Many of us have been there, we see an article about Second Life and some witty so and so says “Second Life, is that still around?” ho ho ho. However I find myself uttering such a line whenever I come across an article about SLCapex these days. SLCapex is a stock exchange game based in Second Life and you really need to pay attention to the game part of this setup. Indeed the last time I really paid much attention to SLCapex was back in March 2011 when Skip Oceanlane was announced as the new CEO and made valiant attempts to get the ball rolling again.
For those of you who joined Second Life after about 2009, banks and stock exchanges used to be quite a big thing in Second Life. However as the real life banking crisis played out, Second Life had one of its own in 2008. The issue was that banks weren’t official, there was no real oversight and people had been losing money. Things really started to come to a head in the summer of 2007 with the collapse of Ginko Financial. This was such a big issue that The Economist covered it : A credit crunch in cyberspace :
IN VIRTUAL worlds you may be able to fly, but the laws of economic gravity still apply. Last week, when real-life financial markets suffered a credit crunch, Second Life, the much-ballyhooed 3D online world, experienced its first bank run. This featured avatars, electronic alter egos, lining up in front of virtual teller machines, trying to withdraw so much money that it forced the bank, Ginko Financial, to cease operations and turn deposits into perpetual bonds. Some predict that the virtual economy is in for its first financial crisis.
Linden Lab did not act right away, much to the annoyance of some users, but by January 2008 Linden Lab announced a new banking policy :
Since the collapse of Ginko Financial in August 2007, Linden Lab has received complaints about several in-world “banks” defaulting on their promises. These banks often promise unusually high rates of L$ return, reaching 20, 40, or even 60 percent annualized.
Usually, we don’t step in the middle of Resident-to-Resident conduct – letting Residents decide how to act, live, or play in Second Life.
But these “banks” have brought unique and substantial risks to Second Life, and we feel it’s our duty to step in. Offering unsustainably high interest rates, they are in most cases doomed to collapse – leaving upset “depositors” with nothing to show for their investments. As these activities grow, they become more likely to lead to destabilization of the virtual economy. At least as important, the legal and regulatory framework of these non-chartered, unregistered banks is unclear, i.e., what their duties are when they offer “interest” or “investments.”
There is no workable alternative. 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.
This caused chaos of course for the remaining banks and they soon went belly up, despite the best efforts of some. Whereas some felt this was evidence they weren’t viable in the first place, I felt that this would have happened if a similar law had been passed in real life. However you couldn’t blame Linden Lab for this, the risks were too great.
Stock exchanges suffered too but weren’t banned. However there was to be a large issue with Stock Exchanges in the shape and form of the World Stock Exchange scandal. This did not end well and talk and trust in virtual stock exchanges quietly diminished, but it has never completely gone away, writing in January 2009 at Your2ndPlace Konner McDonnell asked : Have Virtual Investors Learned From The WSE?
Throughout all this, SLCapex has been quietly chugging along with its virtual world stock exchange game, much more quietly than it used to but over the last week or so it has been gaining some headlines because of the IPO of STUDIO 777 (FUN).
