Tuesday, August 12, 2008

Linden Dollar Strengthens to 263

Here is how the Lindex really works. There are two queues: a buy queue and a sell queue. The buy queue has been at 275L for people willing to wait, and 274L for people who didn't. The sell queue has been at 264L for people willing to wait, and 265L for people who didn't. Occasionally someone was in a real hurry and dumped or bought at other rates. This has been true for so long that, according to my partner that moved money it was a better peg than a dollar board. A few weeks ago, he said, this peg was going to move, strengthening the Linden by a bit. In the real world, he went on, this move is so small that it would be a ghost of a breath of a hiccup. Here, it is news because those of us who charge in Linden have high, what he called "menu costs." It takes more to change prices. That plus relentless deflation of value and depreciation of most assets, meant that few, if any, merchants had real pricing power. Thus people turned to scams and games to get it.

This small shift means that everything in second life is a tiny bit more expensive in real world currency.

My partner noted the process. First the buy queue dropped form 274 to 275. This meant that currency traders could no longer go from the top to the bottom without loss, or with a small profit. They had less and less incentive to sell 264L/$ Lots of people did so out of habit, but 263 became more and more attractive, and more and more days, it got touched.

Today, he says, was the watershed day: a weekday with action at 263, rather than 264. He says that it won't hold today, because it will take time for people used to exiting at 264 to get it, but the pressure is on a slight move of the linden peg to stay permanent.

In disclosure, since we sell lindens to buy dollars to pay tier, it helps us a tiny tiny bit.

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