am a casual gamer, partially by my own volition. When I moved to this erstwhile unfamiliar Nebraskan city four years ago, I resisted the urge to purchase a gaming system for one principal reason. Social exploration of and adaptation to my new home could have been severely hampered by Guinness-fueled shootouts, races, and adventures confined within a flickering-until-four-in-the-morning cathode ray tube.
One can easily become consumed by his gaming hobby. With online gameplay that appeals to his instincts and technological splendor that creates an alternate reality, I submit that some gamers can become more connected to their virtual world, and as a result, less so to their real world. A curious thing happens when one becomes more wired yet more disconnected: rational thinking, manifested in online behavior, often falls by the wayside.
On January 8th, Linden Lab banned in-game banking in its popular online virtual world, Second Life. Suspect banking practices as well as regulatory and legal concerns prompted the company to issue the ban, noting that no virtual bank could operate "without proof of an applicable government registration statement or financial institution charter" (see also: the likes of a CitiBank). Unsurprisingly, this announcement caused a bank run, as Second Life citizens rushed to withdraw their Linden Dollars before the new policy took effect on January 22nd. Linden Dollars are traded daily on Second Life's currency exchange, LindeX, and are pegged against the United States Dollar, which Second Life citizens fund from their first life bank accounts.
Bank runs in the real world can cause significant problems. Not every penny of every depositor's funds is kept in a bank's reserve; the balance is lent to a bank's borrowers. Through this lending process, banks become interest earners from their borrowers and interest payers to their creditors. This economic arrangement, attractive to all parties involved, hinges on one crucial element: trust in a bank's solvency. Depositors must trust that their bank is lending responsibly, otherwise non-payment from too many of a bank's debtors could result in unavailability of a depositor's money. Any one depositor must trust that he could withdraw his funds today, even while understanding that not all depositors could withdraw all of their funds on that given day. Today, bank runs are tempered by regulatory and insurance agencies that ensure transparency in the banking industry and protect depositors up to a certain amount. Moreover, a bank's desire to maintain its brand value and reputation compels it to make responsible loans and investments.
How did Second Life's citizen-run banks compare? Frankly, they didn't. There were no Second Life rules regarding banking reserves, no insurance corporation for depositors, and no transparent information for depositors regarding how their money was being lent. Any Second Life gamer using a citizen-run bank did so at his own peril. Shortly after Linden Lab's announcement, banks in the virtual world put a halt on withdrawals. Technically, there is no rule preventing banks from keeping depositors' funds. Second Life banks are not even needed to transact in its economy; Linden Dollars paid out and received by a character are maintained in the user's account, much like other important profile data. So why deposit in the first place? What could citizen-run banks possibly provide that Linden Lab's embedded account management could not?
How does a 60% return on investment sound?
Suppose an average Joe approached you on the street and pledged that, if you deposited with him $100, then he would return $160 in a few weeks' time. Surely you would not trust a random stranger to be a careful steward of your money, particularly with such fantastic promises of return that do not track at all with contemporary markets. Why then, would anyone trust a Second Life bank to do just that? What the hell were these depositors thinking?
In my opinion, these depositors were not thinking and were consumed by greed. What puzzles me is how this behavior existed in an online arena, but with rightfully little thought, would be dismissed as foolish in the real world. Is there something about an online gaming experience that can suspend a gamer from his reality? Can the alternate reality be so exotic that it suspends some critical thinking skills a gamer may feel not applicable to his environment? But really, what's so exotic about a second life?
It certainly is not the end of the world as we know it. While no parties involved are disclosing the financial impact of the banking ban, nary a blip in Second Life's regulated markets indicates that many citizens saw the banking system for what it was. Likewise, many gamers do not suspend a sense of reality upon entering an alternate reality. As our society progresses into an increasingly connected lifestyle, however, we must remain cognizant of the disconnectedness that can occur within our own mind's rationality, and what social implications can result from a citizenry's overly suspended reality.
I suppose that's why I didn't trust my introverted self to purchase a gaming system before settling down into a new life in a new place.
