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.”

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. [1]

[1] Scott Duke Kominers, 2022, Metaverse Land: What Makes Digital Real Estate Valuable

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.”

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. [1]

[1] Scott Duke Kominers, 2022, Metaverse Land: What Makes Digital Real Estate Valuable