French-fluent readers, the great Le Monde of France has a new article on a famous old story from the virtual world economy, part of a larger series on the topic: Comment Ginko Financial, la plus célèbre banque de « Second Life », s’est écroulée -- i.e. "How Ginko Financial, the most famous bank in “Second Life”, collapsed".
Ginko, as longtime readers may remember, was an SL-based financial service offering incredibly high interest rates to users, attracting high skepticism over its management and cash liquidity, not to mention allegations that it was a Ponzi scheme, until Linden Lab finally shut it down.
As I discuss with Le Monde reporter Florian Reynaud, the Ginko case was another lesson for Linden Lab on the limits of libertarianism. Florian also managed to get an official statement on Ginko from Linden Lab, but it's very broad -- because, he tells me, the Lindens don't have anyone still employed there who even remembers that far back.
Read the Linden Lab statement below along with an English excerpt (albeit with a mediocre translation from Google):
Raph Koster, co-creator of online role-playing game pioneer Ultima Online, likes to say that “the libertarian economic ideal does not survive the management” of a virtual universe. The laissez-faire, according to him, comes up against the ingenuity and the greed of the players. And Second Life, one of these most well-known universes, is perhaps an example of this doctrine. Launched in 2003 by the company Linden Lab,
Second Life is a platform in which users can create 3D worlds (today a little dated visually) and interact in them freely. It is not only a place where you can visit Mont-Saint-Michel by flying or chat in a cyberpunk café in a bear costume, it also very quickly became an economic El Dorado. Real real estate developers have made a fortune there, selling or renting virtual plots of land. Others set up banks: the best known of these was called Ginko Financial, and today it is one of the most controversial names in the gaming economy...
Second Life was until then “almost a case study of the limits of libertarianism, analyzes Wagner James Au. We have seen the most malicious actors or the most harmful consequences of a completely free market”.
If Linden Lab did not want to give an interview to Le Monde, the company nevertheless sent us a press release explaining that it had not had to deplore any new scandal similar to that of Ginko Financial over the past fourteen years, thanks to the rules put in place to ensure the financial security of its economy.
"Generally, Linden Lab lets its residents decide how to act, live or play in Second Life, but unregulated virtual 'banks' have brought substantial economic risks," the software publisher explains today. “Offering interest rates too high to be viable, [these virtual banks] are in most cases doomed to collapse,” continues the publisher.
Read it all here (paywall), part of a series. This week Florian tackles the Final Fantasy XIV housing crisis, and "the final story will be dedicated to the EVE Online economy", he tells me.
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