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.
- 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.