SL Banking...

Are inworld banks (where you deposit your Lindens, and they claim you get "interest" safe? Which have you tried?

SL is not really the same as the real world. I would never give my lindens to anyone to hold. I just don't think there is anyone that could be trusted with them. To my knowledge there are no "rules" that could keep someone from walking away with all your linen dollars. Sure, you could file an abuse report, but we all know how well those work. I have rented a vendor spot in a popular/mall before and the owner and managers never gave me title to place my items. I filed an abuse report and never got my lindens back, but was given a message it had been resolved, lol.

Don't trust anyone else with your lindens, that's my opinion.

Apart from that....

Interest is something that is build over time and at slow rate... with other words, your Linden should be deposited for a longer time and only by a huge amount of Linden that could become interresting.

Nothing for me... money should roll...

Morwen "big spender" Bunin.

I wouldn't suggest using banking systems. Your basicly giving your money to someone else and trusting them to give it back to you when you need it. How do you know their gona do that? They might have been in business a while doing it, but i still wouldn't trust them that much.$L might not be real money but it has value = real money. So if you bank 50K linden your givng them like $160 (estimate) USD to hold for you. I keep my money safe on a alt. Not on my active accounts incase i either get hacked or i click on something that steals my money. ya never know what might happen hehe.

I don't see the need to give anyone anything you can't safely hold yourself. If you want to make money with your Lindens, play the Lindex or something.

I have nothing against any of the SL banks, I treat them all equally.

I avoid them like the plague. There's no security, no traceability, no accountability, if they decide to run off with your cash.

Like most things in SL, they exist, but as I have no need for what they offer ... then I don't use them.

Broccoli

I have both looked at, and tested the two main Second Life banks. To be frank I cannot gainsay what they pay, but there are no easy explanations as to how they achieve it.

Of course an almost exact parallel does exist in first life investments, many people do not understand how stock markets actually work and how you can make money, the same applies in spades for more exotic vehicles such as private equity and hedge funds. Try explaining to someone what being "short" on any asset really means and you will all understand what I trying to say.

To use another analogy who would have thought a business operation that started in a garage using two university students would have evolved into a business that will soon (by all accounts) eclipse Microsoft (Google).

My own personal view is that if you invest in Second Life itself via land or creativity for a fungible gain, that is an extremely high risk business that should not consume more than 1% of your liquid disposable cash or income, and if as part of that you choose to place money with the largest Second Life bank (and if you are prepared to accept that additional risk) then they do say there is no gain without pain.

There is a Reuters interview with Ginko (on the Second Life Reuters website) You may all wish to read through that and draw your own conclusions, the information is in the public domain.

Please note NO PART of this post either endorses OR does not endorse the concept of Second Life banking/merchant banking.

Regards

John

I have some money in stocks.... but I know how the stock-market works. It is a game for me... if I loose some then I can only laugh (meaning the amount of money I have in stock stocks in not trivial).
The only responsible way to place money on stocks if you don't know the stock-market is to hire someone who does... but those people are very expensive.

Difference with this to SL. In RL people who mess up and cheat on people can be hold responceble.... In SL not.

Morwen.

SL business are all inherently high-risk, high-reward operations. 44% ROI over a year is high of course compared to the real world, but in SL it's not really that much. Consider things like speculating in real estate or even renting a mall stall and selling textures you uploaded for 10 lindens each. The ROI on all these things are also quite high. Thus, the high interest rate in-and-of itself may not be any indicator of fraud.

OTOH, consider the risks:
1) That the bank owner actually has honest intentions.
2) That the bank owner own [unclear] investments with the borrowed money turn out.
3) That LL doesn't go bankrupt or otherwise doesn't do something that compromises your investment before you cash out.

Suffice it to say, there is no way you can consider it to be a "safe" storage for your money. At best it is a risky investment. At worst... well...

This information is supplemental to the good and accurate posts above in this thread.

For sake of full disclosure, we have no equity stake in any of the banks described in this post, nor, for that matter, are we still doing business with any of them on any large scale. If accounts are still open with them, they have only nominal amounts of our working capital.

I can offer some specifics on SL banking from first-hand experience with them by having tested out two of the in-game banks over the past several months with fairly large deposit amounts. I know this because they told us we were one of their largest depositors, which left us more than a little concerned in that we were only talking about a couple thousand USD.

Without going into specific names, I will state experiences and a summary opinion.

They both purported to pay .1% _per day_. Our experience indicates that they achieved this. That annualizes to about 36% per annum if my math is correct. Far better than a Money Market.

They both purported to maintain a 70/30 ratio in loans to cash on hand. We have very good reason to believe this was not a sustainable goal for them, putting them in the risky position of becoming insolvent with surprisingly low transaction amounts shifting in and out.

One was forthright enough to admit that it did not guarantee that you would be able to get your money out, and further placed a maximum amount for a daily withdrawal - assuming it was available - which could put one in a bind if they needed more than the daily cap for a large transaction, such as a land acquisition. It also went on to indicate it may not be able to pay interest on a regular basis. This bank also stated clearly that it placed a large percentage of its deposits into REAL LIFE investments. We never learned what these were, but it did bring up the issue of liquidity, in that they may need to liquidate RL holdings to satisfy withdrawal requirements within SL.

The other one placed no such restrictions on daily withdrawal caps, and we learned that they made their money by loaning out at .15% _per day_, or roughly 44% per annum. They secured these loans with SL real estate and held the option of reclaiming land in the event that the borrower defaulted. Even with this collateral, the simple reclaiming of land in the event of default did not assure liquidity when it was needed. They'd still have to flip the property, most likely at a steep discount to recover liquidity, significantly increasing their exposure potential for big losses.

Another startup bank has recently formed and while it appears to be well-intentioned and attempts to provide a certain legitimacy by virtue of having a real-life Web page (!), it is clearly a case of an operation trying to shoestring itself into existence by not only selling shares but also supplementing its revenue base with alternate operations like dance clubs. I don't know about you, but it doesn't instill the greatest confidence to visit my bank's ATM in the lobby, then take the elevator up to the bank's strip club. But then again, this is SL, so what's reality got to do with it? I also note that their stated interest rate paid on deposits is under 10% per annum.

As was stated in the previous posts, while the short-term gains are tempting, the reality is that it is a trust situation and you have to have the faith in these virtual operations with virtually no real life contact information nor any clearly defined recourse mechanism within the game to recover your funds in the event that the operation becomes insolvent.

Like most investments, those who are willing to take large risks are also those who occasionally make big profits. They are also the same ones who occasionally lose it all and have to start over.

Caveat Emptor.

Banks are risky in SL. Not only do you have to worry about the bank, but you have to worry about LL going under and/or closing your avatar account, which LL can do as per their TOS "For any or NO reason." How many times do you read posts on the "Linden Answers" forum that say something along the lines of "My account was banned and I lost all my money I invested! Why was I canceled? No one has answered my question and phone support says they can't help me!" I would NEVER invest more than 100,000L$ in SL at any given time, bank or not.

I also only use banks which tell me who they are in real life and give accounting and stats, real world address, etc. Most banks refuse to tell you who they are in real life and I've only found one SL bank which has given accounting info or invited people to visit them in real life. I have "tried" them all, but as per my above minimum requirements for me to continue to use them, I only use "SL Bank" at this time and have about 30k deposited.

The spirit of P.T. Barnum is still active today, that's why Scams like an SL Bank keep popping up.

(For those of you who don't understand the reference:
Phinias T. Barnum, Turn of the Century Carnival Showman and Expert pervaricator when asked about his staggering success was quoted as saying "There's a Sucker Born every minute."

Angel.

A very good piece of advice was given to me a long time ago in regards to SL banks. Never invest more then you are willing to lose. It still holds true today. If I were to lose all my money that I have invested in an SL bank, I would be upset, but I understood when I started that the possibility of losing it all was there.

That is some great advice. You can, however minimize the risk by making sure that the bank you invest in tells you who they are (accountability). I mean really, any kid in his mom's basement could technically start a "bank" in SL. By finding out who is running your bank (in real life) and knowing if they actually have the skills to run the bank, will help to minimize the risk associated with such an investment. I mean really, if they refuse to tell you who they are in real life or how they make their money (and not just big words they learned while watching CNBC like “venture capital” or “SL emerging markets”, that could be anything), they must have something to hide. If they are loaning money, what is the default rate? How much money are they making? What is their accounting numbers? Are they in the hole? To make a smart investment you need these figures. By not providing them, they must again have something to hide.

I totally agree that you should not invest more than what you are willing to lose, and should avoid being blindsided by "high interest rates." What good is a high interest rate if one day your bank is gone with not only your gained interest but also your initial investment?

I think a few too many people join SL and think "wow! I want to start a bank!" and in all reality, they have no idea of what the hell they are doing. In other words, find out who is running your bank in SL!

Perhaps I should venture my head over the wall and say this is what I do in first life Morwen (a UK IFA). Please believe me a good IFA is not that expensive and will certainly add value far in excess of any fees or commissions charged. Have a look at my home in Caledon Cay, I advertise openly (modest cough, shameless ramp now over

But reverting to the issue of Second Life banks they have been both a puzzle and a complete mystery to me ever since my early days in Second Life. Effectively the largest bank admits to using funds to invest in first life assets, yet the rate of return beggars on a historical basis some of the most successful first life investment funds I know.

For example in the UK if I mention Anthony Bolton of Fidelity or Lord Rothschild of RIT Capital Partners, or in the USA Warren Buffet of Berkshire Hathaway, I would point out the equity return on these collective investments is now acknowledged to be some of the best investments in the world, but the largest Second Life Bank (Ginko) has seemingly easily out performed these funds.

In terms of capacity both depositors (now around 12,365) and funds under management/deposit ($L 97,213,954 ) is no longer pin or small money. Indeed I believe Second Life by its own statistics has around 50,000 premium subscribers and total Linden Dollars in circulation equalling $L 1,475,305,542.

Those figures tell me nearly 24% of all premium members have a Second Life bank account and the amount of real money at risk (around $350,000 US dollars) is about equal to 15% of the entire Second Life money base. In essence after Anshe Chungs Dreamland business, Ginko (the bank in question) would appear to be the second or third largest Second Life business.

I truthfully hope that the investment managers of Ginko continue to manage funds in their almost uniquely talented way. I would also comment that if those skills could be duplicated in first life they would possibly be counting the number of private Yachts, Jet Aircraft, and Houses they would own.

But to answer the questions raised by others on this thread – ranging from kicking a Gift Horse in the mouth, to that of a Ponzi scheme, well I am afraid there are no easy answers. Perhaps these external links may help further

Finally it is possible the failure of any large Second Life bank could do immense damage to the Second Life platform.

Sources

http://www.sunseekersalesgroup.com/index_flash.asp

http://www.anshechung.com/

http://secondlife.reuters.com/

https://ginkofinancial.com/

http://secondlife.com/whatis/economy_stats.php

http://secondlife.com/whatis/economy-graphs.php

http://www.metaversemessenger.com/


Regards

John

In direct answer to the question, I would say that there is no guarantee of safety whatsoever.

Also, here is a nice breakdown of why Secondlife’s "largest bank" is probably not that large at all. Remember, at their current interest rate, 100kL$ is being plugged into their database each night simply by the database calculating interest, not by people depositing more. They treat that like "growth" when really it should be a debit. "Growing 1 million L$ every ten days because of interest payments you are paying your account holders via your database creating L$ numbers out of thin air, is not growth, it is a liability. Here's the link:

http://forums.secondcitizen.com/showthread.php?t=3306&highlight=ginko

Maybe, but at the same time I think this sort of thing is both inevitable, and also necessary to spur the next big stage SL economic development - namely some sort of effective contract law. I just can't see LL doing something proactive on this without a major blowup (although If I did, I would be greatly impressed).

A simple Question;

WHY do you Need a Bank in SL?

~No one can steal your Money (Unless you are Fool enough to hand it Over to them)
~It is neither Unsafe, Nor Inconvenient to "Keep it all in your Pockets" (The difference between being Donald Trump in RL, or Anshe Chung in SL, In RL they don't make pants with Pockets Big enough for all that Cash.)
~You can Earn More Camping, or selling One Lamp than you can make in a Month of Promised Interest.

And most of all,

~There isn't One single thread in ANY of the forums questioning the safety, or feasability of Keeping your Money in your Pockets.

Just the fact this question had to be asked should be More than enough reason to Not take part in an SL Banking system.

Angel.

Fair comment.

From what I have read it might be possible to loose money via an asset server although one would hope record keeping on significant amounts would enable you to correct the problem.

However as to a more general answer to your question, the whole of Second Life has been both set up and designed to stimulate a virtual economy that in some degree can mirror the outside one.

There are other Metaverses (grids) where this is not the case, the largest of which is Active Worlds, where there is virtually no economy at all between players/Avatars. Active Worlds (apart from a non economy) is very similar in "feel" to that of Second Life, although the technical computer background in terms of an "in world" operating system has a few differences.

If that is what you want then migrate there. But I do have to say the highest number of in world Avatars I have ever seen logged in simultaneously, spread across all Active Worlds public and accessible Private Estates, has not exceeded around 250 users (currently 122 users) Comparing that with SL you can see the obvious.

Taking this point one level further it might be possible to draw an analogy between the two worlds insomuch as within Active Worlds all that is necessary is you pay AW to own land (either via premium membership or world ownership) obey AW's TOS and that’s it. Like SL free non-land owning membership is also available within AW. Buildings, Objects (prims) and types of scripts are free to all users

SL is the complete opposite; by and large you need money to enjoy your SL membership in terms of building, scripting, textures, uploading, and land ownership, to name but a few in world activities.

Given those facts are a reasonable statement, Second Life could be compared to a capitalistic society based on a type of free market economy, while Active Worlds could be likened to the complete opposite, a soviet socialistic state, or a type of communism.

Therefore Banks (and the concept of money) has no internal meaning within AW, but has every meaning within SL. By and large if the concept of money has some fungible meaning it is human nature to try to get it to work harder, hence the range of financial services that are embryonic within SL.

As human beings we currently need none of this, both AW and SL are entirely superfluous or a non-core requirement in terms of basic food, warmth, clothing, houses, and direct physical needs. But there is clearly something within many of us that desires an alternative reality; this concept extends through regular bloggers and BB posters, to users of peer-to-peer sites such as Myspace and Friends Reunited, through to that of very complex virtual reality worlds such as SL and WoW.

In my own opinion it still remains to be seen if this VR Second Life subset of the web (which in itself is another type of reality) has commercial value beyond that of a nickels and dimes economy. I personally think it might, in which case the evolvement of a virtual economy, currency, and financial services, are almost certain to occur in one way or another because that is human nature, that is the desire to AQUIRE.

Even you talk about other ways of earning money in your post, such as creating (building a lamp) or camping. Therefore I would say where one way of making money might exist, someone else will try to find another way.

Finally I know I have rambled on a bit and no part of this post has been designed to offend you. Opinions welcomed on this post

Regards

John