The Sandbox – one such virtual world – is leading the pack with both the highest number of traders and sales. The Sandbox also boasted the highest trading volume last week, taking in more than $86 million, while Decentraland followed in second place with more than $15 million traded for land plot NFTs.
But what’s the increasing appeal of buying a plot of virtual land?
Hayden Hughes, CEO of crypto social trading platform Alpha Impact, told GOBankingRates that NFTs and play-to-earn games – such as Axie Infinity from Vietnamese developers Sky Mavis – have brought an entire generation of people into shared online communities. Hughes expressed that, as these communities grow, participants have a creative desire to express themselves by owning items in the metaverse: in this case, owning land.
“The rush to acquire land in the metaverse is driven by creatives who truly want to express themselves, and speculators who want to cash in. Unlike the ICO [initial coin offering] bubble in 2017, the metaverse has actual adoption and a thriving (albeit early) ecosystem. Facebook / Meta is not the leader in this space and the rebrand has also brought attention on the ecosystem,” Hughes said.
DappRadar notes that it’s not only the appetite for metaverse experiences that’s increasing, but also the price for metaverse land. Last week, five of the 10 most expensive NFT sales concerned metaverse land plot NFTs in different virtual worlds.
The top grosser was the Fashion Street Estate in Decentraland, which switched owners for 618.000 MANA, or $2.42 million, per the data. However, last month, an Axie Genesis plot – the scarcest land in yet another stand-alone metaverse game – sold for 550 Ethereum (ETH). This transaction represented “the largest sale ever for a single plot of digital land,” according to a tweet from the developers, with 550 ETH being equivalent to $2.48 million as of Dec. 3.
Axie Infinity, Denctraland, and Metaverse Gaming
According to Axie Infinity whitepaper, “Lunacia, the Axie homeland, is divided into tokenized plots of land which act as homes and bases of operation for their Axies. Plots can be upgraded over time using a variety of resources and crafting ingredients that can be found when playing the game.”
Lunacia consists of 90,601 plots of Land, which are represented as NFTs and can be freely traded by players, according to the developer whitepaper. The Genesis property in question is particularly valuable because of its scarcity: there are only 220 Genesis plots within the game’s 90,601 plots.
A recent report from Grayscale Investments explains this evolution of the “creator economy,” known as “play-to-earn,” which allows users to own their digital assets as NFTs, trade them with others in the game, and sometimes carry them to other digital experiences. As such, projects like Decentraland are creating an open-world metaverse wherein users can log in to play games, earn MANA (the native token of Decentraland, with which users can purchase NFTs, including LAND or collectibles), vote on economy governance, or create NFTs. The presumed benefit of this framework is that it gives users substantial interoperability between systems as a value proposition for their time spent in-game.
Matt Maximo, research analyst at Grayscale Investments and co-author of the report, told GOBankingRates that land in the metaverse is a really interesting concept because traditional real-estate is valued largely due to proximity to shops, services, and other people – you’re bound by the time it takes to travel from your home.
Many metaverses like Decentraland, however, allow players to teleport around the world, making travel instantaneous and irrelevant to valuation. However, given that this market is extremely new, a lot of the higher priced sales have come from LAND parcels with good locations – ie. proximity to major attractions in the metaverse.
“Investing in LAND is exciting but comes with the risks of any emerging market. LAND and MANA holders are incentivized to prevent expanding the Decentraland map and keeping the number of parcels low, however, there will also be a point where expanding the map and creating new LAND to sell will benefit them more than the dilution of their property,” he said.
He added that because LAND plots are NFTs, liquidity is much lower with these assets than with the underlying tokens like MANA.
“If you are in a time crunch to sell, you may be forced to sell below market value to the available bidder, whereas if I hold MANA, I can simply go to an exchange like Uniswap or Coinbase and instantly make the trade,” he added.
Infinite Land in the Metaverse?
While the expanding opportunities within the metaverse have dramatically incentivized the buying of land as a way for participants to stake their claim in a virtual world, one potential issue is that there might bealso be an infinite supply of land.
“So it is very difficult to gauge the value that the land will hold in the future, and in that sense, buying right now could be seen as a risky investment. For example, if digital land becomes so abundant, then supply-demand economics kicks in and the price will go down. However, the sheer number of possibilities that the metaverse might be able to offer may outweigh the risk for investors who want to be sure that they’re among the first to own land in the digital space.” Reeve Collins – co-founder of BLOCKv & SmartMedia Technologies – told GOBankingRates.
The frenzied push to purchase digital real estate might create a brief crash, Eduardo Erlo, marketing manager at blockchain-based encrypted messenger Status, told GOBankingRates. Erlo elaborated to suggest that because land in the metaverse may be so infinitely abundant, paying large amounts of money for it now could prove fruitless.
One way to circumvent the infinite abundance of digital land, he said, would be for some metaverses to have built-in scarcity concerning plots of land — such as the Genesis virtual land mentioned earlier — akin to the kind of built-in monetary investment scarcity that Bitcoin offers. “It’s still too early to know any of this, but it’s exciting to watch,” he said.
The market opportunity for bringing any number of metaverses to life may be worth more than $1 trillion in annual revenue, according to Grayscale. The asset management firm estimates that revenue from virtual gaming worlds could grow to $400 billion in 2025, from $180 billion in 2020.
Several experts agree that purchases of virtual land in the metaverse can therefore be viewed as an investment of sorts. That is, as a bet that the metaverse — and the individual metaverses within the greater whole — will deliver on promises and transform into a dynamic virtual ecosystem in which we will all be, in some way, participating in, according to Robert Powers, director of decentralized media at Vivid Labs.
Powers told GOBankingRates, however, that we are still in the early days of the emergent metaverse — or metaverses, because there will likely be many of them, not just one — and so we should be cautious about speculation that leads to the kind of rapid prices increases that we are seeing right now in terms of digital land.
“But all in all, this explosion of development offers tremendous potential for what is to come in a more fully immersive digital world. Maybe these early buyers of digital land could be the equivalent of owning the digital Empire State Building or New York City itself,” he said.
Dan Patterson, general partner at an NFT-focused investment firm Sfermion, makes another point in terms of the value of digital real estate.
“Each plot of digital real estate, in these future environments, will be a 3-dimensional profile page that is entirely user-owned and generated,” he told GOBankingRates, adding, “How much is the most high-traffic page on Instagram worth?”
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