Tuesday, May 09, 2006

TOS Change makes it possible for LL to sell L$

Sunday 10:45PM SLT, Robin made the following announcement. Link

Updating Terms of Service

Tomorrow we'll be pushing an updated version of the terms of service. They've been rewritten to separate out the billing terms, and also to be easier to read overall.

We have also made a change (see paragraph 1.4) to enable the L$ sale by Linden Lab. We are considering the sale of L$, but only within the context of smart economic policy. In other words, we will only sell L$ if we think the economy can absorb a new infusion of L$ because either other sources have been reduced or sinks have increased.

Quickly the forum speculation and panic began. 2 possible scenarios seem to be predominantly emerging.

When LL decides to sell L$ directly to users, they will do this independently from the Lindex. This would mean that someone wants to by a 1000 L$, presses the button in the clients and the L$ is directly created. And LL could sell it for whatever price they want, even for a better rate then the Lindex offers.
Most users don't look at the Lindex and just use the inworld option. This would make it hard for every content creator to convert their L$ to US$ and pay their tier, or their RL bills.

If this only happens a few times, to introduce new L$ in the market it won't have such a big influence. But LL has flirted with the thought of doing away with stipends and if at the same time they keep all/some of the sinks, this would mean that a constant new influx of L$ would be needed by selling directly to users. This scenario will cause a lot of trouble for who ever depends on trading their L$ on the Lindex. And that would certainly slow down content creation to a crawl. Which would be bad for SL on the long run.

The second scenario is that LL will be selling on the lindex when ever the L$ starts to rise quickly compared to the dollar, and just use it as a tool to stabilize the market. Essentially creating a cushion, for whenever there is a suddenly influx of demand/users or when a big businesses for what ever reason hoards ten millions of L$ in the hope to influence the market and sell them later for a better price. But what is dangerous, when LL would do this they create a hard max price for the L$ and that would hamper free trade.

What it boils down to is, do we trust LL to do no Evil.

And at the moment that is hard to determine either way, because there hasn't been much of a LL response after their announcement of the TOS change. It would help people to keep their trust in LL if they told us what the circumstances would be to and how they would infuse new L$ in to the market. Right now everyone seems to be concerned, confused and some people are panicking. As a result the quantity of L$ on the Lindex went way up and the price dropped. And we will just have to see if this will be absorbed in the next days or that as more people become aware of the situation, will try to cash out as well.

I would like to point out that LL would also have other tools to stop a to rapid demand of L$, and that would be cutting/removing sinks or increasing stipends. Those seem reasonable alternatives with only one drawback, it won't make LL money. And i think that is what worries people most, that this will be used to make LL money in the expensive of content creators. Even if they don't intent to now, they have opened the gate to do so in a future where competition might be around and profit margins become important.

A lot more can be said about this and a lot more is being said on blogs and forums all around. But will just have to see how the next days will play out. And do we trust LL?

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