Economy of Virtual Worlds

Second Life is a virtual world and has its own economy and a currency referred to as Linden Dollars (L$). This economy is independent of the Pricing, where users pay Linden Lab. In the SL economy, residents buy from and sell to one another directly, using the Linden, which is exchangeable for US dollars or other currencies on market-based currency exchanges. Linden Lab reports that the Second Life economy generated US$3,596,674 in economic activity during the month of September 2005, and as of September 2006 Second Life was reported to have a GDP of $64 Million.

The basis of this economy is that residents (that is, users, as opposed to Linden Lab) can buy and sell services and virtual goods to one another in an open free market. Services include building help, businesses management, entertainment, and other personal services. Virtual goods include buildings, vehicles, devices of all kinds, animations, and works of art. To make money in SL, one must find customers who are willing to pay for the services or products that one can supply.

Because of the existence of virtual land, there is an active virtual real estate market. Originally all land comes from Linden Lab (which is part of the pricing and a revenue stream for them), but after that it is bought and sold much like real-life real estate.

In addition to the main economy, some residents receive a small weekly stipend, depending on the kind of account they have, and when they joined Second Life. There are also the virtual equivalent of minimum wage jobs and charitable organizations that try to introduce new residents to the consumer economy.

Residents may purchase L$ directly through the client, or convert between Linden currency and U.S. currency through either Linden Lab's currency brokerage, the LindeX Currency Exchange, or other third-party currency exchanges. The ratio of USD to L$ fluctuates daily as Residents set the buy and sell price of L$ offered on the exchange, and fluctuated between L$240/USD and L$350/USD between October 2005 and September 2006.

Second Life publishes updated economic stats of its vritual world at http://secondlife.com/whatis/economy_stats.php