Investing in Virtual Land Pays More Than Dividends
Ever since Meta made their big announcement about their plans to embrace the metaverse, virtual land has experienced tremendous growth both in the number of virtual landowners and in total value. With all this attention on the metaverse, what is the metaverse anyway?
The metaverse could be the next iteration of the internet where users explore the worlds of virtual reality (VR) and augmented reality (AR), gaming, and digital assets using identities owned by the user.
The blockchain-based metaverse is built on top of open standards and is accessible to any who choose to be a party of the community. The ‘perfect’ open metaverse allows permissionless participation for all users, where no one can get banned. Most metaverses that exists now are still centralised and, therefore, we are not close to the perfect open metaverse, but that’s the goal of many metaverse companies. For example, The Sandbox Game aims to achieve 100% decentralization within 5 years, where the team claims it will continue developing the platform while owning 0%.
As users also become owners of the platform, the incentives to innovate and grow the platform increases.
The Value Proposition for Virtual Land
Real-life events will transition to digital events: plenty of people prefer the convenience of attending a meeting or a workshop from the comfort of their homes. Companies prefer scaling their events to a wider audience.
Global demand instead of localized demand: creators and users from all over the world can collaborate and create experiences.
Increase in internet users and accessibility: as technology grows, the barriers to entry are reduced for mass adoption.
Income generation opportunities through asset ownership: this is the key difference between a Web2 metaverse, Roblox for example, and a Web3 metaverse such as Sandbox. In Web3, users can own their assets, and monetize and trade them in the open market.
Ecosystem and partnerships: the ecosystem strengthens with every additional user and partnership which is known as the ‘network effect.’ Social media companies such as Twitter and Meta (Previously, Facebook) were built on this concept. The same applies to the Web3 platforms. Metrics such as monthly active users and the number of unique land owners are important metrics to determine the growth of a metaverse.
Rise of the creator economy: the advent of social media created untold new creative jobs — ones we couldn’t even imagine in the early 2000s. Similarly, the metaverse will create jobs that we can’t imagine just yet. Positions for voxel artists, game developers, sound engineers, community managers, hosts and so on are currently waiting to be staffed. These are just a glimpse of the opportunities that the metaverse will create.
“Open metaverse job opportunities”- Sebastien Borget, Founder of The Sandbox Game
Generating Income from Virtual Land
Flipping land: become a virtual land real estate expert where you identify arbitrage opportunities, develop, and resell the land. When you get familiar with a certain metaverse, you identify the pockets of value it contains and, therefore, are able to identify undervalued opportunities. Furthermore, you can buy undervalued land, increase their value by developing the property, much like real-life property, and resell them.
Become a builder: Grian, one of the top builders in Minecraft, is said to earn over 1.5 million USD through his builds, YouTube channel, and sponsorships. This is from a closed metaverse where users don’t own their assets. When users have the ability to own their assets, they can approach land-building as an investment that can increase demand for high-quality land builds. Users with zero coding knowledge can even start creating voxel assets, and entire games, using free software such as VoxEdit and Game Maker by The Sandbox Game.
A typical Sandbox build from Tentango
Working in the metaverse: land owners from a metaverse will have access to more networking opportunities and events within the ecosystem, improving the probability of future employment in the metaverse. The most recent example of this phenomenon was through the ‘The Sandbox Alpha Pass’ which was raffled only amongst land owners. The Alpha Pass was an NFT ticket that allowed users to explore the Sandbox metaverse for the first time and earn rewards.
Renting out land: the blockchain metaverse is still in its early days and renting virtual land hasn’t been explored in-depth. It’s not too hard to imagine scenarios where space is rented out to host events, advertise, or create games. For example, you can use your virtual land to build a museum where individual artists can rent out space to display their work. Imagine creating an exclusive gym for fitness enthusiasts in the metaverse where they can connect and build. For example, OliveX is building a fitness metaverse where players can work out at home or in the gym to gain in-game rewards through a tokenized asset.
Creating a unique experience where users have to use an in-game currency to play: gives creators the opportunity to create more value through merchandise sales and renting out advertising space. You can attract larger foot traffic by offering unique experiences. This audience can be leveraged by demanding higher premiums for ad space. This is the same concept that is used in real-life shopping malls and online websites. Stores with higher foot traffic and websites with higher web traffic demand higher ad premiums.
NFT museum in the Decentraland metaverse
Play-to-earn games: in a few years, people will look back and laugh at themselves for not monetizing their game time. Axie Infinity took this concept mainstream in 2021 and have experienced tremendous user growth. With play-to-earn games, players from emerging economies have the most to gain. Axie is a simple game compared to AAA games such as Fortnite and Call of Duty. As the blockchain gaming industry grows, such play-to-earn opportunities will increase. Landowners can make use of this gaming trend by creating and hosting games in their virtual land.
Participating in virtual events and quests: users can win NFTs and POAPs by completing quests and attending events. WonderZone in the Decentraland metaverse is an example of a game where users can craft NFT wearables by using the resources mined from meteors. The crafted wearables can then be sold in a secondary marketplace.
Wonder Mine game at WonderZone in the Decentraland metaverse.
Borrowing and lending: as virtual real estate appreciates in value, owners might be able to leverage their land to acquire other assets. This is the same concept that applies to borrowing against the equity of a home in real life.
Marketing: Adidas acquiring Sandbox Land is the first of many more companies adjusting their marketing strategies to embrace the Web3 economy. As big brands realise the shift in user attention, we will see more big brands building in the metaverse. Companies currently invest millions in their social media strategy. A few hundred thousand dollars wisely invested in the metaverse will hardly make a dent in a corporate balance sheet, but the revenue potential provided by the metaverse is virtually limitless. An entire digital native generation, coupled with a rapidly growing blockchain technology? Fashion, entertainment, and media companies have the most to gain by embracing NFTs and the metaverse.
Adidas bought 144 parcels of land in the Sandbox metaverse.
In addition to income-generation opportunities, being involved in the metaverse as a value creator gives you an edge in finding new investment opportunities. This is through the networks made, data collected, and the trends spotted along the journey of owning a piece of virtual land.
Where attention flows, capital flows.
Metaverses exist separately from one another and it is still too early for them to be interoperable. This is a risk to owners as assets cannot be transferred from one metaverse to another. In the case of declining demand and user base in a particular metaverse, users are unable to bring their assets over to another metaverse.
Trading virtual land involves getting a Web3 wallet, such as Metamask, which poses its own security risks. This is a barrier to entry for many users due to the multiple hurdles they have to overcome to buy virtual land. The first transaction is always the hardest.
Along with rapid innovation in the industry, new leaders will emerge and thus attract more users. Investors need to have an open mind in order to discover more opportunities.
Internet speed is currently a problem. As more infrastructure is built and more people are online, the demand for the servers that host the metaverse will increase drastically. A clear example of this is Decentraland where users regularly experience lag times and interrupted connections.
Liquidity is another concern for virtual land. NFTs and virtual land, unlike stocks or crypto, have no instant liquidity providers. This will become a major issue if there is ever a prolonged bear market.
Yet virtual worlds will survive as long as the community thrives. This is where a metaverse like the Sandbox has a clear edge. They have provided free tools such as VoxEdit and GameMaker to empower creators who then specialise in the Sandbox ecosystem. By providing the right tools and resources, the Sandbox ecosystem increases engagement and the value of the whole community.
Looking Beyond a Buzzword
‘Metaverse’ had its moment where it appeared in everyone’s social media feeds. However, the real building starts now. The metaverse is still in its infancy and the pie is large enough for everyone to have a piece. To gain exposure to this megatrend, investors can simply buy the leaders of the industry, or go a few steps deeper and invest their time in a metaverse that they resonate with. The easiest way to engage is by owning a virtual piece of land in a metaverse, as this will increase the probability of spotting trends, networking, and finding asymmetric opportunities — an approach that stands in stark contrast to the passive investor who might only purchase the native cryptocurrency of a given metaverse.
The metaverse is still in its infancy. Its limits are defined only by the imagination of its users.
Ash Perera is a crypto enthusiast who explores NFTs, DeFi, and the metaverse through content writing and podcasting.
BanklessDAO is an education and media engine dedicated to helping individuals achieve financial independence.