Big Business Money based on trust

Thursday, 4:30pm - 5:30pm

Virtual Currency / Virtual Business = Big Business Money

(Virtual currency) exchanges promise the opportunity to stimulate virtual economies not just throughout individual virtual worlds but across worlds. Join us for a discussion on what the future will look like as these exchanges take off and how users will conduct commerce. What does it take to build and foster a thriving virtual economy?

• Edward Castronova, Associate Professor, Indiana University (moderator)
• John Zdanowski, Chief Financial Officer, Linden Lab
• Peter Phillips, Technical Director, Millions of Us
• Guntram Graef, Co-Founder, Anshe Chung Studios, Ltd.,China
• John Bates, Evangelist, Entropia Universe

John Bates of Entropia was double booked, so he started off with a little insight on Entropia. This virtual world is the only one that has it's currency really pegged with the US Dollar at an exchange rate of 1 USD to 10. Entropia is a mixed world with gaming and social elements and when things cost you real money, it changes the came. Buying guns and bullets that cost you (even if it's nano-payment) makes the game take on a new dimension.

Anshe Chung Studios now is one of the largest of 45.000 profitable companies in Second Life, with total assets going up to the region of 800 islands / sims. What would happen if they withdrew all their assets at once? Both John Z of Linden Lab and Guntram Graef aren't afraid it would blow the economy. Linden Lab is putting on about the same amount of servers every month. Stop that for a month and the economy will stabelize.

The same happened with the banning of Gambling, said Zdanowski. We had to do this because of US regulations or run the risk of being shut down. Overnight the user to user transactions dropped with 40%. Was gambling such a large part? Not really. Zdanowski estimates that gambling was only up to 3% of the market. The exchange rate never dropped and within 3 weeks the stock exchange was level again. The Linden Dollar has been very stable in the past year and a half, leaving not much room for money traders and fluctiating only a couple of Linden cents to the dollar in this period.

Zdanowsky doesn't see the Linden Dollar as a real currency though, but more a licence to use certain aspects of Second Life. Residents have to have trust in the currency, it's stability, in order for Virtual Worlds to create successfull economies. Earlier this month Linden had to add VAT to their game for European Users. This also because of international monetary regulations, and the Lindens are fully aware that this puts European users, about 35% of their community at about a 20% disadvantage. User to User transactions aren't taxed though.

I asked John Z and Guntram how to make the economy safe, as in the Netherlands we've seen a story extortion and abuse over Runescape money several weeks back. Also think of money laundring between virtual worlds through the Anshe Chung Exchange. No problem here again, according to Linden's CFO. They're monitoring transactions and if there's a resident wanting to buy Linden dollars worth say 10.000 USD he'd personally invite them to fly in and find out what the heck they would wanna do with the money. This economy is based on trust. One fundamental rule for us is to know our residents. We know who makes money. It can happen that all of a sudden you're a new sucessfull virtual entrepeneur, but then I'd like to personally meet you and get to know your business. He expects the next wave of regulatory action to take place in the banking sector in Second Life and Linden have hired a hotshot laywer and former internet crime prosecutor to be up to speed with all the world wide regulations regarding this.

There is a lot of scepcis, a lot of resistance against Linden playing a strategy that's so much hands-on on the economy. Yet Virtual Worlds do take a new place in the world of global economy. They're dealing with micropayments all over the world. The European VAT regulation was never designed for this, it was designed to protect the local market in the 80's as US based companies like AOL started pricedumping their ISP services on the European market. Now Linden has to deal with it, or again risk shutdown in Europe. In my personal opinion, they're on the right track. John's solid performance was a sign of confidence on behalf of the Lindens that they're on top of the game.

Final tidbits:

• Chung obtained an Entropia Banking Licence earlier this week


• Chung is now implementing an interface to exchange IMVU credits


• Chung also provides Venture Capital for virtual startups.


• It took Peter Philips, former Linden Lab employee less than three weeks to program the Lindex


• Entropia has a Swedish banking licence


• Companies have to closely watch the market to stabalize it. Neither inlation or deflation is a good thing for an economy, even if it is virtual.

Metaverse news august

Last week has been very busy with pressing Real Life projects, so I've not been following the news properly. Here's a round up of some interesting news from the virtual world blogoshphere:

Ambling in Second Life:

• Brand Protection in Virtual Worlds
  
  The topic of branding should be close to the heart of any organisation setting up in a virtual world. In theory, this new environment should not pose any greater problem than existing communications channels, such as the web, TV or the printed word. However, there is one key difference between this and existing channels: it is an unknown.
• Another Second Life Conference is Cancelled
  
  I have just received news that SLCC 2007 - Deutschland, due to be held from 21st to 23rd of September in Dusseldorf has been cancelled.

Virtual World News:

• Millions of Us Enters Gaia
  
  We reported in June that Millions of Us had partnered with Gaia Online. If you want to see the fruits of the partnership, the first project went live yesterday.
• MGA Entertainment Looks to Expand Online Worlds
  
  We reported yesterday that MGA Entertainment, maker of Be-Bratz, was following up with a virtual world tied to its Rescue Pets line
• Virtual Worlds: The Future of Military Training
  
  We reported earlier in the week that Forterra was opening a National Security Division
  (NSD).
• MGA Entertainment Launches MyePets.com, Second Toy-Based Virtual World
  
  MGA Entertainment, maker of Bratz and BarbieGirls.com-rival Be-Bratz.com, announced its second toy-based virtual world today--Rescue Pets: MyePets.com.
• IBM Looks at New Virtual Transactions Methods
  
  "IBM aims to invest the majority of its research and development dollar into building software that can link traditional transaction systems to modern interfaces, for example, releasing automatic teller machines that link to banks in virtual worlds such as Second Life," said SVP Steve Mills.

Metaversed:

• 15 Things You Should Know About vSide, The New 3D Facebook
  
  The Grid Safari group got the grand tour of recently launched vSide today by Doppelganger founder Andrew Littlefield. We took a long look around the entire system, and learned a whole truckload of new tricks in what has to be one of the best looking 3D social environments, if not the best, I've been in. vSide is a beautiful space for teenagers to hang out, socialize and listen to music. As Littlefield puts it, if Second Life is Myspace, then vSide is Facebook.
• Google Earth + Skype + Multiuser = Unype
  
  Created as a free project by Holoscape Inc. founder Murat Aktihanoglu, Unype allows multiple users to interact with the Google Earth API together and speak to one another through Skype. While there has been much speculation about Google's plans for future virtual worlds, Unype demonstrates how easy it might be to put something really interesting together. It's in a very early beta stage, but at a tiny 210K download it's definitely worth taking a few moments to look at. (Unfortunately, Windows only at the moment.)

3PointD:

• Conduit Social Gaming World Gets $5.5m Round
  
  Susan Wu, who was instrumental in arranging the Virtual Goods Summit I moderated a panel at in June, emailed me some embargoed news earlier today, and though I begged and pleaded, she asked me wait until midnight to post it. However, I see that the news is already out there, so I have to apologize to Susan and jump the gun, if only slightly: The news is that Charles River Ventures, where Susan is a partner, has just co-led a $5.5 million Series A financing of Conduit Labs,
• Metaverse Roadmap to Singapore
  
  The fifth annual State of Play conference on legal and social issues in virtual worlds is under way this week in Singapore. I had to cancel my trip out there, which is a shame, since SoP is consistently one of the most interesting gatherings of VW thinkers. Jerry Paffendorf is there, though, and reports that the chin-wagging is already gathering steam.

KZero:

• Beastie Boys live in There
  
  Beastie Boys live in There. That’s live as in appearing in real-time as opposed to living in There, just in case you were wondering. As part of their recently agreed partnership, Capitol Music Group and There.com brought The Beastie Boys in-world on Monday night to hang-out with the residents. Other planned event sclude Korn, Yellowcard and Lily Allen.
• HiPiHi announces global strategy
  
  HiPiHi announces global strategy. The Chinese 3D virtual world HiPiHi announced its global strategy on 20th August 2007 in Singapore，and has confirmed their strategic investors, including ngi group.

Ugotrade:

• Thinking Globally, Connecting Virtually: Anshe Chung Makes a Home for Non-profits on SL.
  
  Anshe, through her own portals on Second Life and other ventures, has been responsible for getting a vast number of people involved virtual worlds. She explained that she hoped the Non-profit Commons in SL could extend this process of finding new ways to connect technically, socially and emotionally to the members of non-profits.
• Social Web Music, Global Change, and "the web as a virtual world"
  
  I met with Ansi Orochi (a.k.a. Ansgar Schmidt, Lead Architect, Virtual Worlds, IBM Research and Development) on Sawubona on Second Life to ask him the question: “What Are The Most Important Characteristics of Web 3D?”


• Next generation of Software Design: 3D command/service centers in Second Life
  
  Yesterday, in Second Life, I met Illuminous Beltran, a.k.a Michael J. Osias, Chief 3D Architect for the IBM IT Optimization Business Unit. Illuminous is leading a team of researchers building 3D Command Centers for customers. And, during my tour of the Virtual Network Operation Center Division of Scripts in the Sky Research Labs, Dreamland Industries, in Second Life, he introduced me to potential role of Second Life in the next generation of software design.

SLCC dispute

Second Life seems to be at the center of debate these days. This time it is no legal argument, no violation of the ToS but the SLCC (Second Life Community Convention) that's infuriated many residents and bloggers.

NickWilson of Metaversed reports:

"Second Life's SLCC mixed reality community event has been a hot topic of late. Since the publication of a "community standards agreement" which among other things prohibits the recording of panels, even by the panelists themselves, residents have been in uproar. The overbearing, restrictive rules being imposed upon attendees is not the only point of contention however. The question monopolization, and the "non profit" status of the organizers, Future United and their partners Phreak Radio, (who have exlusive rights to everything panelists and musicians produce at the show), was called into question today by vocal critic, Prokofy Neva."

[Read full article here]

Let's track back a while.

People have been working hard on getting the annual Second Life Community Convention on the road, making tons of arrangements. The Convention is supposed to be a big Fan meet, sponsored by Linden Labs, Millions of Us, Rivers Run Red, Anshe Chung Studios and many many more more and/or less known content creators.

Something happened on the way, as Moo Money reports in the Second Life Insider:

"With the registration of a couple of controversial Second Life residents, some are in a state of panic. Many feel that these individuals would hamper their convention experience. Another issue that has also cropped up is the entrance of "press" requesting permission to film. Due to these incidents, The Future United Group has decided to clarify their policies in a Community Standards Agreement."

This happened on June 28 2007 posted in the SLCC Community Standards - Agreement, which did not seem to calm down residents, but instead irritated a lot of people. A few days later irritation turned into aggravation with a waiver sent to performing artists.

The full text of the 'document' can be read at SL LIVE Music Blog and includes indeed an aburd requirement for artists. As SL Live author Slim Warrior rightfully remarks:

"lemme get this straight… I am asked to perform, having sent off an “audition mp3′ then, I fork out a fortune to get to this event. I also pay a registration fee and of course will be performing for FREE! but if I ‘don’t’ sign, I can resign from the line up…. Thanks for that! "

This has caused several artists to cancel, among which the turntable wizzard DJ Doubledown Tandino who commented "I, Doubledown Tandino, ain't gonna go livin' by no contracts no mo'."

From a performers point of view this is indeed a killer-contract for artists who write their own music and thus own the copyrights. They are asked to perform for free and give all their rights to Phreak Media so they can “recover a small portion of their costs’

SLCC's doomsday bells

SLCC's doomsday bells tolled when Prokofy Neva reported:

"Has everybody seen what a road wreck the Second Life "Community" Convention is? It's an accident going somewhere to happen, unless its sponsors, including RiversRunRed, Electric Sheep Company, New Media Consortium, Anshe Chung Studios and many more step up to the plate immediately and demand participation in, and accountability from, the organizers in the form of the Future United Group and Phreak Radio -- these intertwined FIC entities that have hijacked the conference process for years now, and whose chickens are finally coming home to roost."

SL's Land of the Free

Second Life is getting a lot more press than any other virtual world at the moment, though publicity seems to be on the negative side right now. This is bound to happen as SL offers much more freedom to their users than any other VW / NVE. Second Life is the ultimate virtual representation of the Land of the Free, the American Dream.

Linden vs. Bragg could never have been Kaneva vs. Bragg and Linden vs. Familes de France could never have been There.com vs, Familes de France. Linden vs. Woodbury could never happen in Stagespace.

These legal suits are inevitable and some will be won, some may be lost by Linden Labs, as Second Life becomes the testground for virtual law. They will get media attention, good or bad, but that should not influence our opinion of Second Life.

Home of the Brave

The case with the SLCC is different though. It is nog an argument between Linden and residents upto no good, or careless naive users that happen to be at the wrong place at the wrong time. SLCC is all about Enjoying Second Life. We have a mutual interest to have Second Life succeed. Both Linden and SLCC will like to see the Convention leaving positive thoughts on Second Life.

I am sure all sponsors, who have a financial interest in the success of Second Life, and all residents who invest money and/or expensive time in Second Life all wish to further Second Life's advance. With that objective in mind I would like to call on the SLCC organising comittee to take a deep breath.

Sit down together and decide a mutual course of action. Dare to rewrite and admit 'clumsiness' where possible. That would be Brave.

Chung boosts virtual finance

Earlier this month I've blogged about Anshe Chung getting a banking licence for the Entropia universe. It seems like that this was just a starter for our Metaverse Mogul, according to a press release on the AC Studio website:

"Anshe Chung Studios is preparing to launch a virtual financial market, financial products and a set of services that are going to, for the first time, allow direct capital flow and investment across virtual world boundaries. This step will be the first of many in the creation of an open, cross platform Metaverse economy that transcends individual virtual worlds. "Some virtual worlds like Second Life (R), Entropia Universe (R) and IMVU (R) have demonstrated the enormous economic potential that exists when key sectors of a virtual world economy such as content creation, trade, banking and services are privatized. This has lead to a boom in each of these worlds that has yet to be matched by any other economy, real or virtual", says founder Ailin Graef a.k.a. Anshe Chung. "Now the time is right to go further and link these exciting spaces together, to begin with the creation of the global Metaverse." [read the full article @ Anshe's site]

Intergalactic news

Here's some interesting news from other media

Second Life resident demographics

Both 3pointD blog and the Dutch webwereld report on the current statistics for Second Life. For the first time the US visitors were not the most active SL users, in march 2007 SL was visited by 207.000 US citizens, but were topped by the Germans with 209.000 residential immersions.
Numbers 3 to 5 are France, UK and the Netherlands. These figures were produced by a comScore research.

Based on the comcast publication, serious Dutch Press (Nu, De Pers and Elsevier) reported that about 9% of the Dutch have stepped into Second Life already. Linden Labs says otherwise, more like 2%). Anyway it would all wrap up to about 40.000 active Dutchmen in SL.

Hails from a different Galaxy

RuneScape, an MMORPG, reports that it has hit 1.000.000 (one million) subscribers. In the Wild Wild West only World of Warcraft can boast more subscribers. Of course, Cyworld Korea has many many more.

Thene there's news from yet another Virtual World, this time it's Entropia who's auctioning banking licenses. One of the most remarkable new bankers in Entropia is Second Life's inworld mega real-estate dealer Anshe Chung who acquired the licence for a lousy 60 US bucks. Superchung is perhaps one of the most cross-reality entrepeneurs at this moment, having commercials ties with IMVU and There.com as well.

update

Some of this blogs readers have pointed out that there was a serious error in this post. They're right. Chung purchased the licence for US$ 60,000 -and that ain't lousy anymore.

Virtual Fortunes

As Lordly already posted, businessweek is doing an SL special, here's the interesting part:

"Meet the virtual world moguls. The number of Second Life residents generating more than $5,000 in monthly income has more than quadrupled to 116 in the past year."

The millionares:

1. Phillip Rosendale (the guy who did SL)
2. Ailin Graef(Anshe Chung real estate)
3. Reuben Steiger (Millions of Us)
4. Sibley Verbeck (Electric Sheep)
5. Alyssa LaRoche (Aimee Weber)
6. Adam Frisby (real estate)
7. Kevin Alderman (Strokerz Toys & Amsterdam Sim)
8. Peter Lokke (clothing)
9. Christiano Diaz (snapzilla SL)
10. Adam Anders (whatever, over 100.000 sales a day)

To wrap it up: No 1 is the one who dunnit, 2 real estate owners, 3 big builders, 2 clothing &kinky toys and 1 sidekick. So if you're not good at actually doing something, you can always invest in real estate.

Fairchang Real Estate

Second Life's first and foremost real estate millionare Anshe Chung inspired many to invest in virtual land. One of the big newcomers is Fairchang Real Estate. Just south of IBM's Codestation and Dev World, the socalled Developers Archipelago, a whole new continent is emerging from the virtual sea.

As per now it consists of nearly forty sims, and if all rented / sold, should be able to give mr. Garth Fairchang a healthy little something to spend.