Second Life: Virtual Economy Meets Real World Finance

By Mark Hoerrner

The Sims is a video game in which you can create a second life, a way to interact with thousands in a virtual world. Second Life is a virtual world in which you actually create a second life replete with a job, salaries and all of the visceral experiences a computer-aided living can provide.

Meet Second Life, a project just a few years old that now boasts an online community of more than a quarter million. Recently profiled in Wired magazine, the virtual world is creating a stir by its virtual vs. real world economy. In Second Life, you don’t just earn virtual "linden dollars." You can exchange the linden dollars for real dollars.

The way it works is fairly simple—interested parties sign up for an account, create an avatar (a physical manifestation of themselves in a virtual environment) and then begin interacting with the Second Life world. The "game," such as it is, comes with a virtual creation tool that allows players to begin building anything—from games to furniture to high-end graphic objects—that can be sold to other players.

The lure of the money is so great that people are making a real-world living off the virtual participation in Second Life. A retired exotic dancer who manages the virtual landscape for "Samurai Island," a popular destination and game within Second Life, admitted that she makes more real-world money from Second Life than she did dancing. Another individual runs a string of virtual casinos that by his own admission, garner up to $3,000 per month for about 10 hours per week of work. Still others, like the inventor of the popular Second Life game "Tringo" have found that some things in the SL world can crossover to the real world. The developer now has offers to take the game out of Second Life and possibly even have a game show created based on Tringo.

Other "occupations" Second Life participants have developed are pet manufacturer, jewelry designer, bodyguard, publicist, gunsmith, real estate speculator, dancer, musician, vacation resort owner, tour guide and writer.

The options in Second Life are as open as the imagination, that is, as long as you have the ability to master the computer code required to truly manipulate the virtual world. SL claims to have an "easy-to-use and fun-to-learn" scripting language, but for those who are not computer savants, the ability to make money may be limited.

An interesting feature of the virtual world is the ability of participants to own a piece of it. In addition to the objects and games created by those who are members of Second Life now—and the game agreements allow all users to retain the intellectual property rights of the things they create—users can actually own "land" in Second Life.

The function of real estate is a little different in Second Life, but the creators have developed a way to manage the behind-the-scenes server infrastructure needed to maintain a large graphical world. The solution: charge people real money for the real estate. Not only do the virtual acres come with a linden dollar price, but they have an initial purchase price reflected in U.S. dollars and incur monthly maintenance fees that can soar up to $1,000 per month.

What may be the most interesting side effect of Second Life is that while it is a virtual world, it intertwines with the real world through articles, through coverage, through online communities and other gatherings of fans. There are writers employed in the real world who are specializing in writing about specific events in Second Life and who are taking real or linden dollars for their work, as well as advertising on their web site.

Authors such as Julian Dibbell that have created real world books—such as Dibbell’s "Play Money"—are being offered for sale in a virtual format in Second Life. Dibbell is charging around 750 linden dollars—around $2.50 in real dollars—for his virtual book, though for roughly 6,000 linden dollars, a Second Lifer will receive a virtual copy and a physical, real-world copy of the book. The irony of Dibbell’s book is that it explores the rise of online economics based on his experience selling virtual money in another massively-multiplayer online game.

One of the upcoming questions is whether or not the Internal Revenue Service will soon be looking at unique opportunities in the realm of taxing virtual economies. Currently, the Second Life community is seeing the transfer of millions of real dollars. States, also, are examining the ability to tax items created by Second Life manufacturers.