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Virtual Upstart: Stephanie Roberts’s avatar, Zania Turner (right), earned money hosting Slingo, a blend of bingo and slots. Roberts (left) now dreams of selling virtual Zamboni machines.

Credit: Photograph by Hayley Murphy (left); Courtesy of Stephanie Roberts (right)

To IBM’s Kearney, the situation recalls the formative days of e‑commerce, which were plagued by uncertainty and lack of trust. “If you look at early [Web] days, it was the same,” she says. “You had all the similar issues: ‘I’m not buying anything on the Internet because someone can steal my credit card number.’ ” Linden Lab’s Yoon agrees. “When you first started to see the Internet as more than just education and government, you started seeing all these crap websites thrown up all over the place. It’s sort of like the disorganized user-created content within Second Life,” he says. “We saw that whole cycle in the development of the Internet–the cycle of doubt and fear, and realization that there is economic value, and communication and community value. We are seeing exactly the same thing happening again.”

So far, not many complaints about virtual finance and commerce have surfaced in courtrooms. One–maybe the only one–revolved around a Pennsylvania lawyer named Marc Bragg, whose avatar went by the name Marc Woebegone. In 2005, Bragg signed up with Second Life and started whiling away his off hours amassing and reselling virtual land and selling virtual fireworks to other residents. He was doing quite well until May 2006, when Linden Lab accused him of manipulating an auction to acquire virtual land at a below-market price. The company shut down his account and confiscated all his virtual holdings; in so doing, it seized Linden dollars and property worth about $8,000. As the company saw it, Bragg broke the terms of service on his account, and his account was consequently canceled. Bragg felt he’d been robbed of real assets, not just a Second Life account, and so he took Linden Lab to court. He got his account and some of his belongings back in a recent settlement whose full terms were not disclosed.

The Bragg case–which hinged partly on Second Life’s representations of virtual land as something that can be “owned”–showed that real-world authorities may not automatically dismiss virtual currency as Monopoly money, or in-world contracts as a game. But Ben Duranske says that other complaints, such as those of Ginko customers who say they lost money, have not yet elicited any governmental action. Duranske founded the Second Life Bar Association, an in-world community of real-world legal professionals and scholars, to explore questions of technology and the law. “If I did what the people of Ginko did–only using stamps and envelopes–it would be illegal, and easy to prove to a jury,” he says.

Virtual Solutions
In the summer of 2007, Linden Lab announced that to help make transactions more secure, it was creating a voluntary ID system, so that in-world consumers could verify attributes–such as the age–of the people behind the avatars they were dealing with. Another reason was to keep minors out of certain areas of Second Life; people under 18 are not allowed to sign up for accounts, and Linden has been trying to stamp out virtual sex between “adult” avatars and “child” avatars. The company also introduced algorithms that identify suspicious activity and warned users to be more prudent in their online dealings. “We caution our residents to be wary of anyone offering extremely high interest rates at no risk, either in the real world or in Second Life,” the company’s CFO, John Zdanowski, wrote in the Second Life blog (under the avatar name Zee Linden). “If it sounds too good to be true, it probably is.”

Now users themselves are setting up some quasi-regulatory structures. Some have started the Second Life Exchange Commission, which sets standards for financial disclosure; others have created the Virtual World Business Bureau, which rates businesses, warns residents against scams, and acts as a clearing­house for complaints. Just as a real-world company will seek affirmation of its credibility from Pricewaterhouse­Coopers, “the virtual environment absolutely has to be able to say you are a legitimate company doing legitimate business,” IBM’s Kearney says. “If you look at the 3-D Internet as the unformed future of the Internet, it will be very important to solve these problems.”

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Credit: Hayley Murphy

Tagged: Business

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