June 01, 2022 - 25 min read
Along with the broader NFT boom, buying NFT land in the metaverse has been one of the hottest crypto and blockchain trends in recent years. Industry data suggests that land sales in the metaverse peaked at $500 million in 2021 and are likely to increase by over 100% in 2022. Crypto asset manager Grayscale believes this trend will grow exponentially– with virtual land potentially becoming a $1 trillion industry in the next 5-8 years.
Plus, it’s not just crypto enthusiasts investing in metaverse land– Samsung, PwC, JP Morgan, and other megacorporations have also bought virtual land in recent months. For instance, PWC recently purchased a small land plot in The Sandbox, perhaps the first professional services firm to do so.
In addition to traditional finance and tech giants, major fashion brands including Dolce and Gabbana, Tommy Hilfiger, Perry Ellis, and a variety of others recently held the first metaverse fashion week in Decentraland. The week was a smashing success, generating millions in sales, with some NFTs of real-world fashion items selling for higher prices than the real-world items themselves.
Gucci has also made a few bets on metaverse land, purchasing property in The Sandbox in order to create a specialized area for Gucci-based experiences known as the “Gucci Vault.” If that wasn’t enough, in June 2021, major auction house Sotheby’s opened the first-ever virtual gallery in Decentraland.
It should be noted that investment in metaverse land is also beginning to imitate real-world real estate investment strategies. In December 2021, blockchain investment firm KleinCap investments’ MetaSpace REIT (MREIT), the world’s first tokenized virtual real estate investment trust, began trading on the decentralized exchange Uniswap. Another company, the Metaverse Group, which boasts a virtual headquarters in Decentraland’s Crypto Valley, plans to launch another virtual land REIT in mid-2022.
In this article, we’ll review some of the top virtual land metaverses, including Decentraland, The Sandbox, and Upland, how to purchase and sell land there, and discuss profit strategies for virtual land investors and speculators.
While this article isn’t offering investment advice, virtual land is not a good investment for anyone who isn’t willing to lose everything they put in. Of course, this doesn’t mean that some people aren’t making large sums of money off of it.
One major issue with virtual or metaverse land investing is the permanence (or impermanence) of today’s platforms. For instance, even if we make the assumption that the virtual real estate market will grow exponentially, we don’t know if Decentraland and the Sandbox will become the next Myspace or Vine– big platforms that eventually faded out or closed altogether– or if they’ll become industry giants like Facebook, Instagram or TikTok.
Since the Web3 metaverse industry is so new, it’s certainly possible that newer competitors with better graphics, more advancements in AR/VR technology, or better tokenomics could potentially overtake the current market players.
Despite these pitfalls, there are certainly ways that people and brands can profit from purchasing land in the metaverse. One, higher-risk method, involves buying, selling, and trading lands. This takes significant research, as investors must discover under-appreciated but potentially rare land plots, market them, and resell them at a higher value. This can be especially profitable if the land is in a good location and hence, is desirable for development by major brands or influencers. We may even see the proliferation of metaverse real estate brokers in the near future.
Another method involves taking raw land and developing it into some type of profitable virtual business or attraction. After creating the business or attraction, the owner can charge other users to buy specific NFTs related to the land, or charge an entrance fee. They may also create exclusive clubs that only permit the holders of specific NFTs to become members.
In addition to buying, selling, and developing virtual land, virtual land can be leased on most platforms, which is another potential source of profit for virtual land investors and entrepreneurs.
When you purchase a piece of virtual land, you’re purchasing an NFT that represents that land in a particular metaverse. Therefore, you’ll generally need to have an ERC-20 and ERC-721 capable crypto wallet. Common options include the popular Coinbase or Metamask wallets, though there are dozens of good options to choose from.
Users can buy lands within each game, with a slightly different process for each game, which we’ll review later. However, another excellent way to browse through potential virtual land options is to utilize third-party NFT sales platforms like OpenSea or NonFungible.com. In order to make a purchase, you will also need a sufficient amount of tokens for the platform on which the land is located. For instance, if you want to purchase virtual land in The Sandbox, you’ll need to purchase SAND tokens. You will also need enough ETH in your wallet to facilitate the gas fees for the transaction.
After that, you can usually purchase the property in one click, provided you have sufficient funds. After a few seconds (sometimes longer) the funds will be withdrawn from your wallet and you will receive your NFT. If there is a bidding process on the property, you can enter a bid, and if you win, you will be rewarded the property.
As of Q2 2022, the virtual land industry is dominated by two major players, Decentraland and The Sandbox, though there are a handful of other metaverses vying for the attention of casual players and serious investors alike, including Upland and Somnium Space. Since land in Decentraland and The Sandbox has become so expensive, with entry prices currently around $4,000 for the least expensive virtual land, investors are beginning to focus slightly more on other platforms in order to pick up virtual land at a discount.
Below, we’ll review some of the major land metaverses, how they work, and how to purchase land there.
Decentraland, which was founded in February 2020, is a virtual reality-based land metaverse built on the Ethereum blockchain. As of May 2022, Decentraland is the largest virtual land metaverse by market cap, with its native MANA token sitting at a market capitalization of more than $3.9 billion. The game’s native ERC-271 NFTs are referred to as LAND tokens.
In addition to the aforementioned fashion brands Dolce and Gabbana, Tommy Hilfiger, Perry Ellis, and Sotheby’s, Samsung, Australia Open 2022, Digital Currency Group, JJ Lin, and other major brands have also begun to promote themselves on Decentraland.
As previously mentioned, lands in Decentraland are NFTs. LAND holders can use their LAND NFTs to build 3D spaces and applications inside Decentraland. Each land parcel is 16m x 16m (52 ft. x 52 ft.). However, there are certain height restrictions. The height is restricted based on these limitations as well. LAND is scarce; the Decentraland metaverse is limited to 90,601 total land parcels, including 43,689 private parcels, 33,886 district land parcels, 3,588 plazas, and 9,438 streets.
In addition to basic land, there are also estates, groupings of two or more land parcels that are next to each other and can’t be divided by non-land areas such as roads or other parcels. Users can also connect parcels to create their own estates.
Unlike some blockchain games, which operate with a traditional, centralized corporation at the helm, Decentraland is structured as a Decentralized Autonomous Organization (DAO), an organization in which the individual LAND and MANA token holders vote on how to allocate resources and how exactly to develop the rules and structure of the organization.
Specifically, DAO members vote on how to upgrade the metaverse to add more features and wearable items, specify the details and times of LAND auctions, decide how and when to add and replace content servers, and determine primary sale fees.
Despite its popularity, it should be noted that the game has suffered from speed and loading issues, and can sometimes be difficult to play even for those with high-speed internet connections.
As of May 2022, The Sandbox is the second-largest virtual land metaverse by token market cap, with a market cap of the platform’s native ERC-20 SAND governance token sitting at just over $3.1 billion.
The Sandbox was one of the first players in the virtual and metaverse land industry, having been founded in 2011 by gaming developer and publisher Pixowl. The company first launched two incredibly successful mobile games, The Sandbox (2011), and The Sandbox Evolution (2016), which generated a combined 40 million in downloads. However, the blockchain metaverse game that so many know and love today wasn’t launched until 2018.
While it was initially created by a for-profit publisher, like Decentraland, The Sandbox is now operated as a DAO (decentralized autonomous organization). Therefore, the SAND governance token holders vote on how the game will evolve and how revenues will be utilized to further the metaverse’s growth and development.
In The Sandbox, platform land sale fees are set at 5%. 50% of this revenue is apportioned to the SAND staking pool as staking rewards for token holders who stake SAND tokens, while 50% goes to The Sandbox’s Foundation, referred to as “Foundation,” to further the development and governance of the game. Foundation has created a $2 million Game Maker Fund, which it has used to fund over 15 gaming projects (including an ATARI licensed game) in The Sandbox metaverse and to fund over 100+ artists to create original in-metaverse NFTs.
As a gaming platform, The Sandbox blockchain offers three major products that allow users to generate their own content. These include:
Like Decentraland, the game’s native ERC-721 tokens that represent virtual land are referred to as LAND tokens. However, user-generated items use the newer, semi-fungible ERC-1155 standard, offering them a much greater degree of flexibility, as well as (potentially) the ability to create dynamic NFTs that degrade or grow in value over time.
Purchasing virtual land in The Sandbox is somewhat similar to buying land in Decentraland, but there are a few key differences. Just like in Decentraland, virtual land can come in two types, independent LAND NFT parcels sized at 96×96 meters (much larger than in Decentraland) and Estates, which are combinations of multiple LAND NFTs. LAND can be bought from other players but can also be purchased through official presales, which have traditionally sold out in just a few hours.
Here are a few basic steps detailing how to begin buying land and items in The Sandbox:
Upland was founded in 2018 by entrepreneurs Dirk Lueth, Mani Honigstein and Idan Zuckerman. The Upland token market cap is quite small, and as of May 2022, its native UPX token was reported to be less than $120,000.
This is likely because UPX is not tradable outside the game and dollars must be converted to UPX inside the game, though this may change in the future. However, this small market cap doesn’t mean that the game’s economy isn’t thriving, at least for its relatively small size compared to metaverse giants Decentraland and The Sandbox.
According to the Upland website, users have earned $1.8 million by trading properties in NFT in the Upland universe. In November 2021, the game raised $18 million at a $300 million valuation. With the prices of NFTs spiking in Decentraland and The Sandbox, the token price and the value of Upland NFTs could increase quickly as players look for lower-cost virtual land investments. Unfortunately, unlike other virtual metaverse games, users do not yet have the ability to take self-custody of their NFTs. There is also not nearly as much of an interactive MMORPG-style environment for players to interact in. These could both be major reasons why Upland’s economy is hundreds of times smaller than its competitors.
To play Upland, you will need to download a browser extension, which is easy to download in the Google Play Store if you are using the Google Chrome browser, which is recommended.
Somnium Space is a VR-focused metaverse, which like Decentraland and The Sandbox, is built on the Ethereum blockchain. Like those other metaverses, players can buy, sell, and trade land, as well as creating NFTs.
Somnium Space was founded by Artur Sychov, who publicly launched the platform in September 2018. Unlike other competitors, Somnimum Space is heavily focused on VR, and can be played on VR devices, PCs, and on mobile (also unlike most other virtual land metaverses).
The Somnium Space map comprises 5,026 purchasable land parcels which are available in three different sizes.
How to Buy Land on Somnium Space (H4)
Click here for a full guide on how to navigate Somnium Space.
Cornerstone.land, also known simply as Cornerstone, is a much newer NFT-based land metaverse which announced its’ launch in January 2022. Cornerstone.land was developed by ZOAN, a VR and graphics studio headquartered in Helsinki, Finland. While the metaverse is currently 100% owned by ZOAN, the company says that it plans to introduce community governance in the near future. Cornerstone, like Decentraland and The Sandbox, was developed on Ethereum and issues NFTs utilizing the popular ERC-721 token standard.
Cornerstone’s first NFT land sale began in February 2022 on its proprietary Fun.gi platform and was denominated in ETH. It consisted of an extremely limited sale of only 10 lands. The Cornerstone metaverse is much smaller than other metaverses, initially consisting of only 100 land plots located on one island.
However, when all land plots 100 are sold, volcanoes will erupt on the island, greatly increasing its landmass and creating more virtual land plots. Prospective initial prices have been set between €10,000 to over €20 million, though it’s unclear if how the market will respond to this aggressive pricing strategy.
The game itself, which will be built on the Unreal gaming engine, and will emphasize VR experience, has yet to be launched, but is expected to launch in the coming months. It plans to create a strong competitive advantage by developing an extremely detailed world reminiscent of AAA video games and realistically animated films, in contrast to the somewhat basic graphics currently utilized by other land-based metaverses.
In addition, unlike other metaverses, the Cornerstone metaverse incorporates geological principles into its construction. According to the Cornerstone website:
“73.3% is base stone that is a great construction material for building foundations and hard-surfaced stone structures. 26.4% is organic soil that is used for the construction of more complex architectural structures because of its soft and sculptable nature. 0.3% is a stream of shape-shifting and active mineral, Noza. This material is programmable by nature.”
Unlike some other metaverses, Cornerstone emphasizes extremely strict property rights. Player avatars must be expressly invited to enter another person’s property and cannot wander freely. However, like other metaverses, users will have a lot of flexibility in developing their land. Despite this, they will typically need to purchase building materials in order to improve their lands.
Like other metaverse platforms, Cornerstone NFTs are also available on OpenSea, though, as of May 2022, there has been no active trading of them on the platform.
Sin City Metaverse is yet another virtual land metaverse that has been recently launched to some fanfare. However, as of May 2022, the company’s website appears to be down, so the current status of the project is a bit unclear. The virtual reality and gameplay aspect of the metaverse is expected to launch soon, but no date has been provided. Sin City Metaverse is reportedly designed to be a Rated-R collection of “the worst neighborhoods on Earth.” In early January 2022, it was reported that the initial land offering (ILO) sold out, with $3.5 million in virtual property selling out in only 2 hours.
According to a Sin City Metaverse press release:
“There are a total of 15,000 plots of land measuring 10x10m2 carefully zoned into 17 districts. Each of the districts have their own background story and gameplay but the most noticeable identifying mark will be whether the district is a low-security zone or high-security zone because this feature is what will determine the economic mainstay of that district and by extension the players’ roles.”
The game is designed to have four main districts, the Red Light district, a medium-security zone, the Cartel District, a low-security zone, the Chinatown District, a low-security zone, and the Strip District, a high-security zone.
The Red Light District allows landowners to create their own strip clubs and adult entertainment businesses. These landowners can generate income in the game’s native SIN token if other players buy lapdances and other adult services, and can also own brothels.
The Cartel District allows landowners to build drug processing facilities and farms that produce marijuana or coca plants, as well as warehouses for gun runners. Players in this district can form factions with other players, but face the threat of potential DEA raids.
The Chinatown District, which is considered even more dangerous than The Cartel District, is controlled by factions and gangs, particularly the Triads. The most valuable assets can be obtained in this district, including cash and Chinese medicine. NPCs can be killed here to obtain items like guns, swords, and cash.
The Strip District, modeled after Las Vegas, is the safest zone in the game, where police will protect players who are threatened. This district allows landowners to construct casinos and hotels and to buy and trade high-end in-game items such as expensive designer watches.
“Rarity sniping” is the process of carefully pre-selecting NFTs by examining the characteristics that could make them rarer than other NFTs in the same collection. While this typically applies to generative NFT collections, it can also be applied to land and items in the metaverse games mentioned above.
According to Tokenized: The rarity rank of an NFT indicates how rare an NFT is within a given collection based on the individual traits it has and how common they are.
For example, in Decentraland, estates and land near roads and plazas are rarer, and hence, more expensive. Land located near land owned by well-known influencers or brands is also generally more rare and more expensive.
In an ideal situation, a prospective virtual land investor will be able to find undervalued land with characteristics that are not realized or understood by the seller, but are recognized by the buyer. This will make it more likely that the buyer will be able to flip the land for a higher price, or develop it into a profitable attraction at a lower initial cost.
There are a variety of formulas to calculate the rarity of an NFT, with the most popular being the Trait Rarity Score formula:
NFT Trait Rarity Score = 1/(Number of Items With a Rare Trait/Total Number of Items in Collection)
For example, if there are 10 lands with a specific trait and there are 10,000 pieces of virtual land in a specific metaverse, the NFT rarity score for that specific trait would be: 1/(10/10,000) = 1,000.
The overall rarity of a NFT is calculated by adding the rarity score of each rare trait.
There are a variety of free, popular tools NFT investors can utilize in order to check the potential rarity of an NFT, including Rarity Tools, Rarity Sniper, Rarity Sniffer, and RankNFT. Other options include Trait Sniper, RarityMon, MomentRanks, NFTSniff, NFT Stats, and HowRare.is.
Users can compare the rarity scores of potential NFTs to their offering prices in order to determine which NFTs may be the most undervalued, and hence have the most potential for price appreciation.
This Decentraland LAND parcel is labeled as “Rare” but is not necessarily particularly rare.
In contrast to the LAND parcel labeled rare, this LAND parcel is actually quite rare due to the fact that it’s located in Crypto Valley, one of the most desirable and expensive neighborhoods in the Decentraland metaverse.
The virtual land boom is almost unlike any other phenomenon we’ve seen in modern times, except for perhaps the related boom in generative NFTs like the Bored Ape Yacht Club (BAYC). On one hand, virtual or metaverse land offers an interesting and exciting investment opportunity. On the other hand, its high risk, and the incredibly high prices virtual land has reached has led many people to compare it to a ponzi scheme, or, at the very least, a massive bubble that will burst in the near future. In some ways, this could be hurting the reputation of the overall blockchain and crypto industry, as outsiders may confuse potentially “scammier” or riskier investments like virtual land with more legitimate crypto, DeFi, and blockchain applications.
Despite the excitement that the virtual land boom has caused, issues with UX and accessibility have also plagued the space. It’s relatively complex to even begin playing popular games such as Decentraland and the Sandbox. Both of these games require downloading memory-intensive clients, have slow gameplay and freezing issues, and do not have any type of fiat on-ramp, forcing users to transact only in crypto. This, along with the aforementioned high cost of virtual land in these metaverses means that, for now, the user base of these platforms will be limited to crypto native individuals. This will likely limit the overall growth and the sustainability of both property prices and token prices for these platforms.
Other metaverse games, like Upland, are easier to play, but don’t carry the ownership and economic benefits of rivals like Decentrland and The Sandbox. In the future, competitors are likely to emerge that combine both the economics of Decentraland and The Sandbox with the easy onboarding and property purchase process and the fiat on-ramps of games like Upland. When this occurs, the virtual land market might be able to grow even further and truly earn the respect of both mainstream gamers and crypto investors alike.
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