Linden Dollar Economy Announcement

Linden Dollar Economy Announcement: Stipend Change for New Premiums, L$ Sales by Linden Lab, and LindeX Circuit Breakers

We are going to make several changes over the coming weeks in order to provide Linden Lab with more tools to manage the Second Life economy. Stability of the L$ economy reduces pricing problems for creators and consumers of in-world content. As we have previously announced, detailed information about Linden Dollar sources and sinks is always available at https://secondlife.com/currency/economy.php.

Exchange rate stability requires a careful balancing of sources of new Linden Dollars, sinks of Linden Dollars, and the growth of the economy due to new Residents and increased economic activity. At present, money is added to the L$ economy mainly through a fixed system of payments related to the number of active SL users. Long-term, we believe that these fixed-supply systems will need to be replaced with dynamic mechanisms that respond to market conditions. So at a high level, expect us to gradually reduce fixed stipends, and move toward selling Linden Dollars into the economy at prices or using mechanisms designed to keep the economy stable. This announcement details changes in stipend amounts (for new users only), and specific guidelines for sales of L$ on LindeX by Linden Lab.

Stipend Changes

New Premium accounts that are registered on or after Friday July 21, 2006, will have a weekly stipend of L$400, down from L$500. Stipends for current Premium accounts are not affected by this change.

Selling L$

As a dynamic source of L$ in the Second Life economy, Linden Lab is going to sell a measured amount of Linden Dollars on the LindeX exchange. We want to continue to give the community as much transparency into our methods as we can, short of providing information that allows people to take unfair advantage of market trading opportunities. We will begin selling Linden Dollars on LindeX on or after July 24, 2006. The following restrictions apply to our LindeX trading:

1) Sales will not be secret. We will trade only from the account name Supply Linden. Our sell orders will always be visible on LindeX, and the supply of Linden Dollars sold by Linden Lab will be displayed on a separate line on the Economic Statistics page.

2) Sales will not be market-sale orders.  Supply Linden will list only limit-sell orders.  We will not sell Linden Dollars through market-sell orders.

3) Sales will have restrictions applicable to currency tier traders. Supply Linden will start trading under the limitations of Currency Trader Tier 2. This tier is limited to US$10,000 selling per rolling 30 days, and also limited to US$5,000 per day. Further information about currency trading tiers is available at https://secondlife.com/currency/describe-tiers.php.

4) Sales will be volume-restricted based on LindeX volume.  In any 30-day period, we will not sell more than 5 percent of LindeX volume in the past rolling 30 days.

5) Sales will be volume-restricted based on Linden Dollar sinks.  In any 30-day period, we will not sell more than Linden Dollar sinks in the past rolling 30 days.

All of these limitations are subject to adjustments, but all adjustments will be announced at least 10 days before taking effect.

LindeX Exchange 'Circuit Breakers'

In addition, effective immediately, we are establishing "circuit breaker" trading halts based on movement (positive or negative) of the average exchange rate in any given day, as follows:

>10 percent in any 12-hour period:  projected 1 hour halt

>20 percent in any 12-hour period:  projected 2 hour halt

>30 percent in any 12-hour period:  projected close until noon the following day

Averages will be determined for these circuit breakers at least once per hour. We continue to reserve the right to halt LindeX at any time for maintenance, or to investigate system misuse or malfunction. In the event we determine any automated halt period to be unnecessary, we may recommence trading prior to the end of the projected halt period.

As LindeX becomes an increasingly sophisticated product feature, we will continue to evolve these and other measures.

Comments

[Lewis Nerd]

How about doing things to improve things for those who do not wish to play the "economic game"?

I am strongly of the belief that the concentration on the 'economy' side of things is what will be the eventual downfall of SL, as people concentrate more on making money instead of having fun.

Lewis

[Madame Maracas]

Some of these measures seem awfully familiar, like fail-safes in place at CBOT and the MERC to keep things from getting out of hand ala Black Monday in 1939, and to that end I'm pleased.

That LL will be releasing currency, albeit at a rather controlled rate, into the pool via Lindex is frankly not surprising DESPITE the many protestations to the contrary in the past. Did I beleive that the non-participatory stance of LL would remain indefinitely? No. Do I (and I have to believe LL is as well) expect a firestorm of angst over this policy change? You betcha.

I am apparently, at my core, a rather naive person, as I expect folks to catch on and realize that SL isn't a game, nor a platform at it's root. SL is a business. The business provides a platform that can be "gamed" in a variety of manners, design, business, partying, socializing, lounging about are all valid uses of the resources provided on the platform by the business that is SL/LL.

To view the user/owner - resident/LL relationship in any other light is folly and leads to (from what I see) great dissatisfaction with the service (SL) provided.

I view these changes as expected, sensible and responsible. Would I rather that stipend bonuses and all those other revenue streams still existed? Yes, in a selfish way. Would I care to suffer the consequences? No, I spent time over at There.com. An empty VR world is a truly sad sight to see.

It's tough being da boss if you care about the results I'm sure.

Good luck! (hands out asbestos suits for all)

[Xavior Nicholas]

They could at least try to come up with ways to make money easier to obtain for new players. They've done away with with dwell, which makes camping chairs useless (at least, more than they already were).. they've done away with the stipend for new accounts.. they're lowering the prem account stipend.. and according to this they're putting restrictions on even buying L$.

I'm sure there's a lot of people going to throw a fit about this change, as they seem to with all the other changes. My only concern is how these changes are implemented. Like most things, making an adjustment in one area is going to have an effect in another area. Specifically, it's hard enough for new players to make money. They opened the registration so now there's a huge amount of new players with no money, and relatively little means of making any.

I'm not an econonomist or anything like that, but to me, this seems like it would create a concentration of wealth. Sure, by looking at numbers like volume and exchange amounts the economy might look like it's doing good, but the problem is that there could only be like 20% of the SL population actually taking advantage of it. The whole 'accounts after such and such date only get this much while older accounts get more' would be a good example of that.

In all fairness, the stipends could be the same for all prem accounts. Afterall, the account holders are 'paying' the same amount. It doesn't seem fair that they receive different amounts.

just my 2 cents.. for whatever it's worth.

[Crucial Armitage]

sounds like a good plan this was inevitable and to me it seems like a good plan over all.

[Linada MacKay]

The main thing this will do is selfpaying premium accounts. Sensible move for Linden to make money off, but not good for people planning to exist small scale on their minimal land while still keeping the game free.
Personally i think it would be better if income was made from landfees rather than basic land. Of course they are ways around premium accounts and still use land, but that's not what Linden wants to achieve i think.

[taxontheeconomy]

Unfortunately, this is a *source* and therefore a tax on the economy.

I know Philip won't tell the truth here, but the lindens are taxing the economy by 10,000 USD per month with this technique.

[Brace]

Gather ye Roses, while ye may

[Maklin Deckard]

I would really like to ask Phillip what he thinks the incentive to being premium is if you aren't a land baron or a land renter? I mean I can get 2X the land for the same USD from land rentals as my tier would buy me. Now, with the cuts to new premiums, what incentive is there for any sane new player to even consider a premium? It was never a good value proposition if you didn't want a LOT of land, now its even more a losing proposition.

[Jon-Pierre Gentil]

I too would like to see more ways for newbies to make money. As it is, unless you BUY money, it's almost impossible to get a start doing anything.

[Lina Pussycat]

Well I'll bring up a point that was put out already there is to much focus on the economic side of things. Its a point to make that the community in SL is what will keep things alive not the economy and if things are focused economically to much things based community wise will go down hill. Cutting more L out of the system will only work for a breif time and the L will always fluxuate no matter what is done. Only way it'll go up is all L coming in is gotten rid of and greed mongers are allowed to control everything.

New policies dont hurt but your going to have to start looking at SL as a whole and work to balance between the two if SL is to survive in the long term. Its your descisions to balance economy and community that will decide the future. Hopefully you realize this and take it into careful consideration when deciding future policy because i for one rather enjoy SL and dont want to see the downfall of it caused by bad decisions. Ive seen it to many times in the past

[Lina Pussycat]

All im saying is dont try to balance the economy to much try to balance SL as whole which exists as more then just an economy. Its a society its got a economy, community, and cutting more L out just leads to the ultimate downfall of any jobs in SL at all. Eventually things would just phase out job wise. Unless your planning on making a job market for us why do this? People are going to find L harder and harder to get. Lets hope this is your last move to try to take more L out of SL because its becoming harder for people to earn L each time you do.

And if you focus to much on L balance you will need to constantly lower it till no one earns any L and then you will need to add in L in small increments into Lindex. But your then forcing people to buy all their L and thats a bad move both business, economically, and socially, except for a few people no one would really benefit from much more economic policy changes and that includes you in the long run unless you intend to be the only one allowed to sell L into the future.

Please dont take this as being harsh but it is a response and will end up being the truth if you dont try to balance both economy and community which you seem to be shifting to far over on the economic side of things. If people have less L to spend these same people that think the economy is failing are eventually going to whine that they arnt making a profit because they have few sales or few people renting.

Community transcends Economy and you need the community to have a working economy.

[anonymous]

Lewis Nerd wrote:
"How about doing things to improve things for those who do not wish to play the "economic game"?

I am strongly of the belief that the concentration on the 'economy' side of things is what will be the eventual downfall of SL, as people concentrate more on making money instead of having fun.

Lewis"

While I can sympathize, your comment appears to be made from the 'SL is a game' mindset. If Linden's focus is on keeping SL a game, your suggestions make perfect sense.

However, its very clear from Linden's perspective that their intention is to build the platform, not the game.

You may be correct that these changes further the demise of 'SL the game'. However, that may be irrelevant if the focus and goal is to further the emergence of 'SL the platform'.

I would strongly advise finding ways within yourself to embrace this future of the platform, rather than attempting to lay down in front of the bulldozer and halt it. Not doing so is both futile, and counterproductive for yourself.

Good luck!

[Ronnie Rabbit]

More people - far, far more - are interested in 'SL the game' than 'SL the platform', especially when you realize 'game' encompasses such a huge variety of activities. Emphasizing the platform over other considerations is a limitation to your market, and thus will be a long term reduction in income (even if there are some short-term gains, and I'd need to see a few months of numbers before I was convinced of even that much).

[Lina Pussycat]

Anonymous whoever you may be. The problem with focusing on either end of the spectrum is simply as i have said above. If one focuses to much on SL as a game it ends up the same as if they focus to much as it being a platform. How LL makes SL looks it has to balance the two and as i have stated those decisions to focus on both area's as opposed to one or the other are going to make or break LL in the long run of things.

If they focus on it as a platform quite simply there will be people that just leave. A very large number of people are here for SL not due to the platform aspect but due to the game aspect and thats what someone saying SL is just a platform makes. They fail to see all of what SL encompasses. As i say to newbies who often question just what SL is. I say this. SL is what you make of it.

If you use it soley as a platform that is your perogotive but you should take into account that the majority of SL residents are not here for the platform aspect. SL is a game and SL is a platform at the same time. It would be you using it as a platform or a game though. One shouldnt force idea's on other people and if LL truly hopes to make SL as good as it can be they need to balance it.

I hope in the future this is realized that SL is not just a platform and doesnt just exist as one. I hope LL realize that the majority of us suffer from the economic changes that are constantly being introduced. You cant alienate one group or another because quite simply look at it in this aspect.

First we run into the fact that if SL is to work as a platform it needs to work as a game as well. There are a few sides in this situation and quite simply they need to balance out for SL to work. You cant have it one way or another its gotta work in all directions to be successful.

[katykiwi Moonflower]

I think these changes will be very beneficial for stabliizing the value of the Linden, particularly the temporary halt in trading when value fluctuates as defined by the margins mentioned.

The only area where I would like to see more tweaking is the stipend. The reduction should apply to all members across the board, although I do understand the reasons in favor of reduction for new premium members only. I do think, however, that stipends should move in increments toward elimination for all members.

I like these changes, and think it will protect against some of the market manipulation and value fluctuation that we have seen. Good decision!

[Kathmandu Gilman]

I'd say not to penalize new players by reducing their stipend, instead stop paying stipends to the rich. If a person has over say $100,000L in their account for that month, they really don't need a stipend. The stipend is for those starting out or don't intend on making money in the game. I have over $400,000 L, why do I need a $500L entitlement every week? Stipends should go to those who need them.

[Lina Pussycat]

katykiwi, ill state this again. If they focus on the economy it'll be bad for SL. Getting rid of the stipends for all memebers leads to forcing people to buy L and guess what? Then only the rich or people that have L benefit. You appear to fail to see the effects of what this has on things a whole and are only focusing on a short term economic gain which will be very short lived mind you.

The fact is these are bad moves. The economy as is is quite stable at the moment. It has remained at about 300 > 1 usd for the past month and that is quite stable i'd say. As i have said there are a few sides here and there needs to be a balance. Unless you are sitting there rooting for the end of SL as anything more then just a place to build stuff where you have to spend money everytime you want to do something.

Changes in economic policy hurt everyone in the long run especially phasing out the stipend. As people have less money they are less likely to spend it as freely thus the people developing things end up suffering more then if there was more L in the economy. This causes them to have to drop down the price on their items and then the price of L starts to climb dramatically.

In which case LL can introduce new L to try to "balance" things but they are still forcing people to buy all their L. They would also need to do away with sinks to make this work at all thus doing away with using L from sinks to put up for sale thus causing them to have to sell money made out of thin air.

You also run into the point that this is pennalizing all players to benefit those that make money in SL but these people stand to make less in the long run of things. They may stand to have a rather short lived economic boost but after that things will only go downhill for everyone including LL. So actually these economic reforms if continued would be bad for everyone.

Regardless of what people may think its a cold hard truth LL, and the people selling L need to realize sooner rather then later. Hopefully they open their eyes before its to late.

[Xavior Nicholas]

That's basically like what I was saying about concentration of wealth. At this rate, it's going to be like a virtual third world country.

[kitty rich]

i think that these are generally good moves - the $L350 exchange rate was ridiculous. SL is a game and in my mind dollars have been the scoring system -a reward for skills and accomplishment - something that camping always stifled. A healthy economy that encourages initiative is a sign that Linden Labs is running the game correctly

As an SL Instructor i am hoping that players will spend more time learning marketable skills and get a balance in their SL lives - not just be looking for total pleasure but rather work towards a goal and relate to other citizens. Of course playing purely for money is as destructive as playing the whole game in casinos and brothels.

The only other element i would like is a set number of basic lessons with a set curriculum(building, social structure and commerce) which once completed, would see a new player rewarded with a one off payment.

Thank you for the announcement.

kitty
xxx

[Lina Pussycat]

Kitty one problem. Not everyone is going to come here to work. I think asking them to work to enjoy SL is a bit off. They need a choice and without a choice its destructive to everyone. LL is both a platform and a game and its gotta be balanced well for things to succeed. I dont think forcing people to learn "marketable skills" is the right way to do things.

SL is enjoyed by the majority of its residents as a social game. And a few that use it as a platform and social game. Some focus sheerly on the platform aspects. I have taught people but it should be their choice they should just be forced into it as the only means to actually enjoy SL.

As someone who teaches independantly i can tell you personal experience on my end towards the individual person is a bit greater then that of the instructors. Everyone learns different and not everyone can learn every skill. But forcing it isnt really a solid answer. I think LL should of kept the economy as it was.

Whats likely to destabalize the economy is this announcement. The economy will need to rebuild and it'll stabalize around the point. The change was rather uneccessary if you look at the value of L over the last month. The economy has been stable there was 0 reason for the change really.

[PecanPraline Cookie]

I don't understand all this economy thing and balancing thing its above my head and i'm sure many others head. I've been playing SL since 2004. I came to this game to have fun and learn a few skills. There are things I miss that we don't see anymore because of the making money thing. I miss show and tell when people created and showed their quite unique inventions off and I miss seeing a dumb toilet made and laughing my head off. I miss pageants where we ran and bought our swimsuits and gowns just to look pretty for the nite. I just plain miss the inventive quality that is lacking in the events. I mean anyone can do cyber sex. Different strokes for different folks, but there are people on here who want to have some good ole fashion fun and then go have sex lol. I like trying to make a few things to sell but with all the competition these days its hard to make a buck. I wish there was a way to get more exposure for the things that we create. A lot of good scriptors and builders out there who haven't got a chance. I'm grateful for what little stipend I do receive because of the lack of exposure for my things. I work hard on an item and can't afford to place my things everywhere in world. Just a few comments from the peanut gallery :)

[Chase Speculaas]

LL selling $L directly? Obviously it'd be a nice way for LL to make some extra cash (which I won't compain about, I understand that LL is a business, etc.), but I don't see how it helps solve the problem of perpetually devaluing $L. Am I missing some crucial point here? Or would it actually just make the $L worth less in USD terms?

[Baba Yamamoto]

Emphasizing platform over game will lead to a short term limitation to the market. 6 million people use WoW. It's probably one of if not THE most successful online game ever. It's a great number for a game.

1,023,000,000 use the internet. In the July 2006 Netcraft Survey, 55,622,584 web sites use apache. Microsoft IIS accounts for 25,726,748.

Each individual website has it's own set of users. Google earned aproximatly $0.12 per search and around 1,831,600,000 searches are conducted per month on Google for aproximatly 220 million dollars in revinues per month.

Other sites may earn less or more, but Google makes much more per month than World of Warcraft based on advertising alone. The chance that someone of their many millions of users will click on and ad an maybe buy something.

In the USA e-commerce exceeds $130 billion dollars a year.

Emphasizing platform over game is how Second Life will grow beyond the scope of any game. The focus of World of Warcraft is the game itself. The focus of Second Life is to make anything possible including games like wold of warcraft that serve millions of users and services like Google that reach nearly half the internet population.

[Lina Pussycat]

Problem there baba. Is Emphasizing platform vs game in second life may put the scope beyond that of any game but what will the user base of that area truly be? When you take game out of SL your left with something devoid of the social area's that SL have and is just about business and developing it as simply a platform will lead to people consistantly having to work to do anything in SL.

Having games in SL is great but when no one can afford to play them or make them what then?

[Gigs Taggart]

A great move, it will allow more flexibility in sources.

One concern is that it will make the premium account worth not as much. The previously calculated 361 break even rate is going to be 287 with stipend 400.