Virtual Real Estate and Gaming See High Demand in the Metaverse
VYSYN Weekly Release #104: Virtual real estate prices record 879% growth in 30 months
Despite the downturn in the digital asset industry, some sectors of the Metaverse have continued to boom. Fresh data from Chainalysis reveals that virtual real estate and blockchain gaming have gained traction - despite the market-wide downtrend. These two industries are recording impressive figures and the dynamics behind their growth are getting bigger.
In this week's edition of the VYSYN Release, we will analyze the scope of the growth of these industries in the Metaverse. We will also highlight some factors behind their impressive performances in recent times.
Digital real estate sees massive growth
Real estate prices in the Metaverse have surged over the past few years, recording several impressive sales. In November 2021, a piece of virtual land was sold for $4.3 million on The Sandbox - the most expensive land sale on the Metaverse ever.
In a recent report, Chainalysis explained the growth of virtual real estate in comparison to the traditional real estate industry using a longer time horizon. In only three years, from September 2019 to March 2022, the prices of blockchain-based virtual real estate rose by 879%. In contrast, traditional real estate prices increased by 39%.
The blockchain analytics firm identified three factors behind the impressive performance of virtual real estate assets. First, it highlighted the utilities of virtual real estate in the Metaverse. These assets offer current and future earning opportunities to owners.
Virtual real estate utilities include embedded videos, images, interactive NFTs, play-to-earn game integrations, and digital learning. Some of the prospective earning opportunities are renting and leasing, free airdrops of virtual real estate NFTs, and future AR/VR integrations.
Providing access to private events and gated NFT communities has provided a major boost to the demand for virtual real estate. A typical example is the Bored Ape Yacht Club (BAYC) project that bundles its NFTs with entertainment and digital community. This tactic has resulted in over $310 million worth of Metaverse land sales for the project.
The second factor is pricing. The cost of Metaverse real estate is determined by the blockchain network upon which the project is launched. Metaverse lands on Solana have lower entry-level pricing compared to lands on Ethereum.
The reason for the big difference in pricing lies in the gas fees. Solana’s average gas fee of $0.00025 is a small fraction of Ethereum’s average gas fee of $5 to $50. Investors see more affordable deals on Solana. Recently, several Ethereum-based Metaverse projects are integrating with Polygon, a Layer-2 scalability platform. This Ethereum sidechain offers pricing and speed performance competitive to Solana.
The third factor is the users’ land holding time. Chainlaysis compared data related to asset holdings across 11 Ethereum-based real estate projects. The data revealed there was high speculation, with buyers trying to flip the assets. In 10 of the 11 projects, users held their virtual real estate NFTs for less than 25% of the time the project’s NFT collection was live. And in six out of the 11 projects, users held it for less than 15% of the time. Due to the high demand for virtual real estate NFTs, holders have a huge market to quickly sell their assets at a profit.
VR addition boosts blockchain gaming projects
Blockchain gaming is another industry recording impressive performance in the Metaverse, according to Chainalysis. These games saw a meteoric rise in their popularity during the COVID-19 lockdown. In its annual report, the Blockchain Games Alliance revealed that play-to-earn games generated over $2.2 billion in revenue in Q3 2021. On the top of the list was Axie Infinity, which gained global publicity when households in the Philippines quit their day jobs to focus on gaming. Wider user adoption has also led to the rise of smaller titles like Nakamoto Games.
Chainalysis noted that the key driver for growth in the blockchain gaming industry is the adoption of virtual reality (VR) technologies. Over the last four years, the VR-based gaming industry grew at a compounded annual growth rate of 28.5% - largely due to blockchain gaming adoption. Such an increase in immersive virtual experiences is a good indicator of the rising prospects of Metaverse.
Institutional capital pours into blockchain gaming projects
Interest in Metaverse-related projects, including blockchain games, has shown no signs of slowing down. The industry has seen the influx of several large institutional investors looking to establish their brands in the Metaverse. According to a Citi report, blockchain-based game companies raised a staggering $2.5 billion in funding last quarter, a 150% increase from Q1.
There are concerns among Web 3 investors about large tech firms centralizing the virtual worlds, removing interoperability, and reducing value. However, it seems that big tech is realizing that it is in their interest to make the Metaverse as accessible as possible.
Last month, several big tech companies, including Meta, Microsoft, and Epic Games formed the Metaverse Standards Forum (MSF). This group intends to create open standards for new technologies like Web 3, the Metaverse, AR, and VR. This will allow the mass adoption of these technologies. It will also allow free movement and interoperability between different virtual worlds. Meta has already announced that its Metaverse ventures will be interoperable with existing projects.
Rapid shifts are taking place in the digital asset industry, which will uncover new opportunities. The unique blend of gaming, blockchain technology, the Metaverse, and VR can unlock new and exciting consumer experiences. Analysts are optimistic about the future of blockchain gaming, virtual real estate, and the Metaverse - they could be the next big things for the digital asset industry.
About VYSYN Ventures
VYSYN Ventures is a longstanding venture capital company that specializes in funding and supporting disruptive startups in the blockchain and cryptocurrency industry. We have provided early-stage support to several projects that have grown USD market capitalizations of hundreds of millions and even billions. Our incubation program focuses on providing capital allocation, versatile marketing support, and tech assistance.