I’ve said time and again that L$ != $, i.e. Linden Dollars are not real money. I keep emphasizing this because real money is subject to banking regulation and money transmitter laws, and we don’t want L$ to be confused by regulators for real money, at least not until we find reliable partners to do the portions of our current business that could become subject to these regulations.
I’ve done a poor job in explaining what Linden Dollars actually are. This is because I don’t actually know what they are, not exactly, and it’s really tiring trying to hide my ignorance. So let me just tell you what I know. The first part of what I know is kinda boring, and it goes like this:
Linden Dollars are a license right, defined in our TOS. As of this writing, the current TOS says:
You acknowledge that the Service presently includes a component of in-world fictional currency (“Currency” or “Linden Dollars” or “L$”), which constitutes a limited license right to use a feature of our product when, as, and if allowed by Linden Lab. Linden Lab may charge fees for the right to use Linden Dollars, or may distribute Linden Dollars without charge, in its sole discretion. Regardless of terminology used, Linden Dollars represent a limited license right governed solely under the terms of this Agreement, and are not redeemable for any sum of money or monetary value from Linden Lab at any time. You agree that Linden Lab has the absolute right to manage, regulate, control, modify and/or eliminate such Currency as it sees fit in its sole discretion, in any general or specific case, and that Linden Lab will have no liability to you based on its exercise of such right.
Wha? I sometimes explain it this way instead: Linden Dollars are a feature of the virtual economy portion of our service offering. See, people enjoy participating in a virtual economy, and this is one feature we provide to make that participation easy. We didn’t have to use the fiction of a license right. We could have used, say, a box of special Linden toothpicks instead. We could have said to everyone, “Hey, if you want to buy and sell things in-world, we want you to use our special toothpicks as your medium of exchange. You don’t have to do this, we just want you to. We want you to write us a letter, include a check to buy these toothpicks from us. We are the only ones who can issue these special toothpicks. You can set prices for the things you are selling in these toothpicks, and you can buy and sell these toothpicks with other users at any price you want. But we will never buy toothpicks from you, or give you anything else for them. Once you buy a box of toothpicks from us, you can’t return it. S’ok?”
Conceptually, Linden Dollars are exactly the same as those toothpicks. But of course it would have been insanely stupid to try this with physical toothpicks when we can use a simple license right that will serve the same purpose with much, much lower friction in use.
I’ll make another point: We didn’t have to call them Linden Dollars. We could have, for example, called them Linden Bunnies. We could have made the LBunnies visual in the virtual world, so that when you carried the LBs around, say, you would wear them on your head. (I suppose a stack of bunnies on your head would eventually get really unwieldy, but we could have used different color bunnies to indicate denominations – a white bunny named George would be one LBunny, a green bunny named Benji would be 100 LBunnies, maybe we’d have a blue bunny named Sammy for 10,000 LBunnies. Instead of it being all about the Benjamins, it would have been all about the Sammies.) Had we used virtual bunnies on heads, I believe very few people would confuse our virtual currency for real money.
But what is real money anyway? This is actually a complex question with more than one perspective for an answer. (That, btw, is what I say when I’m not really sure what I’m talking about.) However, one of the key factors that makes money money, from the perspective of regulation, is that money is redeemable for monetary value. Now, that’s a bit tautological (I like to use big words and then undermine my appearance of familiarity with these words by linking to a definition) but the key statement there is “redeemable” – this is why we continually insist that Linden Lab will never give anyone real money or any other value for Linden Dollars.
Note that this is not the same as saying that Linden Dollars have no value! I have heard many people, including myself, get confused on this point. Linden Dollars obviously have market value – there is no conceivable way we can deny this when we ourselves run a market in Linden Dollars, and moreover we have talked about this many many times publicly. And never mind whether or not we can deny anything, it’s just true: people ascribe value to Linden Dollars. But that has never been important to our position. What is important is that we do not redeem Linden Dollars, we do not give you any monetary value for them.
So, in case you aren’t already bored, you may be wondering why the title of this post says this is only possibly boring. Well, it’s because this stuff is only boring if everything I say above is right. If it’s not, we are going to have some very interesting problems. But not only do I not know if all of it is right, no one does. At least, no one that I have been able to find so far.