I don't need to own land in the metaverse to explore its games, events, and other attractions. But many people choose to buy digital real estate, whether to grow their business or host private events.
Maybe out of fear of missing out (FOMA) or simply due to lack of experience in the digital realm, companies stumble upon bizarre questions, such as, do you need fire insurance for your digital real estate?
We are not yet immersed in the metaverse. Once you enter one of the most popular ones, Decentraland, it doesn't seem that unfamiliar. JP Morgan operates in the Metajuku mall. You can wander into Sotheby's virtual gallery, Atari Casino, and spot many more well-established brands. I even visited the Ukraine war protest gallery, displaying photographs of this war-torn European country.
Any business wanting to grow in the metaverse needs to get a hold of digital land. I sat down with the founder of digital real estate platform, WeMeta, Winston Robson, to discuss the properties of virtual land.
Price is going up
According to the recent JP Morgan report “Opportunities in the metaverse,” the average price of a parcel of land jumped from $6,000 in June 2021 to $12,000 by December across the four leading Web 3.0 metaverses.
In June 2021, one land package in Decentraland was sold for $913,000, with the developer Everyrealm turning it into an entire shopping district, Metajuku, where JP Morgan is the first thing you see upon entering the mall.
According to WeMeta analytics, on March 26, the average price for the parcel of land in Decentraland was almost $48.5 thousand, in the Sandbox - $10.7 thousand, and in the NFT Worlds metaverse - $36.5 thousand.
Land is scarce
Robson explained that digital land is a base layer for the metaverse. Once you have it, you can start building different experiences on top of it. As with real-life plots, digital lands appear to be a scarce resource. The pricing is somewhat similar, too.
"Decentraland is only 90 thousand parcels, and Sandbox is 100 thousand. On these lands, you can build different experiences. People price the land based on the current demand is. So the more people want to buy into a specific world to build a certain type of experience or be next to certain people, the higher the land price goes," Robson explained.
Genesis Plaza is the central spot in Decentraland. If you want to settle somewhere nearby, it will cost you extra. In the Sandbox, Robson explained, parcels neighboring Snoop Dogg's property are also more expensive.
"You get exposure based on who your neighbors are. Suppose you have a high-traffic area next to you. In that case, you'll get more opportunities for people to see whatever you are building," he explained.
Then, of course, the bigger the land is, the higher the price. With a larger parcel, you can develop a more complicated experience. The math in the metaverse is quite an irregular one – one+one doesn't equal two.
"It's like one plus one equals three, and then maybe three plus three equals twenty. When you have 3x3, you can build something taller that has more details and takes up more memory space. If you have 1x1, maybe you can build something that's 10 meters high, and if you have 3x3, maybe you can build something that is 100 meters high," Robson said.
Who buys and why?
Regular people like me buy digital land, too. But in the metaverse, 80-90% of buyers are companies looking for business opportunities.
"You'll see a lot more of these brands come in. This is the future of commerce," Robson said. For some firms, stepping into a metaverse is quite a challenging task.
"We were working with people in December. They were asking for fire insurance, so it's a very nascent and new space where you don't need fire insurance. Still, not everybody knows that," WeMeta founder said.
You don't need to own land to set your foot into the metaverse, as I mentioned before. Despite that, consumers are buying digital real estate. Why?
"I have friends who bought land to show off their own NFTs, and they just want to have a place where they can send their friends a link, hang out, share new NFTs with their friends and talk about them in a space they own. It's kind of like private galleries or anything you would do in real life where you have private events, or you want a small, secluded, and private venue," Robson said.
Many people are speculatively investing in virtual parcels of land, looking to return a profit eventually.
"I bought land in the Sandbox once to see what's going on. People are just immersing themselves in the world, trying to figure out what's going on. There's certainly a profit aspect to it, but I think many people are just trying to have fun as well," Robson explained.
Consolidation is not there yet
The beauty of the metaverse should be its decentralization – as long as its users can make vital decisions about their virtual future by voting. But, given the land is a scarce resource on most of the metaverse projects, will we see a consolidation of the land?
"Sandbox has a lot of brands coming in and buying much larger plots. It will be interesting to see how that plays out. The lands are so big that even if brands are coming in, they are not buying the whole thing," Robson said.
According to WeMeta analytics, in Decentraland, the biggest player owns about 6,2% of the land, and only six more people own more than 1%. In the Sandbox, there’s only one person who owns more than 1%. In Cryptovoxels, the biggest owner has about 2,35% of the land.
“The biggest owners are in that 1-2% category,” Robson said.
The Decentraland Foundation owns 71% of the land in Decentraland, and it’s all available for purchase. Other metaverses haven’t minted all the parcels yet, but they still are the biggest owners of the land at this point.
Metaverse will be a $760 billion business
The global metaverse market, estimated at $110 billion, is projected to reach approximately $760 billion by 2026.
The transition to the metaverse is imminent, the market research company Global Industry Analysts claimed in its recently released report.
“The conversation around metaverse has re-emerged, and with the likes of Meta, Google, and Microsoft joining the bandwagon, the dialogue got stronger and is headed towards actualization in terms of rising interest in funding projects, expanding outreach of technological collaborations, changing paradigms in the marketplace, and an overwhelming response from users,” it said.
In 2020, the global metaverse market was estimated at $107 billion. It is projected to reach $758 billion by 2026. The US is currently in the lead – the country accounts for 41,2% of the global market ($58 billion). China, the world’s second-largest economy, is forecasted to reach a $103 billion metaverse market.
Globally, Japan and Canada will also grow their metaverse landscape significantly. Within Europe, Germany is set out to be the most significant player and reach $59 billion by 2026.
Global Industry Analysts noted that no company exerts major influence at the moment. However, significant players are racing to dominance by investing in multiple metaverse projects and engaging in deep learning and research in the field.
Meta, Microsoft, Google, Roblox, Nvidia, Unity Software, and Fastly are named in the report as companies leading the innovation, technological collaboration, and market expansion to race ahead in building the metaverse.
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