2002-2003: Beta, taxes, layoffs and the road to economy
In November 2002, closed beta testing of the newly dubbed Second Life began, and open beta followed in April 2003. The user interface was primarily green in color.
Second Life initially suffered from a tragedy of the commons, so a rudimentary economic system was put in place, initially focused on flat, scaled fees to place objects in-world (not at all unlike the pennies system used in MUSH and MUCK predecessors to control resource utilization), and later followed by a more complex system of taxes.
Users almost immediately began trying to evade taxes, and a tax revolt began in a portion of Second Life called Americana, which did not simmer down until September.
In October 2003, Second Life 1.1 was released with measures to stifle tax-evasion, and Americana was doomed. With this release, though, came a vehicle API, new terrain textures, animated hair and clothes, bumpmapping, and shininess, all of which served to energize content creation in new ways.
The 1.2 release in December 2003 was the big landmark, bigger perhaps than Second Life going into production on June 23rd that year. The tax system was completely abandoned and replaced with a land-ownership model. Land was taxed in either L$ or USD. Scripters were able to create dialog boxes, and the user interface changed color to blue.
There was a tremendous outcry about the new blue color of the user interface, and quite a bit more about the new economic system, which you might recognize as the modern Second Life economy (barring a few adjustments). Many averred that these changes would spell the death of Second Life within months.
2003 also marked a period of severe financial trouble for Linden Lab and a mass layoff of staff. The company struggled to keep operating and offered a lifetime charter membership to raise funds. Charter members received a Linden dollar stipend and the ability to own 4,096 square meters of virtual land forever at no further charge.
Charter members paid US$160 or more. There were enough charter members to keep the company afloat until the financial situation improved.
2003 was the year that Linden Lab adopted the slogan "Your World, Your Imagination" until the deprecation and removal of the slogan in 2007.