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Virtual Currency

Are Linden dollars real money?
August 8, 2007

Are the Linden dollars I discuss in my article on Second Life’s economy real money? Linden Lab itself seems confused by this question. The company has encouraged people to think of the Linden dollar as real money by running the Lindex (where Second Life residents can trade Linden dollars for U.S. dollars), and by including a section on its website about business opportunities in Second Life. But it also carefully avoids legal responsibility through the language in the company’s terms of service: “Second Life ‘currency’ is a limited license right available for purchase or free distribution at Linden Lab’s discretion, and is not redeemable for monetary value from Linden Lab.”

What I take from this is that Linden dollars are real money as long as Linden Labs allows them to be. For as long as they have an exchange rate with U.S. dollars, I can transform a virtual income into a real-life income. On the other hand, depending on Second Life for income is a risky illusion. Linden Lab’s terms of service notifies users that the company can pull the rug out from under a virtual savings account at any time. No virtual income is safe as long as it depends on the whim of a single company.

This no-man’s land – where money is real, but only as long as it is allowed to be real – is fascinating to me. I sometimes wonder if so-called real money is also a shared illusion – the difference being that real money is backed by governments rather than companies.

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