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Project Entropia dollars, or PEDs (10 to the dollar), in the com-
peting Entropia Universe; Therebucks (1,800 to the dollar) in the
teen-focused There; and Webkinz KinzCash that kids use to buy
treats for digital Chihuahuas and raccoons.
But big companies like Sun, Reebok, and IBM don't really do
business in virtual worlds; they "tunnel" into them. To close a deal,
you need to step out of the "sim" and into the traditional Sun or
Reebok or IBM website. These companies deal only in real cur-
rency, using established protocols for encryption and authenti-
cation. By contrast, people like Stephanie Roberts are actively
conducting transactions in virtual worlds, using virtual money to
buy virtual clothing, land, animals, sur oards, and art for their
avatars. They deposit money in virtual banks and even invest in vir-
tual stocks. And that's where the problems are arising. The blogo-
sphere is full of complaints about Ginko losses and about deals for
land and goods that went wrong. And some fear that these issues
will thwart the growth of e-commerce in virtual worlds.
To IBM's Kearney, the situation recalls the formative days of
e-commerce, which were plagued by uncertainty and lack of trust.
"If you look at early [Web] days, it was the same," she says. "You
had all the similar issues: 'I'm not buying anything on the Inter-
net because someone can steal my credit card number.' " Linden
Lab's Yoon agrees. "When you first started to see the Internet as
more than just education and government, you started seeing all
these crap websites thrown up all over the place. It's sort of like the
disorganized user-created content within Second Life," he says.
"We saw that whole cycle in the development of the Internet---the
cycle of doubt and fear, and realization that there is economic
value, and communication and community value. We are seeing
exactly the same thing happening again."
So far, not many complaints about virtual finance and com-
merce have surfaced in courtrooms. One---maybe the only one---
revolved around a Pennsylvania lawyer named Marc Bragg, whose
avatar went by the name Marc Woebegone. In 2005, Bragg signed
up with Second Life and started whiling away his o hours amass-
ing and reselling virtual land and selling virtual fireworks to other
residents. He was doing quite well until May 2006, when Linden
Lab accused him of manipulating an auction to acquire virtual land
at a below-market price. The company shut down his account and
confiscated all his virtual holdings; in so doing, it seized Linden
dollars and property worth about $8,000. As the company saw it,
Bragg broke the terms of service on his account, and his account
was consequently canceled. Bragg felt he'd been robbed of real
assets, not just a Second Life account, and so he took Linden Lab
to court. He got his account and some of his belongings back in a
recent settlement whose full terms were not disclosed.
The Bragg case---which hinged partly on Second Life's rep-
resentations of virtual land as something that can be "owned"---
showed that real-world authorities may not automatically dismiss
virtual currency as Monopoly money, or in-world contracts as
a game. But Ben Duranske says that other complaints, such as
those of Ginko customers who say they lost money, have not yet
elicited any governmental action. Duranske founded the Second
Life Bar Association, an in-world community of real-world legal
professionals and scholars, to explore questions of technology
and the law. "If I did what the people of Ginko did---only using
stamps and envelopes---it would be illegal, and easy to prove to
a jury," he says.
In the summer of 2007, Linden Lab announced that to help make
transactions more secure, it was creating a voluntary ID system,
so that in-world consumers could verify attributes---such as the
age---of the people behind the avatars they were dealing with.
Another reason was to keep minors out of certain areas of Second
Life; people under 18 are not allowed to sign up for accounts, and
Linden has been trying to stamp out virtual sex between "adult"
avatars and "child" avatars. The company also introduced algo-
rithms that identify suspicious activity and warned users to be
more prudent in their online dealings. "We caution our residents
to be wary of anyone o ering extremely high interest rates at no
risk, either in the real world or in Second Life," the company's
CFO, John Zdanowski, wrote in the Second Life blog (under
the avatar name Zee Linden). "If it sounds too good to be true,
it probably is."
Now users themselves are setting up some quasi-regulatory
structures. Some have started the Second Life Exchange Com-
mission, which sets standards for financial disclosure; others have
created the Virtual World Business Bureau, which rates businesses,
warns residents against scams, and acts as a clearinghouse for
complaints. Just as a real-world company will seek a rmation of
its credibility from PricewaterhouseCoopers, "the virtual environ-
The point isn't just that
somebody else ended up
with Roberts's money. It's
that nothing happened to
whoever may have taken it.
Between her and other
victims, as much as
into the 3-D ether. That is
not what we have come to
expect from e-commerce.
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