer it from himself. Whatever it is, this is really the root of the problem: those Lindens never leave the system. They just cycle in the system forever. Once you create an object, you're free to copy it and sell as many as you can with no further resource output.

That would seem to be the place to capture the L$... If you want to sell more, you pay for more objects being created.

A lot of users don't know that GOM exists.

If they did, some percentage might use them.

That percentage will buy more L$.

Any user who has made L$ knows that GOM exists and is unlikely going to need to be told about it.

That's where I would disagree. There is a maximum price people will pay for something. However, then you have people who are willing to take less than that to attract business. What you're basically witnessing is a price war. If there were only a single seller they can take the price to the max people will pay, or beyond what most people will pay because they are a single source. In the example of GOM you have people competing for cash from potential buyers L$ buyers.

Say there are millions selling for $3.84 (min price). If someone comes in with 20 blocks and sells them for $3.83 that supply will disappear pretty quick and $3.84 will be the bottom price again. Or if I go over to the buy listings and offload some for $3.77, that's still not going ot affect much. It's only when it happens en mass that the price would change signficantly. If someone came in and dropped 10000 blocks at $3.80, then yeah, there will be a price drop. This is someone who's willing to lose 4 cents per block to get rid of their inventory now. That's the price of convenience/liquidity.



This is an example of what I said above. You valued getting some cash more than getting what you thought was the best you could.



I'd argue that's not artificial. That's the market. I mean there is a limit right? You're not going to sell blocks for $0.01 are you? There is some minimum at which you will flat refuse to sell. I'd imagine that's common amongst sellers. There is some point at which it's no longer worth the time it takes to aquire the L$ in the first place.



I attribute some of that to ignorance of GOM. I take Ultima Online and World of Warcraft as an example. IGE has a price they charge for Gold or L$ or what not in every game. Both Ultima Online and World of Warcraft lack an equivalent to GOM. Care to guess where to get the best prices on the currency in those realms is? eBay... The same thing has been going on there for years. The market eventually aligns itself to a somewhat stable price.

Ultima Online is a prime example of inflation. There were no money sinks in that game for nearly 5 years. Money just passed around from player to player never disappearing. The result? Buying things for millions of gold is relatively common.



That's great until I come along, open up another website and sell L$ for $3.90 a pop and start another price war. You can't fix the problem by manipulating the market... And by market I mean all buyers and sellers, not a specific site/seller like GOM/IGE/Anshe, etc.

As long as I'm making money, what's my incintive not to undercut you and get more business for myself?



Of course, as a seller you want the most you can get. You're making the assumption that by putting certain controls on GOM you can control that price to a degree. My point being that GOM would just die. Someone else will replace them. I mean look at it this way. If i'm going to a few cents of every transaction of L$, and I know for sure I can take business out from under them if in my market blocks are 40 cents less (your example), I'd be stupid not to set up a market and eat GOM's lunch.

Basically GOM would be the loser in that deal and the price of L$ would stay the same. Buyers and sellers would just find (or create) another avenue to trade.



I assume these brokers would be real people who have to be there to execute the trade. I'd much rather deal with an automated system that can do it now than have to find the person I'm trying to track down to make a sale.



I'm thinking GOM is a red herring here. I'd submit it's not artificial. The problem is that there is no consumption of the resource (L$). As I mentioned in another thread, there needs to be consumption of them to prevent their price from dropping. I would suggest something along the lines of a cost to create a transferable object (something you could sell). As it is now, it costs content sellers nothing to sell as many copies of somehting they make as they want. If they had to pay L$ to create salable objects (to Linden Labs) I think the problem would fix itself.

You could flood the market with Linden but they become an expendable resource necessary to create saleable objects. Maybe there could be a new flag on something that allows it to be sold for money vs. only given away for free. I wouldn't suggest hurting people who just like to build for fun or give stuff away. Call it a sales tax if you will.

I have to say I trade quite regularly on GOM and too be honest I don't think price fixing will work because either the traders will compete to get all the business or the large sellers will dump. I do work with volume in mind, and with that aim, I'm always willing to tighten the spread to improve liquidity and get business.

Having said that the price does stabilise, even though we've had several days of dumping the prices always hovers back to around about the IGE and Anshe Chung levels (IE where they've set their buy prices at present).

That's been happening Chip.

Some of us have the distinction of being "...muged on-high."

You

You're forgetting the various reason why this is not a good idea for LL.

Sigh, I see this in thread after thread....

We do not know how much money leaves the economy every week. People guess, and say things like "I don't think uploads and other sinks take enough out of the economy..."

Everyone guesses, and thinks that they know best. I remember not to long ago the L$ was over 5USD per 1k. People still spend that much on other sites like IGE, E-bay, an the likes. Another key thing that people don't realize is that more money needs to flow into the economy then flows out because the economy is growing. As more people join into the grid, the money supply needs to grow in order to keep it flowing. One of the best things I can think of is the USA economy. The Feds keep printing much more money then they destroyed. Does the USA need more sinks? I think not.

Well personally, I don't presume to know if we need more sinks or not for sure. I just don't have the data to make a conclusion like that. The best that we can do here is speculate endlessly.

The problem could also be at the exchange. Or, the "problem" could just be that the L$ wasn't worth what we thought it was in the first place. If this is the case we should all probably get in gear adjusting our in-world prices if we care about the conversion rate. Or, the problem could be something else entirely that I'm failing to consider.

What is certain: the L$ is sliding again at GOM.

That's called Sales Tax.


That's called Arbitrarily-Enforced Random-Rate Income Tax

Remember that to many people SL is just a game, and the L$ are rewards, like powerful artefacts/weapons and rare items are in some other MMOGs. These reward social interaction and entrepreneurship and content creation. From this point of view, taking L$ out of players' accounts would be considered a punishment.



The money supply should follow the growth in wealth. The Feds print more money every year because there are more things produced, more services provided than the previous year. But when they print too much money and cycle it through the economy the amount of money relative to actual wealth in the country increases, and the $ value of things thus decreases => inflation.

Seeing how the $ value of L$ is decreasing, destruction VS creation of money in SL is clearly unbalanced beyond the rate of increase of wealth.

which leads me to...

To bring back balance, I suggest that LL start selling food for AVs. If your AV is well fed, you can set its appearance to what you really want. As AVs start starving, their traits decompose slowly over time until they reach the skin-and-bones look. Also, if you try to keep it cheap and buy only low-grade, cheap food your AV might start inflating instead

Soooo, who's voting for this money-sink ?

I see one very serious problem with Linden$. There is sitting more than 50 million L$ at IGE and GOM waiting to get sold - and this despite prices of all 3 exchanges being reduced drastically. Even IGE finally lowered prices.

The past 4 months we saw Linden$ loose value despite IGE and others hording massively. Can you only imagine what happens if those people, most of all IGE, decide they need unload?

We need new money sinks and better content that people will invest more US$ for. I am serious when I suggest Linden Lab to auction off sims for Linden$. 50 million L$ that are sitting there (on IGE and GOM alone) and waiting to unload should be worth 200k US$. I think it would make sense for Linden Lab to auction off the next 200 sims for L$, setting minimum bid at 250000 each!

IGE isn't stupid. They won't unload all at once.

In some ways, if they did, it might work in everyones favor as it will bring GOM more into the picture which in some ways creates more credibilty than IGE does.

I will have to agree with Anshe. Land auctions is a way that we can get this excess L$ out of circulation. If we add new fees in other fields, many users would have to adapt to new fees, and change is bad.

Land powerhouses like Anshe's Dreamland or Shaun's Cyberland has access to millions of L$. I think starting to reduce L$ stock with these land firms would be much easier.

Another method to eliminate excess L$ from the market could be a sales tax on each land sale. (NOTE: land sales ONLY, land has been long accepted as a commodity that has fees involved. We don't want to destroy the already weak content creation market).

If we look at the weekly land sales volume in terms of L$, I believe it is roughly 100 million L$ of volume. If we taxed 5% of each land sale, we would be able to remove 5 million L$ from the market per week. 20 million L$ would be removed in a month's time.

This is not going to affect land merchants like Anshe or Shaun either, they can always raise the price as more operating costs are involved. I would be willing to take in a tax whenever I want to get rid of my land, knowing at least my L$'s value is being protected.

If we combine L$ auctions and sales tax, I think we can drastically reduce inflation and slow the decline of the L$ drastically. We might even see a rise in the L$'s value if its effective.

Just my 2 cents.

well, while LL might be willing to watch (albeit unhappily I am sure) the exchange rate fall and content developers' incomes drop, I would imagine they still intend on collecting RL currency for their own revenue purposes.

Putting sims up for sale for L$, and then sinking the currency collected, would be an investment in the game (i.e. a corporate expense given the opportunity cost), not any sort of income generation for the company.

Forseti, yet, land, once sold, has tier costs, I am sure LL is making a small profit from that.

I think Kavai is right. Taxing land, and setting more land purchases in auction to L$ will repair our declining L$ value. Please tell me a linden is watching this thread. It needs to be done.

The L$ is worth what it's worth in the market. That's the baeuaty of the market. There is no arguing that the L$ is slipping against the US$. Now there are two ways to increase the value of the L$ (assuming that this is actually a good thing): either lower the supply of the L$, or increase the demand for L$.

Now, most people think about restricting supply (have more money sinks). But the value of the Linden dollar will also increase if there are more compelling reasons to buy L$. Meaning, if there is more desirable items being sold in SL, more "must-have" things so that people actually want to buy L$ on the market, then its value will increase.

Since content is player-created, that means we all have a way to create value for L$: create compelling content.

So... get back to work on that next great project! Er, once SL is back up again.

Very true, but "LAND" is the major money maker in SL. content is second to the land. The more, you can just buy land off auction with L$, the less the L$ is circulated out of SL. Its supply ad demand. We need to get more people buying L$ than selling it. Only then will the value rise again. I have seen the value go down to under US$17.00 in the past. it will rise again. Just stop selling L$, and start buying it.

Flyingroc, how can we create more *attractive* things for SL? Isn't SL innovative enough? Although it is a way to fix the problem, it depends on the users to create the products and I am not willing to let LL sit idle-ly by while users try to save themselves with little power over anything.

The easiest way to fix the devaluation of the L$ is thru sinks, it really is the most effective way. until we have other solutions, I think thats the only way to go.

And you're certain of this? That content is second to land.

Care to share your data?

Another cause of the recent devaluation might also just be a delayed effect of the free account giveaway.

i agree that LL would naturally be much more focused on the recurring revenue aspect of land (lifetime value of the customer and all that). If they truly become concerned that inflationary pressure could threaten the viability of SL, then they might decide to eat the up-front cost of putting up some sims.

i think the current stipend system myght be rebuilt in this way:

each week Linden lab look at the "sink bucket" how much they got from the various money sink that are in game
and they redistribute as stipend ONLY this, not more not less, each week would vary of course but it would make sure that no L$ is created, they could remove some or add some if they want each week, thus managing the cash volume ingame

some will probably whine but well

It would be singling out realtors and make them pay the bill. Why? Simply because in any sale that would involve us as middle person the land tax would be charged twice. It would be charged when we buy the land and again when we sell. Looking at very small margins involved it might very well make whole realtor business unprofitable and thus kill off one service sector.

Beside that it could be avoided: you sell me land for 0 L$ and I pay your avatar directly.

Before AnscheLand, Cyberland et al - the largest sink was the land auctions for L$. With Linden's changing the auction structure to US$ only, it has removed SL's largest sink for in world currency. This was a direct sale without needing to take GOM/IGE rates into play. I doubt LL did this without putting serious thought into this decision, (as Philip seems to be quite aware of the SL Economy), but I can't speak for someone who isn't in the conversation. Can we get a Linden to comment on the economy and possible devaluation of L$ due to lack of sinks, with a larger influx of L$ being pumped into the economy then ever? Everything else is pure speculation without concrete data - something only LL has at this point.

~J

I see a lot of proposals here addressing the income issue. The last time there was an income cut, a large number of people left in protest (or claimed they were going to). Note the number of vote proposals centered around the concept "gimme more money".

Beyond the general unpopularity of it, cutting stipends doesn't necessarily address the lack of money sinks available. Putting 10 billiard balls a day in a box will still fill it, just not as fast as putting 20 a day into it.

The sinks Robin mentioned ( Here ) are:
- upload charges
- land claims and payments
- gifts

I shall take them in reverse order (please feel free to correct me on any flaws):
Gifts - the only payments I am aware of that are recorded as gifts, and are not retained by the recieving avatar, are ratings. I know many people who flatly refuse to give ratings at all, under the current system. I've only done it on extremely rare occasions. However, there are still some people who think it's worth throwing their money at.

I'm going to use what i consider to be a likely maximum average of one triple-rating given per av per week. That turns out to be L$3 million per week (3 ratings * L$25 per rating * 40000 avs).

Land claims and payments - Under the current land sales model, the only land that's paid for in L$ and does not go to another player is First Land. Let's say that a massive 50% of the new accounts each week buys first land. That comes to L$25,600 per week (100 new users per week * 50% * L$512 per plot).

The only direct L$ payment I am aware of, was the land tier partial payment (which has been removed).

Upload charges - this is very difficult to measure. I don't know how many uploads the "average" user makes. In the last week, I've uploaded 11 total items (I haven't made any new products this week). When I am in production mode, it can be 20 times that many.

Most users don't create often, but some (particullarly clothiers) upload many hundreds per week (it's impossible to see shoulder seams in the previewer), so let's say our average is around 25 uploads per week per user. That'd come to L$10 million per week (40000 users * 25 uploads per user * L$10 per upload).

So, we see that upload costs are indeed the main sink for money - which seems like it's penalizing content creators. But further, we see that (if I take my numbers to be correct), the total outflow is just over L$13 million.

Compare that total to the L$16 million that Lordfly came up with for inflowing money. The difference is about an extra L$75 per av per week (L$16mil - L$13mil / 40000 users).

IMO, there does need to be additional L$ sinks, but it's far from being an overwhelmingly urgent matter.

Anyway, that's my L$5 (~us$0.02)
[edited for grammar]