Key Highlights:
- Back in 2021-2022, the Metaverse land prices surged.
- The hype was created by the involvement of celebrities within the NFT space.
- Weak utility and many other reasons made it difficult for these metaverse lands to sustain.
The NFTs exploded back in 2021 as they turned digital images into huge money making opportunities. Bored Ape Yacht Club sold for about $1 billion worth of NFTs, and then there was CryptoPunks which was sold for millions at auction houses like Sotheby’s. Celebrities like Snoop Dogg and Eminem were extremely active within this space and even bought these well-known NFT art pieces.
OpenSea, which was the main NFT marketplace, reached $3.4 billion in monthly sales by January 2022. NFTs were not just art, but they were actually proof of owning something that was completely unique that too on the blockchain.
At the same time, the metaverse also gained a huge attention towards itself after Facebook became Meta in October 2021. Platforms like Decentraland, The Sandbox, and Somnium Space would let users own virtual land as NFTs. This is exactly when virtual real estate prices sky-rocketed, MANA token jumped by 4,000% and one plot sold for $2.4 million. All of this activity on the blockchain made digital worlds feel real and valuable.
What Is Metaverse and Metaverse Real Estate NFT?
The metaverse is nothing but a network of connected virtual worlds that use VR/AR, blockchain and social features. For better understanding, it is more like a combination of Roblox and crypto, where digital economies run on tokens.
Metaverse real estate NFTs are virtual land pieces on blockchains like Ethereum or Polygon, which provide unique digital assets proving ownership. The best example here is Decentraland.
Decentraland is a virtual world that is built on the Ethereum blockchain. On this platform, users can easily buy, sell, and build on digital land. Each piece of land is an NFT and it is called LAND token. When this token is bought or a piece of land is bought, proof of ownership is provided.
In Decentraland, the user can create 3D spaces like buildings, games, or art galleries. Users can also host events such as concerts and meetups that are virtual. Users can also trade land items by using the platform’s cryptocurrency, which is MANA.
Basically, it is a city that is fully digital and here users can own property, earn from it and interact with others. The space actually combines Minecraft, Second Life and crypto ownership, all in one.
The Boom: What Made Them So Special?
Metaverse land boomed in late 2021 because it mixed hype, scarcity and easy speculation with strong on-chain activity. Then there was celebrity influence due to which adoption of NFTs increased within the space. Snoop Dogg’s Sandbox project saw a fan pay $450,000 to buy virtual land that was right next to Snoop’s property. This move actually gathered a great amount of attention.
At the same time, brands and gamers rushed in and started buying lands left and right. This pushed the demand as the plots available in this virtual world were limited. The numbers confirm this boom.
The Sandbox recorded 65,000 land transactions which were worth $350 million in 2021, while Decentraland logged 21,000 deals which were worth $110 million. Average land prices exploded from about $100 in January 2021 to $15,000 by December.
After the Sandbox Alpha launch, around 8,000 lands sold every month between November 2021 and January 2022, with prices rising from 3.5 ETH (~$13,000) to over 5 ETH (more than $18,000). Along with hype, utility promises and surging transaction data marked a clear boom phase.
The Crash: Why Did They Fail?
During the boom, metaverse land was selling for more than what people were paying for real homes. Platforms like Decentraland and The Sandbox attracted brands, speculators and crypto influencers who believed that virtual lands would be the next big thing. At the time, some plots sold for more than $200,000 and hype deals like the one listed above (fan buying Sandbox property next to Snoop Dogg) made headlines.
However, by 2022, the bubble burst. Decentraland’s LAND prices fell by about 98%. During the same time, the NFT trading activity also took a hit, NFT marketplace like OpenSea trading volumes also went down by 97% from January 2022 highs.
Several issues caused the crash. First was definitely the overhype and weak delivery. Metaverse worlds were slow, they were buggy and they were mostly empty towards the end of the boom. There were only 2,000 – 5,000 daily users when compared to Roblox’s 70 million users.
Second, the 2022 crypto bear market made things ever worse for this space. As Bitcoin prices fell and major failures like FTX shook the confidence, speculative capital dried up.
Third, most land had little utility, rent yields were minimal, events were not able to retain users and many of the plots sat there unused. Data from DappRadar also shows how daily activity of the users dropped by 90% after 2022.
According to an analysis by Clifford Chance, artificial scarcity was created for no reason. Virtual land can be created at near-zero cost, this thought process was something that made long-term value fragile. The prices of these lands were closely tied to the crypto market. During 2022, the market faced a great downturn, and as the prices of the lands were closely tied to the crypto market, users understood that the prices of these lands were also volatile.
Then there was technological limitation where today’s hardware, networks, and computing power are not advanced enough to support large, immersive and seamless metaverse worlds at scale. Also, there are uncertain legal rights, where NFT ownership depended entirely on platform terms. Together, these flaws made virtual land far less “real” than what investors had expected.
Final Thoughts
From all of this, it can be deduced that the metaverse real estate boom was a result of hype but the crash revealed that without real users, strong tech and clear utility, virtual land cannot sustain real value.
Also Read: Music, Movies, & Art as NFTs: How Artists Are Using Crypto
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