Defying the doubters, interest in the metaverse continues to soar, and investment is keeping pace. In January, leading investment bank, JP Morgan published a report titled “Opportunities in the Metaverse”, noting that annual spending on digital goods had reached $54bn globally. The report argued that the market was reaching an “inflection point” – soon, there would be no turning back.
No market segment has made this clearer than virtual real estate. According to the report, the average price of a parcel of virtual land had doubled across the second half of 2021 – and the pace of growth does not seem to be slowing. In late April, the wildly successful start-up behind Bored Ape Yacht Club began selling deeds for virtual land in its nascent metaverse project, Otherside. The sale raised more than $300m in just three hours.
Inevitably, mainstream reports of a “virtual real estate boom” have tended to trade in cynical incomprehension. After all, what could fully digital land possibly be worth to anyone but the die-hard crypto enthusiasts?
However, on closer inspection, the value of virtual real estate is evident. In this post, we’ll look at how the metaverse is the logical next step for the growing digitalisation of our everyday lives. As a result, the question of who owns this virtual space becomes vital – especially if we want the future of the web to avoid repeating the mistakes of the Web2 era.
Immersion in the metaverse
The excitement over the metaverse is easy to understand if you reflect on the current state of our online lives. Though work and leisure are now largely inseparable from the digital platforms and virtual worlds we navigate, the way we interact with the web has not evolved much over the past decade.
For all the wide variety of activities we can participate in online, they mostly share the same limiting interface. The term “screen time” captures this well. Whether exploring an expansive gaming world or sharing a presentation with our colleagues, we do so through a near-identical array of flat screens, using the same few gestures to swipe and click our way around.
Not only that, but our online activities also remain segregated from one another. We leave social media to start gaming and close a shopping app to open a streaming video service. Though many of our day-to-day activities can be accessed through the web, they remain fragmentary, separated from one another.
What the many competing definitions of the metaverse share is the sense that this is outdated – that the potential of the web is not being fully exploited. By coupling virtual and augmented reality tech (VR/AR) with an open and persistent online world, people will be able to immerse themselves in their digital activities truly. From entertainment to shopping, socialising to working, users will be able to traverse an integrated online space seamlessly.
In this context, the headlines of a virtual real estate boom make perfect sense. If we’re all going to spend much more time inhabiting fully realised and interactive virtual spaces, owning those spaces has real, self-evident value.
Of course, this also means that powerful companies will be looking to accrue as much of this value as possible. Much is at stake whether the metaverse is designed with their interests in mind.
Who owns the virtual world?
Despite their conflation in parts of the media, it’s important to stress that the metaverse and Web3 are not the same. While Roblox and Fortnite are presented as precursors to the metaverse, they are much closer in design and structure to the familiar walled gardens of Web2.
The owners of these platforms set the terms of use, and any digital assets you purchase are not yours to dispose of as you choose. So the noise that Fortnite’s publisher Epic Games is making about moving into the metaverse should be met with caution. A centralised metaverse risks replicating the many problems of the Web2 era at an even larger scale.
Blockchain-based metaverses such as Decentraland and The Sandbox forge a much different path. By tokenising the assets within their virtual worlds, they offer inhabitants true digital ownership, allowing them to buy and sell these assets on an open market. And this extends to the land that makes up the world itself.
Of course, this hasn’t stopped big brands, celebrities, and legacy institutions from getting involved. Even just a few highlights can give a sense of the range of those already buying in:
- Last September, the rapper Snoop Dogg built a parcel of land in The Sandbox that he intends to use for “virtual hangouts” and “exclusive concerts”.
- In January, Samsung launched a virtual version of its flagship New York store in Decentraland.
- In February, JP Morgan set up a virtual lounge in Decentraland’s Metajuku mall; not to be outdone, HSBC announced a partnership with The Sandbox in March.
The above purchases are far from an exhaustive list. Nevertheless, it indicates the potential of the metaverse to incorporate all the various web-based activities that are currently dispersed across different platforms and applications. Inhabitants can buy digital wearables in virtual stores, attend virtual concerts using NFTs as access tokens, and – perhaps most importantly – buy their own virtual real estate to build on as they wish.
Virtual real estate and the ownership economy
It is this possibility that makes the decentralisation of the metaverse space so important. A blockchain-based metaverse would give users true ownership of their digital assets. It would also ensure that these assets are verifiably scarce and can therefore accrue value as demand grows.
It becomes particularly important for virtual real estate. Not only is the value of digital land dependent on its scarcity, but it also gains value through its use. For example, a bustling city centre location is more valuable than undeveloped land far from any amenities. The same would very likely apply in the metaverse. A plot of land in a busy location, or one that hosts compelling virtual activities and draws many users, would see its market value grow.
This has major implications for what is being referred to as the “ownership economy”. Presently, online activities predominantly generate value for the owners of the highly centralised platforms that dominate the web. Sharing content and interacting with your friends enriches Meta or Google; playing games or building virtual worlds is a source of revenue for Epic Games or Roblox.
The ownership economy represents a radical shift away from this dominant model. At its core is the belief that you should be able to benefit from the value your activities produce online directly. The tokenisation of virtual real estate is one way to make this a reality. Virtual real estate represents the intersection between investment and enjoyment that the decentralised metaverse offers, reversing a situation in which people produced, engaged, and interacted without any stake in the virtual spaces they inhabited.
But the prospect of investing and earning may be less important for many than the more fundamental question of control. Owning your own parcel of metaverse land gives you the freedom to use it as you choose. And whether you’re building a virtual clubhouse or social venue or you just want a place to show off your NFT collection, you can rest easy that no centralised authority can unilaterally take it away from you.
Building a truly decentralised metaverse
This vision of a fully decentralised and blockchain-based metaverse has yet to reach fruition. There are several major issues facing the existing blockchain-based metaverses such as Decentraland and The Sandbox. And if these difficulties cannot be solved in a decentralised way, the risk of the metaverse being overtaken by a new set of walled gardens will be high.
The three core issues that existing metaverse platforms have failed to solve are:
- Interoperability. At present, moving digital assets between different metaverses is not widely supported, which will increase the risks of centralisation as users get locked into a single platform.
- Scalability. The Bored Ape land sale in early May brought Ethereum to a standstill due to its widely acknowledged throughput issues. As user numbers increase, the underlying blockchain will need to be able to handle huge numbers of transactions without bottlenecking.
- Compute. To fulfil its ambitions of making the web immersive and persistent while accommodating millions of users, the metaverse will require enormous amounts of computing power.
The Cudos network is aiming to power the metaverse by offering an integrated, sustainable, and fully decentralised solution to these issues. The Cudos network is highly scalable and interoperable, with a number of inter-chain bridges currently implemented and more in the pipeline.
Most importantly, the forthcoming launch of Cudo Compute will offer a revolutionary solution to the unprecedented computational demands of the metaverse. By providing a decentralised source of cloud computing, Cudo Compute will not only tackle the environmental issues of the centralised cloud industry but also avoid the frequent outages that have beset the web in recent years.
Help Cudos to build a decentralised future
The Cudos mainnet launch is imminent, marking a major step toward realising our ambitious goals. If you’d like to support us, why not sign up for our ambassador programme and earn up to $2000 per month in Cudos?
We have also recently launched the alpha phase of Cudo Compute, and are looking to develop a better understanding of what our users need. Take our survey today to help us build a sustainable future for the web!
About Cudos
Cudos is powering the metaverse bringing together DeFi, NFTs, and gaming experiences to realise the vision of a decentralised Web3, enabling all users to benefit from the growth of the network. We’re an interoperable, open platform launchpad that will provide the infrastructure required to meet the 1000x higher computing needs for the creation of fully immersive, gamified digital realities. Cudos is a Layer 1 blockchain and Layer 2 community-governed compute network, designed to ensure decentralised, permissionless access to high-performance computing at scale. Our native utility token CUDOS is the lifeblood of our network and offers an attractive annual yield and liquidity for stakers and holders.
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