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Homesteading in the Metaverse

What is Digital Real Estate and Should You Be Buying?

Welcome to the frontier. Scams, hacks, land conquests. We are witnessing a cryptographic Wild West and fresh lands are up for grabs. The onset of “digital real estate” has had many scratching their heads and the rest scraping together ETH to buy coveted digital “plots.”

But should you be homesteading this digital frontier? We spoke with some of the industry’s leading creators, builders, and thinkers to help answer these questions.

A thank you to Michael Wagner, CEO of Star Atlas; Loopify, Founder of Treeverse; Wil, Founder of The Littles; and Josh Ong, thought-leader and Sandbox ambassador, for their contributions.

Article TLDR:

  • There are two different types of in-game worlds: sandbox worlds that allow users to build on the land they own, and game worlds that simply use land as an in-game asset for resource acquisition.
  • I have concerns about artificially creating scarcity for in-game sandbox land. Value is not created from scarcity. Scarcity is created from value. Highly followed Twitter accounts aren’t valuable because there is a scarce amount of Twitter accounts. They’re valuable because they offer value to their users, and few accounts are able to compete.
  • Games like NFT Worlds that are compatible with existing games (such as Minecraft) have a huge leg up over those that require new skill acquisition.
  • Keep an eye out for new sandbox land models that don’t need to fix an artificially scarce amount of land to drive value and price. I’m still figuring out exactly how that would look.

What is valuable about digital space?

Digital space is not a novel idea reserved for Web3. We each already have our little corners of the Internet — our Instagram profiles, our websites, and our Pinterest boards. We cultivate and craft each with care. Some are worth more. Some less.

So what’s new here?

Blockchain is the digital ownership layer for the web — a key component for Web3. Imagine an internet with different virtual spaces each featuring different styles, different goals. Some are immersive fantasy worlds with complex game mechanics. Some are business networks. Others are simply neighborhoods with architectural masterpieces. What you do with your little corner of this world is entirely up to you. You are free to build, develop, host, rent, or sell your space.

However, there are still some technical and potential economical limitations when it comes to these emerging worlds that must be considered.

Does it make sense to have digitally scarce lands?

The big question is whether it makes sense to artificially create scarcity around digital spaces. Think of the Sandbox and Decentraland like YouTube channels for virtual experiences (games, concerts, casinos, adventures, etc). Each plot works similarly to a Creator Account. People can certainly still create assets and even monetize them without land, but to build experiences, one needs to have space to build.

AltVR strongly objects to the scarcity model in his video. He says that the current Metaverse projects have it backwards. They hold that scarcity drives demand and thus, if you create artificial scarcity, you’ll “artificially” drive demand which will in turn drive price. The hope is that this will eventually lead to user value.

The Metaverse Mentality!

Create land with artificial scarcity > “This is scarce, so it must be valuable” > Price goes up > Hopefully value is created

He argues that, in the real world, value drives demand which in turn creates scarcity. Scarcity is relative and without value creating demand, it is not scarce. Real world land is not expensive because it is scarce, it is expensive because it provides value for those who use it, driving demand and creating scarcity.

Real World Dynamics

Land offers value > Demand goes up > Price goes > valuable land becomes more scarce

Do you understand the difference?

The question then becomes, is scarcity good for digital space platforms? I think that digital scarcity is good when the goal of the platform is to create exclusivity. But digital scarcity is likely bad if the value itself is to provide experiences or content. If your value model is based upon encouraging as many people to build on your platform — thus facilitating the highest quality and most expansive content — then scarcity is a bad idea. As Loopify stated, “I don’t believe in the concept of putting an artificial scarcity on land and then creating value around it, it has to have meaning behind it. An example I like to use is: ‘Imagine if you could only post YouTube videos if you had a limited edition YouTube pass, YouTube never would have become popular.’”

Take the Sandbox for example. It seems clear that they are making exclusivity a core value on their platform. They want land ownership in the Sandbox to essentially put users in a whole different tier of Metaverse landowners. But this all depends upon there being a lot of users coming to the Sandbox. My concern is that, by artificially limiting who can build in the Sandbox, they’re putting a constraint on the innovation and quality of experiences, thus limiting the ultimate level of users they will attract.

On the flip side, it is certainly possible that the high cost of acquisition and the potential profit actually encourages more dedicated builders and creates truly vibrant communities with powerful network effects. The wide array of tools that these sandbox worlds provide give powerful tools to creators looking to create and monetize their talents.

Hunting For Real Estate in Different Worlds

Those hunting for digital “real-estate” deals have many options from which to choose. There are two main categories of land: “sandbox” worlds where owners can develop their land as they see fit, and “game worlds” where land is a game piece providing access to additional resources.

“Sandbox” Worlds

The Sandbox

Opensea Link

Sandbox is a voxel-based game (meaning it looks similar to Minecraft with pixelated characters). Wil, the Founder of The Littles said that The Littles is developing in the Sandbox due to it being “a great vehicle for experiences.” The capacity to craft experiences has attracted partnerships with over 50 top brands and companies. Users can build and create with the Sandbox Voxel Editor and then upload them with the Game Maker and apply various game mechanics on their land (represented by an NFT). Players can sell their land and creations on the Sandbox marketplace and utilize $SAND, an in-game token.

The game has yet to launch, although it ran a successful Alpha for 5,000 players earlier this year.

Sandbox is doing an awesome job encouraging people to build in-game assets and acquire Sandbox-development skills.

The Bottom Line:

The real value proposition for the Sandbox is as a monetizable, decentralized game platform. On the positive side, I think it is well positioned to take advantage of the entrance of top brands (such as Adidas and Nike) who want to facilitate virtual experiences for their customers. As Josh Ong said, “Sandbox will be the first onboard for Web2 people,” given the strong brand-engagement already present.

Decentraland

Opensea Link

Decentraland is very similar to the Sandbox, although it is not built in a voxel style. Decentraland has been playable since February 2020 and already has an engaged user base (approximately 20,000 per month) and an active DAO. Most current use cases focus around casinos, concerts, and art galleries.

The Bottom Line:

While Decentraland lacks many of the high-value partnerships present with the Sandbox, it makes up for it by focusing on decentralization around its DAO and facilitating a very engaged community. Decentraland is currently developing VR integration which will greatly enhance the level of immersion of the world.

Worldwide Webb

Opensea Link

Worldwide Webb is a 2D, 8Bit-style game world, playable in a browser, that focuses on compatibility with existing projects. They are constantly working on integrating existing NFT PFPs as avatars. They’ve hinted that BAYC and MAYC may come soon.

Land exists as different size apartments, where users can host events. The team is working hard to add additional functionalities including smart contract compatibility (which would allow you to upload a mint contract directly to your space).

The Bottom Line:

I’m skeptical of the long term value of Worldwide Webb, but they are really the first to demonstrate how people’s PFP NFTs can be utilized across virtual spaces. I do think this puts them in a valuable position, at least for the short term. Long term, it’s unclear to me why someone would choose them over a more immersive world.

NFT World

Opensea Link

NFT World has recently exploded in popularity. It is a decentralized, fully customizable, voxel world. In contrast to the Sandbox where each land plot is tiny, NFT World plots are essentially enormous playable worlds, which can be built upon or used as “portal” to other worlds.

NFT World can be developed just like Minecraft which makes it appealing to a huge host of Minecraft gamers and developers.

The Bottom Line:

NFT Worlds is probably the most interesting “sandbox” world and the NFT space has caught on. While NFT Worlds are scarce, each one is essentially an entire world, making it a much more attractive option for those unwilling or unable to acquire enough space in the Sandbox or Decentraland. Its compatibility with Minecraft allows existing talent to migrate easily.

Game Worlds

There are definitive concerns around some P2E games, as highlighted in this article. Primarily, the risk of P2E games is that people play them, not because they’re enjoyable experiences in their own right, but because they see them as income sources. The problem then is that they only stay profitable as long as new players are joining. If the game isn’t “fun,” that is inherently unsustainable.

Axie Infinity

Accessible via their marketplace

Axie Infinity is the most popular P2E game with over 2.7 million monthly players. Players compete, battle, explore, and craft. The game has largely become an income source for third-world countries. Land can be purchased but has yet to be integrated into the game.

Treeverse

Opensea Link

Treeverse is still in development. I spoke with the founder, known as Loopify on Twitter, to get a rundown.

“The vision for Treeverse is to be a blockchain MMORPG where users can turn the items they earn in-game through crafting or loot into NFTs.” Land is available as Founder Plots which can be placed inside the public map. Placing the land does not affect gameplay, and nor does it allow you to craft your own experiences (as with Sandbox and Decentraland) but it does allow you to customize the map’s appearance.” Loopify added that if a user does not publish their land, they will receive a private house they can customize.

Wolf Game

Opensea Link

Wolf Game is a farmville-style game that is still in development. Land will allow players to more quickly acquire resources and may be instrumental in breeding animals. The game has a strong community and is currently played by top NFT personalities including Gary Vee, GMoney, and AJ Vaynerchuk.

Star Atlas

Assets are purchasable on their marketplace

Perhaps the boldest and most visionary of Metaverse projects, Star Atlas is working to build a space exploration game, where players join factions, explore, conquer, mine, develop, and earn the in-game token, $ATLAS.

They have put enormous thought into their in-game dynamics, with complex DAO structures and interesting economics with two in-game currencies, one a transactional token and the other a governance token with the power to levy taxes.

Depending on what gameplay a user wants, they can be a builder, a fighter, or a landowner. Land can be transacted, developed, mined, and even used as collateral for loans. Land is not yet released and gameplay is still limited, but there is no game with a more advanced vision than Star Atlas.

The Bottomline on Game-Centric Land:

The main difference between game land versus sandbox land is that with games, the land plots aren’t inherently required for playing the game. They simply serve as additional tools to enhance resource acquisition. Because people are simply “playing” with them versus developing on them, I think they totally circumvent the question of whether digital scarcity is “good.”

Final Considerations

Short term, it’s likely that the hype around digital real estate will grow. The massive success of NFT Worlds shows that games that allow people to build immediately without acquiring new skills will be the immediate winners. Worldwide Webb’s collaborations across the NFT space is a great vision of the potential power of Web3 interoperability.

Decentraland and the Sandbox offer people the capacity to create unique experiences.The Sandbox and their wide array of partnerships seems to be the most attractive to new corporate partners and celebrity adopters, but Decentraland’s more decentralized structure could serve as a value breeding ground for some very innovative ideas.

Personally, I am hesitant to purchase land in any sandbox world as I do not yet know how artificial scarcity will effect innovation or demand.

In-game land is a totally different model and one I am very interested in. Personally, I would not own assets in any game I myself was not playing. Wolf Game is the only game that has captured my attention enough to play. But I will continue to keep a close on Star Atlas and Treeverse, mainly because of my belief in their teams’ expertise.

It truly is a Wild West out there. Models are being tested, communities are being built. While many valid questions surround the digital land revolution, acquiring land in the right world could prove to be a very valuable investment, especially with the potential to rent it out to future developers.

A Thought Experiment:

My thoughts are directed towards envisioning the ideal digital real estate platform. It needs to answer the question of why people would want to use it, to come to its lands, and the answer cannot be because the land is scarce or the price high. I think real value will be in the form of giving people the tools to easily offer gamified experiences. Furthermore, base land should be virtually free to anyone who wants, minus a fee to disincentivize spam. What determines the value is what is built on it. Scarcity becomes about owning a plot of highly coveted land as many people want to come to experience what the land has to offer. I kind of think about this like owning a highly-coveted Discord channel.

I’m still working on this…

Action Steps

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This is not financial advice, merely my thoughts on the space. Please DYOR.

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