Are Digital Land Plots Worth the Investment?
Written by
John Csiszar
Edited by
Chris Cluff
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A digital land plot is exactly what it sounds like: a space of land available for sale in the virtual world. Digital lands have rapidly evolved from spaces for gamers to places where people can explore new virtual worlds or even conduct business.
While the concept of a digital land plot might seem nebulous to some investors, the reality is that big money is pouring into the industry. In December 2021, someone paid $450,000 to be Snoop Dogg’s “neighbor” in a virtual world, and that’s not even close to top dollar. In November 2021, Republic Realm, a virtual real estate developer, bought a piece of land in The Sandbox metaverse for a record $4.3 million.
But are digital land plots worth the investment, or are they just the latest passing fad? Here are the arguments both for and against.
Digital Land Is a Good Investment
Regardless of what you may think of digital land as an asset class, the proof is in the numbers. According to some estimates, the metaverse is expected to grow into an $800 billion market as early as 2024, so clearly there’s potential for money to be made. Here are some reasons digital land may continue to increase in value.
The Asset Class Is Attracting a Flood of Money
For better or worse, money is flocking toward digital land. As prices have continued to rise, more and more money is flowing into the industry. As the technology develops, offerings are likely to become more and more attractive, extending their appeal to a wider audience. As most mainstream investors are still on the sidelines regarding digital land, momentum could spread rapidly, benefiting those who get in early.
Some Huge Corporate Names Are Backing the Metaverse
Billionaire Facebook co-founder Mark Zuckerberg believes so strongly in the future of the metaverse that the company changed its name to Meta Platforms. But that company is far from the only high-powered tech company to pour money into the metaverse. From NVIDIA to Microsoft and Adobe Systems to Alphabet (formerly Google), tech industry giants are making big bets on the future growth of the industry. As these companies tend to define the future direction of technology in general, it lends credence to the idea that digital land isn’t just a passing fad.
Digital Land Is Just the Latest Trend
The value of some digital land has skyrocketed seemingly overnight, and many investors aren’t even aware of what it is or how to buy it — or even what the potential gains or losses might be. This alone could be a sign that it’s an overhyped market that is destined to fall. But there are other reasons that investing in digital land might not have long-term investment potential. Here are just a few.
Digital Land Can Be Endlessly Created
The law of supply and demand is one of the reasons that physical land and properties are valuable. While new homes are always being built, there is a limited supply of land on which to put them. In high-demand areas like San Francisco, for example, the very geography of the area prevents additional homebuilding on a significant scale, which helps push pricing up. In the virtual world, however, there are no limitations whatsoever. Developers can create as many lands in as many places as they want, meaning that demand can never catch up with supply.
There’s Currently a Lack of Regulation and Security
When it comes to investing, digital land is truly the Wild West. There is no regulation over who can build virtual worlds or how they can be marketed or sold, leaving the area wide open for scams and manipulation. Cyber security is another issue.
What Type of Investor Is a Match for Digital Land Investing?
There’s no way to classify the digital land gold rush as anything but a speculation at this point. However, that doesn’t mean it’s not worth an investment. You’ll just have to be sure that you have a high risk tolerance and can afford to lose your entire investment.
Even more conservative investors can take a swing at digital land investing; but, if you fall into this category, you should limit your exposure to just a few percentage points of your portfolio. That way, you’ll still have exposure to the potential upside of digital land, but a losing investment won’t hurt your long-term financial goals much.
As with any investment, you should consult with your financial advisor and do your own research as to which digital land plots have more potential upside than others.
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