Plots of virtual land are being sold at exorbitant prices; some Next Earth NFTs in Vatican City have increased by up to 42,000 percent in a single month. These are not works of art, rare wines, or antiques; they are digital real estate on a blockchain.
A tile (or a hundred square meter plot) in Vatican City sells for more than 42 BUSD in Next Earth, while Monaco sells for more than 14 BUSD per tile and Macao sells for around 4 BUSD per tile. Surprisingly, the famous Arc de Triomphe was purchased for around 100 BUSD and re-sold for 3,400 BUSD on the first day of the Next Earth NFT marketplace’s launch.
But what does this massive increase in value mean for users looking to invest in virtual real estate? What role does scarcity play in driving up prices, and how can buyers tell if an investment opportunity is sustainable?
The answer can be traced back to a fundamental concept in economics 101: supply and demand. People are willing to pay high prices for virtual real estate, creating what appears to be an opportunity for early adopters who understand where the demand is.
The Metaverse’s Supply and Demand
Virtual land is currently in short supply, while demand is skyrocketing. Neal Stephenson coined the term “metaverse” in his 1992 sci-fi novel Snow Crash. It refers to a virtual existence that exists apart from the physical world.
Other examples include Second Life and Minecraft, both of which are owned by video game companies. There are numerous other metaverses in the works. When NFTs become mainstream, users will be able to truly own pieces of metaverses, increasing demand for virtual land even further.
Because these metaverses have yet to gain popularity outside of tech circles, there haven’t been many options for ordinary people to purchase NFTs. This is about to change, however, with the launch of Next Earth’s new NFT marketplace.
NFTs’ value rises due to scarcity.
Virtual land scarcity, combined with the ability to own real estate in an entirely virtual world, has resulted in a market for blockchain-based real estate that few could have predicted just a year ago.
Naturally, there is fierce competition among landowners for virtual land parcels. As a result, there have been some spectacular price increases, particularly in the virtual equivalents of Vatican City, Macao, and Monaco.
Why do people pay such high prices for digital real estate? Because it’s in short supply! There are a limited number of tiles available. While the majority of virtual tiles will not be built out (that is, converted into virtual buildings or resource-generating assets), they will still determine who gets to live in Next Earth’s metaverse and participate in its activities.
When Purchasing NFTs, What Should You Look For?
When it comes to non-fungible tokens, it’s critical to understand how they compete with their traditional counterparts, such as real estate and gaming, and whether they have what it takes to succeed.
Despite the country’s current housing shortage and rapidly appreciating assets such as urban apartments, real estate remains one of the most popular ways for people to invest. Why? Real estate has high fixed costs but low marginal costs, which means that when a property is renovated or expanded, the expenses do not rise as much as in other industries.
Users want self-custody of assets in the digital realm, and claim stake in something they’re interested in, whether it’s their hometown or a famous monument, so they own real estate in the virtual metaverse for other reasons.
Linden Lab, the developer of Second Life, became an unlikely success story after capitalizing on technological advances to create a more engaging virtual world through avatars.
Today, projects like Next Earth are taking the concept of virtual land to the next level with NFTs, allowing users for the first time to truly own virtual property on a replica of Earth.