Due to Second Life's rapid growth rate, it has suffered from difficulties related to system instability. These include system lag, and intermittent client crashes. However, more disturbing faults are caused by the system's use of an "asset server" cluster, on which the actual data governing objects is stored separately from the areas of the world and the avatars that use those objects. The communication between the main servers and the asset cluster appears to constitute a bottleneck which frequently causes problems. Typically, when asset server downtime is announced, users are advised not to build, manipulate objects, or engage in business, leaving them with little to do but chat and generally reducing confidence in all businesses on the grid.

A more disturbing fault, believed to be caused by the same issue, is "inventory loss" in which items in a user's inventory, including those which have been paid for, can disappear without warning or permanently enter a state where they will fail to appear in world when requested (giving an "object missing from database" error). Linden Lab offers no compensation for items that are lost in this way, and will not even record the data for debugging purposes if the user is not a Premium subscriber; although many in-world businesses will attempt to compensate for this or restore items, they are under no obligation to do so and not all are able to do so.