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Reader Comments (21)

Posted: Jan 21st 2010 12:28PM (Unverified) said

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Nice speculations considering the lower user hours number ... but what are the key findings of your recheck?

Posted: Jan 21st 2010 12:43PM LaughingTarget said

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You know what's really sad about it all? This is how nations calculate GDP.

Posted: Jan 21st 2010 1:24PM LaughingTarget said

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I hate the iPhone so much.
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Posted: Jan 21st 2010 12:49PM LaughingTarget said

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You know what's funny? This method is the exact same one used to calculate GDP growth in every nation on Earth.

Posted: Jan 21st 2010 2:12PM (Unverified) said

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I surely agree on user-to-user transactions data not being really relevant.

But what about the 11% growth in the aggregate earnings of Second Life Residents?
That seemed a positive data to me, given the shrinking worldwide and U.S. economy during 2009.

Hopefully, you're going to publish more analysis of the other statistics released by Linden Lab...(?)

Posted: Jan 21st 2010 1:48PM (Unverified) said

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Hahahah!

Last year I proclaimed all those hyped-up proclamations of the stunning growth of the Second Life economy and record-breaking precedents and blah blah blah all a bunch of hogwash for exactly the reasons you state here.

The only true value of anything "SL economy related" the way I see it is and always has been exactly how you describe it: whatever legal tender is changing hands and I'll qualify that a little further: legal tender changing hands between Linden Lab and anyone else.

I convert Linden Dollars to legal tender credit all the time (I consider a "cash-out" being the actual requesting of payment of that credit into my PayPal account or a real bank check I can cash - hence "cash-out"). But I never cash-out that credit. I let it sit so that Linden lab takes my tier fees and preemie account fees and all that from it. So if I don't cash-out - it still should not really count as part of the "economy" because it is still the same dollar for the candy bar back and forth, even though it is legal tender.

The point is all those fancy numbers mean nothing. Exactly because of the candy bar example you used above. Using only the number that actually goes into and out of banks and the Lindex.

Posted: Jan 21st 2010 5:16PM (Unverified) said

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Actually the L$ is not legal tender, read the fine print that you agreed to in the EULA. In particular, if say your account was hacked and then resulted in its contents (L$, assets, and all) being lost there's no real obligation for the Lab to reimburse you. Or say you were a griefer and decided to stop griefing, then you load up the account with some money as L$, but later on you get banned. Well, according to the EULA they don't have to cash you out, it's not money you bought, it's SPACE BUCKS.

The reason why it's not money is because Linden Lab doesn't hold any currency (paper notes or otherwise [bullion] ) in reserve to cash out everyone should such a run on the L$ occur. Otherwise they would come under federal regulations for such financial ventures just as Entropia Universe is under such legal considerations in its own country (it was incorporated or partnered with a bank if I remember right) which has a similar result. In the end, it's not money that's actually circulating, it's SPACE BUCKS that is circulating.

What the Lab needs is actual money coming in at a growing pace to show real economic growth. Real money that can be turned into more developers to fix client/server problems, more hardware for sims, more money to dole out to the members of the equity (they are a privately traded company), and so on. Without that growth they are stuck in the mud, stagnate and unable to progress.
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Posted: Jan 21st 2010 7:19PM (Unverified) said

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The Lab doesn't ever convert L$ to USD out of its own pocket, so the idea of having reserves is moot. It's never paid a user for a Linden Dollar. Linden Dollars are only paid for by other users.

Yes, the Linden dollars are "space bucks", but only to the extent that pretty much every other currency in circulation is also.
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Posted: Jan 21st 2010 1:56PM (Unverified) said

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This is just geeking edgecasing nonsense, Tateru, and it's especially silly when you don't tell us WHAT the errors were.

The *volume* of transactions still matters, even if it is merely money passed back and forth between somebody playing a slot machine, and then getting a win back from the casino owner, er legal game of skill owner every few moments.

Economies are agnostic about the content of the transaction. There is nothing something less authentic about gambling or other rapid transactions than there is in putting bus fare or laundromat payments and getting change or buying your groceries. It's just a transaction.

Your notion that the entire economy also consists of nerdy little kids standing around with script and passing money back and forth is also something invoked every time this discussion is had, and dismissed as a silly anomaly.

The volume may be exaggerated in another way, in that buying and selling Lindens is merged with the report of transactions strictly in world.

Your other notion that "newly minted currency" is a metric is also silly -- you're forgetting *the Lindens print money*. They have Supply Linden put into the LindEx unilaterally as an emission, i.e. not a facilitation of exchange between buyer and seller, anywhere from $100,000-500,000 *US dollars* worth of Linden currency a month.

The way to judge the economy is by the total amount of transactions over a dollars. In December, this number was 487,919 in December 2009. It was 458,783 in March 2009. That means that in nine months, the economy grew by about 6 percent. That's about how much it usually grows. That's the real number, everything else is speculative, but even so, it's useful to know the volume and velocity of financial transactions, and those have ground despite the removal of gambling.

Posted: Jan 21st 2010 4:38PM (Unverified) said

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wouldn't the buy and sell prices of the L$ be a good indicative of the health of the economy?

Posted: Jan 21st 2010 7:22PM (Unverified) said

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The exchange rate isn't a bad indicator, but users make an (unintentional) effort to keep it flat, so I'm not convinced how good an indicator it really is.
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Posted: Jan 23rd 2010 12:32AM (Unverified) said

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is that any different from how it happens with the exchange rate of any real world currency?
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Posted: Feb 20th 2010 8:47PM (Unverified) said

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imho to compare SLs economy and compare it with RL economy it would really being interest in how big the sum of L$ (M3 or M2) is.
I once missed that the data are provided by LL i toke them and hold them near the us$ https://jira.secondlife.com/browse/WEB-973 .
Data crunching could be taken much further, but the line of L$-supply against us$ (M2) looks already impressive.

In 3 years the L$ somewhat like M3 grow near the factor 10!

TigroSpottystripes Katsu said on 4:38PM 1-21-2010:
> wouldn't the buy and sell prices of the L$ be a good indicative of the health of the economy? ...

I tend to see LindEX as a regulated market.

If we take a look at the L$/us$, it swings since years between 269 and 259L$/usd.
no big breaks of the top or lower line.

For sure the user2user transactions are to high, but it gives us a trend and comes close to the GDP (Gross Domestic Product) from RL economies.

Brede Armozel said on 5:16PM 1-21-2010:
> Actually the L$ is not legal tender, read the fine print that you agreed to in the EULA. ...

At the moment a virtual currency gets trade able to RL currency the virtual one looses some of its virtual-being. The point in the EULA is simply not durable form my point of view.

Due do many ppl (theoretically) have to pay tax in their country for their profit as soon as they realize it to a RL currency and due SL is so often compared with RL countries (its said that the landmass of SL is like this country or the economy would be like that), we really should get a chance to compare the numbers.
Specially if the ppl have to pay taxes on their profit.
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Posted: Jan 21st 2010 5:59PM (Unverified) said

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The following statement may be on loose footing:

"Compare this with user-to-user transactions: In my user-accounts (including trust accounts), I've got just about one million Linden Dollars. Now, for accounting purposes I'll move them around. Bam. User-to-user transactions jumps by one million Linden dollars. Bam. There it goes again."

LL bans or suspends accounts when they shuffle large amounts of Linden Dollars between alts, or even individuals multiple times, I forget what the amount is, but it's a surprisingly low amount.

I can't find the original article, but it is referenced here in the Alphaville Herald:
http://www.secondlifeherald.com/slh/2007/08/our-heros-are-d.html

Posted: Jan 22nd 2010 1:18AM (Unverified) said

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But not something I've ever had trouble with. Maybe they're used to me doing it by now.
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Posted: Jan 22nd 2010 1:15AM (Unverified) said

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I just wonder one thing. *Why* has the number of transactions increased so dramatically from one year to the next? Is there something new on the grid that can be traced to the dramatic increase? Yes, as Hiro points out in his article, the growth of the LindeX "cash-out" increased by 6-7% or possibly even more if third-party exchanges and XStreetSL "cash-out" are added to the value. But not much more. So why the sudden increase in the user-to-user transactions? What made them shuffle money around between users much more in 2009 than 2008? Is there something _new_ on the grid in 2009 that makes them shuffle it so much more?

Questions, questions :) But we'll never have the answers, I guess, unless Linden Lab reveals them.

Posted: Jan 22nd 2010 1:23AM (Unverified) said

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Well, looking at Linden Lab's gross xstreet sales, you can conservatively assume that xstreet double-handling accounted for three billion linden dollars of the user-to-user transaction figures. I don't have the back of an envelope handy but that's about 11 or 12 million USD in double-counted user-to-user-transactions, right?

Plus, they're *both* used as growth indicators. Win-win, right?
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Posted: Jan 22nd 2010 1:34AM (Unverified) said

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Just as an addendum, we are in no doubt that the SL economy has grown over 2009. We don't believe that the figure is 65% and we don't believe that the figures that are presented justify that figure. So, we don't actually know how much growth there was.

Hiro Pendragon figures it may be seven percent growth. If so, that's a very good result.

Given last year's overall economic conditions, seeing a growth of even 2% (and the figures to back that up) would have been quite heartening.

Posted: Jan 22nd 2010 11:52AM (Unverified) said

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I don't believe for a second that the economy grew 65%, but at least they're comparing the same figure, year over year... and, of course, they're going to select the one that paints the SL economy in the best light. A lot of it has to do with the XStreet/OnRez acquisition. I know that in the case of SLBoutique, deposits / withdrawals made a fair percentage of our total transactions, and those would count.

Posted: Jan 22nd 2010 11:02PM (Unverified) said

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I remember there was a big problem in the past where the Lindens tracked it down to a guy sending L$ between two of his accounts repeatedly with testing some scripts. I was a bit taken aback when I saw the new statistics as was immediately reminded of this. Most other games allow us to have multiple characters under one account. Those figures may have been more accurate if that option was available.
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