Supply and The Benefits of Ignoring Geometry
Securing Equitable Access to Virtual Real Estate — Part 2/5
Guest blog by Jeran Miller — if you are interested in submitting your stories to WeMeta, please reach out!
Note: This is the second in a series of articles on equitable access to virtual real estate. If you’d like to start from the beginning, you can access the first article here.
Minting new parcels
Because of their digital nature, there is no limit to the number of virtual real estate (“VRE”) parcels that can be created. And, increasing the amount of parcels available for purchase is one of the most obvious ways to keep them reasonably priced. After all, provided demand stays the same, increasing supply should create downward pressure on their cost. It’s elementary economics.
increasing the amount of parcels available for purchase is one of the most obvious ways to keep them reasonably priced
The practice thus far for most platforms has been to set the total number of its parcels at its inception. Thereafter, the developers release it in packets over a span of years. They are not doing this as a price control measure, though. It allows them to make more money, since the prices tend to rise between releases. It also provides a more regular stream of income than selling everything in one go. Unfortunately, it would seem at this point that the volume of parcels being released is not actually enough to stabilize their prices. When growth is on the scale of a few thousand percent per year, increasing the number of parcels by 10% or so really isn’t going to make a dent. That may change when the growth levels off, but it is what it is for now.
It should be noted that these platforms are capable of minting more parcels at a later date. They would do this by adding a new smart contract to the blockchain. (I discuss the nature of metaverse scarcity in depth here.) But, ideally, any change in supply would be done in a manner understood at the platform’s outset. One could imagine the creation of more parcels being done automatically at certain milestones, such as the user population passing a certain number, market activity reaching a certain level in a given region, and so on. If it’s allowed to be done arbitrarily, it’s easy to imagine a developer selling more land to make up for a slow quarter, diluting the investment of the current users. One could keep things transparent and fair by defining those terms from the outset.
Changing the nature of scarcity in-world
We should also remember that we are free in our virtual worlds to make changes to the laws of geometry and physics. This could have an interesting impact on scarcity, and potentially positive repercussions for democratizing access to VRE. Here I’ve highlighted three changes that I believe merit consideration:
1.) Fast travel
The simplest example is “fast travel” or teleportation. When travel time is zero between any two points on the map, it no longer becomes nearly as necessary to be located in high-traffic areas. Access is much less dependent, then, on where you’re located, and land values can be spread in a way that they aren’t in the real world. Thus, not being able to afford space in a “central business district” is less of an impediment. It takes just as long (or less time) to visit a shop on the outskirts of the map as it would to visit the shop next door.
When travel time is zero between any two points on the map, it no longer becomes nearly as necessary to be located in high-traffic areas.
2.) Infinite space in every parcel
There’s also nothing to stop a building from being larger on the inside than it is on the outside, as pointed out by Lars Doucet in his excellent article. In many games, you open a door and enter a building that seems significantly bigger than you thought it would be. One could do this, or perhaps create “Instanced” parcels. This change to geometry is significant because any sort of business could potentially be located on a single parcel of land. This change would really open up the potential for what a new entrant could do with their space.
3.) Variable locations
Finally, a more exotic option was put forward by Matthew Scott Jones, who suggested that perhaps parcel locations themselves could be alterable. Those who are more active, generate more revenue, or receive more “likes” from the users could be moved into more desirable parcels near high-traffic areas. One of the fun things about the Metaverse is how creative people can be in organizing these worlds, and I’m sure even more interesting ideas are still to come.
Lessons from Final Fantasy XIV
One virtual world in which most of the above has been tried is Final Fantasy 14, a very popular MMORPG with about 3.48 million players per day spread across its various servers. It has had a housing problem since practically the beginning of its lifespan. In essence, there is just not nearly enough housing to meet player demand. And, as a result, the FFXIV housing market is characterized by sky-high prices, a black market existing off-platform, and even bots that camp out in front of homes to grab them as soon as they become available.
This is not for lack of trying by Square Enix, though! For instance, Patch 3.3 added hundreds of homes per server, and they were all gone within hours. Some servers sold out of their stock in minutes. The same thing happened when the “Endwalker” expansion added even more homes: things largely proceeded as before. In fact, to attempt to solve the supply issue for good, Square Enix has provided a practically unlimited amount of instanced “apartments” available to players. This, too, had little effect on the market for houses, as those shopping for homes appear to be a different group of users than those that would be satisfied by an off-map apartment. So, they recently tried adding a lottery system to distribute a number of homes differently. Paradoxically, this only served to increase demand, as the more casual player population realized they too might now have a chance at getting a home. It has been, in summary, an almost comical series of errors.
Bear in mind that this demand exists in spite of the fact that housing doesn’t really confer any significant benefit to an FF14 player! They are really only designed to act as a medium of self-expression for the player. In the context of a metaverse, though, there is not just the motivation of expressing yourself by decorating your property. People want to make money off of it! Imagine what this would do to demand in Final Fantasy if that was now openly allowed. No wonder VRE prices have run up the way they have.
The experience of Final Fantasy 14 provides us with a few takeaways. The first and largest is that people really want virtual real estate. It doesn’t even need to do anything. If it’s customizable and and provides a little in-world status, it can be in very high demand. The second is that, in such a high-demand and low-supply environment, you would have to release a ton of land to make it affordable — much more than the approximately 1–2% increase in total supply The Sandbox last released. Finally, we can surmise that instanced locations, even when made practically infinite, are not going to be sufficient. People want to see their mark on the map, with their home visible to others. If we’re going to employ anything described in this article, it needs to be done in conjunction with other methods from different sections.
The experience of Final Fantasy 14 provides us with a few takeaways. The first and largest is that people really want virtual real estate. It doesn’t even need to do anything. If it’s customizable and and provides a little in-world status, it can be in very high demand.
Up next, we explore the possible effects of changing the distribution and the nature of ownership within these virtual worlds, including fractionalization. Click here to read.
