Server crashes and unauthorized duplication are only the tip of the iceberg

Last week I read about the second major "threat" to hit the virtual world of Second Life and I started to think about the realities of both real world economies and their virtual counterparts. Are the two really so different, and should they be?

Second Life is an Internet phenomenon that has generated more hype than it has broken new territory. A few months back I logged into the virtual world to see what the fuss was about, and quite frankly I was unimpressed. It was my first time in a virtual world since around 1999 when I first logged into Active Worlds. Since then the graphics have changed but largely the "game play" of the VR world is still the same. You can walk around, build things and of course chat with other VR residents. There is of course one small difference with Second Life and that is the ability to buy and sell goods in a virtual economy.

And therein lies 99% of the hype. Liden Lab, the maker of Second Life, has devised a brilliant economy where players not only pay rent for virtual space, but are also able to convert real money into virtual funds so they can buy goods and services. Stories continue to circulate about players who have quit their day jobs to become full time in game developers and sell their wares exclusively inside the Second Life World. It all seems like utopia and bliss except for a few small drawbacks.

A month ago the virtual world was in an uproar over a program called "copy bot" which will essentially duplicate any in game object regardless of who created it. Unlike the real world of fake Rolexes and Gucci handbags, the copies are identical to the original and this has many of the in game merchants fearful of loosing their "livelihoods". Things would turn more serious a few weeks later when the virtual world was brought to its knees by a self replicating worm called "grey goo" which overloaded Second Life's servers and eventually knocked everyone offline.

These recent events show just how unstable a virtual world can be. It's also a reminder that the generally accepted economic rules of the real world may not be as applicable to the less tangible version in Second Life. For starters the idea of artificial scarcity is only possible when you tightly control supply. However, digital goods are too easily replicated, and thus it is not practical to enforce copyright on every single in game object. This is probably why Liden Lab has suggested that IP holders invoke the DMCA against those that infringe on their rights. However this has another serious drawback.

Liden Lab's notion of how disputes should be settled is also a serious problem with the economic model. In the real world, economic disputes would be resolved by arbitration or court ruling. However in the digital world no such construct currently exists. By making the suggestion that IP holders invoke the real world DMCA against violators, they are in turn suggesting that in game disputes be settled outside of the virtual world.

This not only shifts the burden on to real world court rooms, but also threatens to extend the court's jurisdiction over virtual worlds. Such a decision could set legal precedent for courts to not only rule over disputes but to regulate behavior there as well. A more slippery slope could even exist if the court decided that governments have the power to tax and tariff trade inside these worlds.

Of course I can't blame Linden Labs for wanting to avoid the legal quagmire of settling game disputes. However I feel that as the host and provider of this virtual economy they have a duty to not only establish fair and equitable trade practices but to provide remediation for the disputes that arise. This is, after all, what governments and trade unions have provided for centuries in real world economies. There is of course a cost associated with this, and at this time it's unclear whether Linden Labs could remain solvent long enough to create a truly self sustaining economy.

Though it may not be a true economic system, the idea of a virtual economy is novel none the less. The lofty goal of establishing the web's first virtual trading place is not without uncertainty and risk. Instead the goods provided inside the virtual world are an extension of the world in which they are created. As such they are not whole and free standing goods, but instead dependant on the master program for existence. If the electronic world in which they reside were to cease existence, so too would the goods and services provided by in game merchants.