Second Life is a privately owned, partly subscription-based 3-D Virtual world, made publicly available in 2003 by San Francisco-based Linden Lab, founded by former RealNetworks CTO Philip Rosedale. The Second Life "world" resides in a large array of servers that are owned and maintained by Linden Lab. The Second Life client program provides its users (referred to as "residents") tools to view and modify the SL world and participate in its economy.
The central currency of this online world is the Linden Dollar, a fictional monetary unit that is exchanged within Second Life for in-world items and services, either with other residents or with Linden Lab itself
Second Life has its own economy and a currency referred to as Linden dollars (L$). Residents receive an amount of L$ when they open an account, and a weekly stipend thereafter - the amount depending on the type of account. Additional Linden dollars are acquired by selling objects or services within the environment. Residents may purchase Linden dollars directly or convert between Linden currency and U.S. currency through Linden Lab's currency brokerage, the LindeX Currency Exchange. The ratio of US$ to Linden dollar fluctuates daily as residents set the buy and sell price of L$ offered on the exchange. Linden Lab has stated that the Second Life economy generates an average of US$500,000 in economic activity each week.
The duality of Linden Lab's stance on the value of the Linden: Linden Lab has been criticized for marketing SL as a viable business channel for making real money, while at the same time including provisions in the Terms of Service which give Linden dollars no legal value, Linden Lab is not required to pay any compensation if L$ is lost from the database.
Unusual phenomena in currency market: Services for buying and selling Linden dollars are structured in a similar way to real life currency dealing: amounts are bought and sold through brokers at variable market rates. However, because the actual economy of Second Life does not correspond to a self contained country (a large proportion of the population have no way to earn money other than buying it with money from outside, and those who earn large amounts of money often only do so in order to sell it for money from outside), the currency market exhibits unusual phenomena: consumers and those with less money within SL have no limit to how low they would wish the exchange rate to fall, and sellers and the rich have no limit to how high they would wish it to rise. This creates conflict and complaints whenever currency market trends persist for long periods of time; consumers complain that a rising Linden dollar gives them bad value for their US$, and sellers complain that a falling L$ gives them bad return on their work.
Effect of in-world economy changes made by Linden Lab: Certain changes made or proposed by the developers have had the effect of creating new markets, but also have on occasion destroyed or removed the value of existing ones, or inadvertently given a market leader at a particular time unique advantages that entrench them as a market leader in the future. The most well known example of this is InfoNet, an in-world newspaper and information delivery service run on a for-profit basis, and formerly (as with many such systems in SL) of limited effectiveness due to a limited range of access points. When the old concept of "telehubs" was removed from the game, Linden Labs replaced them with "InfoHubs" each of which including an InfoNet access point which was hosted for free on system owned land; it also placed InfoNet access points in the Welcome Areas where new users arrive, where no user is normally permitted to leave business-related objects. This had the effect of giving InfoNet an instant and substantial advantage.