Is the Question 'Can Metaverse Land Be Scarce and Valuable?' an Oxymoron?
Introduction
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Great question, no?
From a conceptual standpoint land in the metaverse is infinite, just virtual representations of space existing on a computer screen. And now, with the nascent quantum computer era coming to fruition, virtual space may be seen as endless as the physical universe.
Hell, even the definition of the word 'virtual' in a computer sense gives metaverse land limitless qualities. 'Virtual' in computer terms is defined by Oxford Languages as: 1) "not physically existing as such but made by software to appear to do so"; and 2) "carried out, accessed, or stored by means of a computer, especially over a network" [Oxford Languages. Virtual definition. (Accessed July 10, 2022)].
"The adjective virtual is used to describe something that exists in essence but not in actuality... Although virtual can be used to describe anything that exists in effect, but not in fact, it is often used to describe things created in a computer or online world" [Vocabulary.com. Virtual. (Accessed July 10, 2022)].
So given the foregoing, metaverse land should be limited solely by the capacity of the human imagination - which is infinite. Accordingly, being an infinite commodity, all metaverse land should have no value as there is no scarcity present in the metaverse economy. However...
If this conceptually infinite commodity, metaverse land, is infinite and devoid of value, how come it commands huge prices in sales on the internet? For example, how did Yuga Labs (Bored Apes Yacht Club) sell 'Otherdeed' NFTs for $300 Million for land plots in its soon to be released metaverse?
Well friends, all of the foregoing has raised the broader question: "In the metaverse, a vast, near-endless digital space, how can digital land ever be scarce"? [Krion, A. Believe it or not, metaverse land can be scarce after all. (Accessed July 10, 2022)].
Let's dig in and answer this inquiry.
How Virtual Metaverse Land May Be Scarce and Valuable
Value Laws Governing Real World 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. 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.
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To somewhat try and simplify:
In the most basic terms, real-world land values are based on location and utility. A piece of real-world land is valuable based on how long it takes to get to other locations you want to go, which is why land in Tokyo and New York are among the most valuable in the world: They’re close to cool stuff. This geographical reality is inextricable from the scarcity of real-world land since each piece of land has an entirely unique geographical location relative to every other piece of land.
[Morris, D. Why on Earth Would Land Be Scarce in the Metaverse?. (Accessed July 10, 2022)].
This concept may be visually displayed by the following diagram which maps the extent of human modification of the Earth's surface:
Merging the 'Real World Value' Concepts with Metaverse Land Values
To address this, let's do so by way of example. Let's assume you need metaverse land to place your high-end fashion business. Remembering that value comes from purpose, you would rather locate your high end business in a 'Fifth Avenue' area rather than a slum area. Plus you would rather place your store near other high end fashion stores such as 'Gucci' like on the 21st Floor of Bloktopia [See, for clarification: Nagoda, K. BLOKTOPIA: A New Metaverse Project Built on the Polygon Network (A Deep Dive). (Accessed July 10, 2022)]. "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" [Krion, supra].
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.
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As For the Metaverse Elephant in the Room
Face it boys and girls, as much as we may hope, the metaverse simply is not real. At present, the metaverse is not styled as a seamless virtual reality internet representation as depicted in the movie Ready Player One.
Instead "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" [Id].
As such:
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.
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Metaverse Land Embracing 'Financial Skeuomorphism' and the Set-Up for an Inverse Rug Pull
Basically, "you could describe the entire idea of investing in metaverse land as a form of 'financial skeuomorphism'. Skeuomorphism refers to the tendency to design digital products in ways that mimic the physical world..." [Morris, supra].
... metaverse projects wedded to the valuations of their land plots may have swallowed a poison pill they can only expel directly into the faces of their investors. To prop up land values, developers may have to impose artificial limitations that harm the user experience, and eventually, the actual value of the system. Conversely, making a metaverse easier to move around or create content within would almost inherently harm land values. So far, this may simply be a case of founders moving so fast they haven’t entirely thought through the implications of their basic models. But the less generous interpretation is that they’re exploiting the skeuomorphic biases of buyers – using the metaphor of "land" in a way that implicitly exaggerates the inherent value of the virtual objects they’re selling and laughing all the way to the bank.
So given these propositions, an investor is left to decide whether or not metaverse land values are merely illusory. Well, why?
Because basically metaverse developers may subsequently intervene and pull a technical reverse rug pull. While presently touting metaverse land values in a skeuomorphic sense, at any time they could reverse course and simply inject additional land into the system. A reverse rug pull because instead of removing the platform to destroy value, the developer would be adding land thereby destroying value (removing scarcity).
In essence:
In the virtual world, the amount of land available is potentially unlimited. If all of the virtual plots of land on a platform are sold, but there’s still demand from buyers, there’s ultimately nothing to stop the developer creating as many more plots as they need. The big platforms currently have limits on the amount of land – enforcing "artificial scarcity," but there's no guarantee this will always be the case!
[Marr, B. How To Buy Land & Real Estate In The Metaverse. (Accessed July 10, 2022)].
Final Thoughts
One day, we may indeed end up with a single coherent metaverse, but even there, the rules binding it will likely work as a natural — or artificial — foundation for conceptualizing value, which will likely factor in scarcity in some form. Now, in a world of scattered metaverses that users cannot seamlessly bounce between, competition and, by extension, scarcity are very much part of the equation.
[Krion, supra].
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