Nifty Island and the Case for Scarcity
Key Points:
- The founder of Nifty Island has stated that digital land scarcity is “unethical” and “a losing [business] strategy”.
- I argue on the basis of digital scarcity’s use in game design that it’s not inherently unethical. One must consider its results.
- I argue that digital scarcity makes for a reasonable business strategy because of its ability to prevent spam and make efficient use of a metaverse’s resources, which are in fact limited.
It’s hard to believe we’ve already reached a point where the announcement of a new “metaverse” is so prosaic as to be quickly forgotten. There are just so many out there already. I spend a large portion of my day scrolling Twitter or checking feeds to see what new developments there are in this space, and I still can’t possibly keep up. New projects are thrown from the fire of Web3 like sparks. And, every hour of every day, it seems there’s something else to discover.
One of the projects that quickly appeared and then vanished from my radar screen was “Nifty Island.” It only registered again recently when a friend drew my attention to an article he had read.¹ It featured their founder and his thoughts on scarcity — a question that informs the ethos of the whole Nifty Island project. I took it in and felt compelled to research a bit further. I realized that I had actually tread this ground before when I rediscovered the low-poly, palm tree statuettes they offer as NFTs. They have an odd sort of whimsy that sticks in the back corners of your memory. They had stuck in mine, so I suddenly realized that all my “new” reading was really just a refresher.
Nifty Island is rather typical of what people are coming to call “metaverses.” Like so many other projects, it seeks to assemble a virtual world in which people can build anything they choose on NFT-integrated land. This gives users the opportunity to profit from and/or sell their creations, adding a pecuniary fold to the atmosphere of play common to most virtual worlds.
Their unique selling proposition, though, is that land in Nifty Island will be unlimited in supply and free to mint. Anyone can join in and receive a small island via NFT at no charge.² For its founder, the perhaps pseudonymous Charles Smith, this move is both a business decision and a moral imperative. “Scarce virtual land is not only unethical, it’s almost certainly a losing strategy,” he opines at the article’s outset.¹ Charles may be right about the second part. It could be that a limitless supply of content turns out to be as fruitful for his metaverse as it has been for YouTube and Twitter. About the first part, though, I believe he’s mistaken: it is not unethical to make virtual land scarce.
This sometimes feels like a weird position to take. I am, after all, arguing for denying people something that is both useful and ostensibly free. Still, there are good reasons for artificially imposed scarcity. Acknowledging these will help us understand why scarcity works, as well as clarify its moral status.
Games Are About Scarcity
In a podcast recorded the day after announcing Nifty Island, Smith provided some insights into the way that he views scarcity. “We think that people are playing games to escape the constraints of normal life and not to be reminded that the land is super expensive.” ³ While I agree that games are an escape, and being reminded of rent adds nothing to the fun, the effects of scarcity are decidedly not something that people try to avoid in games. The opposite is in fact the case.
Within games, resource scarcity is what allows for interesting choices. Do you clear out your inventory to make room for the treasure you just found? Do you take your shot, even though you’ve only got three bullets left? These constraints are the source of the game’s challenge, and ultimately, its fun. Think about it: Monopoly is hardly worth playing with infinite money, and only barely more interesting than chess on an infinite grid. We need limitations for the game to hold our interest.
Games are just weird when you think about it. To make them fun, we intentionally limit what we can do, essentially causing ourselves difficulty. We don’t want to be so constrained that it makes the game unfun, but the scarcity of something crucial gives meaningfulness to our choices. So, we make things harder for ourselves. But, somehow, the result makes us happier. If every need were met, every wish granted, and success assured, we would get bored — even though that’s precisely the state of things we strive to achieve in our regular lives. Strange, right?
While I don’t believe this is a particularly good argument for making land scarce, I do think it illustrates how scarcity is not, by its nature, a bad thing. We find we often prefer it. It makes more sense, then, to focus on why something is being made scarce, and if the benefits derived from this outweigh the negative consequences. Virtual scarcity’s ethical status really depends on how it’s done, or on its results. Don’t condemn it without that context.
But, should it cost thousands of dollars to begin building in a certain virtual world? Perhaps not. Still, I believe it should cost something, and our experience with email demonstrates why.
The Spam Problem
In the infancy stage of email’s development, there was a debate within the nascent Internet community. Some felt that we should require “postage” of some sort on every email. The cost would be vanishingly small — less than a cent each — but it would act as a deterrent to mass mailings, and it would provide a layer of traceability.⁴ Ultimately, the decision was made to keep email free, primarily on the basis that even the smallest amount of postage could limit access for some of the world’s poorest people. It’s a reasonable consideration, but the decision has had some negative repercussions. Allowing people to send infinite emails resulted in enormous mass mailings. Imagine the opposite route had been taken instead. For the cost of a few pennies to a regular user, we could have found ourselves living without “junk folders” and free of fraudsters trawling email address books for their next mark.
This “spam problem” exists anywhere that creation requires no investment on behalf of the creator. It makes a profitable strategy out of generating an immense amount of content, knowing that only a small portion of it will return any money. In the context of email, or of YouTube and other Web2 platforms, we have created algorithms and filters to circumvent most of the junk that’s out there. In contiguous 3D space, though, it’s much harder. If a metaverse becomes popular without any barrier to endless creation, the result will be a spamscape: parcel after parcel of copy-pasted advertisements, phishing hooks, and other such garbage stretching out between you and your destination.
Imagine the ugliness of such a place. It’s perhaps the only thing worse than the emptiness that land speculators produce. Nifty Island has cleverly side-stepped this problem by making their parcels non-contiguous. Each one is a literal island unto itself, and you can teleport from one to the other. This may work out fine for them, but it seems unlikely to be viable in all virtual worlds. Not every metaverse can be an archipelago. A universal adoption of Nifty Island’s model would result in vast continents of junk, and the net outcome may be worse for everyone than if the land was made scarce enough to carry a price.
The Invisible Power Glove of Adam Smith
People also adopt digital scarcity to create markets, knowing that it makes their projects more efficient with regard to their resources. We see this in Ethereum and Bitcoin, which regulate the use of their processing power through transaction fees and “gas.” This creates better outcomes than allowing any and all transactions to go through.
While we may not stop to consider it, even in the digital plenty of a metaverse, we have resources with a limit. We have to consider things like processing power and memory (neither of which can support an infinite world). There’s also limited user attention, token supply to take into account, and more. Creating a market for land helps ensure that a metaverse’s resources are used to their highest productive potential.
It is of course not necessary that a virtual world have a certain size. But, I’d like to suggest that it should have one, even if that changes over time. There’s a balance to achieve here that optimizes the user experience — an equilibrium of concision and plenty that makes things more compelling. A puzzle with only two pieces, after all, is about as useless as one with two billion.⁵ Somewhere in between is ideal. This analogy is imperfect, I admit it. But it is sufficient to illustrate my point: there is a certain scope and density of content that creates the best experience for most people.
We see this all over Web2, where the balance is enforced by algorithms. The platforms provide you with a curated feed, artificially limiting how much of their content you see. But this solution becomes much harder when you’re dealing with a 3D space, especially when people have claimed the right to a specific slice of it. Limiting land and creating a market around it is another way to achieve this equilibrium, and it constitutes yet another benefit that may make a scarce world better than one with infinite space.
A Problem as Old as Money
After reading and listening to Charles, Nifty Island’s founder, I was honestly struck by his thoughtfulness. But, his opposition to digital land scarcity seems much more like a frustration with the results of the market than it does an abstract objection based on principle. He may disagree with that assessment, but I just doubt he would feel how he does if the market had determined that land should cost $1. Instead, the parcels cost thousands, and most regular people are totally priced out. Smith would be in good company, as this is a problem that has been noted repeatedly throughout history: markets are frequently efficient, but rarely fair.
Smith seems to believe that everyone should have a chance to create. And, about that, I think he’s essentially right. There should be somewhere people can build something wonderful, even when they have no money. So, I’m happy his project exists, both to provide that opportunity and to act as an experiment. I want to know what happens when there are no barriers to entry, and I’d like to see the extent to which making the land non-contiguous deals with the spam problem.
My qualms are simply with Charles couching virtual land scarcity in absolute ethical terms, and with him describing it as “a losing strategy”.¹ Scarce digital land, to me, makes sense in most metaverse contexts. The normative question — whether it’s good or not — really depends on its implementation and the effect it has on people. Scarcity is not necessarily deprivation. And, scarcity within certain limits has its clear benefits. If it didn’t, I doubt people would so gravitate to it in their play time. Nor would they create markets around digital resources in so many contexts, from World of Warcraft to the Ethereum blockchain.
So, a little more subtlety is needed here. Rather than claiming there’s something immoral about making virtual land scarce, let’s focus on the results it achieves within a given project, and then decide. There are implementations of it that are helpful, and there is a degree of it that is preferable. As to how much scarcity? Well…just not too much.
1 — http://blockworks.co/scarce-virtual-land-is-a-losing-strategy-cofounder-of-nifty-island-says
2 — https://www.niftyisland.com/
3 — https://play.anghami.com/episode/1024086001 [~26:53]
