Welcome to the age of the digital land rush, where investors, brands and presumably very wealthy individuals have set their sights on owning virtual land in the metaverse.
The virtual land market in the “big four” metaverses - namely, Decentraland, Somnium Space, Cryptovoxels and Sandbox - topped €440 million in 2021, and that figure is projected to double in 2022.
The Sandbox metaverse is currently the land sale record holder, having sold a plot of land for €3.8 million in a single transaction last December.
Is the virtual land market turning into a digital property bubble?
But is the market overheating? Even some of the founders of these metaverses are cautioning against the inflated prices that plots of land in their virtual social worlds are fetching.
Speaking to Euronews Next, CEO and founder of Somnium Space, Artur Sychov, lamented the influx of financial speculation driving up prices in the ecosystem.
“There is a lot of hype and there are a lot of, unfortunately, players in the market which try to take advantage of people,” said Sychov.
“There's a lot of people who don't understand why they're buying and they're trying to speculate on it, which is an absolute no go and they should never do that”.
According to Sychov, investors buying up virtual land NFTs in order to eventually turn a profit on them as the prices climb go against the spirit of virtual social worlds, which should be about creators, building communities, sharing art and sharing experiences in virtual space.
“The bubble - and I have to say, the media is also complicit in it because the articles or the news videos, they don't go into depth and into details, right? They just mention the prices because it's a very catchy thing to mention and I understand,” he said.
“But it creates this kind of bubbly thing where people say, ‘Oh my god, OK, there's an ability to earn some money and I will buy this parcel. Whatever that parcel is, I would never even build [on it or] take care of it. I’ll just buy it and hope that I will sell it later for a higher price”.
Before Meta’s splashy announcement of their intentions to build a metaverse bumped the idea of virtual social worlds to the top of the news agenda, the idea behind selling virtual land parcels was that it would give participants in the various communities the opportunity to build within the world and enhance the overall experience for users.
As Somnium Space is a partially decentralised, blockchain-based virtual world whose land parcels are traded on marketplaces like Parcel and OpenSea, or sold at auction, Sychov has little control over prices dictated by market demand.
How does buying virtual land work?
Virtual land sales function in the same way as NFT sales. Ownership is guaranteed by a unique piece of code stored on a blockchain that certifies an individual's rights over a digital asset in a way that cannot be altered.
“Land is an NFT, so that is, effectively your deed of ownership that is yours, yours to own forever,” said Dave Carr, formerly of Decentraland and currently involved with virtual real estate aggregator Parcel.
“There are also mechanics in development at the moment, such as rentals and fractionalisation of NFT, which is the splitting apart of an NFT so that people can own a piece of that overall NFT. And that's something that's rapidly being developed”.
Do you have to own land to participate in the metaverse?
While casual users of virtual social worlds may be put off by the extremely high prices of land parcels, according to Carr, this doesn’t necessarily mean they will be completely priced out of the metaverse.
“One of the big questions that we get from people who are just finding out about virtual worlds in the metaverse is, 'oh I feel like I've missed the boat. Have I missed the boat?’” he said.
Carr insists it all depends on what they want to do and where they want to do it.
“For creators, for example, you don't need to own land to get involved in creating stuff or even having a shop or monetising your creations in the Metaverse,” he said.
Creators will still be able to build wearables, experiences and games in the metaverse that they can monetise if they choose.
“There are also other mechanisms coming into play like rentals, so a landowner can rent out the experience to a creator, to a community, to a brand. That can be the parcel if you like, where that creator can be involved in the metaverse and let's say, create a pop up shop and sell their wearables or what have you,” he said.
Another factor to consider, says Carr, is that virtual social worlds are still in a nascent period and the future is likely to bring more and more metaverses catering to different interests.
As such, there will be more opportunities for people interested in these new worlds to get involved.
“It shouldn't also be forgotten that there are more and more virtual worlds coming and more and more opportunities for people to get involved and buy land,” he said.
“So I think that there will always be some opportunities out there to stake your claim in the Metaverse as it were”.