An explosion in the popularity of digital assets known as NFTs (non-fungible tokens) has led to virtual items of all shapes, sizes and formats being bought and sold – from video art pieces to trading cards and even memes. But what if you’re looking for something on a slightly grander scale?
Enter virtual land, existing in a dizzying array of digital worlds that collectively form the metaverse. Already, there is no shortage of organisations offering users the opportunity to claim a piece of the metaverse for themselves. Platforms such as Decentraland, Somnium Space or The Sandbox have all sprung up in recent times to offer users the opportunity to own spaces within their individual virtual worlds.
If the concept of virtual land is a head-scratching proposition, consider that many already pay good money for virtual locations in the form of websites – distinct locations upon which anything can be built within the limits of the form. Buying virtual land, then, can be thought of as the Web 3 equivalent of purchasing a domain name. But what exactly is it you’re acquiring when you purchase virtual land?
So You’re Thinking of Buying Virtual Land?
Virtual land is essentially just an NFT that confers ownership of a given digital space. For more information on NFTs as a whole and how they are built, visit our explainer, but suffice it to say that virtual land is created by platform developers who parcel off land from a large map of potential properties for users to buy using cryptocurrency. Proof of ownership is then assured by the blockchain technology on which the NFT exists, a ledger secured by the efforts of a network of computers solving complex mathematical problems in order to verify and record transactions without resorting to one central authority.
It is then acquired either directly from the seller or on a secondary NFT exchange such as OpenSea. The particulars of how virtual land is bought and sold differ slightly per platform. An average land parcel in Somnium Space sold for 6.57 ETH (the cryptocurrency also known as Ether) in June 2021 while Decentraland uses a dedicated token known as MANA to buy virtual land as well as goods and services. With the metaverse as a whole benefitting from positive trends such as the renaming of Facebook to Meta, it’s little surprise that the virtual land market has been experiencing significant growth of its own – with all-time users of virtual worlds up to nearly 50,000 as of November 2021, according to one report.
Who is Buying Virtual Land?
While both retail and institutional investors (there are even some funds focused exclusively on investing in virtual real estate) have bought into virtual land as speculators, others have found longer-term uses for virtual spaces. That includes companies such as PwC which bought a plot in Decentraland to act as a hub for its Web3 advisory offering, and celebrities such as Snoop Dogg, who has created an experience on The Sandbox known as the Snoopverse.
The price of virtual land is inherently changeable, dictated as it is by factors common to other non-fungible tokens, as well as those that drive the price of real-world land such as scarcity. Land on different platforms will differ in terms of what can be built upon it, for instance, as well as the tools that are available to produce those creations. At the same time, the popularity of the platform itself will drive prices up or down.
How Can it Be Used?
Virtual land can be used for anything that the owner wishes, be that socializing, gaming or any other experience that is supported by the digital world in which the space is situated. The landowner might wish to host a brand experience of the sort pioneered by Nike with its NIKELAND game within Roblox. Competitor Adidas has duly bought a plot of land within The Sandbox to produce its own experiences.
And Just as Web 2.0 websites utilize advertising space to capture the attention of users, similar opportunities can exist on virtual land – albeit in less intrusive and annoying forms. Consider Admix’s recent NFT billboard partnership with Somnium Space, for example.
What are the Risks?
As much as virtual land can be compared to its real-world equivalent, there are, of course, huge differences. While the value of real-world property might also plummet, at the end of the day you are still left with a tangible possession that exists in the same reality as everyone else – and thus has every chance of increasing in value again.
If a piece of digital land resides in a platform that falls out of favour or even potentially closes, however, that investment may well be dead in the water. Such volatility in the digital land market has opened up opportunities to rent virtual spaces rather than purchasing them outright, in order to mitigate the risk of being left with a useless asset. By working with landowner partners such as Admix, which holds property across a range of metaverses, brands can lease land for as long as is necessary. That might coincide with the duration of a particular marketing campaign or event, for example, allowing brands flexibility while ensuring they aren’t exposed to the risk of holding virtual land themselves.
The new frontier of virtual land in the metaverse, then, offers a new and tantalising opportunity, one that allows individuals and organisations to own virtual property anywhere imaginable. Just like real-world spaces, these new worlds of virtual real estate represent both a place for enjoyment as well as a financial opportunity for owners and brands alike – and the race to capitalize on them is well and truly underway.