Bretton Woods Agreement For SL

The Bretton Woods Agreement for SL is a recommendation that Linden Labs
institute a monetary policy to prevent the Linden Dollar (L$) from being
susceptible to Mudflation.

Since its inception, the Linden Dollar has fallen day after day, month after
month. The economics of Second Life do not encourage investment in
L$ nor L$ denominated things. In the Real World, a currency might be in
demand because things within that country are desired. To aquire those
things, you have to buy that nation's currency. The problem with SecondLife
is there aren't enough things to command a huge inflow of USD's trying to
aquire L$. This results in a trade inbalance that see's more L$'s seeking
US$ than the other way around. Thus the declining L$ value as it gets
exchanged for US$.

My Bretton Woods suggestion is that Linden Labs under pin the value of
L$ with a tangeble asset such as Gold. Linden Labs would fix the amount
of L$ in circulation and set a flat price for the value of L$ with respects to
the amount of Gold in they have in the vault. This would effectively peg
the L$ at a certain price and stabilze the currency. Movement in the
currency is possible, but only if a certain factors are triggered. For instance,
the Real World price of Gold would move the L$'s value up or down. But if LL
gives the L$ enough of a float, the Real World market will rarely impact the
L$ value. The 2nd would be no new L$ currency. LL would have to stop all
L$ printing, unless they are adding more Gold to the Vault. No new L$
should be issued unless a similar amount of Gold is available. Third is that
LL would have to allow for multi-party verification on the amount of L$ in
Float and the amount of Gold in their vault. And last, all "sinks" would be
abolished. L$ would never be destroyed, it would always remain in circulation
within SL.

All other steps Linden Labs has taken up to this time has resulted in
zero positive gain. Mudflation continues to plague Second Life with no
end in sight. And left unchecked and ignored, the result will be devistating
to the SL economy in 2006. So far the L$ has declined 12% since Oct'2005.
At this rate, it will be worth US$2.13 per L$1000 versesthe US$3.50
per L$1000 it is today.

NOTE:
--------
Gold = Gold should be either Gold Coins/Bullion physically stockpiled or eGold.
Bretton Woods Agreement: http://en.wikipedia.org/wiki/Bretton_Woods_Agreement
Mudflation: http://en.wikipedia.org/wiki/Mudflation

Interesting that you should bring this up. I've been working on a resident operated service which will work in a VERY similar way for some time now. It should be completed very soon. I will post here when it is ready.

Do you seriously expect LL to use USD, to purchase gold, to back the $L ?

No.

Bretton Woods was a system which made sense in the WWII and post WWII economy which in many countries - not just the socialist ones - was a planned economy. Some aspects of the agreements were not very long lived when the world economy shifted more and more to free markets. The first major cornerstone of Bretton Woods that collapsed was the gold backing of currencies and the idea of fixed exchange rates - or, to quote the Wikipedia again:

The OP might please forgive me, but I think its funny to bring up the idea of Bretton Woods for SL and linking to a Wikipedia article like this. It is a long one, I admit but a very good one, which I used for the preperation of classes and presentations before. And it describes in very plain words (a little further down), why fixed exchange rates don't work in the current world economy.

The simple fact of the matter is that as far as I can see Lindon would not do anything to stabilize the L$ if it cost them real dollars to do it.

Therefore the solution is simple.....we all use real ones in game.

It would need some once off software changes but at the end of it 1 cent would currently equal about 3 Lindon Dollars. 1 real cent would become the new minimum transaction, therefore for example a Pre Fab House costing say $L 4,000 would equal around $12.

I do not think most people would mind playing/investing around say $100 as a float in game, which would also keep commission/credit card transactions at a reasonable level.

My first inclination went I read this post was to make the comment "Wake Up People And Get A Real Life". Now this may be a sort of long reply, however, let's take a look at the real facts. 1. Linden Labs is a business. Someone in real life who has a business has one major goal, that is to make a profit. 2. Regardless on what it said, this is not a real true e-commerce, it is a on-line game. 3. The percentage of residents who post to this forum is approximately 1.10% of the total population of Second Life. ("Most users ever online was 1117, 10-23-2005 at 10:34 PM" Based on a stated poplulation of over 100,000 residents divided into the maximum on-line resident in the forum, equals .01117 or 1.10%).

If your in a business are you going to listen to only 1 per cent of your base population, I think not.

If there were a way of actually getting a true reflection of how the majority of the population regard Second Life I am pretty certain the majority would tell you that this is nothing more than a game and they are here to enjoy the game, have some fun, and make good friends, and basically communicate with those friends on a daily basis.

A vast majority of the residents in second life are here to do things and have things they would normally not have or could not afford to have in their real lives.

A very low percentage of those residents are here to really make real life dollars, a large percentage, but still low, are here to create things to; yes make enough to support the costs of playing in the game, but in most cases I believe they are here to be creative, sell what they can to support their hobby, and still have a good time. We have a extemely talented population of creative people and make a lot of fantastic items. They spend many hours creating such things as home, cars, clothes, etc...to sell to the general populaton, however, with the exception of a very very few, nobody is getting rich off this program.

Now, in reference to this post. Asking Linden Labs to use a Gold standard as a basis for the linden dollar, you have to be kidding. Going back the the basis for a business, they are in it to make money.

We, the residents of Second Life are the ones who really make this program what it is, but we must also realize just what the program is, and again if you could really poll the majority of the population you would find is it still nothing more than an on-line game to the majority.

You want Linden Labs to take action on anything in Second Life???????? Then find a way of truly getting the majority of SL to make a proposal. Numbers get attention!


I agree that the linden dollars needs to be stable. A stable linden dollar would put things in check and hopefully stabilize the value of land and created objects in the game. If it were me I would proposed a set base of 250 lindens per 1 USD period. Then the ecomony would stabilize around this figure we would have a set value on all items in SL.

Just my thoughts!

George you are missing the point old fruit.

How on earth are you going to enforce an artifical exchange rate in a free market.

For example at this moment in time just before the day job kicks in I am looking at my stock monitors......Google (epic code goog ) have taken a wacking last night and today because they missed their numbers. Share is currently off $23 following on from $50 down last night after the bell.

At one point they were around $460 they are now $396 as I type. Do you think there is any hope I could go to the NYSE and insist on selling them at $460 (smile) and getting filled

The only way to achieve a stable dollar exchange rate is to use real ones. How many more times do I have to post this point no disrespect intended

Paulismyname! But is that not what you were saying when you stated that 1 cent could be equal to 3 linden dollars.....all I did was state a figure...it very well could have been 1 cent = 3 linden dollars...I basically said....1 usd = 250 linden dollars.... now maybe I am not sure what you mean by float...you mean I just put out there (and where) $100.00 usd just to sit there and not use???? I guess I am confused....

No I am not saying that at all George......or perhaps my last post was a little grammatically muddled as the day job kicked in and haste was called for (smile)

What I AM saying is this.

Some people regard SL as pure entertainment, others see it as a type of combination between business and play, and finally some people see it is a type of business - in other words a trading platform

SL is NOT a pure game, but neither is it a pure business

I believe that on the whole those who regard SL as business/play or business trading would appreciate a stable currency to accumulate money

That can only be done by using a real life currency. IMHO Lindon would not use business resource to prop up Lindon dollars

Therefore a once of game conversion needs to be considered in terms of currency...from Lindons to pure US dollars

Finally within that last point we would all need to convert Lindons to real dollars OR accept a total loss on Lindon dollar balances. On that point neither of these options would be painless but should be viable if it is a once off hit on currency accounts only and....

We have the easy ability to sell First Life goods and services within Second life as well as provide Second Life entertainment in game

Call us Second Life 3D EBay...............

Ah yes...to support some type of stipend for non-landowners Lindon charge a small sales tax on each and every transaction. In the UK we call that VAT

Hmm...


The most users online in forums 1117, most online in world 5600. So to compare something that you can actually compare online to online, forums has about 1/5 the draw of the world.

We all know there are not 100K actual active individual (alts dont count) resident accounts.

You are all missing(scaring to see) one(and only) real truth.
If LL decides to shutdown grid and end the game ur millions of L$ worth a big 0. Yes "0".
This is not a speculation, and dont panic, they wont do this for looooong long time. I am trying to come one point.
They can not guarantee the value of "L$". If once they start to do this, it means guaranteeing the L$ all the residents have. It comes to one point at last: "If LL decides to shutdown grid, and end the game, LL will pay you for all of L$ you have.".
Wake up. This wont happen. They can regulate the economy, like managing L$s given away by LL etc. But they will never guaranteee the value of L$. This is just not possible.

So stop producing unnecessary ideas. All they can do is a little regulating the economy, they have all the economic data(which no goverment has), all L$ in the game, all land size, monthly growing primary accounts, monthly L$ income to the game etc. All they need to do is a little regulation by analysing these datas.

Well, you're assuming that regulation would help the economy.

This is certainly disputable... to say the least.

There are many who would say that real-life meddling with currency is the source of most of our economic ills.

Read again please(to say the least), i am not assuming it ld help the economy. I am just saying they wont do more than this.

I look at it this way:

The Linden dollar is like a 'Magic the gathering' card.

To my buddy one of these cards may be rare and beautiful, and worth a lot of money.
To me its a peice of cardboard for a game that I don't particularly like.

It's in the eye of the beholder - the Linden dollar is only worth what someone else will pay for it. If it lets them buy a house they like, or go to a strip club, or get a new skin, or get that sweet parcel of land they like - it has value.

But it's only worth what someone ELSE will pay for it.

And seeing how there are no real *needs* in Second Life (Land is as close as it gets - and you don't really NEED it to participate) - its all raw entertainment.

People LOVE getting money - people aren't so enthusiastic about spending money. Saying 'The Linden Dollar priced high is a *GOOD* thing' is only good for some people - the more it costs the less attractive it is to buy - so fewer people getting a larger chunk of the pie.

I like it the was it is - let folks work out what they're willing to spend - 'good deals' shouldn't always be for one side only.

-- addendum : when the reverse was true on GOM I didn't see the reverse argument. When the L$ spiked and went ludicrously high - all was well and wonderful in the world.

o_O ;;;

That's anime-googly-eyes-with-three-sweatdrops, the highest possible rating one can give a statement that makes one spit coffee all over their monitor and keyboard.

Not to say "I told 'em so"... but I've pointed this out for months, back when GOM was failing and way back before LindeX was formed. I cautioned Linden Lab on their proposed model, pointing out it would do exactly what it's been doing. A bunch of LL groupies insulted me up one side and down the other, making all kinds of emotionalistic claims and rationalizations as to why the L$ / US$ ratio should never be stabilized. Claims of infringement of personal freedom, buyer wishes, seller rights, etc.

As a result, without regulation of the Lindex we have rampant L$ devaluation and a forcastable spiraling downard trend. Merchants are losing money (and I'd wager, a number are leaving SL even as they were months ago). Before long, we are going to see large landholders and even sim owners releasing their lands as they can no longer generate the funds to pay for them.

I was thinking about it just the other day. Linden Lab seems to constantly pat itself on the back and consider itself to be very successful. In some limited ways, they are (a lot of Second Life itself, as a program, is fairly advanced and enjoyable). But... they have about 100,000 members, the vast majority of these either non-paying newbies, or people who no longer log on. I've often wondered what the actual figures are of "Premium members" and "those who have logged on in the last X amount of days". Of course, LL is not about to release such info. The only information I've ever seen was when one Linden let slip that of about (the then) 50,000 members, about 9,000 logged on during a single day. That's a loss of what, about 80% active membership? The only reason they claim 100,000 members is because they never remove a member for inactivity. If they did... or if they discounted those who haven't logged on in 30 days, I would imagine that figure would be far lower.

When we consider that other online games boast paying memberships far in excess of 100,000... one can come to the conclusion that whether the Linden Lab model is successful or not is highly debatable. For a certainty, their economy has some serious problems. The sad thing is... it was all forseeable... WAS forseen... warning given... warning ignored... results as predicted.

Hello Everybody!

I wanted to introduce myself to the community. I've been hired to do economic analysis and make policy recommendations. I am specifically looking in to the issues of currency depreciation in SecondLIfe right now. Since I've just started the process of gathering data, it'll be a few weeks before I have any results to share. Meanwhile, I welcome your suggestions and comments.

Policy Recommendation:

1) Back the L$ with Gold or Cut the Money Supply in Half and Fix the Float.

Life will be MUCH better.

ONLY ONE SUGGESTION FROM ME:
Do not believe everything you read here. Most of them are only speculators. Most will try to use you to manage the economy in their way. Just analyse the real data, stay close to the game to understand the differences between SL and RL.

If LL cuts and/or the stops the supply of (New Money) into the economy, its just
a matter of time before the demand side economics begin to force up the
valuation of the L$.

The problem right now is that SL has "too many" L$ Linden Dollars in Circulation
and not enough in-game investments to keep L$ in the economy. As a result,
citizens are exchanging their L$ for US$ at a greater rate than US$'s are buying
L$. The effect is a continued decline in the L$'s value.


A) Shock Effect: Stop Printing New Money. Cut all stipends.
B) Let the L$ shortage force demand for L$ and push up the valuation
C) Slowly reintroduce Stipends and Control the L$ inflow/outflow to keep
a balance between supply and demand.

WELCOME Vashudha! Hope all goes well... and that you're more successful than others have been.

I'd agree with the final statement about there being differences between SL and RL. Not sure that really makes all that much difference. However, sorta agree/don't agree on the first part.

There are a lot of folks I've met on Second Life that are not professionals by any means... but have a real feel for the game and have a good head on their shoulders.

One of the problems I often see in SL is people trying to make simple things way too complicated. I fully agree to analyze the data... but as Kaz recommends, also get the big picture by getting into the game itself. I've spoken with Lindens who seem to be clueless as to how the game itself operates, the problems everyday people go through in game, the things we face on a daily basis.

So examine the data Vas, use your expertise, then play the game for a couple of weeks and check with your gut feelings. One of the main problems I've seen with SL economy is failure/refusal to stabilize equivalency between the L$ and RL$. Until that platform is stable, SL economics will remain unstable.

Welcome and do not believe Kazanture

A warm welcome, Vasudha!

Glad to have you on the Linden team. You will see that Second Life is a fascinating playground for anyone interested in the workings of a human society and economy. A sandbox for macroeconomics. Where else would you find that? The economy of Second Life has many facets, not only the exchange rate.

If you want some advice - who would want that, LOL - take your time to look "at it all". Like Wayfinder said it: Dive in! Really join us inworld. Go shopping! Buy some land! Talk - and listen - to those who are active in the economy: the movers and shakers, the designers, builders, scripters and creators of all kind and the "consumers", too. I am a big fan of "data" as you will see when you come across one of my posts or blog articles, but ... it is not all data. We are a lot of irrational humans running around here!