I was fascinated to read an article about 'Anshe Chung' the webs first virtual millionaire. My son would argue the point as he plays an online game where he regularly spends a billion dollars but it translates into a new space ship or a new planet or something along those lines. The difference being, unfortunately for me and my son, that Anshe Chungs virtual dollars translate into real world dollars, of the folding variety, and my sons don't .Anshe Chung is a resident in the virtual world Second Life. Developed by Linden Labs, Second Life has a virtual currency known as 'Linden Dollars' which are convertible into US Dollars. The basis of Chungs fortune has been calculated from assessing the value of her virtual real estate for which there is a liquid market in the 'game'.
The remarkable thing about the fortune that Chung has amassed is that it is reported she did it from an investment of $9.95 paid by Chung's creator Ailin Graef. Her wealth was created by buying virtual land in Second Life and then sub dividing it and developing it with landscaping and themed architectural buildings for rent and resale. Along with her land holdings she has several million Linden Dollars in cash and significant investments in the Linden Stock Market.
According to reports the valuation of $1mn could be a conservative one based only on the holdings in Second life. On the basis that this is seen as a business, the brand value, future earnings etc would have to be taken into account if a true valuation is to be made. Chung also has holdings in other virtual worlds such as IMVU, There or Entropia Universe.
Unfortunately Second Life has had its problems, stories of harassment and fraud have blighted the game and one would imagine, will only increase as SL becomes more popular.
Reading the article got me to thinking that if Second Life is just a accelerated version of the real world then these things are bound to happen and it is only a matter of time before we see a 'virtual hedge fund'. There are, apparently, already virtual prostitutes.... (I kid you not...take a look here..).
But before you reach for the virtual telephone to call the virtual BVI to set up your virtual fund you may be too late. As with anything that can be analysed some have tagged potential problems ahead for the virtual economy (allegedly - don't want to be virtually sued!- Compl).
The problem, it seems, is the currency issue (isn't it always). The Wiki on 'Linden Dollars' says:
"Residents may purchase L$ directly through the client, or convert between Linden currency and U.S. currency through either Linden Lab's currency brokerage, the LindeX Currency Exchange, or other third-party currency exchanges. The ratio of USD to L$ fluctuates daily as Residents set the buy and sell price of L$ offered on the exchange, and fluctuated between L$240/USD and L$350/USD between October 2005 and September 2006."
It seems that Linden Labs have created a virtual nightmare (ok, I will stop that now). They have effectively got themselves into a situation where the exchange rate, and therefore the flow of $L in and out of SL must be managed with the skills of the Fed Chairman. The stated aim is to keep the exchange rate at between $L250/USD $L300/USD but it would seem from research here that the rapidly growing numbers of users in SL will begin to have a dilutive affect on the strength of the $L.
Seriously, you should read the research that some people have done on this. They are talking about 'virtual fiscal levers' and sinks etc..
It is only a matter of time before we have a virtual Jim Cramer having a go at Linden Labs to 'cut the rate' to save the sub prime mortgage market in SL. I can see CNBC now.. "What happened is Linden Labs got people into the game on 'teaser rates' and now with stability being difficult to maintain for the $L the exchange rate it is crucifying renters. People begin to panic sell their properties, Jim Cramer is tearing his virtual hair out (his avatar would have to have hair..right?), vitual hedge funds are exploding everywhere and the virtual private equity funds come in to hoover up the debris. Even the virtual hookers are complaining."
If I were Linden Labs, I would create a virtual Ben Bernanke right now... At least there will be someone to blame....virtually..
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