Other World Notes: Promising Unity-Based World Accepting Linden Dollar Exchanges for Its Own Currency

Friends Hangout, the promising Unity-based, user-generated web world that I wrote about recently, is now accepting Second Life's Linden Dollars in exchange for "Tokens", its own internal currency. Those exchanges will be handled by First Meta, the virtual currency trading service which just became Friends Hangout's official and exclusive provider.

"I think it was a natural fit for both companies," First Meta Co-founder & COO Aileen Sim tells me. (That's her at a San Francisco social gaming conference, where I got to first meet her.) "We manage every piece of the currency exchange operations, so [the FH development team] can focus on making their platform even better." That also means they can handle exchanges of Linden Dollars from Residents interested in converting some spending money for use in Friends Hangout. "The exchange rate will fluctuate depending on supply and demand for both currencies, and of course the USD exchange rate for Lindens," Aileen adds. As of last week, the exchange was 4.5 Friends Hangout tokens for 1 Linden Dollar.

Comments

[Ann Otoole InSL]

How long till LL begins terminating accounts involved in funneling L$ to other locations? Probably not long.

[brinda allen]

"How long till LL begins terminating accounts involved in funneling L$ to other locations? Probably not long."

Lets start a pool Ann, number of days?

...let's see...how many Lindens will it take to make the decision?
Divided by the # of depts....times PI...plus periods in second sentence......
Wait, what was the question again?

[Lalo Telling]

Hey, look at it this way: LL will probably figure a way to spin it into "positive monthly Linden flow", or maybe a new metric, "grid-to-grid transactions", and then parade it as another sign of economic health.

More likely, they won't care.

By the way, InWorldz already accepts L$ in exchange for their currency (I'z, which a lot of people are calling "izzies"), with a flat exchange rate of L$ 1 = I'z 2. It's done through a scripted "ATM": you pay the SL account of one of the InWorldz founders on the SL side, then collect from the same account on the InWorldz side. And that's a "user-to-user transaction", as far as SL is concerned, no different than paying a content merchant or a landlord who then cashes out to pay tier, or buy a venti latte.

[Galatea Gynoid]

How long until some clueless individual tries to spin this as a bad thing? (Looks up to Ann's post.) Ah, nevermind...

[Hamlet Au]

SIMMAH DOWN NOW!

[Ann Otoole InSL]

So LL should use our money and our efforts to finance the competition? I thought the LL board was a tad more intelligent than to be farming and nurturing parasites.

[hexx]

I vote for the "grid-to-grid transactions" spin with the economic health angle that Lalo mentioned.

[Ignatius Onomatopoeia]

I tried once here, and the comment didn't make the cut. LL has the most recognized currency of all the grids: why not leverage that and make some money from these transfers? Why not make the Linden the de-facto intergrid currency, as the dollar is for the oil market?

Most of us trust the Linden Dollar, I'd wager.

To continue Ann's unfortunate metaphor, then the "host" would make money from those "parasites."

[currency]

Allowing trading of virtual currencies between platforms has risks for all parties involved. What the two platforms are choosing to ignore (or incredibly naive about) is that allowing this opens the doors wide for fraud and money laundering. In the long term, it can deeply hurt either (whoever is most naive or vulnerable will be hardest hit) or both.

Have fun!

[aileen sim]

When users trade from Linden Dollars to another virtual currency, no Linden Dollar actually "disappears" since someone else is buying that L$. The effect is no different from another user selling his L$ for USD on the LindeX.

(And vice versa when one trades his FH tokens / imvu credits / frenzoo gold etc for L$.)

Second Life was built on the fundamental belief that an open economy and freely-traded currency benefits all parties in the economy; It fosters creativity, encourages quality content, provides new business opportunities etc etc etc.

Isn't this why we love SL in the first place?

[CronoCloud Creeggan]

I am surprised about the hype of Unity based worlds on NWN, since Unity is not cross platform.

[Ann Otoole InSL]

@aileen - All this: "Second Life was built on the fundamental belief that an open economy and freely-traded currency benefits all parties in the economy; It fosters creativity, encourages quality content, provides new business opportunities etc etc etc." is possible and ongoing without LL having to be used as a money laundering service. The fact LL appears to allow it may be misleading. Since these inter grid transfers can easily conceal fraud or criminal or worse operations in the other grids then it is a good possibility LL does not even know about it. These systems are bypassing LL's anti fraud mechanisms. LL needs to be concerned and deal with it.

Maybe Hamlet can ask LL what they think about their anti fraud systems being bypassed so easily. I.e.; there is no way for LL to know what goes on in these other grids. Then the money comes back to SL and cashes out all crispy fresh and clean.

I doubt LL is aware of this. Or at least I doubt the people that need to be aware are aware of this.

[c3]

unity3d like adobe flash, is a cross platform tool. Specific developer applications and services built upon the platform , may or may not be "cross platform" be that OS or Device "platforms".

c3

[aileen sim]

@ann: we do work closely with LL's fraud teams. they know about our business and ability to exchange to and from other virtual currencies.

The exchange from one virtual currency to another does not create what you call an "inter grid" transfer (which seems to be your argument for money laundering).

L$ can only exist on SL's servers, IMVU credits on imvu's servers, FH tokens on FriendsHangout servers etc. What seems to the user as an exchange and transfer from one currency to another is really this:
-- 1. user A transfers L$ to us in SL. that L$ stays in SL.

-- 2. we sell that L$ to user B in SL. that L$ still remains in SL. (note: so far, not any different from Lindex)

-- 3. we take that money and buy FH tokens from user C in FH. Token is transferred from user C to us in FH. said token remains in FH.

-- 4. we transfer that FH token to user A's avatar in FH. said token still remains in FH.

There is no actual "inter-grid transfer". All we are doing is streamlining the user process, and reducing friction (e.g. paypal fees). The effect on SL is exactly the same as the effect of any regular L$ exchange.

(In the real world, money is not laundered via currency exchanges. money is laundered via places like casinos and nightclubs.)

--
Let's assume for a minute that there is money laundering risk here (even though there has never been a single significant case amidst all of SL's controversies and scandals over the last 10 years.)

That risk exists purely on the fact that there is a liquid market for USD-L$. Allowing direct exchange of L$ to another virtual currency does not increase the risk since users can already do this indirectly the day LindeX was born:
1. sell L$ into USD
2. Buy other virtual currency with USD

If anything, as an intermediary we reduce the risk since (1) we are able to draw relationships between SL avatars and other world avatars unlike in the second scenario whereby the relationships are lost to LL once the L$ is sold. (2) we keep records of all such transactions and are constantly monitoring them.