Randolph Harrison goes into Second Life, expecting to make a quick buck via market arbitrage, and realizes that getting money out of Second Life might not be as easy as getting it in.
Enter the second problem, the L$ exchange markets are effectively rigged. At any given time over the past year or so, the SLL/USD exchange rate has hovered between about 250 and 300. That is, for every L$300 you earned, you could expect to get $1 USD. Now recall, there are supposedly hundreds of thousands of real dollars being spent daily; over L$250,000,000. Between Linden’s official exchange market and the private exchanges, all appearances suggest a large volume of L$ daily exchange trade.
The catch is, however, these headline rates only apply to small amounts. For small time buyers and sellers of L$ — be they virtual Johns paying up for sexy avatar escorts, or small time digital jewelry makers cashing out a couple hundred real dollars – this works well. Most of these people will use Linden’s official LindeX exchange, anyway. LindeX is actually not a virtual currency exchange market so much as it is an open auction, anyway. This means LindeX is not particularly useful for big trades.
[...]
As we scratched our heads trying to figure out if there weren’t a more clever way of disguising our trades, or perhaps creating our own in-game banks and exchanges in order to arbitrage the other direction, it suddenly dawned upon me.
This game was just a pyramid scheme.
SecondLife is not a dramatic taste of our future, in which markets are virtual, currency is free from government control, taxes are non-existent, and normal people can become real millionaires simply by clicking their mouse a few times.
SecondLife isn’t even a simple virtual economy, with legitimate buying and selling, and opportunity for those who would compete.
No, SecondLife is a classic pyramid scheme. Or, more of an Amway-like pyramid: partially legitimate, partially ponzi. Sure, there are plenty of legitimate SecondLife customers who just like to go there to get their kicks, spend a couple dollars, and be on their way.
Somebody in Slashdot commented that making money in your First Life isn’t easy, why would it be on Second Life? Good point, but it obviates the fact that Harrison didn’t have any problems making money - he had problems getting it out of the system.
[...] Research runs Second Life, a virtual world that I’ve mentioned before. They’re currently enmeshed in a legal situation because they denied access to a person, who [...]