ToS L$ Change Update #2

Maria Korolov over on Hypergrid Business is doing an excellent job of tracking events related to the changes in the Linden Dollar exchanges due to the Linden change in ToS. If you need the latest information, I suggest you follow her blog.

The point has come up that the Linden ToS provides for a 30 day window from the time of a change until the day it is enforced. The Lab is telling third party exchanges they must be shut down by Monday morning (5/13).  If they enforce the Monday Morning shut down, that would seem to leave the Lab liable to lawsuits for damages. So, this Monday morning’s shut downs may be a costly mistake.

However, the Lindens do have the capability to shut down non-compliant exchanges. On the Linden side it is just a matter of deciding to and doing it, some clicks on the Linden computer screens.

So, several exchanges plan to close on Sunday night (5/12). Others like  MBkash and WoozKash, and Podex plan to demand their 30 days and operate until June 5th, 30 days after the ToS change and notification.


In a free market the biggest deterrent to business is uncertainly. If you are paying tier and/or selling products and services you are now uncertain what you can do. Putting more money into SL is suddenly high risk because you don’t know if you can get it out. In most cases people can take money from their pocket and hope to ride on until the uncertainly is resolved, or make they a call and start closing down. Or they can risk a loss and continue on expecting something to be worked out.

Another facet of business in a free market is trust. When citizens can trust their government (Linden Lab) they have some measure of certainly in what they can do. They can play the odds on the risks they can evaluate and take. The current Linden behavior is like the government of Cypress suddenly deciding to tax money which citizens had already paid taxes on (their back accounts), re-taxing a second time… an inconsistency in behavior and an obvious attempt to confiscate citizens’ private property. This exchange closing with little to no notice is an odd enforcement by Linden Lab that will cripple businesses. It is a change in Linden Lab’s behavior and written policy. If the Lab violates their 30 grace window for ToS changes, they will destroy trust. While that will be a metric that is difficult if not impossible to measure, it is going to have an effect on the future of Second Life. I think a negative one. But, not one I can estimate the scope of.

I am sure you are carefully considering how to get funds out of Second Life and how much to invest or not.


Some are speculating that the Lab is closing down Second Life and this is a step in that direction. That speculation makes no sense to me. SL is the Lab’s cash cow.

The people working on SL like Oz, Maestro, Simon, Kelly, and others that regularly talk with users… they would long ago have been let go if SL were being shut down for any financial reasons or other shut down plans. The current projects upgrading SL would never have been allowed to start. So, I think the speculations that closing the exchanges is a step in an overall shut down plan are irrational.

To date this appears to be a financial change wrought by a government requirement. Internally the Linden accountants may be trying to make the most of it. Like any government, they may think forcing people into a channel where they have to pay more to the Lab, is going to bring in more money. It generally doesn’t work. (see Laffer Curve for why raising taxes results in less revenue)

Or… the legal counsel may be being overly cautious. It may be weeks or months before we have a clear idea. Or we may never know. What we do know is the Lab has battened down the hatches and staff has been instructed not to discuss the ToS change. It is going to be some time before the uncertainly resolves into something businesses understand and can plan for. That means SL business is going to take a hit. Yes, another hit…

3 thoughts on “ToS L$ Change Update #2

  1. “Another facet of business in a free market is trust. When citizens can trust their government (Linden Lab) they have some measure of certainly in what they can do. They can play the odds on the risks they can evaluate and take.”

    The Linden Lab as government analogy is sometimes a good one. With L$, I don’t think so though.

    Imagine if a government like the United States’ didn’t accept their own printed currency, and insisted taxes and other dues be paid in gold only. Imagine if only citizens dealt with the legal tender. Wouldn’t that be wonky?

    That’s how it is with Linden Lab and Second Life. The US government doesn’t accept payment on dues in gold, it only accepts payment in dollars. Linden Lab however only accepts payment for tier and premium in real money, not L$. The parallel of Linden Lab as government and L$ deserving the same kind of faith as the US dollar falls apart there.

    Fortunately for Linden Lab, the fact that even they don’t accept L$ for payments, nor would ever redeem L$ balances for real money with their own coffers hasn’t effected the value of L$ and they’ve been able to make money on the exchange.

    In the long run, I hope everyone that is any kind of dependent upon their L$ balances realizes Second Life, abstractions removed, is just an online product, and at 10 years old is already antediluvian compared to most.

    It’s silly to believe Second Life will terminate tomorrow. It’s sillier though to believe it’ll be around indefinitely.

    This whole third-party exchange business hasn’t shaken my faith in L$ one bit. But I’ve never hung on to an amount of L$ that would hurt to lose the USD value of should Second Life close the next day. The only wake-up this turbulence should be for is those that use their L$ balance as a bank account. L$ isn’t as good as gold, nor a dollar. If it isn’t good enough for Linden Lab to accept or redeem directly, treat it accordingly.

  2. If I look at websites like VirWox, that is a large business and probably the owners full time job. It is scary how the Lindens can take somebodys living from one day to the other. We saw the same many times if we think about the gambling or banking ban or the changes with OpenSpaces. But that is not all, often bugs destroy working products, like a pathfinding game that I built.

    So the conclusion would be that it is never good to stand on one leg. I think Cloud Party is an excellent candidate in a few month for a second leg to stand on.

    Maybe one day we have a decentralized virtual world similar to the Internet and without a corporate dictator.

    • I strongly agree. Dependence on a single supplier/source of a service or product is a poor choice for any business. Or for that matter most any aspect of our lives.

      Cloud Party is looking good. OpenSim has possibilities and is an excellent low cost learning path.

      High-Fidelity is an intriguing possibility.

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