Linden Lab's banking ban announcement, two weeks on
Filed under: Economy, Opinion, Second Life
Tomorrow, Linden Lab's Second Life ban on unregulated banks kicks in, and both banks and financial institutions that pay or charge interest must change their modes of operation or cease operating as of Midnight tonight.
ATMs must be removed (or in the cases of those that use avatars to that purpose instead of ATMs, we understand that the avatars have to cease doing their thing) - or face punitive removals and/or administrative sanctions from Linden Lab.
For two weeks we've had protests - some assuredly genuine, some apparently staged - runs on banks (a sort of game of musical chairs, where everyone hopes not to be the one left standing when the music stops), and the usual commingled mish-mash of cheering, screaming, jesting and angry outbursts that you get when... well, when anything at all changes (or, actually, when it doesn't change as well. Pakka's law holds firm, and that sort of thing is a steady susurration everywhere).
So, looking back over the last two weeks of user-to-user transactions and Lindex currency exchange data, what aggregate effect on the economy can we conclude that announcement two weeks ago had?
None at all.
Well, almost.
There has been a slight, but not really significant increase in user-to-user transactions, and ... well, that's about it.
This is not to say that there hasn't been significant personal impact on people and organizations within Second Life. Especially if you are one of the affected institutions or relied on them or lost money on them. Surely there's plenty of negative impact from that perspective, but in aggregate? Nothing much to tell.
The two weeks since the ban have seen record concurrencies, with higher usage of the virtual world than in any time previous, and there's been no sign of inflation or deflation of the Linden Dollar in that period.
Short version, after two weeks, there's been no significant aggregate impact on the economy (news which will doubtless surprise some, and anger others) - as we said, personal impact may be significant, but doesn't factor large in the economy as a whole. At least not yet.
We'll take another look in the economic figures in another week or two and see if there's more significant effects in the broader Second Life economy.
_thumbnail.jpg "Aion Beta: Asmodian Ascension Quest")
Reader Comments (Page 1 of 1)
Arthur Fermi said on 12:25PM 1-21-2008
This is significantly more important to the blogshpere than it is to the majority of secondlife users. Even if there are 500,000 active users in SL, there is probably less than 1% of that population that has an accounts. I'm not saying people won't loose money, and i don't feel for them, I just think that a mountain range has been made out of a molehill
Arthur Fermi
Reply
Pavig Lok said on 2:11PM 1-21-2008
Oh it was rather important to the residents I had in my ear for several days last week - "the sky is falling" they told me as they ran in circles, "the economy will crash". Mind you these folk were mostly shop owners and sl "professionals" who have enough lindies coming in on a daily basis to make banks worthwhile as a holding station for their takings before their monthly cash-out or somesuch.
I think Mis Tateru is correct in that this will have very little aggregate effect on the global economy. To folk who are closer to the banks as clients, and deffinitely to the banks themselves, it's true - the sky has fallen. But it's had a large effect on only a small number of people, and as the economy normalizes I see very little difference in the long term.
Perhaps now there's a gap in the market for _real_ properly backed financial services, as they won't have to compete with smaller high risk cowboy operations. I'm sure any banks currently in SL which qualify as financial institutions under law IRL would agree, and be back trading as soon as they can get the paperwork together.
Reply
Arthur Fermi said on 2:42PM 1-21-2008
This is completely overblown and over hyped and to be honest, any business owner having a need for a bank should be moving Lindens out on a daily basis and converting them to cash. Handing money over to a stranger is not a smart business strategy for anyone. I feel sorry for the new people but anyone who has been in SL for 6 months watching this and not pulling their money or moving it to "a better bank" its their own fault.
Reply
Frans Charming said on 3:58PM 1-21-2008
It has nothing to do with how long you have a account. Nobody should handover anything they value to a stranger that only says they will give some interest on it. SL or RL.
Reply
Prokofy Neva said on 3:05AM 1-23-2008
Blinks.
Tateru, you truly live in some other life, not the Second Life of many people, but...some other life...beyond...beyond comprehension.
Oh, I'm not saying that there is any large percentage of people who use banks. There aren't. My polls show that. Arthur is right. The majority of the 350,000 people who spent more than a $1 last month in SL didn't spend it on a bank. But, a goodly chunk did, and that does have a pull on the economy.
If nothing else, surely you can see that there is a huge volume of cashouts. I don't know *what* to ascribe the huge volume of LindEx -- historical highs -- activity on January 3 and January 4th except New Year's resolution not to spend money on a game...or conversely, some people with school holidays still and time to play...or people with an early tip-off about the banking announcement Jan. 8.
The fact is, the Lindens were forced to print and sell far less Lindens this month -- this is what I blogged about today:
http://secondthoughts.typepad.com/second_thoughts/2008/01/bank-holiday.html
You cannot deny that as real revenue lost for Linden, and a sign of people needing to cash out in large numbers -- and not making the round trip back again. Of course we must wait til the end of the month, but it's not a good sign.
Next, there are a number of people looking very hard at the numbers of 60-day log-ons:
I did, anecdotally. Also Rezzable did:
http://rezzable.com/blog/2008/uncategorized/2006-vs-2007-second-life-data/
and Dusan Writer has a thoughtful piece on the same subject:
http://dusanwriter.wordpress.com/2008/01/22/rezzable-parses-second-life-stats-its-the-economy-stupid/
And these figures show not just churn, or poor retention, but poor retention even of those retained for the 60 days...and more people spending less.
Banking may only be part of this, but it's a factor, as was the casino ban, because it involved the entry-level economy for newbies.
Ginko gave every single avatar who logged on, regardless of whether they were the 10th alt, a free $100 just for registering with the bank -- and not even requiring a deposit. That kind of newbie grants program, unsustaintable as it proved to be, picked up the slack when the Lindens stopped paying out dwell and higher stipends.
In short, the casino ban, and then the banking ban which made sense too, did have an effect on some very big players' economies, and some significant thought not majority number of residents, and that did affect the economy, as can be seen in the numbers: Lindens lost revenue, and people were forced to cash out at lower levels of value.
Reply
Pavig Lok said on 11:37AM 1-23-2008
Maybe Prok is right. Thank goodness the US Federal Reserve kicked in to regulate transactions or it might have had a worse knock on effect on the world economy. I wouldn't want it devaluing my superannuation investments.
http://www.slnn.com/article/federal-reserve-ll/
:P
Reply