The lawsuit brought against Linden Lab was settled out of court yesterday. Apparently, Bragg was given his SL account back as the result of a “misunderstanding”, SL’s TOS was changed, and no doubt money changed hands from one party to another.

If it had gone to trial, it would have resulted in some of the (if not *the*) first court rulings regarding the legal rights of virtual property holders. Such a ruling could have been a landmark in what can and cannot be expected from MMO/VW companies and their clients – or it could have choked the industry in lethal tangles of governmental regulation. Needless to say, not wanting to submit their business model to the vagaries of whether or not a random judge understood virtual worlds no doubt weighed heavily in Linden’s decision to settle.

Commentary from people who know more or less about this stuff than I:

• Virtually Blind doesn’t have much to say now, but I’d expect more later
• Prokofy Neva has angry (and atypically terse and focused) commentary
• Virtual Worlds News with analysis of the TOS changes prompted by the suit/eventual settlement

So, say you decide you want to make a bank in Second Life. I mean, hey, people have money, right? And, well, what do people do with money in RL? They put it in a bank! So, there you go. Simple enough. Make some ATM machine models, a sleek building, promises of wild 100% interest compounded annually, and you’re good to go.

Until, you know, people decide they want to pull their money back out of the “bank”. Whoops.

After considerable thought, we have concluded that the only way forward from this is to convert, compulsorily, all customer deposits into a tradeable debt security called Ginko Perpetual Bonds. These bonds, listed on the World Stock Exchange (www.wselive.com), will allow Ginko Financial to recover from recent events by removing all pressure from our cash reserves while providing accountholders with a way to cash out on an open market.

World Stock Exchange being… um… another wholly virtual and fairly troubled entity within Second Life. There’s lots of adjectives that could be used here for this whole thing, but what probably comes the closest: Ponzi scheme.

Linden Lab’s traditional response to all of this is that they don’t regulate anything, and no one should treat these “banks” and “stock exchanges” as anything other than mini-games, on the order of your office’s fantasy baseball pool. Well, assuming the guy who took your money lived in Sao Paulo, Brazil. Philip Rosedale, Linden’s CEO, was actually asked about this in a recent online chat:

[14:19] Jay S.: lol, is there any new policy concerning the Ginko scandle, Ie it looks more like a ponzi scam
[14:19] Philip Linden: jay we haven’t created any policy thusfar on bank, etc.
[14:19] Philip Linden: we try very hard not to make rules we do not need to.
[14:20] Philip Linden: We haven’t made any about banks
[14:20] Jay S.: ok
[14:20] Philip Linden: I would note that there is a lot of transparency around projects like Ginko
[14:20] Philip Linden: moreso that in the real world

As Nobody Fugazi commented,

Phil says Ginko Financial is transparent. Meanwhile, a two fingered sloth in Suriname is awaiting powdered goat milk. One of these statements is true – pick one.

For more on this, check out Nobody Fugazi’s blog, and especially Virtually Blind’s complete coverage (written by Benjamin Duranske, attorney and SL commentator). He’s been writing about this strangeness from the start, and most notably got Ginko’s elusive owner in an interview (the one linked above). Matt Mihaly has his own commentary up here.

Prokofy Neva also has a few articles on this, which as best as I can tell alternate betwen laughing at people foolish enough to invest in Ginko and furious that something might actually be done about it.

Putting your money into a pixelated online object hooked up to an anonymous avatar is about as risky as putting it in under a park bench in Central Park — it could be gone by morning. And yet…it has worked better than people thought, in this “fastest growing economy of the world” precisely because of the fast rate of growth and the incredible volume of Lindens. There *are* usually enough Lindens to pay withdrawals, offer high interest — and keep it going for years! People like Benjamin Duranske quick to scream “Ponzi” are completely — witlessly — neglecting to notice that the RL original Charles Ponzi started and tanked and was in jail in a mere six months from December 1920 to the summer of 1921, even in a world without the Internet. Ginkos, however, has lasted for more than 3 years. That simply has to be *explained* and not merely screamed at witlessly.

No, actually, when someone takes your money and doesn’t give it back, yes, screaming witlessly is a valid option.(I’d say more, but I’m still mad I didn’t make his enemies list.)

Oh, and can it get worse? Yes, it can get worse.

As more and more people sell their L$ on the LindeX, Linden might choose to maintain its L$270=US$1 peg for some amount of time, but operating under the assumption that it has not maintained 100% US$ reserves, it will eventually run out of US$ or decide to stop selling them, and the L$ will depreciate rapidly. In either outcome, residents will discover that they possess less wealth than they perceived they had during the time leading up to the crash.

To summarize, it appears very likely that Second Life will experience at least some form of economic recession.

See, no one ever demands that Blizzard puts the Azeroth GP on the gold standard.

As part of this weekends’ Relay For Life event (which has raised a whole lot of money already), for $L200 you can turn your PC into a Gamecube and slash your way to greatness and rupees. To quote the rules:

Zelda Quest
A dark game of mystery, intrigue and dodongos.

The Zelda Quest is what you make it out to be, you can spend your day leisurely exploring and collecting rupees or you can take the offensive and pound some rupees out of the various guards and monsters around Hyrule. If you were particularly cut-throat you could attack other players, and steal their rupees!

That’s right – Rupee to crush. It’s for a good cause, so get out there and dislike some smoke, courtesy of your griefy friends at W-Hat.

Linden Labs announced today that “casinos” in Second Life will be shut down, effective immediately.

Casinos were up until recently at the top of the “Popular Place” search listings (which are, to be sure, heavily gamed by paying people to loiter), and were popular for much the same reasons casinos in real life are: you can blow a lot of money with the hope of winning. Since the L$ is easily converted to $, this has long been thought a possible legal liability for Linden Labs.

Currently the casinos in SL are still going strong. It’ll be interesting to see if there’s any attempt at an active enforcement (something Linden isn’t exactly known for) and if so, how this will effect the stupendously high “$ traded in Second Life” figure proudly advertised on Linden Labs’ front page. (Second Life Insider does a good job at tracking that on a day-by-day basis, so that’ll be where to watch for that.)

Recently, I’ve been spending more time in the media’s favorite metaverse, Second Life. What follows are some random observations. Take from them as you will.

First, and most obvious, Second Life is wackily broken. *Wackily*. It’s straining under the load of its own success, and buckling. Often I was randomly booted in mid-conversation. Others report inventory just missing randomly, which in an economy benchmarked on RMT, is kind of serious. Without this being fixed, and rapidly, everything else will be kind of moot. Everyone I talked to online is waiting – with an almost quiet desperation – for a “Second Life killer” to come out.

The following statement will infuriate anyone who plays SL. It’s also true. Second Life is a level and class driven MMO.

The levels are social acceptance. The classes are social groups. The grind is real. Luckily, I was powerlevelled. In Second Life, you are twinked just like any other MMO… only here your armor is your skin. Literally.

The first level are newbies fresh off the “Island”, who have newbie skin, generic clothing and worst of all, bad hair. Thus, the people who are not newbies can be told from the newbies literally – literally – at first glance. The cost of not being a newbie – a photo-realistic, professionally designed model/skin, and actual hair that doesn’t look like a Gourard-shaded model from 1997 – is minimal; in the best shops perhaps $3-4 worth of $L, and often given away for far less, or for free as promotions. The real cost is knowing that you should do this. Knowing WHERE to do this. Knowing that these options exist. Knowing, period. Knowledge of Second Life isn’t just power, it’s experience points. Enough knowledge – enough XP – and you level. Ding. The newbies have their own level of hell, which mostly consists of wandering amongst the powergamed “popular sites” (more on that later) accosting each other for random sex and failing. (Link NSFW). A quote I heard on another blog was that of an experienced user dismissing a random newbie groping and flailing with the devastating retort, “I don’t talk to people with newbie skins.”

The social groups in SL – the classes – are somewhat better known to outsiders, simply because they are easy enough to see. The bondage/BDSM community is huge, as are the furry community, probably since it’s painless to experiment in both. Something Awful has a massive presence, hated by the rest of the “grid” or server. A university, Woodbury University, had its online presence infiltrated and annexed by the notorious /b/-4chan website community. Goreans have their own community, as do Star Trek fans. Sometimes next door to one another, using banlines to war with one another.

Finding these classes requires its own form of XP, because the ability to find anything in Second Life without the help of someone already there is completely broken. Scam artists have completely subverted the in-game search tools in SL, primarily through ‘camping’, or encouraging broke users to remain in their area and thus driving up their traffic rankings in return for a paltry, sub-penny trickle of L$. In a social MMO, the fact that there is no real in game search for social events is unfathomable. It’s as if television networks just stopped posting or following schedules, and expected fans of each show to notify each other, through word of mouth, when the next episode would air. Everyone in SL knows this is a problem, and shrugs eloquently. It’s broken, like much else in SL.

What isn’t broken is sex. Not so much the animatronic sex that SL is known for (link NSFW, durr) — that’s usually kept safely behind closed doors, if for no other reason than privacy – as in the hypersexualization of avatars. Everyone is pretty, has perfect skin, big tits or washboard abs, and perfectly coiffed hair. Or you’re a newbie. There’s so few nonperfect avatars that going against the grain is actually a viable market niche for people that want to look different. With that hypersexualization everywhere, as can be imagined, sex happens, and becomes its own subculture – it’s own class within SL.

And of course, behind the scenes there’s politics and intrigue. This Rolling Stone article, linked to by Something Awful’s latest Second Life Safari (a freewheeling series of videos highlighting the most outrageous and stupid parts of SL), seems to track with what I’ve seen in game and in the community outside it. Namely, the specter of a wildly, laughably utopian/libertarian Linden Labs running smack up against their chief nemesis, an ex-Sovietologist cum forum troll. It has to be true, because even Gabriel Garcia Marquez wouldn’t fantasize such a pairing. Like most online games, a “feted inner core” is widely rumored to abuse access to their friends with the game’s developers and much forum drama results thereby.

But what surprised me is what actually isn’t broken. Within all this random wreckage of buggy clients and randomly crashing servers and drama and politics, microcommunities are forming. People are making a living off this stuff, a few pennies at a time. Some are making quite a living indeed. Anshe Chung isn’t so much a fluke as simply the outlier best at playing the press.

Another surprise was that the further you went in levels, the more the men disappeared. The top tier of Second Life is run by the women. Whether or not those women are actually women in RL is (frequently) debatable; what isn’t is that women avatars run Second Life’s communities. The further you leave the newbie island, the further you leave behind men.

Some of this is explained by a social and builder MMO such as Second Life naturally attracting women, while men looking for the drops from orc pirates are a bit dismayed at the lack of structured violence. You’d think that would be stereotypical, until you realize that once you level up into SL’s more gated communities – there just aren’t that many men.

There’s a few reasons for this. One, it’s hard for men to play the SL fashion game. There’s a lot of clothes for women. Men – not so much. The market drives a lot of this, of course, but it becomes a self-fulfilling prophecy. Also, men are seen as the teeming horde of newbies sending random crude ‘Barrens-chat’ style come-ons to the unattainable women walking through with perfect skin and hair. It’s harder for men to earn XP in SL because of this. Literally. Men become less easy to trust, simply because they are part of the flailing mass and *don’t fit in*.

But the converse to that, as someone told me explicitly, in these exact words, “In Second Life, men tend to become worse, and women tend to become better.” Freed of their concern for their appearance, age, and RL social status, women take to SL with relish and feed off of each other positively. Most of the most dramatic areas in SL are female-owned. It’s been known through studies that middle-aged women tend to be the social hubs in MMOs – in a social MMO like SL, this becomes raised to the Nth degree.

It’s alien to almost anything online that’s come before, and I suspect that alienness – that singularity – is what inspires SL’s most fervently myopic defenders to tilt at the wheel again and again. Because in spite of the flailing newbies, crashing platform and constant drama – this is something that SL’s partisans want to see remain. It’s what is missed in most media coverage, and it’s what the partisans are terrified may go away, washed away in a tsunami of media backlash, moral judgement and clueless administration.

That core of the singularity is what is actually Second Life’s core strength, and what keeps its users struggling through the level grind and the broken client and the lack of governmental, er, Linden oversight. Because as a social MMO, once you get past all the clutter and dross, SL actually works. I can honestly say that nowhere else online have I argued about Islamic fundamentalism at one in the morning while lounging in a pool with a half-naked demon-thing. Much like how people played Ultima Online despite its rampant peekay and endless bugs simply because it was the promise of something new, people find the core of SL is actually the other players. That’s something that’s difficult to break.

As for myself? Like most in SL, I’m finding my own way around now that I got to the endgame. If you’re looking for me when I’m in SL, I’m an insane angel from the future in the City of Lost Angels, last seen in the Free Kitten box, attaching random scripts to his cane, and wondering what a brother’s gotta do to get their weapon SDK.