Philip Rosedale on What Libra & Bitcoin Can Learn from Linden Dollars

Above: Philip Rosedale's 2009 Slideshare for turning Linden Dollars into global currency

Great Medium post for cryptocurrency geeks by Philip Rosedale, who reveals his slide deck from 2009 -- back before hardly anyone knew about Bitcoin -- explaining his plan to turn Second Life's Linden Dollars into a global real world currency. As I never get tired of pointing out, Linden Dollars are still used for more daily transactions than Bitcoin, so Philip's analysis of that plan is worthwhile for crypto advocates -- and perhaps even more relevant to Facebook's plans to create a global cryptocurrency called Libra.

For instance, he talks about how Second Life's very international userbase shaped his approach, and compares that to the direction Libra is now taking:

Because avatars came from all over the world and were constantly interacting both socially and financially, we got a painful lesson in how impossible it was to come up with policies that made every country happy. Based on this experience, I can say with some confidence that it is going to be nearly impossible to do something in the way of a new currency if you a-priori need multiple countries to agree with and support the idea.

So, for that reason, I started in 2009 trying to think of how to make some sort of ownerless system where lots of different countries and institutions could easily opt into initially being part of it, with the hope that once the system got started the cost of any one party opting out would be less than the benefits of staying in. My plan (from the slides) was to create a network of ‘balance servers’ that would stay in sync with each other using a basic consensus algorithm — the same sort of strategy Facebook is proposing for Libra.

Much more here if you're willing to go deep into the crypto weeds. This ambitious plan for Linden Dollars was never put into effect, and as I recall, somewhere around 2009 is the time when Linden Lab started describing L$ not as a currency, but with this legalese:

Second Life includes a component of virtual tokens ("Linden Dollars" or "L$"), each of which constitutes a limited license permission to use features of Second Life as set forth below. Linden Lab may or may not charge fees to acquire or use Linden Dollars, and these fees may change at any time.

I.E., Linden Dollars are not actually money, but a limited license that's relevant only to Second Life. Which is not as sexy as saying it's money, but is probably a good way of minimizing unpleasant visits from the IRS. I sort of suspect Libra will meet a similar fate, and scaling back of ambitions -- especially if it becomes associated with the "vice" economy:

The industries with the greatest incentive to use Libra now are on the edge of the mainstream economy -- for instance, gambling, online gaming, porn, and the burgeoning legal pot industry in some US states. In my view, their rapid embrace will likely turn Libra into "Vice Coin" -- a brand association which might hamper Libra's adoption by the wider mainstream. (Which is probably not what Facebook and its partners were going for.)

More on that analysis here.

Comments

[Joey1058]

From my perspective, what's interesting to note is Rosedale's attempt to get into the mainstream crypto market with HFC. The lesson to be learned here applies to Linden dollars, High Fidelity Coin, and Libra: Don't piss off the US federal government. L$ got slapped down by FinCEN. HFC is dancing with them as well, I'm sure. Facebook has always unofficially considered themselves outside of any governmental control. So they're about to dance with not just FinCEN, but however many global monetary regulators their white paper pissed off.