Just recently, Yuga Labs, the team behind the world-famous bored nonfungible token (NFT) primates, nabbed some $300 million with its sale of Otherdeed
Just recently, Yuga Labs, the team behind the world-famous bored nonfungible token (NFT) primates, nabbed some $300 million with its sale of Otherdeed NFTs, a collection of land plots in a soon-to-be metaverse. Indeed, NFTs, the blockchain industry’s primary method of creating digital asset scarcity, have emerged as the preferred way to handle virtual land ownership for most metaverse projects, including Decentraland and The Sandbox. All of this has prompted an interesting question in the community: In the metaverse, a vast, near-endless digital space, how can digital land ever be scarce? Well, let’s dig in.
First and foremost, let’s address the elephant in the room: The metaverse isn’t real. I mean, the Ready Player One-style metaverse, a seamless virtual reality-based rendition of the internet as we know it. So, while you may don your VR helmet for a rave in Decentraland, the device will hardly stay on for your daily dose of Instagram or a news feed surf.
In other words, what we have right now is a growing number of relatively siloed metaverse projects, which offer users an array of project-specific experiences and functions as opposed to the browse-whatever of the larger web. This in itself hints that scarcity is a valid concept to consider in as much as their lands go, even if we consider their value through the same prism as real-world land.
Related: Sci-fi or blockchain reality? The ‘Ready Player One’ Oasis can be built
The laws of the land
In the real world, the value of a plot of land is a product of a few quite clear-cut variables — i.e., natural resources, from oil or mineral deposits to forestry and renewables, access to infrastructure, urban and logistical centers, and fertile soil. All of this can come into play depending on what you are planning to do with this land. Purpose defines value, but the value is still quantifiable.
Value, for its part, often goes hand in hand with scarcity, and land is no exception. The planet’s total surface area is 510.1 million square km, but more than half of that is under water, which works for oil and gas pipelines and submarine cable lines, but little else. So far, we have modified about 15% of the available land area, and yet, at the end of the day, land is finite. Factor in the value and financial feasibility considerations (an investment has to be worth it), and the pool of land that actually makes sense to acquire goes even slimmer.
Let’s take The Sandbox as an example. What’s the value of getting there? Again, value comes from purpose. If you are a fashion brand, for example, you would probably benefit from being in a similar digital space as Gucci. What’s more, if you are looking to compete with this brand, you would want your plot located as close to its own as possible to try and cut into its footfall with the stunning exterior of your own outlet.
Related: The metaverse is booming, bringing revolution to real estate
This is where scarcity comes back into play. There are only so many NFT plots that you can buy next to the Gucci store. In a digital realm, distance as such may seem arbitrary, but it’s not entirely correct. Distance comes down to how this specific metaverse handles space, objects and movement — the crucial, foundational components of its design. After all, you probably want your own metaverse store to be an actual 3D store a buyer can explore, which demands a 3D spatial grid and at least a basic physics engine. Sure, it’s probably possible to play with non-Euclidian geometry and other smart design features to make the space bigger on the inside than on the outside, but this would amp the workload on the backend and affect the user experience.
As we see, technological constraints and business logic dictate the fundamentals of digital realms and the activities these realms can host. The digital world may be endless, but the processing capabilities and memory on its backend servers are not. There is only so much digital space you can host and process without your server stack catching fire, and there is only so much creative leeway you can have within these ramifications while still keeping the business afloat. These frameworks create a system of coordinates informing the way its users and investors interpret value — and in the process, they create scarcity, too.
The great wide world out there
While a lot of the valuation and scarcity mechanisms come from the intrinsic features of a specific metaverse as defined by its code, the real-world considerations have just as much, if not more, weight in that. And the metaverse proliferation will hardly change them or water the scarcity down.
Let’s start with the user bases. The Sandbox reports 300,000 monthly active users, and for Decentraland, the figure is roughly the same. In terms of pure math, this is the cap for your monthly footfall at whatever metaverse outlet you are running. So, even if they are not too impressive, they will likely be hard to beat for most newer…
cointelegraph.com