Do you have a Second Life?

Topic

Focusing on the 3D virtual world, Second Life.

Team Members

Agnes Li, Steven Lee, Wael Nasser

Statement

In this project, we will look at how some banks have made the transition from the Real World (RL) to a three-dimensional realm called Second Life (SL). Although this transition may allow these banks to attract more potential clients, many users of Second Life have mimicked the actions of these banks and have created their own versions of banks in Second life. Unfortunately, there are many risks involved with operating a bank in the virtual community.

Argument

Many users on Second Life have exchanged real world money for Linden dollars. Although Second Life’s banking system may seem like a way to make some extra money in the real-world, some banks offer annual interest rates of 40% or more. These types of cases are almost always too good to be true. Unfortunately, many users fall for these fraud banks and in the end, ended up losing real-world money. The main problem with Second Life banks is that they are not regulated, unlike the thousands of people who help manage banks in the real world. This has created a great sense of unreliability. In this project, we will look into the specific reasons as to why we believe that the banks in Second Life are not as reliable as they seems.

What Is Second Life?

An example of creating an avatar in Second Life

Examples of different avatars

Brief History

Example of an avatar

Second Life was launched in 2003 by a company called Linden Reseach Inc (more commonly known as Linden Labs). Not until recently, has it become popular with the public. The virtual community has now reached approximately 13 million accounts (number recorded near the end of March 2008).

Brief Overview

Second Life, created by Linden Labs, is not just another video game, but instead, it is a virtual world; a community where users can take on a whole new identity online through creating their own characters, called ‘avatars’. Not only can you interact with other online players through your avatar, but you can also buy properties, start businesses, join clubs, attend classes or create objects. The environment in Second Life is very realistic, allowing users to closely interact with their avatars. Residents are encouraged to really use their imagination because the only things provided by Linden Labs are the land, the air, the water and the tools to create a whole new world. Not only is Second Life used for online interactions such as meeting new friends, but there is also a growing interest in distance learning. Universities are starting to open up their own buildings in Second Life where residents can enroll and learn in a virtual environment. In short, Second Life is very similar to the game Sims, the main differences including online interaction and the ability to earn real-world money through the conversion of the “Linden Dollar” to US dollars.

As the creaters of Second Life puts it, Second Life is “an online society shaped entirely by its residents. Participants join a world full of people, activity, and fun – a constantly changing shared reality where they can choose their own goals – travel and explore, claim and build on virtual land, make friends and socialize, or vie for status and wealth”.

Building created by residents

Example of a lecture in Second Life

Building created by residents

Banking Systems

How do they work?

In Second Life, your avatar is able to take on jobs just as you would in the real world. However, in this virtual world, the money you earn from your job is referred to as “Linden dollars”. These Linden dollars can be exchanged to US dollars through a system called LindeX, the most recent exchange rate (as of January 2007) being $268 Linden dollars to $1 US .

A survey taken in Fall 2006, shows that over 3,000 residents make an excess of 20 thousand US Dollars per year running businesses in Second Life. Most of these residents sell objects they’ve created to other residents who want the items. One Second Life resident landed a Business Week cover story for earning a three-figure income (in real-world dollars) selling virtual real estate.

Online users protesting aginst Linden's decision

Unregulated Banks

There are many banks in Second Life which are created and operated by existing users. These banks should not be trusted enough by others to create bank accounts for their avatars and deposit real life money into these accounts. An announcement posted by Linden Labs says the following, "The so-called banks are not operated, overseen or insured by Linden Lab, nor can we predict which will fail or when. And Linden Lab isn't, and can't start acting as, a banking regulator." They also wrote that these banks have brought many risks to Second Life which leads to their decision of banning the banks.

"As of January 22, 2008, it will be prohibited to offer interest of any direct return on an investment (whether in Linden dollars or other currency) from any object, such as an ATM, located in Second Life, without proof of an applicable government registration statement or financial institution charter,"

Linden Labs has taken this step in order to protect their residents from further bank runs. They are now only allowing users who can provide proof of an government registration statement in order to operate a bank in Second Life.

Bank Run

An ATM machine in Second Life

Ginko financial, a virtual bank in Second Life, was an unregulated bank which offered investors an annual interest of over 40%. It recently announced that it would no longer exist as a financial entity.

Residents found out about this outrageous announcement through walking their avatars through the lobby of virtual banks and reading a big sign stating that, “Due to an extreme surplus (of withdrawals) since the announcement of the Linden Labs new policy regarding inworld banks, we have temporarily disabled the withdraw feature on ATMs until further notice,”.

This raised a huge amount of problems in the world of Second Life. Ginko financial caused many users to lose real-world money and will have to repay approximately 200,000,000 Lindens ($750,000 US dollars) to Second Life residents who have invested their money with the bank. A very small number of people have happily announced that they have been able to recover their Linden dollars, but the majority are finding that they are no longer able to withdraw their Linden dollars from the ATM machines. As a result of this, these users are not able to transfer their hard earned Linden dollars back to real-world dollars.

Future of Second Life

Linden Lab's vice president Joe Miller announces that they are currently doing more research on the aspect of voice communication. In an article featured in the April 07 issue of PC Advisor, Miller states that, "You won't have to run anything else, or do anything else: just speak to someone or a group of people as you engage in a conversation today in a room. As you move through a large group of people, you'll be able to hear multiple voices, each emanating from the proper place in 3D where they are, so it makes it very much like a real experience of walking through a crowded room where there's a number of people speaking. It's an important attribute we'll be adding shortly." This feature may seem out of the world, but soon, residents of Second Life will be able to take their online interaction with other people to a whole new level.

Competition

Playstation Home

With the second life coming into light there is always competition in the waiting. Thats were Sony's new virtual world comes in, Playstation Home. Playstation Home is going to have similar features to second life in that it is going to be a complete online world. With customizable avatars and items you can purchase for your avatar there is not going to be a lot of difference between the two. However the main difference is that Playstation Home will start out free instead of paying for a premium subscription. Only the future can see which one of these virtual world will survive.

World of Warcraft

World of Warcraft is most likely the most played online game to date. While it doesn't give the full customizable and community feel as second life, World of Warcraft is one first main stream virtual worlds. World of Warcraft allows player to pretend that they are heroes of old and hack and slash their way to a top level. While the appeal is still there many players might find themselves drawn away from the simple and community life of second life to join in some monster slaying adventure in the World of Warcraft.

Conclusion

In turn with all the problems received from the second life banks, it has been announced that as of January 22 2008 all banks that do not have a real world affiliate will be discontinued. Therefore only entrusting money to actual banks.

Alternative solutions: Though it is most likely final, there are things that second life could of done in order to fix the problem with the bank system. One being implementing regulations or permits to those who decide that they want to open an online bank in second life.

Video / Sound Links

Introduction to second life

World Bank discussion in second life

Financial loses in the real world:

References

Do you have a Second Life?

Contents

Topic

Team Members

Statement

Argument

What Is Second Life?

Brief History

Brief Overview

Banking Systems

How do they work?

Unregulated Banks

Bank Run

Future of Second Life

Competition

Conclusion

Video / Sound Links

References

Agnes:

Steven:

Wael:

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