Virtual currency

General
Virtual currency is

"a medium of exchange that operates like a currency in some environments, but does not have all the attributes of real currency. In particular, virtual currency does not have legal tender status in any jurisdiction."

"[a] type of unregulated, digital money, which is issued and usually controlled by its developers, and used and accepted among the members of a specific virtual community."

"a digital unit of exchange that is not backed by a government-issued legal tender. Virtual currencies can be used entirely within a virtual economy, or can be used in lieu of a government-issued currency to purchase goods and services in the real economy."

"a form of unregulated digital money, not issued or guaranteed by a central bank, which can act as means of payment."

Virtual worlds
Virtual currency refers to the unit of exchange used in virtual worlds. Originally provided to users of virtual worlds by game creators for use in-game, a robust market has developed for these currencies offline.

Overview (General)
"Virtual currencies have come in many forms, beginning as currencies within online computer gaming environments and social networks, and developing into means of payment accepted 'offline' or in 'real life'. It is now increasingly possible to use virtual currencies as a means to pay for goods and services with retailers, restaurants and entertainment venues. These transactions often do not incur any fees or charges, and do not involve a bank."

Overview (Virtual worlds)
Linden Lab, the creator of Second Life, has been credited with creating the first currency system in a virtual world. The basis for Second Life's virtual economy is the "Linden Dollar," or "L$." Users may buy and sell Linden Dollars on the "Lindex" or "Linden Exchange," which Linden Lab operates. As of September 2009, the exchange rate on the Lindex is approximately 270 Linden Dollars for each U.S. Dollar. Users may sell Linden Dollars on the Lindex and cash out the sale proceeds in U.S. Dollars into their PayPal accounts. Linden Lab monitors and manages the Lindex to keep it stable, and has implemented anti-fraud and anti-money laundering measures.

Given this framework for conducting business, "Second Life has been a starting ground for many real-life companies to explore the opportunities for virtual business and marketing." Lyle R. Wetsch, "The 'New' Virtual Consumer," J. of Virtual Worlds Res., Vol. 1, No. 2, at 2 (Nov. 2008). Many users have even used Second Life to earn money by creating, advertising, and selling virtual goods such as clothing and accessories as well as by operating entertainment venues and offering scripting and creative services to major businesses and universities. This model has been replicated in many other virtual worlds to varying degrees.