Bank Run in Second Life

Jamie found an interesting bit about a bank run in Second Life. The recent ban on gambling combined with a $12k theft from the 2L stock market has caused people to try to get their money back. The article mentions that this could supposedly affect 8.5M players even tho most estimates of actual hard core players in the system are in the 5 to low 6 figure range.

Comments

Vast exaggeration

[DaleGlass]

Ginko is a resident run bank, which has nothing really special about it. You can it on their own a href="https://ginkofinancial.com/">website: They only claim to have 18,875 accounts, quite a few of which probably were created as a test. Nowhere near the 8.5 million claimed.

Ginko's problem was their insane interest rates, which IIRC varied somewhere between 100% and 30% per year. I think it was 70% for a quite long time. People accused it of being a Ponzi scheme, which given that enormous interest sounds likely. That's why I never put a cent in it :-)

Re:Vast exaggeration

[UbuntuDupe]

Okay, I think I have some expertise on this, because I actually ran an SL "bank" (under a broad definition of "bank", but I called it a bank). I can tell you that 100% interest rate in SL is NOT "insane", and I can tell you how to "earn" that kind of interest without a Ponzi scheme.

First, some background: (as of '03 when I played) in SL, they make it so that they "recharge" your money to a certain level each week, sort of like welfare. The day of the week varies between people. So, if you store your money with a trusted party, it will look like you're poor and you'll get money despite not being poor. I believe at the time it was something like LD 7000 that they would recharge you to. My bank served the function of the trusted party: I'd hold their money (through a script) over their recharge day.

Oh, and yes, I was very open about this, and told admins I was doing it. They didn't care.

Now, this doesn't explain how exactly you'd employ someone's money to make more money (like the banks claimed). However, it shows how, using some tricks, you can start with e.g. LD 7000, and "earn" 7000 more each week ... that's definitely more than a 100% yearly effective interest rate!

Re:Vast exaggeration

[DaleGlass]

Well, let's look at the stats, then.

There are 18,875 accounts. Right now there are 34,822 people logged in (see http://secondlife.com/ ). In the last 60 days, 1,646,830 people logged in. So the total Ginko userbase is not all that great compared to the amount of people who use SL.

Next, it's quite reasonable to assume that a good portion of those 18,875 are by people who put there L$1 (USD $.00370) as a test, then forgot about it.

Now, they say their deposits are L$94,441,798 = USD $349,784. But, Ginko's claims about the amount of deposits were cast into doubt by several people, and that number seems to include interest, that is money they would be expected to give, but which none of the users actually put there.

Average amount of money per account is $349,784 / 18,875 = $18.53

Looking at the SL statistics:
US$ Spent Last 24h: $1,433,039
LindeX Activity Last 24h: $223,005

You can see that even the claimed amount of money isn't all that huge, and after years of operation at the enormous interest they claimed, most of that cash must be accumulated interest anyway.

While I bet some people will lose something quite significant, I don't think it's nearly as big as the article says.

Saw this coming...

[ZorinLynx]

I knew this was coming.

In the past couple of weeks I heard of at least three people who had trouble getting money out of Ginko.

Word gets around quickly in these cases; as soon as people found out Ginko isn't paying out withdrawls they lose confidence and want their money back, just as would happen with a real bank.

Thankfully I have no money in Ginko. No way in hell I was ever going to trust them.

Some perspective

[amyhughes]

These "banks" and other "economic institutions" are given more legitimacy than they deserve, and their impact is grossly over-stated.

Before casinos were banned the daily SL economy was about US $2 Million per day. That's the total amount of all transactions between residents that Linded Labs (who run Second Life) knows about. It's currently running about US $1.4 Million. That's a big hit, but the difference was people putting money into slot machines. The banning has hurt some people running unregulated gambling scripts, and benefitted the idiots that were feeding them. A wash, AFAIC.

The Ginko thing also only affects a scammer and his victims, and is only US $0.75 Million. Less than a day's economic activity. Those people payed into a ponzi scheme, and like the gamblers, they had no reason to expect a return. Some might say that whatever the "banker" invested in will suffer, but until proven otherwise, his "investments" are probably real-world. That money is already gone from the economy, and it's not an economy-crashing amount even if some of it actually is invested in SL.

The real danger is to the land barons, who continue to buy up all the virtual land The Labs has to offer; much of it up for sale as casinos also sell off their land. Them, and Linden Lab itself, who stand to lose tier payments on land people can't afford to hold. But if a hypothetical sell-off is short-lived and is absorbed by new members and other residents suddenly able to buy cheap land, LL stands to gain as they get to re-sell land that is abandoned; land they already sold once and will get to sell again. The most likely scenario is that land re-sale prices (prices residents pay each other, not The Labs) will go down some, and The Labs will be unaffected. It is probable, in fact, that they want land prices to go down so people will buy more of it. They make much more money on monthly land payments than they do selling land (i.e. server space) to land barons.