How much would you pay to be Snoop Dogg's neighbour?
Or rather, how much would you pay to be his neighbour?
This person decided that 71,000 SAND would be a fair price to rub fences with him in The Sandbox. At the time of purchase, that translated to roughly $450,000 USD. The value of 71,000 SAND today (Jan 12th)? $364,000
Digital Land: The Hype
This example is one of many - as investors continue to pour millions into purchasing digital land on platforms such as The Sandbox or Decentraland. One of the main arguments put forward by those buying digital land is that the virtual real estate world runs on the same principles as the real world. That is, properties purchased in 'high demand' areas will consequently have higher values. Scarcity means that there will only ever be a limited number of land plots, and those who are early will be able to grab them at a good price. They can then sell these properties months or years later as demand increases with decreasing supply.
The problem is, comparing digital real estate to real world real estate is like comparing apples to...tables.
There is no comparison. Let's break down some of the reasons touted as for why investing in digital land is a sound investment, and why (in my opinion) they are total junk.
Myth #1: Digital Land is Scarce
One of the main arguments put forward about why investing in virtual land is a sound investment is that there is only a finite amount of digital land to go around. While this argument works in the real world - we only have 1 habitable planet (so far), and the land on it is physically finite - it does not work in the digital world.
Yes, platforms such as Decentraland or The Sandbox may limit the amount of digital space available to purchase and thus create the illusion of scarcity. But, what about when Virtualandia, United States of Digital, or (insert clever name here) come around and offer virtual land on their platform? There is literally ZERO limit on how many companies can produce digital land.
For anyone currently arguing "Well what about Bitcoin? Any company can just come and do the same thing too!" - show me the coin that's knocked it off as crypto's primary digital gold. I'll wait...
Myth #2: Digital Land's Value Can Only Go Up Over Time
Looking back at our example of Snoop Dogg's neighbour (let's call him Nate) - one can see how the price volatility of the tokens used to pay for digital real estate can also be a major hurdle to virtual land ownership being a viable investment. If, for example, our friend Nate had decided to sell his plot of digital land 1 month later for the same price he paid for it (71,000 SAND), he would have lost (in $USD terms) $86,000 on his investment.
Sure, this can work the opposite. For all we know, SAND may have went up in that time period. In that case, Nate would have earned a profit, even if he sold it for the exact same amount of SAND. However, much like the scarcity debate, I just do not see any current digital land currency being special enough to have the staying power of a Bitcoin type crypto. There are just too many ways they can be replicated. Bitcoin, meanwhile, has proven that it can outlast any and all 'Bitcoin killers' and has reached a level where it cannot possibly crash to $0. There are too many players invested in its ecosphere and it has a staying power that platforms such as Decentraland and The Sandbox most likely never will.
Conclusion:
Undoubtedly, there have been many people who have made a profit and who continue to make a profit buying and selling digital land. However, at this time I believe for the vast majority of people, buying digital land is a highly expensive and easy way to lose money. Instead, I will continue to stack my sats, and if I'm proven wrong and virtual real estate really is here to stay - I'll have at least have a nice stack of digital gold to buy myself a little fixer upper in the United State of Digital.
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