LEMS V1.27 Released – Currency Updates – LindeX Situation

Dear Residents,

We’ve updated our estate management system to V1.27, which includes a new way of how Tier fees will be managed in future for new contracts since today (See public release notes here). Please note, that running contracts opened before July 3rd will not be affected by these updates.

The update will create new contracts having a fix US-Dollar based tier rate instead of the previous fixed Linden Dollar based tier rates. Having such a new USD based tier contract, you still can continue to pay tier fees at your terminal using Linden Dollar (L$). The system will calculate the corresponding Linden Dollar rate based on the current exchange rate each day.

Why were these changes necessary?

When we’ve made our pricing decision back when the Lionheart Sims were founded, we’ve made that decision being confident in the LindeX exchange rates which have proven to be stable and reliable over the years at around L$ 269 / 1.00 USD. This is important so far, since sim owners have to pay their fees to Linden Lab using US-Dollar, not Linden Dollar. During the last weeks though, the LindeX has begun to show some volatile behavior, resulting in a loss of value of the Linden Dollar compared to the US-Dollar.

On June 16th, this volatile behavior ended up in a market crash, devaluating the Linden Dollar from a previously stable exchange rate of L$ 269 / 1.00 USD to L$ 319 / 1.00 USD. The consequence was, that nobody was able anymore to sell of their Linden Dollars without taking a big loss. Buyers were able to get more L$ for their USD, respectively, Sellers had to give away more L$ for each USD they received. Specially private estate owners, who were due with their fees to Linden Lab, had no other choice to accept that loss or face a suspension of their account and possible loss of their sims. Publicly suspected is the theory that this crash was a reaction on the recent layoffs at Linden Lab.

Gladly, Lionheart was not in such a situation and we were not forced into a loss sale this day. However, this day showed us that we need to find a way to create an even more safe economic environment for the estate than what we already had in place. The market has yet to recover, and the L$ / USD exchange rate has still not returned to the previous long-year stable rate, still causing a loss of money when exchanging L$ into USD.

Most estates have reacted promptly and adjusted their L$-based tier fees accordingly upwards, to reflect the loss in value. Some smaller estates didn’t even notice there was a market crash, failed to adapt, and disappeared over the next weeks. Until today, not yet including the data of the grid survey from last week, since the LindeX crash 106 private estate sims have closed.

It is obvious, that we also will have to respond to the market situation the one or the other way, since due to the devaluation of the L$, everyone is currently paying less tier than it should be the case. The most simple solution would have been to adapt our L$ tier rates to the new exchange rate like it has happened across the grid at private estates to compensate the loss of value of the L$. But we’ve also been thinking about the complexity of the issue, since the rate might evolve into a more stable one at a later point, and we recognize, that all this is a rather dry matter, and not easy to understand for everyone. So we were looking to find a more intelligent and fair long term solution, instead of applying a fast and reactionary fix.

The only responsible answer to this market crash, combined with the aim to grant long term stability for the estate and thus, pricing stability for our landowners,regardless what happens on the LindeX currency exchange market, was to uncouple our tier fees from the Linden Dollar. Since our business currency with Linden Lab is the US-Dollar, it would only make sense to use this currency as new unit to measure our tier prices. As a result, we’ve been developing this software update to enable our system to handle both, old contracts with tier fees based on L$, as well as the new USD tier based contracts, including interactions between both kinds (swaps, deeding of land, ownership changes etc.). Our old tier formula of L$ 1.89 per prim/week translates into the new USD 0.007026 per prim/week, based on the original exchange rate of L$ 269 / 1.00 USD.

As long as the situation does not show signs to get worse again, we will grandfather all contracts which are currently running on a L$-based tier rate, so if you have bought land before July 3rd at Lionheart, your old contract will not change and your L$ based tier rate will stay the same. New contracts since July 3rd will automatically have the new USD based tier rate, and you will be able to use L$ to make tier payments accordingly to the current exchange rate of that day. Please note, that even if the L$ counter value might fluctuate over time, your USD Tier will stay the same and is guaranteed by covenant.

We think this way, over time taking the normal fluctuation of residents into account, we’ll be able to catch up the current losses caused by the devaluation of the L$ and the grandfathering of the old contracts. However, should you voluntarily want to switch over to the USD based tier rates, you are more than welcome to contact us, and we’ll do that for you.

What constitutes a new contract?

Any ownership change does and will be subject to the new USD based tier. Ownership changes can be for example:

  • Purchase of new land or from another avatar
  • Deeding (not setting) land to a group
  • Buying land back from your group to your avatar
  • Swapping

Please note, that even if due to the currently higher exchange rates the L$ values might appear higher, your tier in fact isn’t, since the USD Tier is fix and you will never have to pay more USD for your tier than the rate stated by the new contract. The current exchange rate gives you more L$ for each USD, so you won’t spend more money in-world. In fact, the current market situation is perfect to buy L$ if you need some, for buyers the rates have never been better the last years.

Will the tier return to L$, when the market stabilizes again?

We think the most stable and fair solution on the long term is to continue using the US-Dollar as base for tier fees.

Using the US Dollar will allow us to guarantee you a permanently stable tier price. Regardless what happens on the LindeX, you will never pay a single cent more than you have to. For example, if you buy a new parcel and the tier is today 3.00 USD, it will be 3.00 USD today, and stay 3.00 USD tomorrow and in future, and unless Linden Lab changes sim pricing, that value will never ever change for you. Our covenant‘s price stability promise guarantees for it.

To make this even easier for you, we’re working on the integration of other payment methods into LEMS, such as PayPal or Credit Cards. This way, you can circumvent any currency exchange hassles and fees upfront if you wish so. More updates will come when we’ve put a system in place.

How do we see the market evolving within the next weeks?

To be honest, nobody can answer this question. However, the fact that the creator and founder of Linden Lab and Second Life, Philip Rosedale (aka Philip Linden in-world) has returned to Linden Lab as interim CEO, together with a serious concept of improvements and stability changes, and also being some kind of icon for older Second Life residents who really understands how Second Life works and what the residents expect, makes me strongly believe that the market will recover in a reasonable time and that Second Life will have a brilliant future ahead as a platform and as a community of people for people.

Where can i get more information?

Below, we’ve put together a collection of links which you might find helpful regarding the LindeX, the evolution of the exchange rates, blogposts and forum discussions.

Who can i ask when i have questions?

Please use the Lionheart Estate Residents group chat or our support for questions. Your neighbors as well as our team will gladly help you with your questions.

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Statistics

Sims: 13
Total Land Sqm: 851,968
Public Land Sqm: 400,240
Citizens Land Sqm: 451,728
Parcels: 272
Parcels For Sale: 47
Directory Entries: 30
Citizens Prim Capacity: 381,069
Citizens Prims used: 133,199