In 2021, as Facebook officially changed its name to Meta, the concept of the “metaverse” took the world by storm.Microsoft, Nvidia, Tencent, ByteDance and other technology giants have entered.
At the same time, a trend of “real estate speculation” has also begun to rise in the metaverse world, and even well-known singers JJ Lin and Snoop Dogg have also entered the metaverse. Some of the expensive Metaverse house prices are even higher than the price of a villa in Beijing.
Recently, the data of mainstream virtual real estate platforms have been “diving”, and the price of real estate in Metaverse has plummeted, making the public’s attention once again focused on the new and unfamiliar field of “real estate speculation” in Metaverse. In just one year, what kind of evolution has the “real estate speculation” of the Metaverse experienced? What underlying logic is reflected behind its plunge?
“Flip House”
In the second half of last year, Metaverse real estate players competed to enter the market and expanded rapidly. At present, a metaverse virtual real estate platform based on Decentraland, The Sandbox, Voxels, Somnium Space, NFT Worlds and SuperWorld has been formed.
As early as last September, the famous rapper Snoop Dogg had his own virtual property on the Sandbox platform. He claims to host private virtual concerts, parties, art gallery exhibitions and more there. Even Snoop Dogg has a digital replica of his California mansion there.
Image source: WeChat public account of “Sandbox Chinese Window”
At that time, affected by the celebrity effect, the land price around the virtual real estate of the star also rose sharply, and fans rushed to buy it. Someone spends $450,000 (equivalent to nearly 3 million yuan) at Sandbox just to be Snoop Dogg’s “neighbor”.
But stars are not the first “crab eaters”. Enterprises are the main force behind this batch of “real estate speculators” in the Metaverse.
In November last year, Republic Realm, a company specializing in investing in the development of virtual real estate and other digital assets, bought a piece of Sandbox property for about $4.3 million, breaking a single transaction record at the time. Subsequently, real estate tycoon Zheng Zhigang threw another $5 million to win the largest digital plot in Sandbox.
While companies and stars continue to enter the Metaverse to “take land”, more and more business scenarios and brand activities begin to be derived from the Metaverse.
Nike acquired virtual fashion startup RTFKT and partnered with Roblox to launch the Nikeland virtual experience; Adidas bought more than 140 virtual lands in Sandbox.
Image source: WeChat public account of “Sandbox Chinese Window”
In March of this year, Decentraland hosted the Metaverse Fashion Week, in which a number of fashion brands including Tommy Hilfiger and Elie Saab made their appearances. Sotheby’s, one of the world’s three largest auction houses, has also launched an online virtual gallery in Decentraland.
In fact, just like the official Weibo account of “Sandbox Chinese Window”: “The Sandbox is both a virtual real estate and an amusement park, fully implementing the concept of the Metaverse and establishing a continuous shared digital space where the world and The heroes collide with magical sparks.”
“The places where brands and advertisements gather in the metaverse are places of high value. This is also the consensus of many brand owners and business owners. They are also buying virtual real estate, hoping to build iconic sites in the universe through their own attributes. .” noted Andrew Kiguel, founder and CEO of Canadian-listed Tokens.com, one of the larger owners in the Decentraland metaverse.
“Plunge”
However, “the good times don’t last long”. In less than a year, the popularity of “real estate speculation” in the Metaverse plummeted, and it quickly entered a “cold winter”.
Not long ago, an analysis article by The Information pointed out that the once-hot metaverse virtual real estate is now on the verge of collapse. Although the volume of virtual land transactions soared in the month after Facebook changed its name to Meta in late October last year, the market soon began to cool sharply.
According to the latest report of the research institute WeMeta, based on the data on the overseas mainstream virtual real estate platforms, the average price of virtual real estate dropped from about US$17,000 per block in January this year to about US$2,500 per block in August, a drop of over 85%. . Meanwhile, weekly trading volume fell from a peak of $1 billion in November 2021 to around $157 million in August 2022.
In terms of the average transaction price, NFT Worlds reached its highest point of $44,000 on February 21 this year; Decentraland reached its highest point of $37,000 on November 29 last year; The Sandbox reached its highest point of $35,000 on January 10 this year. .
But from around May, the average transaction price of several companies began to drop significantly. This year, except for July 18, when the average transaction price of Decentraland exceeded $10,000, the average transaction price of other mainstream platforms was below $10,000.
Map of Decentraland (marked in blue for sale) Image source: Decentraland official website
Data from the WeMeta platform shows that in November last year, singer Lin Junjie purchased three virtual real estates in Decentraland for $123,000. The current value is about $16,000, representing a floating loss of 86.5%.
In addition to the plummeting prices, Lin Junjie’s popularity in these three plots is also “in the door.” According to the weekly traffic provided by the platform, only one of the three plots welcomed a visitor on August 9, and the remaining six days of the week were unattended.
JJ Lin’s land purchase record Image source: Decentraland official website
In fact, in addition to the sharp drop in virtual land prices, with the ebb of virtual real estate in the past year, a large number of players with a speculative mentality have also begun to withdraw, and the data of all mainstream metaverse platforms has dropped across the board.
Taking the average number of concurrent users as an example, before May this year, the average number of concurrent users in Decentraland was more than 1,200; the data on the NFT Worlds platform was also higher than 1,000, but since then, the data has dropped significantly to less than three digits.
In terms of market value, NFT Worlds reached a high of about $430 million on March 21, but by August 8, its market value was only $20 million, a drop of more than 95%.
“Disconnected”
The popularity of “real estate speculation” in the Metaverse is like a flash in the pan, especially since the plunge this year has caused more entrants to exit and more followers to stop.
Talking about the reasons for the collapse of Metaverse’s virtual real estate this year, some analysts pointed out that “it is mainly the collapse of global encrypted assets, and the virtual properties of Metaverse are closely linked to the encrypted market.”
In fact, in addition to the main factors such as the collapse of the so-called encrypted assets, the transfer of hot spots, and the departure of hot money, the collapse of virtual real estate prices reflects that the current development of the Metaverse is still in the early stage, commercialization and virtual real estate application scenarios are serious. Insufficient, the game experience based on virtual real estate development is not good.
The core of Metaverse’s “real estate speculation” lies in the value of the virtual space itself rather than the value of land parcels, which is based on the value of a new business model brought about by the industrialization of Metaverse. It is still necessary to wait for the metaverse technology to develop to a certain extent and realize industrialization before the virtual real estate can enter a more benign development track.
Image source: WeChat public account of “Sandbox Chinese Window”
In the opinion of Wang Dongwei, director of Zhongtai Capital, from the perspective of the project, the awareness of virtual land is too advanced, and it takes too long to land.
“The arrival of an era has one thing in common, that is, it will solve many life problems, or it is necessary to improve the efficiency of life or work. For example, telephones, computers,cell phone, Internet, mobile Internet, e-commerce, etc., each era has outstanding representatives. The metaverse does have a lot of room for imagination, but the speculations are basically pseudo-concepts. “
Further, from the perspective of the underlying logic, the so-called virtual real estate on the metaverse platform is essentially an NFT. NFT is a digital asset issued based on blockchain technology. Since its ownership of property rights and transaction flow are recorded and cannot be tampered with, each piece of real estate is “unique”. For example, in Decentraland, the platform has designed a total of 90,000 plots, and will not be added in the future to ensure the “scarcity” of land.
However, this “uniqueness” and “scarcity” are, in some cases, “out of touch” with the real economy. The voice of doubt has never ceased: “In the real world, real estate is valuable because land is a scarce resource. However, this scarcity does not necessarily apply to the metaverse. Because in these virtual worlds, you can build Unlimited properties.”
According to Hu Jiye, director of the Blockchain Financial Rule of Law Research Center at China University of Political Science and Law, the Metaverse is a simulation of real society, and it cannot exist without reality. “Previously, the Metaverse virtual real estate hype that was very popular abroad, especially in South Korea, has now plummeted by 90%. One of the important reasons is that the virtual real estate hype is completely divorced from the real economy and has become a concept and expected hype. Therefore, the development of the Metaverse must be There must be application scenarios that combine with the real economy.”