With more than nine million registered "residents,"
Second Life leads the boom in virtual worlds--online communities with their own computer-­rendered topographies (see "Second Earth," July/­August 2007). But the rapidly growing community is facing a virtual monetary crisis that raises questions about its approach to handling real money.

Trouble started this summer when Second Life's parent company, ­Linden Lab, eliminated gambling activities, erasing about 5 percent of the virtual world's economy. Later, a bank run triggered the collapse of a bank, Ginko Financial, that offered high interest rates on virtual dollars convertible to real ones (Second Life's "Linden dollars" trade against the U.S. dollar at 270 to 1). "Most of these problems have been building for a while," says ­Benjamin Duranske, an intellectual­-property lawyer who has been watching the Second Life banking industry.