by Scott Duke Kominers
Originally Published at: 16Z Crypto
People have been hanging out in digital spaces since the chat rooms and gaming MUDs (“multi-user dungeons”) of the early Internet. But these days, the digital world is taking on a growing share of our activities and time – and it’s becoming more physical than ever before.
A powerful recent example is the Zoom background, which made it possible to separate speakers in a video call from the physical rooms surrounding them. That effectively gave us the power to create private digital spaces. People quickly started making these spaces their own – personalizing them with a variety backgrounds of everything from Serengeti vistas to Studio Ghibli films.
And now metaverse platforms can give our digital spaces a sense of physical structure and geography, creating new ways to explore and interact within them. (I’ve attended several conferences hosted on the Gather.town platform, for example, in which the Zoom rooms used for presentation sessions are connected by an eight-bit digital landscape, where participants can quite literally run into each other.)
How should we think about what to build for the metaverse? The framework is so simple as to be almost tautological: People use digital spaces when they create opportunities not available in the “outside option” of the physical world. This means that the value of those spaces is determined by the activities people want to engage in there, and how the affordances of digital space support those activities.
Again, in the case of Zoom: you’re much more likely to organize a group video call for far-flung friends and relatives than for a chat with a neighbor (at least in non-pandemic times). Likewise, one is more likely to go to a metaverse concert with friends when either the friends or the musical artists (or both) are difficult to see in-person. And while many people will soon be having meetings in virtual conference room spaces, nobody is going to want to take long, boring “commutes” in the metaverse when they could just “teleport,” moving between digital locations instantly. Meanwhile, the metaverse will always be the go-to when it affords experiences that are not available in the physical world – like swashbuckling or exploring distant galaxies.
All of this is still in its early stages, making it difficult to predict precisely what will create the greatest and most lasting value. Nevertheless, it’s still possible to reason about what might drive value for users in our ever-expanding digital space.
Metaverse land and real estate
People have talked about the concept of “digital real estate” for decades. Historically, the phrase has referred to scarce space – often dedicated to advertising – on a given publisher’s website, like the New York Times homepage. Today, people have grown accustomed to centralized entities and attention aggregators – the likes of Facebook and Google – owning many of these spaces, which they rent out.
Digital real estate has always had value. What’s different about web3 is that digital asset paradigms like non-fungible tokens (NFTs) make it possible for individuals to uniquely own – not just rent – specific pieces of digital real estate and metaverse land and locations for private or shared use. Blockchains, a core web3 technology, enable this by offering decentralized, tamper-resistant, and publicly accessible records of who owns which digital assets.
Given that digital space is, in theory, infinitely expansible, skeptics might still question whether the concept of “owning” digital land or buildings even makes sense.
But metaverse platforms have their own forms of scarcity: There’s only so much space on the wall of a digital building, for example; and thanks to geography, there are only so many buildings close to an amenity like a virtual concert hall or a resource deposit like a Vespene geyser.
But at the same time, distance can be less of a factor thanks to the possibility of fast travel or teleportation. Thus, what matters for thinking about the value of a given piece of metaverse land and real estate is how people’s activities inform its use.
People (or rather, their avatars) might walk out of a virtual concert together and then meander down an adjacent virtual shopping strip. Just like in the physical world, then, the shops closest to the virtual conference hall will get the most “foot traffic.”
The Metajuku shopping district in Decentraland
This means local proximity can still matter even in virtual space.
Indeed, there’s a sense in which proximity to metaverse events and amenities might sometimes be more valuable than in the physical world: the audience for a virtual concert, for example, is global, which can in principle bring a lot of attention to whatever’s in the digital-building next door.
Yet virtual proximity matters far less at middle-to-long distances. In the physical world, there’s significant value to having a house in the suburbs because it affords more space while still making it possible to work in the city nearby. But when it’s possible to commute by teleporting, it doesn’t matter whether your virtual “home” is anywhere near your “work” in the underlying metaverse geography.
More broadly, in the metaverse, people are unlikely to engage in time-consuming long-distance travel when there’s the option of teleporting. The one exception is when long-distance travel is itself a valuable or entertaining activity – such as taking a virtual ferry where one can explore and play games while in transit.
All of this means that the value of metaverse land and real estate to users will likely depend on what’s locally proximate, rather than on the full geography of that metaverse. We can expect to see thriving shopping malls, micro-cities, or even entire virtual worlds that are kind of like islands in digital space – packed with activity that leads people to travel locally within them – yet separated by “distances” large enough that people will just teleport across them.
It doesn’t even matter whether these different activities are on the same platform. Just like we might use Zoom for meetings at work and Messenger or Snapchat to socialize, someone might work in Meta’s Horizon Workrooms; then hang out with friends in The Sandbox; and curate their own private art gallery in Voxels.
The metaverse platform market is unlikely to be winner-take-all. Moreover, even within a given platform, there are likely to be many successful activity clusters – and entrepreneurs can try to launch their own by developing novel amenities or resources that serve as hubs for others to build around. That’s the beauty of composability, a core feature of web3 that lets people build on and adapt existing frameworks to create new experiences.
Metaverse land zoning and planning
Building potential is limitless in the digital world, which means we might hope to do away with the frustration of zoning policies and other forms of structured geographic planning. But as with local proximity, planning can almost paradoxically matter more at times in the virtual world.
People might not want to set up shop next to something distracting – and the power of digital construction makes it possible to create spectacularly ugly eyesores. If a virtual space becomes unappealing, then users can move elsewhere instantaneously; this puts a particularly high burden on metaverse platform architects and builders to curate their spaces according to users’ preferences and their intended use cases.
For the same reason, high-level rules are often needed in order to prevent obscenity, harassment, and other usages that devalue the digital experience for participants. Given the importance of local proximity discussed above, guidelines that group complementary types of activities near each other – such as various forms of commercial activity – may also help maximize the user experience.
At the same time, the ability to create beyond the boundaries of classical designs (or even physics) is one of the biggest benefits of digital space. Some metaverse worlds’ principal benefit will be in the freedom they give users to build whatever they want.
One natural middle-ground is to focus just on guiding a space’s high-level layout and visual plan. That’s what the White Sands metaverse project has done with their recent collection of luxury villas: restricting people from altering their villas’ exteriors, while empowering creators to redesign the interiors. This mirrors regulations in many places in the physical world that try to maintain the external visual character of blocks and neighborhoods, while still allowing the spaces inside of buildings to be reconstructed and reorganized.
The importance of micro-level planning, especially, varies by context. Meticulous zoning may be essential in creating an upscale digital streetscape, but could be far less relevant in a game world where people battle orcs or play as goblins. And likewise some types of development restrictions we see in the physical world – such as height restrictions on roller coasters – may be completely unnecessary on metaverse land because digital space is not beholden to the conventional rules of earthbound physics.
But overall, there will be significant value in creating digital spaces that feel intuitive and consistent to users – which means some degree of planning will often be vital.
Digital assets and platform choice
In addition to the question of where digital and metaverse land is most valuable geographically, there’s also the question of which platforms are most valuable to build in. Here, classic chicken-and-egg dynamics of bootstrapping and building marketplaces come into play: It’s best to build for platforms with established user bases; yet at the same time, users are most likely to join a platform that already has a vibrant ecosystem.
This means digital land can be especially valuable to users when it sits atop a platform architecture that’s already popular – as with NFT Worlds, which runs on the Minecraft engine. Similarly, land in a metaverse that integrates many existing digital communities, as The Sandbox does, and as Otherside has suggested it may do, could also hold significant appeal for users and builders.
These sources of value depend, once again, on the intended user activities: Some metaverse platforms will be built to support digital versions of day-to-day tasks; others will be fantastical game worlds; and still others will simply invite us to explore and interact in an infinite expanse.
If a metaverse platform hopes to encourage users to customize their own spaces and potentially launch commercial ventures, then it needs to provide the tools to enable that. By contrast, if a digital space is just intended for use in business meetings or medical consultations, it might be more important to focus more on platform stability, security, and privacy.
Meanwhile, for the creators of digital assets – such as artists, game studios, and NFT communities – it can be especially valuable to build in ways that are interoperable and portable across platforms. One of the greatest benefits of web3 is the chance for users to bring the digital assets they own with them wherever they may go, accruing personal identity, and status, and other attributes. As this model becomes familiar to users, they are likely to demand it more and more.
Portable, decentralized identity applies to everything: Someone might want to take a weapon or talisman they use in a videogame world, for example, and feature it as a decoration in their virtual office. (This writer, for one, has adorned his real-world office with physical representations of his favorite virtual artifacts, such as a map of Hyrule and a Myst “linking book” – why should his digital office be any different?)
But in the metaverse, even buildings can potentially be carried from place to place. An individual who owns a digital building can create a space that’s truly “theirs” by filling it with their favorite art, furniture, or ephemera – and then take it with them as they travel across platforms. This is the thesis behind Far’s SOLIDS, for example: a framework for generative architecture that can be used flexibly across different metaverse environments. As a result, digital land in a particular metaverse may ultimately be able to capture value created in dozens of other metaverses.
The frameworks described here suggest that thinking about what drives the value of digital land for users is not as difficult as it might seem at first. What matters is how people will use the metaverse’s various spaces; how well-suited a digital space is to those activities; and how overall valuable those activities are to users.
The discussion here has focused on use cases that are intuitive to contemplate, and already available on various metaverse platforms. Yet many of the greatest opportunities will be those that we haven’t even envisioned yet, as digital spaces increasingly enable experiences that have no analog in the physical world. As the metaverse expands beyond the scope of what we can easily imagine, it’s important to remember that the sources of value for completely novel applications may be harder to recognize and interpret at first – even when the same underlying principles apply.
But there’s clearly more to the concept of digital and metaverse land than there was previously, as we co-create ever more innovative digital spaces around and for ourselves.
Acknowledgments: My thinking here reflects conversations with a number of metaverse builders and consumers, especially Blockchain Brown, Luke Crawford, Eoghan Crowley, Jad Esber, Far, Flashrekt, Adam Hollander, Bobby Hundreds, Steve Kaczynski, Valet Jones, Limp, NiftyPins, SAFA, and the Chain Runners Architects. Special thanks also to my editors Robert Hackett and Sonal Chokshi!
Disclosures: The author holds a White Sands “Parcel Pass” and advises a different Adam Hollander company (Hungry Wolves); he is also an advisor to Far’s company FINE Digital and holds several SOLIDS, including the one pictured above. He also holds a Modern Billboard lot and an Otherside “Otherdeed.” More broadly, the author is engaged in advising a variety of marketplace businesses and crypto projects, including around metaverse strategy.
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