The Second economic crisis

In early January 2008, many virtual banks in Second Life, some which offered as much as 200% and 300% annual interest rates, collapsed

If outgoing US treasury secretary Hank Paulson’s skeletal visage and your stock portfolio statements aren’t enough to convince you that the global economy is in peril, then a trip to Second Life might help convince you.

Second Life is an elaborate virtual online world run by US-based Linden Labs. Users of Second Life, called Residents, use a free desktop application to create online avatars and then interact with others. Residents can not only socialize, but also buy and sell virtual land and trade in virtual products and services. There is even a virtual currency, Linden dollars, that is convertible to real-world money on currency exchanges.

Second Life, then, started out as the ultimate libertarian project. Residents were free to run any business they wanted to without being hindered by the rules, regulations and oversight that made real-world business and economics boring and complicated. Little wonder then that according to some estimates, in 2007, Second Life may have achieved a gross domestic product of close to half a billion dollars (real dollars, of course.)

Enterprising Second Lifers became virtual Linden dollar millionaires with vast swathes of digital land in their control and thriving businesses in property, clothing and even furniture. So trendy had the service become that hundreds of universities opened virtual branches and, starting with the Maldives, some countries even ran virtual embassies.

Unfortunately, the Second Life economy was not as decoupled as residents may have thought. In early January 2008, many virtual banks in Second Life, some which offered as much as 200% and 300% annual interest rates, collapsed. Users made runs on several banks till accounts had to be frozen. Bankers, residents found too late, were unable to live up to their payout promises.

And now, in an uncanny reflection of real-world turmoil, The Sydney Morning Herald reports that land prices on Second Life may have crashed by as much as 90%.

While it seems unlikely that these property dealers will find a second life in Paulson’s Troubled Assets Relief Programme, the crisis in the virtual world only strengthens our faith in a suddenly fashionable old adage: If a money-making scheme, real or virtual, seems too good to be true, it probably is.

Source: livemint.com

Sweden trumped by Maldives in Second Life

The Maldives has pipped Sweden to the post by unveiling the world's first virtual embassy in Second Life just days before the Scandinavian country's planned launch.

Sweden received much international attention in January when it first announced plans to open an embassy in the virtual online world.

Sweden's Second Life embassy, which opens on May 30th, is to be a replica of the House of Sweden in Washington DC.

Susanna Wallgren from the Swedish Institute has just received an e-mail informing her of the new Maldives embassy when we speak to her. She assures The Local that there is no sense of being upstaged by the island nation.

"Not at all. Good for them. It is great that more countries are realizing the importance of establishing a presence in Second Life," she said.

The head of the Swedish Institute, Olle Wästberg, mentioned earlier this week that the project has cost a total of 400,000 kronor ($57,000). Next week Wästberg will be joined by Foreign Minister Carl Bildt - both in Second Life and at the Swedish Institute - for an inauguration ceremony to mark the opening of the new embassy.

But for now the spotlight is on the Maldives. The small island nation in the Indian Ocean has placed its virtual embassy in the Diplomatic Quarter of Diplomacy Island in Second Life.

"The Maldives is not the wealthiest island in the world. This can give people a contact with the Maldives that they might not otherwise have," Stewart Gibbon from the Maldives Mission in Geneva told The Local.

He explains that he was not even aware of Sweden's plans for online diplomatic representation until his boss happened to mention the fact.

"I suppose it's nice to be first but this was not a deliberate attempt to beat Sweden to it," he added.

At the time of writing there were around 6,500,000 residents living in the alternative reality of Second Life.

Source: Sweden Local News

Maldives Opens World’s First Virtual Embassy

The Maldives has become the first country in the world to open a Virtual Embassy in Second Life, the online virtual world.

Second Life (SL) is a fast-growing virtual community with more than six million “citizens.” It has its own currency, the Linden Dollar, which can be exchanged for US dollars. SL citizens own property, socialize, learn and interact in SL.

The Maldives Virtual Embassy is located in the Diplomatic Quarter of Diplomacy Island in Second Life, an on-line space designed to allow new avenues for diplomatic representation and negotiation, especially for small and developing countries that have limited diplomatic outreach in the “real” world.

The embassy building features a notice board with detail on “democratic and human rights reform” in the country. “The Maldives is a small country but that does not mean we do not have a valuable contribution to make in international affairs,” said Abdulla Shahid, Minister of State for Foreign Affairs.

“The Virtual Embassy offers another channel for us to provide information on the country, to offer our viewpoint on issues of international concern, and to interact with our partners in the international community,” he said.

Diplomacy Island is the brainchild of Diplo Foundation, a nonprofit organisation which works to assist developing countries participate meaningfully in international affairs.

The official inauguration ceremony took place simultaneously in the real world (Geneva) and in the virtual world (Second Life), with participants in both “place” and “space” able to watch the speeches, interact with each other, and explore the Maldives Embassy and the rest of Diplomacy Island.

The Maldives Virtual Embassy will soon be followed by embassies representing Macedonia and the Philippines. Sweden has also announced plans to open a Virtual Embassy.

Source: Minivan News