Published on: 11/07/2022

Metaverse land not infinite, just like real world

The popularity of NFTs is growing tremendously after last year’s boom and the result had the industry offer various different forms of NFTs. One of which is the trending case of virtual land where the sales of these NFTs are soaring higher than the price of land and properties in the real world.

Similar to its physical counterpart, a digital plot of land not only can be purchased but also rented. Many even argued that it is better to rent due to significant price differences.

In addition, the value of digital land is highly dependent on a specific metaverse, which virtual neighborhood the land is located in, its utility, and current market condition. These affected the value of digital land and as users are flocking in to purchase, the scarcity mechanism comes in.

How exactly does scarcity play its part in seemingly endless space? Adrian Krion, the founder of gaming startup, Spielworks, explained that the digital space’s backend servers are not omnipotent. It means that spaces created or hosted are limited so that the entire operational infrastructure will not bust. Eventually, this influenced how people and brands interpret the value of digital land. Therefore, this also creates scarcity in the process.

Scarcity in digital space

NFTs have been going out for quite some time now, from pixelated art that cost millions to 2D monkeys and realistic-looking art up for sale. Eventually, the industry created digital land for interesting individuals and brands to invest in projects such as The Sandbox, and Decentraland — two leading platforms of land ownership which can be recorded as digital assets.

Landowners often use digital land mainly for four different needs namely, advertising, socializing, gaming and work. Two examples of landowners are rapper and media personality Snoop Dogg who purchased a plot of land in The Sandbox to create the “Snoop Dogg Metaverse Experience”. Aside from Snoop Dogg, there is one of the largest sportswear companies Adidas, also purchased a space to create the AdiVerse metaverse experience.

The two mentioned above display a great example of scarcity in the digital space. For a brand or fashion company like Adidas, it is crucial to purchase and be in a space similar to its contenders such as Nike or Gucci. In addition, having a plot close to the two could also benefit Adidas as the company may provide a more interesting store exterior look.

Adding to that, ensuring great users experience while visiting a digital store in the metaverse remains the primary concern. Each project in the metaverse handles space and digital objects differently from the other. So it also depends on how companies manage their existence in the digital space — simpler features and less demanding engine physics equals better performance for the backend server. Otherwise, other convoluted ways or features could overload the backend server and create an uncomfortable experience for users.

“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,” Krion wrote.

Other project-specific matters that set forth digital land scarcity related much to how a project performed. Users will likely resort to triple-A projects despite how scarce the digital land is available rather than investing in a project with little to zero users.

In other words, whether the project is worth investing in or not will affect its value and eventually scarcity. At the time, the metaverse is comprising of various projects instead of a single platform. Despite this, scarcity still plays a part as users are somewhat made limited to bunny hopping from one project to the other.