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Wednesday, August 08, 2007

Scam in a virtual world

Is the Second Life economy bursting? Or has it been a highly creative scam to begin with?

Second Life, which was created by Linden Labs of San Francisco, is an online world where players can trade in all kinds of goods and services. The game's economy is based on fictional currency, called Linden dollars. But those dollars do have real-world value at an exchange rate of about L$270 to $1 on the Lindex market. Second Life's website even boasts that "thousands of residents are making part or all of their real life income from their Second Life businesses."

Now the entire Second Life economy--which could affect more than 8.5 million players--is in trouble.

Although financial institutions in Second Life are careful to define themselves as games, some Second Life banks offer more than 100 percent annual interest--a tempting rate when combined with the possibility of turning Lindens into U.S. dollars via the Lindex. Set off by high interest rates and a recent ban on in-game gambling, the bank run could ultimately have a major effect on the game's economy. The theft of approximately $12,000 from the Second Life World Stock Exchange doesn't help matters either.

If something is too good to be true, it almost always isn’t…

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