Introduction
The Metaverse has risen into the mainstream in the last several years, reigniting the eternal dispute over the worth of a virtual real estate. We must first try to understand how value is created in order to comprehend why virtual properties can be a wise investment over the following ten years.
Although the land or buildings in a virtual world known as the “metaverse” are nothing but pixels on a computer display, their worth is increasing.
You may create experiences on virtual land that are suitable for business, advertising, networking, and entertainment. In this virtual world, several types of buildings are being made, such as corporate offices, casinos, and billboards, where, by utilization of 3D avatars, you may play online games. Each piece of land has a different worth depending on the experience it offers, as well as other elements like collectability, platform recognition, and its market.
How to value the Metaverse land?
Metaverse land value is the result of combining the following:
- Scarcity. This shows how many replicas of a certain item are currently in use. The scarcer something is, whether it is from natural scarcity (like gems) or manufactured scarcity (like limited-edition Versage bags), the more expensive it will be—as long as there is a demand for it.
- Integrity. This shows how well-liked the brand or product is, which increases demand. The brand accounts for a good portion of the value, whether it is Ferrari or Picasso.
- Utility. While scarcity and reputation typically take control in the case of highly-priced objects, usefulness is the main driver of value for commodities. For example, a Gucci shirt costs much more than a Zara shirt, but they still have the same functionality.
- Liquidity The liquidity shows us the level of interest in the product that fuels assumption. If nobody wants to purchase it, a pricey painting is virtually useless. The popularity of any item has an impact on its liquidity.
The correspondence between digital and physical land
The very first thing to have in mind is that there is really a lot of land on Earth. We could place the whole population of the planet in Poland, assuming Manhattan’s density. Nevertheless, each city has a unique level of land shortage.
A location with many residents benefits from its highly active economy, which generates more jobs, entices in more residents, improves market liquidity and encourages network effects. This is the reason why the world is separated into areas with high real estate prices that are concentrated in busy metropolises like Central London.
Not much has changed in the Metaverse. Think of the Metaverse as a 3D virtual world to match his earlier analogy, a digital planet. A new city, with a unique layout, population, and set of regulations, is represented by each platform. It is true that new Metaverse platforms and parcels of property may be created at any time, just as new websites may appear online.
The land is fundamentally useless without liquidity, reputation, and utility, just like building a new town in the middle of Antarctica, so just adding more and more land doesn’t make it valuable right away. Therefore, the audience’s interaction with the land is more important than its overall supply.
You have to do your own research before investing in the Metaverse
Investors interested in purchasing land must conduct extensive research on the blockchain, the numerous metaverses, prior sales in the area(s), as well as how to secure the property.
By combining community activity, trading activity, growth, and new inventions on the platform, you will be able to measure the value of the virtual land that you are interested in.
A natural dilution of worth will occur if there is an abundance of real estate and no economic activity, just as it would if thousands of apartments were constructed for a low-population area where there is no demand for them.
Price comparison is difficult
A report says that the price convergence between the major metaverses shows that buyers lack the knowledge necessary to determine whether the land in one Metaverse is really more valuable than the land in another. Potential purchasers of property in the virtual world must understand the new rules, specifically that what makes a difference in the virtual world is the act of trying to bring humanity and life to something digital, attracting players and then motivating them to come back and interact. In addition, the report’s authors argue that creativity and design are more important in the virtual world than location and pricing.
The myth of artificial scarcity
Every metaverse platform has a limited amount of land, making it naturally scarce, exactly like in real-world cities. Some are saying that creating artificial scarcity by lowering the amount of land parcels in order to raise prices doesn’t provide value. This argument is incorrect since the whole luxury products business depends on creating artificial scarcity by releasing limited editions to raise costs. As long as there is a true demand for it, artificial scarcity really creates genuine value.
We have an unbalanced market when we take into account the dynamics between content providers and normal users in the Metaverse. This is the opposite of platforms like Facebook, where there is an unlimited amount of material and an unlimited amount of customer engagement.
But is it really like that? The algorithm used by the popular social media platforms to distribute material makes the same artificial scarcity, favoring popular posts over less famous ones, and therefore, they are limiting the visible content. Once again, the engagement of the audience with the content is more important than its absolute supply. As a consequence, even on social networks, the algorithm artificially limits the availability of quality material that people engage with.
The importance of utility
What you can accomplish by using it and how much benefit you can derive from it are defined by the utility of a parcel of metaverse real estate. Selling NFTs like tickets, conducting online business, or earning money from advertisements are some of the possible business strategies that you can use. The land’s worth and utility are represented by the expected revenue it may generate.
The utility is currently the layer that the prevalence of metaverse platforms is missing. The extrinsic utility is minimal just because of the small liquidity and audience, despite the intrinsic utility. The utility of the Metaverse will increase as its audience expands. As millions of people in the Metaverse are trying it for the first time every year, the need for companies in the Metaverse increases.
Conclusion
However, the chances are that the most exciting platforms will be ones we haven’t even imagined yet, as digital environments offer experiences that don’t have a parallel in the real world. As the Metaverse develops beyond what we’re able to imagine easily, it’s crucial to remember that the source of value for wholly innovative applications may initially be more difficult to understand and explain – even when the same basic principles apply. But, as we create more imaginative digital environments increasingly around and for ourselves, there is certainly more to the idea of virtual and Metaverse land than before.
According to the concepts given here, determining what creates the value of virtual land for users may not be as complex as it may appear at first. What really matters is how individuals will utilize the different places in the Metaverse, how well-suited a virtual space is for these activities, and how useful those operations are to users overall.
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