Real estate is often considered to be a good investment—but what about virtual real estate?
Non-fungible tokens (NFTs) representing virtual land have become a hot topic since the advent of the metaverse—and there’s gold in them thar digital hills, with some plots of virtual land selling for millions of dollars.
Virtual land forms the backbone of crypto-powered metaverse platforms like Decentraland and The Sandbox, and with legacy big tech players like Meta drawing up plans for their own metaverses, it’s set to become a key point of differentiation between centralized and decentralized metaverse offerings.
As these competing visions of the metaverse’s future jockey for position, it’s first worth defining what the metaverse even is, and how virtual land will play an vital role in its development.
What is virtual land?
All virtual land exists in a digital environment also known as a metaverse. A metaverse is, typically, a video game or digital life simulation where you can interact with other players using a character which represents yourself.
Virtual land, then, is the digital terrain—the geography and physical space—within which players can roam in the metaverse.
Virtual land can be as simple as a 2D pixelated environment, as abstract as a white or black 3D box space, or a rich 3D virtual environment populated with oceans, mountains, and just about anything else you can imagine.
How does virtual land work?
For one, virtual lands don’t require crypto—many video games have offered virtual land of sorts for decades. Depending on a specific metaverse’s design, virtual land can have an “open” or “closed” feel. Many metaverses will show loading screens when players switch between environments, like in the first two “The Sims” games or VR Chat, while other metaverses like “World of Warcraft” offer a more seamless, open-world experience.
But some believe cryptocurrencies and NFT technology may be the key to a truly interoperable and open metaverse.
In Web3, virtual property or spaces are typically sold as NFTs, meaning the proof of ownership exists on a blockchain like Ethereum and essentially acts as a deed granting the holder access and control over said land.
For example, within Yuga Labs’ upcoming metaverse Otherside, Otherdeed NFTs are deeds granting owners a piece of property in the virtual world.
Yuga Labs saw $561 million
in volume traded for its Otherside NFT mint within just 24 hours.
In April 2022, Otherdeed mints slowed the Ethereum blockchain to a crawl; in a desperate rush to claim their virtual land, some users reported paying thousands of dollars in Ethereum gas fees in hopes that their Otherdeed NFT would grant them precious resources—or an ultra-rare creature called a Koda.
How to buy virtual land
While the purchase process for virtual land can vary widely depending on the game and company behind each metaverse, plots of virtual land sold as NFTs can be either minted from the developer’s website (primary sale) or purchased on a secondary NFT marketplace like OpenSea.
What’s so special about virtual land?
It’s worth noting that virtual land as a concept has existed for a while. “The Sims,” which was released over 20 years ago, was a smash hit for its life-simulation environments, where players could create characters, buy virtual land, construct homes, and effectively experience a digital “life.” It’s since spawned three successful sequels with increasingly complex and open virtual worlds—but all are single-player games.
For those looking for an online multiplayer experience with virtual land, Second Life, Habbo Hotel, and IMVU have been around for a while. All games offer a kind of alternate digital reality where players can escape into another world as a customized character of their choice.
However, to date, virtual land has been created and sold within closed platforms, with all the value accruing to the platform itself rather than to the users. In most cases, there are no secondary marketplaces for virtual land. With the advent of NFTs and decentralized metaverse platforms, it’s now possible for users to have true ownership of virtual land, including the right to sell it on and even migrate it between different metaverses.
But why would you want virtual land in a metaverse at all? Well, for one, the pandemic showed people that virtual meeting spaces like Zoom can get old quick, and virtual reality (VR) or augmented reality (AR) environments could shake things up for those with “Zoom fatigue.”
And as the internet increasingly becomes an essential part of modern human life, digital ownership has become more important as well. Assets like virtual land can be used as digital status symbols, meeting places for friends around the globe, or creative hubs. The possibilities are endless.
That said, some believe the technology isn’t quite there yet.
What tokens are associated with virtual land?
While some Web2 metaverse experiences like Roblox do not use cryptocurrency, a growing number of decentralized Web3 metaverse platforms do. The Sandbox uses the SAND token, Decentraland has MANA, the Otherside metaverse will use Apecoin (APE), and the virtual chatting platform IMVU offers VCOIN, to name a few.
Typically, metaverse tokens associated with virtual lands and their economies are ERC-20 tokens, meaning they are cryptocurrencies that exist on the Ethereum network.
The future of virtual land
In 2022, the market for virtual land is largely speculative. Otherside has not been released yet, Meta has yet to realise its vision of the metaverse, and The Sandbox and Decentraland have seen their token prices decline substantially.
While millions may have been poured into this burgeoning space, it remains to be seen whether the majority of Web3 enthusiasts will actually use the virtual land they purchase—or simply hang onto it in hopes its value will increase over time.
Some argue that the metaverse and its virtual lands are, essentially, an overpriced get-rich-quick scheme. One “digital landlord” told Vice that in his view, virtual land was little more than “futuristic hype.” And in February, Protocol asked its readers whether all this virtual land speculation was actually “spoiling the promise” of the metaverse.
But others see potential. Angel investor and Cozy Finance co-founder Tony Sheng sees taxing unused land held by speculators as a potential solution to the speculation epidemic sweeping the virtual land economy.
Sheng argues that metaverse creators should not design for speculators because it does not lead to long-term “value accrual” and will lead to a stale economy. Making virtual land into “productive assets” that are actually used, however, could increase value over time.
The future of virtual land will also depend on company policies on crypto and NFTs, which remain controversial in the video games industry. The creators of NFT Worlds—who built an NFT metaverse on Minecraft with a Polygon integration—got a harsh wakeup call when Minecraft announced in July that it would not be allowing any NFTs on its game servers.
Regardless, there’s still widespread interest in the future of virtual land, with companies ranging from JP Morgan to Gucci carving out their own corner of the metaverse.