In Second Life,the economy is based on Linden dollars (named after Linden Labs, thecompany that created it). This isn't unusual in itself, but thedifference here is that there is an actual exchange rate from Linden$to US dollars, about 300 to 1. Thus, if you sell something in the game,you can make money. Right now it's small change, but what is happeningis that there are enough players that are interested in there where youcould technically make real income from it.
The way it works is that every player by default earns a certain amounta week. A first basic level membership is free for anyone and gainsthem L$50 a week. A premium player paying US$9.95 a month getsL$500/wk. With this ingame dollars, you can buy things from otherplayers or the game itself. You can also create prims and sell those toothers for L$. It's market-driven based on what others really wouldbother to pay for your creation.
These creations really come from two types of labor: visual creation,and/or programming effort. The former is what the object looks likeusing the 3D basic shapes. There are some cute works of art, but itcould also be a house, a park, a toy, etc. The latter is what you cando with the object based on its programming. Most prims are somecombination of both. Even those that don't really do anything have somedefault code.
It takes time, effort and brainpower to build anything since the mostbasic shapes you have are cubes, spheres, pyramids, cones, and otherpolygons. You can grow, squeeze, extrude and combine multiple shapes tomake more complicated ones, then apply colors or textures to it. Usingsuch building blocks, you can make more and more complex objects. Thus,any developer working on a prim would need some level of drawing skilltoo. Any object you create is yours alone, but you could allow othersto copy it, or if you really want to risk it, edit it. More on thislater...
This is a pseudo-real currency (like the Reward points etc fromAmerican Express or other credit cards, or airline mileage cards)because of the tie to real-world currencies. You can extract some ofyour L$ to real currency via Paypal or credit cards, that Linden Labspays you. Thus, if you have earned L$3 million, you have just made$10,000. (Not that that's trivial to do). If the BusinessWeek articleis correct, some of the top players have made hundreds of thousands ofUS dollars from things they have created and sold in the game.
The economy is smart enough and the world is well-managed enough thatthings don't go awry easily. E.g., you can't kill anyone and take theirprims and/or money. It doesn't work that way, and in fact, just bumpingpeople can start raising eyebrows until you get banished.
First thing to note: Linden Labs gives you $50/wk or about $200 amonth. That's about US$1 a month that they have to put into the game(since that dollar could get extracted from the game by the player).That's quite trivial in real dollars but what it really does is incentyou to play the game. You can think of it as a customer-acquisitioncost which at just $1 is really low. A premium player gets more like$10/mo, which is about what they pay in real dollars for their accounteach month.
Technically with the ability to create and sell a prim, it is possibleto mint your own money. The practicality however is that with asufficient number of players, you have a large number of producers, andthe consumers have a lot of choice on what they want to spend theirmoney on. Also it takes time and effort, thus, nothing is really free.Still, the amount of currency in the game is based on two factors: howmany premium players are in the game and how many active basic playersexist. The total wealth increases every month in proportion to this.Not all players are active, and leave after a while (you have to appearon the game each week to gain your L$ stipend).
However, when it becomes really successful, and Linden has a millionactive basic players, they'd have to pay a million dollars into thegame each month, which can be quite expensive. However, the truth isthat more of the active players would likely go towards premiummembership.
So far, I haven't talked about how Linden Labs itself makes money.... in the meantime, you might want to read this article on Virtual Worlds, Virtual Economies.
Community and social computing
I started out on the game Second Life justrecently to investigate how it works. It's not really a game per-se inthat it is not a goal-oriented activity like other 3D games. However,it can be pooled together with the other Massively multiplayer onlinerole-playing environments. It's free to try out, so I registered,downloaded the game, created a character and walked around. It's a 3Dworld like many others. However, the here the point is more that youcan create objects, buildings, vehicles, toys, clothing, etc. I'm stilllearning how to move my avatar around so I haven't taken any photos yet.
What struck me is the similarity to the concepts in LPMuds where Ispent some years playing away in. LPmuds had a C-like programminglanguage that (once you've been promoted to a wizard) you can use tocreate any kind of event-driven software objects. Essentially, the gamehandles much of the work for you and you define the behaviors of theobject. In SL you can also draw and visually create the object as well,starting from simple generic shapes.
For a developer, this is really a bit of virtual heaven. You can pretty much build any kind of object (a primor primitive) you can conceive of and utilize it. E.g., some peoplecreate clothing fashions for the characters, others create new actionsthe characters can do, yet others create houses, buildings, cars, toys,etc. In fact, when you first enter, you are on Help island, wherenewbies go. Here, you can experiement with your own prims or you cantry out some other prims that others have created. For example, thereis a Simon game (remember those), a Sudoku board, a mahjonggtile-matching game, and an arcade Space Invaders style game. These areprims that others have created that allow your avatar to manipulate toplay; so you are playing a game within a game.
For each prim, you have a scripting language that looks similar to C,Java or Python, familar control structures, a library of functions forstring manipulation, math, communication and lists, an event system,and system standard constants. A number of other functions areparticular to the 3D environment and geometry.
All that is not surprising to build into a game these days, but what issurprising is the economy and the impact of retail activities...(continued).
Ian Hughes from our IBM Hursley Research Labs led me onto this company that does 3D Printing of objects from Second Life. Essentially, any 3D object in Second Lifecan now be "printed" as a physical sculpture/model out of foam or waxfor about $30 or $60 up to a size of 9" x 5" x 5". I can't quite tellwhat kind of 3D milling/printing device they use but you can contactthem for more info.
I was thinking of modes of real business services in terms of virtual environments and came up with this list:
I bring this up to consider where the business opportunities lie. WhileI considered the above scenarios for SecondLife (SL) in particular,this is really a generic model that may apply to any online retail website. In the vast majority of such retail web sites, the trade is forcurrency for real goods, but this exchange can occur between a realperson and a virtual identity (it might be one person, it might be awhole company of people). E.g., on eBay, when you bid and buysomething, you never really know if that person on the other end is asingle real person or multiple people.
This is a factor to consider for conducting business. I tend toconsider all interactions significant. The more you interact withsomeone, the more trust (or distrust) you build with that person. Youmight remember fondly of previous exchanges or, after some few basicexchanges to build familiarity/trust, you suddenly find that you aresuddenly suckered out of your money when that big exchange happens. (atypical con-job as we say here).
Trust models thus play an important part in exchanges and mostmultiplayer environments these days have to build in some sort oftrusted exchange system. Most MMORPGs that allow users to exchangeitems have a special "Trade" window where both parties must check a boxto accept the trade for it to complete. This is a scenario that happensin type 4 virtualuser2virtualuser exchanges.
On the other hand, on eBay (realuser2realuser),since the actual exchange involves some form of physical exchange orshipping, they need another another way to designate each identity'strust level, within the system. Thus, you have a rating system tosymbolize that level.
One thing to note is that there is a continuing rise in virtualuser2virtualuser as well as realuser2virtual usertrades. In fact, the latter even applies between you as a real personand your character. E.g., in SL, if you transfer your Linden$ into realdollars through Paypal (i.e, withdraw currency from the game), you arein effect doing an exchange between your physical and virtual selves.
Also interesting is that there are some virtualuser2realuser servicesemergine like the Pizza example. I would daresay this isn't the firsttime this has happened. Some in the late 1980s (if I recall right), atMIT, you could actually order real sodas from the soda machine throughyour emacs text editorenvironment on your online Unix account identity which would chargeyour school food account (one of those cool hacks that Stallman andcrew did with emacs). If this 3D printing service was paid entirely inLinden$ then it would fit into this mode as well.
The biggest deal out of all this is not just in the types of exchangesbut the value applied to virtual objects. That'll be a future post...