New World Notes

Linden Lab Payment Spinoff Tilia Acquired by Fintech Company Thunes; Second Life Staffer Promises No Additional Costs for SLers

Tilia, Linden Lab's spinoff company for processing virtual currency to real money payments in Second Life, Upland (more here), VRChat (more here), and other virtual worlds, was recently acquired by fintech company Thunes:

To accelerate its growth in the United States and its presence in the fast-expanding online gaming market, Thunes, a global cross-border payments company, agreed to buy Tilia, an all-in-one payments platform. Tilia is licensed in 48 U.S. states and territories and offers payment solutions (acceptance and pay-outs) for online games, virtual worlds, creator economies, and in-app purchases.

As part of the transaction, Thunes and Linden Research, Inc. (“Linden Lab”), the current majority owner of Tilia, have agreed to an exclusive five-year partnership in which, post closing, Thunes will provide payment processing and pay-outs to Linden Lab, leveraging Thunes’ global network – allowing gamers to pay, and to receive money real-time, in a more cost-efficient way and with increased transparency.

Emphasis mine, because while this announcement hasn't been mentioned anywhere on Second Life's social media channels, it's inevitably lead some SLer to worry if this means they'll be paying more to process their Linden Dollars.

A Linden Lab staffer says no:

Join Philip Rosedale's FairShare Discord to Discuss Digital Currency & UBI -- And Start Getting a Basic Income of FairShare Currency!

Philip Rosedale is starting to roll out his FairShare digital currency universal basic income project (read my 2023 interview with him here) with Second Life-based meetings (of course!) and a very active Discord.

The FairShare server is already pretty active and chatty, so Philip recommends new users introduce themselves -- and ask another member to sponsor them to join the currency group. (To do that, enter "/join" in the Intros channel.)

When you're a member of that, you start getting a basic income of FairShare currency -- which is already starting to be used:

Can We Solve Economic Disparity With a Transaction Fee? Check Out This Simulation Created by Philip Rosedale

To illustrate the value proposition of FairShare, a new digital currency project from Philip Rosedale, Philip created this interactive simulation of a free market economy. Left to its own devices, his simulation suggests, this kind of economy will inevitably lead to growing divides between the haves and have nots:

Everyone starts with the same amount of money.  When people collide, they buy or sell something from each other. Their wealth is shown by their size and color, with red people being poorer and green people being richer.  Over time, even though the people are identical, the rich get steadily richer simply because they can give or get more than the poor with each transaction.  [emph. mine]

To stabilize inequality while providing a daily income, increase the transaction fee. A small transaction fee provides a daily income and stops inequality from growing too large.

Embedded above, or try it on FairShare's site here. Philip tells me there's an optimal transaction fee to lessen the wealth gap -- and argues that it's a better approach than the government imposing some kind of wealth tax:

Philip Rosedale Launches New Project Using What He Learned Building a Successful Virtual World Economy to Fight Inequality in the Real World

FairShare is a new project from Philip Rosedale with a snarky tagline that pretty much encapsulates what he has in mind: Eat the Rich, but slowly.

“I want to give people something like the Linden Dollar but just as an iPhone app that they basically can use to buy and sell anything from each other,” as he put it to me in a call last week. 

During the COVID lockdown, Rosedale created complex economic simulations which showed him a frightening thing. As it happens, I wrote about one exactly two years ago:

This new simulation basically models the injection of universal basic income -- a solution to the rich/poor divide recently popularized by Presidential candidate Andrew Yang. But as Philip writes, while UBI helps in the short term, his new simulation suggests that the wealth gap quickly starts growing, even with UBI.

"Even with people in a small community trying to look after each other," as Philip puts it to me now, "you will basically end up with a kind of a natural, almost a thermodynamic problem, where some randomly chosen people will basically just end up getting more and more money.”

He sees that in the state of the real world economy: “If you recognize that the economic system we have is so broken, the only safe assumption is we're going to have a violent revolution, as has been had many times throughout history." He even views current political movements through this lens:

"The whole thing with Biden forgiving student loans, that's called 'Jubilee'. It's one of the things that happens on the way to revolution every time. Because one of the things you can do is you can start forgiving debts once the people that are getting screwed get mad enough."

Some metaverse platforms might help with inequality, he believes, but then again, others will not: “Roblox is a lottery you're not going to win,” as he puts it, echoing concerns we discussed here. “You can't go into Roblox and say, I'm gonna make my living in here. Maybe you can go into Second Life and say that.” 

FairShare aims to solve this seemingly intractable problem by offering people who sign up a universal basic income modeled after one that’s helped keep Second Life’s economy thriving for twenty years: 

Can Russian Oligarchs Hide Their Wealth With Crypto? Analysis & Advice for Regulators From a Finance Expert

With global sanctions hitting Putin-aligned Russian oligarchs and their troves of ill-gotten gains, there's been speculation that these billionaires will hide their assets in cryptocurrency -- a suspicion perhaps heightened by the fact that some crypto firms are refusing to shut down access by Russians to their exchange platforms.

How realistic a concern is this, and how should governments respond? I put those questions to Bill Maurer, Director at the Institute for Money, Technology and Financial Inclusion at UC Irvine, and one of the world's foremost experts on alternative/experimental forms of money and finance:

"If you look at real-time transactions right now on fiatleak, you'll see that most of the trading between rubles and crypto is to Tether, a stablecoin that markets itself as fully backed by US dollars," he tells me. "That would represent a flight to stability, in contrast to, say, buying Bitcoin. It's also interesting since there's been a lot of speculation about what the war will do to the price of Bitcoin -- and my answer is, within the current pattern of trading, probably not much.

"Tether, meanwhile, is controlled by Bitfinex, a company that has moved around from tax haven to tax haven (from the British Virgin Islands to Switzerland), with questions about whether the reserves actually exist and where the reserves are really held. Pity the poor oligarch who is drawn to a stablecoin whose value may be based on nothing but thin air. Not."

The problem for oligarchs, he goes on, is that moving their fiat money to crypto means they'll have to keep it as crypto:

If Meta Couldn't Launch a Virtual Currency Because If Its Reputation, What Hope Does Meta's Metaverse Have?

Remember Libra and Diem, the virtual currency project launched by Facebook/Meta in 2019? (Here's what I wrote about it back then.) The Financial Times has a great inside story of what happened to cause that project to collapse. Basically, Facebook happened:

What emerges is a picture of Silicon Valley executives who thought they could charge into finance and make billions, if only they could surmount technical and regulatory barriers. What they failed to realize was that the very fact Facebook had conceived the idea, doomed it. As one government official involved in the process puts it: “Diem spent years trying to reverse engineer their project to fix all of its faults. But they could never fix being linked to Facebook. It was their original sin.”

Read the whole thing here, which ends by casually noting that Meta is now working on making a Metaverse. Left unsaid there is the painfully obvious point:

In a Virtual World Economy, User-Generated Content Prices Are Controlled by the Company, Not the Market (Comment of the Week)

Really interesting conversation on the problem of virtual currency in virtual economies last week kicked off by "Kyz", who explained how difficult it was for them to reliably run a successful business in a virtual world. Replying to the idea that the value of their content is decided by the market, Kyz goes deeper into the analysis:

That's true to an extent and there are parallels between virtual and real life markets. But there's more to it than just market demand and pricing.

For instance, my SL experience put an extra layer of cost into the mix. Linden Dollars are a product or were, to Linden Lab. The currency wasn't just added to the company as a convenience for users, it was acquired by Linden Lab from someone that discovered that virtual money was itself a product that could be profitable directly or indirectly.

The last part isn't quite accurate but the full story enhances Kyz's argument: Linden Lab reportedly made an offer to the user-made Gaming Open Market, which circa 2004/2005 was a popular platform for the community, then in late 2005, officially productized the Linden Dollar through the launch of the LindeX.

"I mean, I get it," Kyz goes on. "And if I ran a virtual world, creating an extra revenue stream from currency is something I wouldn't lightly ignore." But for content creators like Kyz trying to monetize on the platform, this led to additional hurdles and regulations:

Our Payment Systems Are So Bad, Making the Metaverse Might Mean Moving to Blockchain Systems (Which Have Problems of Their Own)

'I'm blogging Matthew Ball’s must-read, nine part metaverse primer over the Summer; my take on Part 1 (introduction to the framework) is here,  my coverage of Part 2 (hardware) is here, with Part 3 (networking) coverage here, Part 4 coverage (computing) here, Part 5 (virtual platforms) here, and Part 6 (open standards) here.

Part 7 of Matthew Ball’s Metaverse framework, on the challenge of payments facing the Metaverse, is the most daunting so far, veering into some thick if necessary weeds to hack through. If I had to summarize the whole thing in a single sentence, it would go something like this:

The payment options we have to deal with are so inefficient, unfair, and monopolistic, we may never get a Metaverse worth the name unless we switch to a blockchain-based system -- even though that has problems of its own.

To break Ball’s case down into more detail (with some analysis of my own):

• Current/traditional payment systems incur transaction costs and time delays.
• Virtual world-based payment systems, built on these payment methods, are even more costly and slow.
• At the same time, distribution platforms (consoles, Apple, etc.) lock in consumers and developers while hitting the latter with high fees, while also locking out payment competitors. (This is, by the way, starting to change.)

With mobile so dominant, and so necessary to achieving mass market growth, current Metaverse platforms end up paying most of their money to Apple and Google Play. For instance, while ROBLOX’s revenue sharing deal is reportedly harsh for their creators (especially as most of them are kids), the company itself takes a huge hit from Apple:

Upland, Blockchain-Backed Mirror World, Attracts Hundreds of Thousands of Players, Earning Cryptocurrency Worth Many Millions USD Every Month

San Francisco HQ of Tilia owner Linden Lab already owned by an Upland high roller 

Let's briefly check in on Upland, the virtual real estate acquisition game that's sort of Monopoly meets a mirror world, where virtual real estate is registered on the EOS blockchain, and is the first paying customer for Linden Lab's Tilia payment service. Since I wrote about it in June 2020 (shortly after launch), it's become an online world with a pretty large virtual community -- and some nosebleed-serious real cash flowing between its users.

According to Sensor Tower, the game's app garnered 100,000+ downloads and earned $200,000 last month on Google Play alone, but that's only part of the story. Upland's website (where the game can also be played) racked up over 5 million views last month, according to SimilarWeb; I'd estimate that as monthly active players in the mid-six figures. 

But the level of transactions already happening in Upland are even wilder:

This user-run site tracks Upland transactions and leaderboards, and they're fairly amazing. Last month, for example, the top 100 Upland players earned proceeds worth several million USD.

"You need to understand that they marketed to the Crypto and NFT guys," as Upland player Octavius explains, "many of which are a new fairly wealthy group of crypto money."

Why Linden Dollars Succeed as Currency Where Bitcoin Cannot: Stable Exchange Rate

Good points from reader Erik Mondrian, on how Linden Dollars help drive the success of Bitcoin, and why L$ is still more often used than BTC to buy goods and services:

The other issue that I think is important to bring up in this context is exchange rate, which weighs the scale even further toward the Linden Dollar. Thanks to its rate remaining relatively stable, Residents can pretty much assume that 1 USD will be worth about 250 L$—now, tomorrow, next week, next month, and next year—an assumption that has a lot to do with the health of the Second Life economy and the willingness of people to accept and rely on Linden Dollars as a form of payment and stored value.

Contrast that stability with Bitcoin—its infamous fluctuations and the astronomical rise over the years in how many thousands upon thousands of US dollars you'd have to pay to get just 1 BTC—and it should be obvious why using the latter as a currency is ridiculous. It's much more like investing in the stock market and then hoping that enough other people will want to buy in that the value of your "asset" keeps going up. (And also hoping, of course, that a certain billionaire CEO doesn't tweet something that sends its value falling again.)

Seen in that light, comparing daily transactions is almost beside the point, since these two "virtual assets" represent entirely different expectations and mindsets. Bitcoin evangelists, like those cited in the article above, celebrate the so-called milestones of BTC reaching ever higher exchange rates and total amount invested. Meanwhile, in Second Life, we use the reliable ol' Linden Dollar to do what people tend to do in any society with a functioning currency: buy and sell goods and services (and pay our rent), trusting that the money we use to do that with will still be worth more or less what we gave or got for it the next time we're asked to open our wallets.

The key reason that Linden Dollars remain stable against the US dollar, versus Bitcoin?