October 19, 2017

Second Life Welcomes Bank Regulators

Linden Lab, the company that runs the popular virtual world Second Life, announced Tuesday that all in-world “banks” must now be registered with real-world banking regulators:

As of January 22, 2008, it will be prohibited to offer interest or any direct return on an investment (whether in L$ or other currency) from any object, such as an ATM, located in Second Life, without proof of an applicable government registration statement or financial institution charter. We’re implementing this policy after reviewing Resident complaints, banking activities, and the law, and we’re doing it to protect our Residents and the integrity of our economy.

This is a significant step. Thus far Second Life, like other virtual worlds, has tried to avoid entanglement with heavyweight real-world regulatory agencies. Now they are welcoming banking regulation. The reason is simple: unregulated “banks” were out of control.

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.”

This was inevitable, given the ever-growing connections between the virtual economy of Second Life and the real-world economy. In-world Linden Dollars are exchangeable for real-world dollars, so financial crime in Second Life can make you rich in the real world. Linden doesn’t have the processes in place to license “banks” or investigate problems. Nor does it have the enforcement muscle to put bad guys in jail.

Expect this trend to continue. As virtual world “games” are played for higher and higher stakes, the regulatory power of national governments will look more and more necessary.

Workshop: Computing in the Cloud

I’m excited to announce that Princeton’s Center for InfoTech Policy is putting on a workshop on the policy and social implications of “Computing in the Cloud” – the trend where companies, rather than users, store and manage an increasing range of personal data.

Examples include Hotmail and Gmail replacing desktop email, YouTube taking over as a personal video platform, and Flickr competing with desktop photo storage solutions. Facebook, Myspace and other social networks have pioneered new kinds of tools that couldn’t exist on the desktop, and more new models are sure to emerge.

I’m confident that this trend will reshape tech policy, and will change how people relate to technology. But I don’t know what the changes are. By drawing together experts from computer science, industry, government and law, I hope the Center can help those of us at Princeton, and workshop participants from around the country, get a better sense of where things might be headed.

The workshop will be held on the Princeton campus on January 14 and 15, 2008. It will be free and open to the public. We will have a series of panel discussions, interspersed with opportunities for informal exchanges of ideas. We’re still putting together the list of panels and panelists, so we haven’t yet published a schedule. If you’re interested in attending or want to get email updates about the workshop, please email David Robinson (dgr at princeton dot edu).

Here are some of the possible themes for panels we are exploring:

  • Possession and ownership of data: In cloud computing, a provider’s data center holds information that would more traditionally have been stored on the end user’s computer. How does this impact user privacy? To what extent do users “own” this data, and what obligations do the service providers have? What obligations should they have? Does moving the data to the provider’s data center improve security or endanger it?
  • Collaboration and globalization: Cloud computing systems offer new sharing and collaboration features beyond what was possible before. They make shared creation among far-flung users easier, allow or require data to be stored in many different jurisdictions, and give users access to offerings that may be illegal in the users’ home countries. How will local laws, when applied to data centers whose user base is global, affect users practice? Do these services drive forward economic growth — and if so, what effect should that fact have on the policy debate?
  • New roles for new intermediaries: Cloud services often involve new
    intermediaries such as Facebook, MySpace, eBay, and Second Life, standing between people who might have interacted more directly before these services emerged. To what extent are these services “communities”, as their providers claim? How much control do users feel over these communities? How much control do and should users actually have? How does the centralized nature of these intermediaries affect the efficiency and diversity of online experiences? Can the market protect consumers and competition, or is government oversight needed?
  • What’s next: What new services might develop, and how will today’s services evolve? How well will cloud computing be likely to serve users, companies, investors, government, and the public over the longer run? Which social and policy problems will get worse due to cloud computing, and which will get better?

Chinese Gold Farmers: Work or Fun?

Julian Dibbell had an interesting article in yesterday’s NYT, profiling several Chinese gold farmers, who make their living playing the massive multiplayer game World of Warcraft (WoW) and accumulating virtual loot that is ultimately sold for real money. If you’re not familiar with gold farming, or virtual-world economies in general, it’s a nice introduction.

Even if you’ve heard it all before, the article is still worthwhile as a meditation on the porous boundary between work and fun online. These guys make their living playing a game, in seven twelve-hour shifts a week. It’s highly repetitive work – they follow the loot-maximizing strategy which involves hanging around the same little area and whacking the same monsters over and over. WoW players even call this kind of play “the grind”.

Yet somehow the guys enjoy it, not all the time but often enough to find a work rewarding in an odd way. One guy, Wang Huachen, has a law degree but chooses to play/work WoW instead, at least for a while.

“I will miss this job,” [Wang] said. “It can be boring, but I still have sometimes a playful attitude. So I think I will miss this feeling.”

I turned to Wang Huachen, who remained intent on manipulating an arsenal of combat spells, and asked again how it was possible that in these circumstances anybody could, as he put it, “have sometimes a playful attitude”?

He didn’t even look up from his screen. “I cannot explain,” he said. “It just feels that way.”

Amazingly, after finishing a twelve-hour shift, some of these guys spend their long-awaited free time … playing WoW.

But all that changed when the boss of one gold farm got a new business idea: rather than grinding out more loot, his employees would instead build up a 40-man team of uber-characters who would serve as mercenaries, for hire by players who wanted reliable, non-greedy companions in attacking the toughest areas of WoW. Suddenly these gold farmers could really use their skills, and have more fun – for a while.

The end arrived without warning. One day word came down from the bosses that the 40-man raids were suspended indefinitely for lack of customers. In the meantime, team members would go back to gold farming, gathering loot in five-man dungeons that once might have thrilled Min but now presented no challenge whatsoever. “We no longer went to fight the big boss monsters,” Min said. “We were ordered to stay in one place doing the same thing again and again. Everyday I was looking at the same thing. I could not stand it.”

What’s most interesting about this, to me at least, is the relationship between the gold farmers and the players they serve. It’s not a personal relationship, only an economic one, in which the gold farmers play the boring part of the game in exchange for a cash payment from a richer customers.

This relationship is an amazing tangle of play and work. The gold farmer works playing a game, so he can earn money which he spends playing the same game. The customer finds part of the game too much like work, so he works at another job to earn money to pay a gold farmer to play for him, so the customer can have more fun when he plays. Got it?