Second Life Currency Crisis?

Linden Lab is now dealing with an increase in the exchange rate's volatility as the population in Second Life explodes. Heading into November, Linden Lab observed the need to increase the number of sinks (exits) in Second Life and reduce the number sources (entries) in order to stabilize the value of the Linden compared to the U.S. dollar.

The Linden's value changes with fluctuations in the quantity of currency that enters and exits Second Life's system. The dramatic rise in both resident count and volume on the LindeX is worrying members that the exchange rate won't remain stable. Supply and demand set the value on the floating exchange rate. With demand rising and supply dwindling, residents are concerned about the value of their Linden currency.

During a "town hall" meeting on economics in Second Life earlier this year, Lawrence Linden (the in-world name of the man responsible for developing much of the LindeX exchange) acknowledged that "the market has grown substantially, as has the community. With that, we've seen the need to make changes to how new Linden are injected into the system.

"Having a more stable exchange rate benefits businesses and socially oriented residents alike," he added. "Having a stable exchange rate helps in-world pricing stay more stable and competitive as well."

Residents' fears stem from the difference in inflows compared with outflows between October and what's occurred so far in November. In October, Linden Lab reported that sinks totaled 36,401,711 Linden, compared with 157,637,800 in sources.