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A virtual bank crisis
January 24, 2008
The online virtual world of Second Life is experiencing a real-world bank run after Second Life’s operator, Linden Labs, closed down about a dozen virtual financial institutions this week. The pretend banks hold deposits in so-called Linden dollars, but Lindens are convertible to real U.S. dollars. Linden’s new policy, under which only chartered banks will be allowed to serve Second Life’s 12 million users worldwide, was prompted by the failure last August of virtual bank Ginko Financial, which cost real depositors an estimated $750,000. “There is not a whole lot that is fake about this,” says Cornell University business professor Robert Bloomfield. (The Wall Street Journal)
What the commentators said
Second Life is “a fascinating social experiment,” said Tim Stevens in Switched. And watching a world with “few rules and fewer rule enforcers” deal with a banking collapse brings its own “morbid curiosity.” Just like “a certain other economy we can think of,” Second Life is probably “in for a bit of a recession.”
So now “virtual bankers are throwing themselves off skyscrapers,” said Nick Booth in The Inquirer. Well, don’t cry for them—these “avatar bankers” are the ones who “ruined the game.” Just like “the stupidest players in Monopoly,” they “lost the plot” and confused Second Life’s economy with the real one. With cheaters like that in the game, it’s time to go “in search of the rule book.”
Yes, the bankers were “shady,” said Mary Jane Irwin in the Valleywag blog. But come on, who would fall for “200 percent interest rates”? Only letting chartered banks operate is a nice try, but it won’t be enough to “pop Second Life’s bubbly fictional economy.” Not with all the “clever virtual shyster entrepreneurs” out there to “keep the farce going.”
Not everyone is welcoming the new rules, said Raju Shanbhag in TMCnet. Following Linden’s crackdown on gambling and underage virtual sexual activity, many Second Life users are chafing at the company introducing “more regulations.” After all, with the motto “Your world—Your imagination,” you don’t want to defeat the ideal of “a world where one can run one’s imagination free.”
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