SLE allows virtual goods and services to be bought and sold within the immersive gaming environment of Second Life. SLE is a virtual marketplace where players can purchase and sell virtual goods using virtual money called Linden Dollars. This currency was named after the game's creator.
Second Life users, also known as "residents," can pay real money to purchase Linden dollars L$ can be used for buying, selling, renting, trading, or transferring virtual land, digital goods, and services. You can also exchange Linden dollars for U.S. Dollars at a floating rate. However, Linden Labs does not allow this currency to become a fully-fledged fiat currency.
Understanding Second Life Economy
Second Life, a virtual world that Linden Labs launched in 2003, is still available. Second Life is a simulation of the real world. Residents can freely roam the virtual world, interact with others, create residential and commercial properties, and transact virtual goods or services using real and virtual currency.
The economy trades virtual goods, including art and clothing, houses, and cars. While some businesses and individuals thrive in the economy, others may struggle and end up in bankruptcy. Second Life is home to approximately 1 million users each month. The Second Life economy's GDP was approximately $500 million. Its gross resident earnings averaged $60 million.
Second Life's marketplace allows you to buy and sell goods using a virtual currency called Linden Dollars (L$). Residents can convert their real money (e.g., dollars) into Linden Dollars to get them. Linden Money can be converted into euros at LindeX, the official currency exchange site of the game. Unlike traditional exchange platforms, market and limit buy/sell orders are carried out among residents.
Linden Dollars as Virtual Currency
Linden dollars have a fixed value on the real market. The FinCen recognized Linden Money in 2013 as a convertible central virtual currency. Any transaction that involves Linden Dollars will have tax consequences. Virtual currency should not be considered real money. Instead, a virtual currency should be treated as property for tax purposes. Therefore, Linden Dollar transactions are subject to property tax laws. When calculating his gross income, a taxpayer must include the fair value of any Linden currency he has earned. Taxes will be applied to capital gains and losses if the virtual currency is used only for investment purposes.
You can also purchase virtual goods from the economy using legal tender such as U.S. dollars. Linden Labs is required to provide land for residents who want to build their homes or business. A 65,356m2 piece of economy land costs $1,675 in U.S. Dollars. Linden Labs may charge a monthly fee to residents who have multiple lands. This fee is paid to rent space on the game server. It increases with the purchase of more land.
Gambling Inside Second Life
SLE has a central marketplace. Linden Labs, Second Life Economy's administrator, can issue more currency keep track of transactions by residents and alter the game's dynamics. Following an FBI investigation into Second Life Economy's gambling practices, Linden Labs banned all forms of gambling from its marketplace in 2007.
The casino owners ended their virtual land use agreements that allowed them to operate and use casinos. This was a huge step in the economic recovery. Virtual banks within the Second Life Economy were also affected by the presence of many "ATMs," which are located in major online casinos. As withdrawal requests increased, $L bank reserves were depleted. This resulted in virtual bank runs and insolvency.
Real-World Wealth
Second Life users have made huge fortunes from the Second Life economy. Anshe, a Second Life avatar that belonged to a real person, established a successful virtual real estate company within Second Life. Chung started by selling furniture, fashion, and property designs. She then invested her profits in buying virtual property and became a virtual real-estate magnate, with $L that exceeded $1 million.
This example shows how Second Life's economy mirrors an economy that trades in fiat currency. Anshe Chung, a web personality and influence, employs many virtual programmers and designers to support Second Life activities. Real-world companies have also taken advantage of Second Life's three-dimensional virtual marketplace. Virtual economy companies can use it for charitable purposes, recruitment platforms, or brand marketing.
