Where to start with this one? Well VAT is as good a place as any.

This is serious "Be careful what you wish for" territory, once L$ is deemed a real currency we're slap bang in the middle of red tape city, distance selling regulations would surely apply.

Oops. That's what happens when I'm really too tired to think properly. You're absolutely right and I've changed it! Thank you very much!

That "twist" is not a new idea… I keep coming back to the same old arguments, but in this case, at least I'm seeing, from the perspective of the technology that LL must have implemented, that there might finally be a non-quirky way of actually doing it.

As for using L$ to acquire "real world" items, the future is now. In my own backwards country, anyone can buy stamps from the National Postal System with L$, and experiments are under way to allow you to pre-charge your mobile phone with L$ in order to make phone calls and send text messages. Sure, it's not a widespread use yet. And I believe that you're right to say that buying digital goods — even if not strictly related to SL! — might be a first, but important, step, which might be far more interesting than selling groceries for L$…

I have to admit that I didn't see LL as providing an "alternative" marketplace to Amazon or eBay; to be honest, I never thought of that. I did think that others would be happy to do so, however; according to their mission, LL is focused on virtual world technologies to "improve the human condition", and I hardly see them as operating their own marketplace. No, I was thinking about existing marketplaces using the L$ as yet another payment service; and of new services, tied to premium content on the Web, that, lacking a comfortable microcurrency payment system, would simply use the L$ for this purpose.

Gwyn, you do a good job of illustrating why L$ could become a real microtransaction currency. However, you don't touch upon the legal ramifications, or business sensibility. Would governments insist that Linden Lab essentially follow the same regulations as eBay? Would L$ have to be tracked and treated as currency at all times, rather than the "when it's sold for US$ it becomes real" paradigm? I know the dreamers at Linden Lab are still looking to "create a new nation" rather than a solid virtual world platform, but does allowing the L$ to become a real item marketplace further the Linden Lab business model?

Let's hypothetically say yes, for the moment. What would make the most sense? Xstreet become both a virtual and real item workshop. Pierre Omidyar gets a little more than a little upset for helping a company that ultimately becomes a competitor to eBay. Governments come in and now hold Linden Lab responsible for aggressively policing their marketplace in the same way that eBay, Amazon, and others do. What's the unique business model? The only thing I can think would be selling virtual world / real world crossover items, something like Webkinz does with their real plush toys and virtual pets.

On the other side of this is a simple fact – more and more of what we want is virtual. Music and movies are sold digitally, as the two biggest examples that come to my mind. Perhaps Linden Lab could stick to the "digital" side of the marketplace, and avoid the same government eye?

What's your thoughts, Gwyn?