In the wake of the closing of Gaming Open Market, the notorious SL group Elf Clan has started its own currency sales operation. A couple of interesting points are worth noting. One is that the entry of the Lindens into direct money trading has oddly led to the loss of GOM but simultaneously with at least one new money trading operation. Two, I wonder what would happen if Elf Clan established its own currency for elven affairs -- currency which could be bought and sold with either dollars or lindens. The group is approaching the size where that might be feasible, and it would have a big impact on group identity. This leads to the question: what is the best way to implement something like that.
I'm not sure why the Elf Clan is "notorious" but they are famous. Wayfarer was leading the charge on the forums to complain about GOM mainly on the grounds that it was a real currency market with a fluctuating rate. Various people pointed out that creating that kind of system isn't a market, and leads to long queues and can break donw. That fluctuating feature annoyed WW who wanted it to have a fixed rate. They've now fixed their currency rate at Phil's Magical $4.00/1000.
In RL, even countries that fix rates still allow some fluctuation, i.e. currency exchanges at the airport cost more than in town (and of course they often have black markets). The actual rates differ, not just the commissions. Making fixed rate currencies in a game like this, especially if LL does it, will only lead to more exchanges being created, more "black market activity" and more unreliabilty.
When LL's takeover of GOM's functions was first announced, there was some idle discussion of trying to create an alternative currency. (As a joke, I announced that I had secured my borders, signed 14 UN treaties, and issued the prok, which is redeemable for $10 LL or $150 off your rent lol.). Seriously, the only forces that could have the power to create their own currencies would likely be huge operations like anshechung.com and slsolutions.org -- Anshe Chung's land business and the Cyberlands stock market. But to do so, they'd have to have both inworld terminals and objects on their land that would accept these other kinds of currency, which would have to be delivered in prim denominations of some kind I think (unless they had some elaborate credit system). The game's exigencies are such that land is set up to automatically take LL, when you sell an object it has a space to type in LL and the object can receive payments in LL etc. So you'd have to create a whole elaborate superstructure to SL to do this -- you'd have to have separate payment objects on your land parcels for people to put prims in? Or you'd have to have them pay LL but convert to your other currency that you'd hold as a credit on your website?
You wouldn't have customer confidence. Most ordinary people would be reluctant to get involved in buying and spending a non-LL currency. They'd either feel (wrongly) that it was "illegal" although I don't think there is anything in the TOS that prevents you from making your own currency. I don't see any Lindens swooping down on me for issuing the prok, and I don't see anyone closing down Pendarren Zaftig, my tenant in Baileya who has an interesting store selling bars of gold which you can redeem for more or the same price, depending on denomination (a great idea in this game of constantly fluctuating currencies). You could conceivable do a land deal in zaftrands, let's say. If you could couple such transactions with the notarized, non-tamperable documentation at Zarf Vantongerloo's notary service in Thyris, you might be able to start a viable world outside the LL confines. Of course, they'd always have that "any reason or no reason" thingie to boot you. Issuing a "currency" inside LL's already existing toy world is just another object/toy -- a game, like Simcast might have had gold pieces in their internal game. They couldn't possibly care about this at one level, yet if it threatened the overall fragile Linden dollar economy they might.
I don't see any of the biggies wanting to take on this idea of starting a currency because it is too risky not only with their own customer base but with the Lindens. I think the general public will not feel comfortable with franchulates like in Snowcrash issuing all kinds of currency and not having one currency throughout the land. Of course, if the Lindens got really stingy with their currency and started charging whopping fees or created far to many restrictions, you might see a Snowcrash-like emergence of Chungbucks like the Kongbucks in Mr. Lee's Hong Kong. I think what Anshe's response has been to the GOM thing is merely to cash out a lot on GOM, but then boost her own exchange and sell to her already existing customer base on her website. People already paying Anshe on Paypal month after month and finding her trustworthy will have no problem at all simply adding another $50 or $100 or more US to their land bill to have the game currency, too.
Posted by: Prokofy Neva | October 03, 2005 at 10:35 AM
With definite respect, I disagree with Prokofy Neva. All you need to create your own currency is products which people want to buy. Preferably, expensive ones that aren't available from anyone else. For example, games or particularly responsive vehicles.
You offer a significant (50%) discount if they purchase using your currency. This is to get them to buy into your economy - you offer an incentive to join.
Once they've joined, you have a toehold. For example, if your method of keeping track of cash is a credit card, then that credit card can also have other, community-building features. For example, tutorials, parties, and demos put on for people in that economy, admission only to card-holders. You could even transfer scripts and have a bulliten board powered by these cards. Money of your kind could be added to the card, similar to the way the Linden's add L$ every week.
This would also create a "bank" of L$. If 100 people buy 100 of these cards with 1000 Elf-Bucks each, you have 100,000 L$. It's unlikely all of those will be used. So, like a bank, you could probably get away with only actually having 50% or less of that L$ - meaning you can spend the other 50,000 L$. It has to be carefully managed: the last thing you want is to go bankrupt.
SecondLife seems like it would be the perfect place to create this kind of "economic minicommunity" which is largely self-contained. There are tremendous benefits to having this sort of system running, not in the least the fact that it is a controlled society. You can invite and boot whomever you want, reducing the amount of noise and graft in your community.
It needs to have an economic basis, or the members will drift away. I think it's a good idea.
I don't know if Linden Labs would have a problem with it, but I don't see what they could realistically do about it.
Posted by: Craig | October 03, 2005 at 01:29 PM
Ok.. Hold onto your hats here. It may not happen often
/begin AgreewithProkofy.blog
The idea of a secondary Currency in SL is dangerously complicated and limited:
1) The areas owned by the issuer of the currency would have to either close their borders to outside trade and customers (Which would lead many designers to pull their product) - OR - Script in purchase arrangements which would end up being a barter system to run parallel to the L$ on every possible item which can be bought/charged for.
2) The Users of this new currency would still get paid in L$ ofr dwell, competitions and other income and would then be FORCED into exchanging, which is a horrible money sink scheme.
3) The users of this new currency could become a sort of insular Meta-eastern Bloc which doesn't venture into the world of the West.
4) "Hey, This ChungDolla is worth 20,000 Linden, but it won't by me water here in the Hell sim, they only take $L."
For RP uses, an item that is touted as "Xmoney" and is used to advance a plot would be a good appliction. Earning "Creds" in the FPS arena which could be used for upgrades only in that area would be effective. Overturning the Linden? Bah. Isn't the saying: "Don't take any wooden nickels?"
Posted by: Janus Sartre | October 03, 2005 at 01:37 PM
For the record there is a long history of self-coined currency in the united states and collectors still trade the stuff on eBay. My great grandfather ran a general store and several other businesses in the midwest and issued his own currency (we have some of the coins still). Already we have seen gold currency in rpg's like Darkwood, and on simcast we were actually going working on a virtual game in game credit card that would be a store of value for exchange of simcast goods.
I don't see how one could argue that a currency developed for a game or subworld in SL could not take root and "become real" like Lindens are. What, only one iteration of virtual currency being real is possible?
I think the elves could easily support their own currency. It might be gifted by Wayfinder for builds that he appreciates. Initially it would be for purposes of roleplay, but in the fullness of time, who knows?
Posted by: urizenus | October 03, 2005 at 01:57 PM
Well, in doing my prok, without being grounded in any economic theory, I just have to wonder how it ever grows from being a kind of glorified green stamp into actual currency. Let's say I close my borders, and put "group only" on all the parcels. Let's say I get all those tenants to agree to my minimal government, which I announces, has only two functions: 1) renting out land and 2) returning prims not set to the group/banning avatars.
To get started, I had a treasure hunt -- but of course that required dicking with the permissions to get it just right, that people could find the object, buy it for $0 in its original state (not a copy, and not put on "copy" obviously, so as to keep the currency value). Then they had to put their found proks into a prim to return to me. Of course some enterprising young sprites used scanners or object finders to find the passive objects with my name on them on the sim, so they could locate 192 instantly even if hidden under water, etc. Others figured out they could take their found proks and sell them to tenants who would then want the $150 off their rent option. It's hard to get currency "going". You hand it out, people use it to buy something valuable (a rental house, land) but.. then what? It's hard to make it stick. If you had an array of stuff, like the houses, land, clothing, vehicles, etc. that might work.
At the end of the day, you still want to cash out to US dollars. So all these other currencies do it just create all this churning activity that you will still have to convert to LL then convert to dollars.
Posted by: Prokofy Neva | October 03, 2005 at 04:54 PM
I once wrote a story about a guy in Ithaca, NY, who has been printing and spending his own currency there for ten years or more. They're known as Ithaca Hours. A not-small number of people in the town accept and spend it. It's all perfectly legal. All you need for a currency to take root is to have someone agree to accept it in exchange for goods or services. In fact, it's not a currency until that happens. Once that does happen, presto, it's a currency. That doesn't obligate anyone to accept it, of course. But you don't need any particular conditions to make it work, you just need the agreement of the people who are going to accept and spend it, and they can be a group of any size, large or small, whether they exist within a country of the real world, as their own country or in the virtual world.
Now, creating a currency with all the bells and whistles of the Linden$, i.e., one that is manipulable by scripts and such within the virtual world is a different matter. Although actually, maybe it's not. If you have a server to keep track of transactions and people trust you enough to use your scrip, voila, there's your currency.
The barrier to entry is in fact very low. Whether you ever get anyone to use your currency outside a place like Ithaca or Second Life, on the other hand, is another matter.
Posted by: Walker Spaight | October 03, 2005 at 08:59 PM
Haha, Ithaca Hours!!! My hometown's claim to fame in some circles. Can't say I've ever recieved one or spent one, despite having lived there for 18 years, but they certainly symbolize well what a bizarre and distinct place Ithaca is from its surroundings. Which might be a good enough reason for Elves to make their own currency too.
Posted by: Hank Hoodoo | October 03, 2005 at 09:24 PM