An article to understand the real estate economics of Metaverse

“Rents in the real world are too damn high. George, let us not repeat the same mistakes in the digital world.”

The most recent new hot spot is a game featuring “digital real estate”. I am worried that these games will lead to a speculative bubble in digital land, causing heavy losses to players, developers and investors. If you are developing or investing in such a game or application and expect to ride a wave of rapid growth to reach a multi-billion dollar valuation, you’d better take a serious look at the fundamentals before hitting the brick wall.

Digital real estate is actually not a new phenomenon. History has always shown that when “digital land” is sufficiently similar to the economic attributes of physical land, we see digital land speculation opportunities, digital housing crisis, and even a full-scale digital economic recession. This means that once the scalpers monopolize the precious digital property and take it away from those who really want to play this damn game or carry out valuable production activities for the community, an exciting period of growth will suddenly occur. Stagnant.

Take Axie Infinity as an example:

An article to understand the real estate economics of Metaverse

Axie Infinity is “a Metaverse inspired by “Pokemon”. Anyone can earn tokens through proficient games and contributions to the ecosystem. Players can fight, collect, raise and build a land based on their pets. Kingdom”. The current state of the game is centered on buying and trading non-scarce virtual creatures called “Axies” in order to fight with them, but future plans will focus on buying and selling scarce digital lands. Although the game is still in the early stages of development, you can buy land now.

An article to understand the real estate economics of Metaverse

Let us completely put aside the fact that Axie Infinity is based on the blockchain and focus entirely on the perspective of real estate.

In Axie, land gives many in-game benefits, including the right to collect rent, which can be cashed in real world money.And unlike the virtual animals in the game, the supply of land is completely fixed. Most importantly, the future stage of the game will encourage people to build new interactive experiences, but this kind of activity will only be open to those who can get land.

I can tell you exactly what will happen here, because this is what happens often-speculators will buy all the land and hold it. If there is no cost to holding this scarce asset that everyone needs and wants, and this asset will appreciate predictably, then speculators will just sit there and watch the price soar, anyone who wants to use the land All have to pay. This will have a negative drag on the entire economy of the game, and speculators will get rich at the expense of others. All these discussions about emerging and spontaneous user creation based on the beautiful “digital country” will stagnate and be overwhelmed by the weight of rent-seeking parasites.

How bad this is for Axie depends largely on the decisions they make in the next few months. But I can say this-the more important “digital land” is to the game, the more serious the crisis will be.

We know this for two reasons-firstly, this is exactly what happens in the real world economy, and secondly, we have seen this situation many times before in the digital economy. Ultima Online, Final Fantasy XIV, and EVE Online are all outstanding examples of virtual worlds with complex internal economies. They all suffer from a shortage of digital land fueled by scalpers and speculation. Two of these games are still suffering from land shortages, but one of them was able to solve their crisis, thanks to a quick-thinking economist who learned from the book of 19th-century populist tycoon Henry George Learned experience.

Digital housing crisis in online games

Since the introduction of digital real estate, there has been a digital housing crisis, which stems from the shortage of digital land.

I remember playing “Ultima Online” in the 1990s. Although I had money to build a house, I couldn’t find a piece of free land to build a house anywhere. The originator of this online game is still in operation today, so I thought I would check the historical data on the housing shortage that I experienced as a teenager. I thought it would have been resolved long ago.

This is the first message of “Ultima Online housing shortage”.

An article to understand the real estate economics of Metaverse

Excerpted from a post on the UO official forum

Until 2018, the housing crisis continued, and as far as I know, it is still ongoing.

Even more shocking is that everything in this topic is similar to the talking points that people familiar with real-world housing crises should be familiar with. The policy proposed by TimSt-allowing the inside of the house to be larger than the outside-is the counterpart of the non-Euclidean video game, namely the increased density of partitions, in the real world by the policy proposed by the so-called YIMBY to abolish the obstacles to multi-family housing The restrictive zoning laws have led to more efficient land use and more housing. Uriah_Heep suggested that TimSt move to a less crowded place, and the answer was that no one would want to move to the rural equivalent of Nebraska in Ultima.

The strange thing about all this is that digital land does not have to be like physical land. In fact, you really have to do this deliberately.

Digital real estate and physical real estate

Real estate, whether digital or physical, is composed of two things-land and improvement. Some examples of improvements are the buildings you build, the crops and orchards you plant, and the landfills that you dump into the seabed to turn wetlands into dry land.

An article to understand the real estate economics of Metaverse

(Modified from the source, CC BY 2.0, author: Philip Taylor)

Improvement is a kind of capital, but land is not. The main difference in the physical world is that you can create more capital, but you cannot create more land. It is a free gift from nature. All problems stem from this and other attributes.

The creators of the virtual world are free to formulate the rules they want, but the more similar digital land starts to physical land, the more serious the damage of digital land speculation.

1. Digital land is not necessarily scarce

There are no laws of physics to prevent you from creating more digital land. Of course, platform holders can choose to maintain the scarcity of land, or any other assets. Wizards of the Coast can create a million black lotus tomorrow, but they have shown players that they won’t do it, and they don’t want to undermine the expectations of supporting their economy. Ultimately, the “scarcity” of digital land is based entirely on players’ trust in the company to maintain its policies.

Moreover, the blockchain does not provide any guarantee that unless the application passes the degraded blockchain test, more land cannot be created. If you can’t pass it (I haven’t seen a cryptocurrency-backed startup do this), your players are still relying on trust.

There are also server costs to consider-fully customizable land may not scale well. But this just makes the production cost of digital land expensive. In the real world, it is even impossible to produce more land (we really mean “location”).

Therefore, the scarcity of digital land is always an illusion-a deliberate choice made by platform holders. However, although it is voluntary, as long as digital scarcity is maintained, it will naturally lead to speculation. As the saying goes, “Buying land, this is the only thing they haven’t made more.”

2. Digital space does not have to comply with the rules of physics

In the real world, any real estate agent will tell you that there are three things that drive the value of real estate-“location, location, location”. But the value of location largely depends on the laws of physics. We take it for granted that the inside of the house will not be larger than the outside, and it is impossible for you to walk out of the front door of the mansion on Pluto and arrive at Times Square immediately. If you can, real estate in Times Square will be much cheaper.

In the digital realm, your world doesn’t even need to be Euclid’s. Portals and teleportation spells are so common, almost unexpected. Fast travel options, instantiation, and “pocket dimensions” that are greater inside than outside allow the digital world to bypass the constraints that make physical land so precious–but only if they choose to do so.

3. Digital land is not necessarily necessary

In the physical world, everything you do depends on the use of land. Whether it’s work, eating, sleeping, or shit, your right to do these things in a particular place depends on a certain landowner (or yourself if you are lucky) allowing you to enter.Just trying to sleep on a park bench can easily be disturbed by the police and even arrested.

This is not necessarily the case in the digital world. In many virtual worlds, it’s okay to be digitally “homeless” – there is rarely a huge cost without a digital roof in the game, and you can still stay healthy and productive without a virtual place, Even wealthy. If you want to hibernate, you just need to log out.

But for whatever reason, many virtual worlds choose to use “digital land” as a necessary production factor. This happens when any interesting thing you want to do requires access to a specific location, whether it is a population center for social interaction, a market for trading, a wilderness for gathering resources, or for exploration Dungeon. So the question is whether there is any exclusivity in access to this digital land. If all valuable locations are instances for every player who wants to use them, or can be used, then you will never have a shortage. But if one player occupies a piece of land, it means that another player cannot use it, and it becomes more like physical land.

Even the land that gives the optional “good” benefits in the game is enough to cause a land crisis, so you can imagine how bad the situation will become when the core game function is locked in the land ownership.

4. Land is the most critical condition

Given that digital land does not need to be like physical land, unless it is a deliberate choice, it is surprising that the way to see the shortage of digital land echoes what we see in the real world. Based on my understanding of the real world economy and my reading of the 30-year history of digital land speculation, I predict that there will be a shortage of digital land everywhere.

  • Scarce
  • Necessary and/or benefits
  • Gain value due to proximity to population centers and/or “public works”

In other words, the more land you have, the more serious your land crisis will be.

The most reliable signs of the land crisis are the permanent landlord class, rampant land speculation, sky-high prices and stark rent-seeking.

All of these will limit your user growth, which is proportional to the importance of land to your game. This has always been the only life-saving straw for most MMO games-houses are “nice things”, so although not getting a house is annoying, you can still have a lot of fun in other parts of the game. This gives MMO developers a lenient space, allowing them to continue to fool around and treat the symptoms of the problem without removing the root cause of the problem.

What I am more concerned about is that digital real estate is the main reason for the game, and land ownership is the basic game for doing everything. Especially when it comes to real money. Ultima and FFXIV have never solved their crisis, but they can maintain their strong momentum today, because it doesn’t matter if an optional part of the game completely rots. However, for EVE, there is a crisis, because the control of the land is the core of the whole experience. Games like Axie must learn the lessons of history before it is too late.

Ultima Online

Ultima Online (UO) was first launched in 1997. Although it is not the first online game, it is a sign that defines a genre. It is characterized by a housing system: accumulate enough resources for the blueprint of the house you want-from a small shed to a magnificent castle, and then find a piece of free land somewhere, and then put it down . Before long, almost every open space was used up.

If you don’t visit your house often, it will be automatically deleted to make room for others, but enterprising land speculators are not discouraged. Owning free plots with buildings-any building-is a good investment, because the price players are willing to pay for the land far exceeds the cost of occupying and holding the land.

So why don’t players move to a server with a small population, a server that has not been filled with houses? This is a good question-less popular servers have more free space; but they also have much fewer players, which makes the experience less interesting. In addition, at that time you can’t transfer your character across servers, so moving also means not only giving up all your friends, but also all your experience, skills, and equipment. Inhabited land was and is the most valuable land.

There is a parallel relationship with the real world-the total land value of the 48 contiguous areas (7.6 million square kilometers) of the United States is estimated to be approximately US$23 trillion. But the estimated value of all urban land (only 198,000 square kilometers) is approximately US$19 trillion. Yes, these are two different methods used by two different researchers in two different years, but the calculation results show that: urban land is where most of the value lies, because it is where people are.

If you don’t believe me, I have a vacant lot in Gerlach, Nevada to sell to you. But don’t worry, it’s only $236 per acre; on the other hand, as far as I know, a 2,300 square foot vacant lot in downtown San Francisco (about 5.3% of an acre) will cost you $2 million.

An article to understand the real estate economics of Metaverse

This is partly due to what economists call the agglomeration effect-living in the middle of a prosperous civilization, you can easily find butchers, bakers, and candlestick makers, and it is much more valuable than living alone in the middle of the forest, even if your The house is the same. This is true for the earth, and it is also true for Ultima.

Ultima Online has some other special circumstances that determine the shape of its housing crisis. Since I haven’t played for a long time, I interviewed veteran UO player Maeelyn Dean (some of you may know that he is the creator of Real Life Comics). I also contacted Raph Koster, the chief designer of UO, but he was a bit too busy when sorting them out, so as long as I could get a few words from him, I edited it myself.

Since UO is an early MMO, it was designed without modern hindsight, so it has suffered some influence. The lasting consequences come not only from major decisions, but also from trivial decisions. Mae tells that even in the ten years of the game’s life, every rock, bush and tree is still an indelible part of the map and cannot be moved because of love or money. This creates a lot of unnecessary blind spots, where people cannot settle their houses, making the available land extremely scarce. There is also no instantiation of dungeons, houses or cities, or any other fancy non-Euclidean tricks to make the supply of land greater than it appears.

In addition, at least in the early days, advanced transportation was limited. Mae reminded me that teleportation is strictly reserved for the mage (or the player who has the opportunity to obtain the scroll prepared by the mage). Even so, it requires investment in spell reagents and runes. The most important thing is that you can’t teleport to where you want to go as you like. You must first go to the desired place in person, and make at least one rune mark. There are also horses and boats, but these may be lost, leaving moon-gates. These are mysterious astrological portals whose destinations are related to the complex movement of the world’s twin planets and are far away from natural attractions.

The combination of three factors makes land particularly valuable in UO-first, land is scarce, because it is extremely rare for new land to be added to the world map. Second, land is useful because in a dangerous world, houses can provide a safe oasis, as well as a convenient alternative to bank storage, and opportunities for socializing and role-playing. Third, land is valuable, and this value increases according to its proximity to major cities, dungeons, or natural resource deposits.

Unfortunately, if you want to truly own a house, you have to pay speculators on the black market. Mae recalled that she spent $30 (equivalent to a two-month subscription fee) on eBay to buy an “absolute top” UO house, which greatly increased her gaming fun.

Next, let’s take a look at “Final Fantasy XIV”, which is plagued by many of the same problems.

Final Fantasy XIV

Search for “Final Fantasy XIV Housing Shortage” on Google, and you will find articles that have appeared many years ago.I haven’t played this game myself, so I interviewed senior FFXIV players Joe Ladakh and Sarawi Nelson and asked them to tell me the details. Any errors below are completely sorted out by myself:

FFXIV’s house can bring some “hard” benefits, but the premise is that you must first obtain special items. One is for you to use your house as a convenient latitude and longitude location, and the other is for you to access your “retainer” to store items. Ultimately, the “hard” benefits of these houses are quite weak (for example, you can use the saver outside of the housing system). Even the things you can really “store” in the house are for the house, and if you give up ownership, you will lose it with the house.

Therefore, the main attraction of housing lies in “soft” interests such as status, aesthetics, role-playing, and self-expression.The last point is particularly critical, because Joe told me that one of the core design pillars of FFXIV, perhaps more than most other MMO games, is about enabling and celebrating player self-expression.

There are “apartments” in FFXIV, but they are in low demand and are not the target of speculators (and they don’t seem to be used as much by players). The reason is that, unlike the real world, you don’t have a basic need for a pure roof; if you want to sleep, you just need to log out. In addition, the basic facilities are provided by a free public room. According to Joe, the public room is a fully equipped instance area where you can change your hair style, access your reservations/inventory, and customize your armor and clothes Exterior. They are basically single-person public toilets that can be used indefinitely. Apartments don’t have many features that you can’t get elsewhere, and they have a small burden on self-expression and artistry. The land for the house is where all the demand lies, but long-term supply constraints make speculation a common phenomenon.

In UO, any vacant land in the wilderness is a potential house plot, while in FFXIV, house land is strictly limited to a specific area independent of the main game, called the “house area”, which rises from the center of the city. Of specific cities. You can think of them as extra-dimensional suburbs. Each residential area has a different architectural style. The most popular is Shirogane, which has an obvious Asian theme. In the past, the houses of all players in a district had to conform to the local style (can you say “Digital Homeowners Association”? Nonetheless, the differences between districts caused changes in desirability, which was reflected in the black market prices of houses .

Mae didn’t like FFXIV’s housing plan because it pushed the housing to its corner, separated from the main game. She admits that the developer may do this to deal with the housing problem without worrying about its impact on other parts of the game, but she believes that this will eventually make the player’s house less “real”, which is similar to the role-playing in the main game. The connection with the daily plot is reduced, which makes the game experience worse.However, the biggest problem with FFXIV’s ultra-dimensional suburbs is that it achieves the worst results of the two worlds to some extent-a virtual bedroom area that does not interact with other parts of the game, and limited land supply, resulting in Rampant housing speculation, sky-high prices and the black market in land.

As Joe explained, each housing area is usually kept full. As soon as anything goes on the market, it will be snatched away within a few seconds. Players will camp for half a day or even longer, just for a chance to get a piece of land.

After the vacant house is cleared, it will enter the market. But this will not happen right away. Instead, a hidden, unknown timer starts to count. This may be many hours. While the timer is running, no one is allowed to buy this vacant lot. As you can imagine, this has led to all sorts of dirty tricks from start to finish, such as plug-ins and the proliferation of robots.

An article to understand the real estate economics of Metaverse

A group of zombie land speculators frantically built a new plot in FFXIV for several hours.

However-if you already own a house, you have a way to skip the line. Current homeowners can choose to move their house from one plot to another, even when the land timer is still counting down.

Joe recalled that he and his friends saved a lot of money, logged in at a suitable location, and then got up at 5 in the morning, just in time for the launch of a brand new housing area. They perfectly grasped the timing of the land grab, and with incredible luck, they succeeded in grabbing the middle-sized house on the seashore in Shirogane-everything else was robbed within 40 minutes, and only because of the server In a state of tension; on a larger server, all were snatched within 10 minutes. As he and his friends moved to other free companies or other games, they did the most basic maintenance inspections to keep the house from being deleted for a few years. During that time, Joe was able to get a small house.With the permission of his friends, he was able to abandon their medium-sized seaside house and relocate his small house to a vacant medium-sized plot within a few seconds. Since the size of your house is related to the size of the land, Joe has the opportunity to upgrade to a medium-sized house for free! He still needs to pay for the land, but he does not have to line up, nor does he have to pay for the upgrade of the house. In this way, FFXIV’s land policy clearly benefits existing landowners.

As Joe said, “This system is very bad for those who do not have housing, but it is actually possible for those who have housing.” He further told me that rich players will pass various The trick collected a large number of houses and pointed me to an article from Kotaku in 2017 that said two players monopolized the entire housing area. “This is still a common phenomenon.” He said.

Joe said that the developer is planning to change the system to a direct lottery, that is, you raise your interest in a certain piece of land, and then randomly select a winner from all interested people, but you don’t have to camp yourself and click to farm. This makes acquiring land less painful, but it does not help alleviate the fundamental problem of scarcity; the land scalpers will definitely find creative ways to increase their lottery shares.

Joe is one of the lucky ones, he got a good house. The scenery here is as follows:

An article to understand the real estate economics of Metaverse

Joe’s precious seaside property

Please pay attention to the beachfront location and fireworks show.

Both of these points have increased the value of his real estate, and they are both at the level of real estate textbooks.Water is a scarce natural feature, people bid to get close to it, and the firework show is a typical example of a non-competitive, non-exclusive public good. The former tends to increase the value of nearby properties, while the latter, according to the Henry-George theorem of Nobel Prize winner Joe Stiglitz, tends to increase the value of land and rents in the entire area.

An article to understand the real estate economics of Metaverse

If you look up “Public Good” on Wikipedia, you will see a picture of a firework show.

In the digital world, there is not much difference between “natural features” and “government projects”-the developer is the government, and the entire world is artificial. But I should point out that the waterfront area in particular has more than just aesthetic value, because you can use it for fishing! This adds value, whether you plan to fish here or not. This all adds value, because others still want to do it.

But wait, there is more!

In FFXIV, the house is not just a status symbol, nor is it just a place to park your things. There is a complete community of character players who take themselves very seriously and use housing as their craft setting. There is even an entire theater troupe and interior designer. But now, the only people allowed to participate in these self-expression artistic acts are players who can get housing.

The developers’ response to the years-long housing crisis was to slowly create more land and make minor adjustments to their policies. When the housing was first launched, there was no maintenance fee, and there was no self-degradable housing. They added degradation to clear vacant houses, but to this day, there are still no monetary maintenance fees to keep the real estate in use.

At the same time, a new housing area is expected to appear in the upcoming expansion in early 2022 as part of the restoration of Ishgardian. In several consecutive updates, there are server-wide goals and activities that allow players to unite to rebuild a “destroyed” residential area. Players complete tasks and provide crafting materials to rejuvenate a new area. The new district will have a huge central plaza and a performance stage, which Joe predicts will make it one of the most in-demand housing areas in history. But if there are no major policy changes, nothing can stop all the land from being swallowed up in a matter of minutes.

At the same time, Xalavier pointed out that developers are studying other things that can reduce housing price pressure-a feature called “Island Holy Land” will be launched soon. There are not many details, but some people compare it with “Animal Crossing Friends”, and the game producer Naoki Yoshida still keeps it secret.

You can think of it as a model that allows you to create your own space without having to meet the requirements set by others or competing with other players. You can take care of your animals and crops, expand the territory of your island, and let your men run free. Therefore, this is a mode that allows you to enjoy a slow life.

It sounds like the “island refuge” will be similar to each player’s independent housing, where there is enough land for everyone, but it is not clear to what extent you can share this experience with other players. If art players just want to have a space for creativity, then this can meet their needs and reduce the pressure on the housing area. This very wise decision is equivalent to directly creating infinite land. But for any activity that requires the participation of others, pressure still exists. The island refuge is also unlikely to satisfy players like Mae, who hope to have a more lasting and tangible connection, allowing players to actively participate in the “real” game world.

As we have seen from “Ultima Online” and “Final Fantasy XIV”, the “digital land” in your game at any time is 1) scarce in supply, 2) valuable or necessary, 3) close to dense population and economy You are preparing for the digital land bubble and speculative crisis to gain value from the activity area.

Now let’s take a look at the famous game that solved the crisis as early as 2003.

EVE Online

The economist Ramin Shokrizade explained the whole thing in his 2013 Gamasutra article, “How do I use EVE Online to predict the Great Recession”. Let me quote the opening paragraph long.

EVE Online’s real estate crisis

Back in 2003, when I helped CCP design the new economy of EVE Online, the biggest problem they designed was that the cost of purchasing and maintaining the factory that was the core of the player’s economy was too low. Since the game was released in the UK a day earlier than the US, when I was allowed to log in to the retail version of the game, all major factories were robbed. This forced me to go to the Minmatar space. Beta testers usually don’t pay much attention to these ships.

There, I managed to buy a key interstellar hub factory and set up a store. In the game, I produced the first batch of Mammoths (a large transport ship vital to trade) and the first batch of Ming Matt battleships. I really want to expand production, but within a few days after the retail launch, all the factories were bought by speculators and left unused. They charged each factory with a fee of US$300 to US$400, but I couldn’t know if they were genuine. Own factories.

A week after EVE was launched, I submitted a report to Reynir Hardarson, which explained how this weakness in the economic design threatened their games and how to solve this problem. My solution is to drastically increase the rents of these factories so that only those who are really active in operating the factories are willing to own them. My idea is to create a “hot potato” effect, that is, irrational people want these factories unless they use them to produce a lot of output.

Although it took several months to implement the repair, once it was implemented, it would function perfectly, allowing speculators to give up the shackles of the economy. During this period, a few players (including myself) who owned factories became very wealthy. Therefore, the effect of this speculation is to increase wealth stratification, reduce economic competition, increase consumer product prices, and crazy real estate inflation. “

Ramin suggested that the “government” of EVE should simply collect the cost of “use it or lose it” as an inevitable cost of holding factories, which have strong land-like attributes (scarcity, production needs). , Get value from location). This fee must be high enough to remove all profits from speculation. This is actually a kind of “land tax”, although your experience in other taxation may tell you that the particularity of land tax is that (all other interventions remain the same), they can be reduced by driving speculators out of the market. Trends in land prices.

I asked Laming this question in the comments, and I quickly understood that he independently re-derived Henry-George’s famous land value tax (or something close to it) from the first principles, even though he did not understand it in advance. There is no understanding of a particular philosophy. To be precise, I say this as a compliment to Laming.

If you are interested in learning more about this economic philosophy, which is called “Georgianism” or “Geographicalism”, I wrote a book review on the main article “Progress and Poverty” as a ten book review of the “Interstellar Code” Entries in the competition and won the first place.

Land appreciation tax-also known as “site value tax” or “location tax”-cannot be confused with property tax-“property” refers to land and buildings, so it is a tax on the sum of the values ​​of both . Land value tax is only a tax on land, which is a scarce basic resource that no one can make, but everyone needs it. It is not a flat tax based on how many acres of land you own, it is a tax on the value of the land. Therefore, a 2% land value tax will only cost you $4.72 per year on an acre of land in Gerlach, Nevada, but you will spend $39,800 on a 2,300 square foot parking lot in downtown San Francisco. /year.

So, when a sufficiently high land value tax takes effect, what are the natural incentives for landowners? Well, they’d better sell the land or build something useful on it. Forcing speculators to push the land to the market, and driving away the bids of those who are not interested in the actual use of the land, will reduce the price of the land. As the value decreases, the amount of land value added tax will also decrease. However, if speculators try to raise land prices again, taxes will rise proportionally, automatically eliminating the bubble.

But will the speculators pass on the land tax and increase prices further? Empirical evidence has always shown that it will not. We have an example of Lamin in the digital world, but it has also been well confirmed in the physical world. The latest evidence is a Danish paper published in 2017, detailing an amazing and well-controlled natural experiment . For a long time, both the Georges and non-Georgians believed that the land value tax was different from the sales tax and income tax, and there was no deadweight loss, and experimental evidence continued to confirm this.

EVE is much more complicated now, and I haven’t looked back to see if Lamin’s reforms have persisted-so to be clear, I am not going to claim that EVE has no land shortage since then. I just reiterated his statement on how to solve the special digital land shortage that the game suffered in 2003.

Remedy

If you want to try to use digital land value tax to solve your digital housing crisis, please contact me, I am happy to help you implement it, and introduce you to many outstanding economists who are firm on this issue. The general plan is easy to grasp, but the specific details largely depend on the specific implementation and social conditions of each game.

But we must always remember that digital land is not physical land, so we can often solve this problem through other means. It’s just to make sure that we solve the underlying problem instead of endlessly clumsily tackling the symptoms.

Don’t forget, you can directly create more land. You have a digital world that is not physically restricted, just print the land like a dollar bill. If your problem is caused by scarce resources, just make it less scarce and the problem will be solved. This solves the problem from the supply side. Of course, unless the maintenance of the land requires a lot of server costs, in this case, you need to ask yourself, as a developer, are you “selling” the land at a price significantly lower than its maintenance cost. In this case, players may be more willing to accept real-world land tax as a maintenance cost-after all, they have already paid real-world money in FFXIV for additional savers. But if you have the ability to create more land, create more.

However, if your game is designed in such a way that location is the value of the land, then this solution may not be enough. Even if you can print an unlimited number of Gerlach in Nevada, the number of San Francisco may still be limited.This is because what makes San Francisco San Francisco is something you cannot directly control-the size and density of your own player base.

Your other option is to make land less important, and solve this problem from the demand side. However, this can be a very crude solution, because it means cutting off features that your players may already value.

However, the bottom line is that if you absolutely insist on man-made scarce land, which is also necessary for production, then a land value tax is the best way.

Now let’s go back to games like Axie. These games need to be especially careful, because digital real estate is a more core activity, so the damage caused by the digital land crisis is even greater. I really hope that everyone can learn the necessary lessons so that no one loses a lot of money and burns the trust of an entire generation of players.

The pre-sale dilemma of grabbing land

If you pre-sell your game in a “digital land grab” mode, you must be very careful. It is easy for you to set a crisis for yourself, you must choose to extract plots from your loyal early players, or demote all new users to unregistered serfs, and stop your growth instantly. We have already seen signs of this tension in Axie (the text in bold is what I emphasize).

“In the next round, the price of [Land] Treasure Box will increase by 17.42%. Editor: Starting from August 12, 2020, we have decided to change this guidance. Pricing for the next few rounds will be decided at a later date to optimize the wide range The distribution of land, while considering market demand, is fair to current landowners and existing market conditions.”

In order to justify the pre-sale of land with real money, the land must have a “hard” utility in the game, otherwise it is just a digital gadget, and early adopters will feel deceived. If the amount of this valuable land is strictly fixed, and these scarcity clauses are a prominent part of marketing materials-“Get your land now before the land runs out!”-then the digital land crisis is not only Inevitable, and imminent.

If your game is successful at the start, at some point, all the land worth owning will be owned, and nothing worth owning can be offered to new players at a monopolistic price. Selling land in stages can prevent this from happening all at once, but it only delays the inevitable. In each gradual phase of the land monopoly, early krypton players will see an increase in the value of their investment because the increased demand for strictly restricted assets leads to a vertical rise in prices.However, the new participants will work as farmers. Depending on the importance of the land, new players may not even be able to play the game at all. Those who play will pay ever-increasing rent for this privilege.

This kind of marketing plan may be a good way to promote fast pre-orders, but for companies that are staring at multi-billion-dollar valuations, it is certainly not a coherent growth strategy. Why invest in a foreseeable project that is destined to stagnate?

I predict that many developers who have tasted the initial success will try different degrees of “land dilution” if they encounter a negative drag on user growth. They will carefully avoid changing the amount of land in order to keep their promise to keep the land scarce, but they will cleverly change the necessity or importance of land for playing games, trying to appease those who just want to buy it without annoying the nobles. This damn game of farmers.

It has not been mentioned that if you are paid in real money, you are actually offering automatic bounties for hackers and scammers to come up with new and interesting ways to steal your players’ accounts and assets, just Generally disrupt your economy. If you don’t believe me, I’m happy to introduce you to all my friends who have worked in Kongregate, Valve, major MMOs and other platforms with virtual economy. Each of these people has more than ten years of experience to deal with the endless cat and mouse game, and can tell you all kinds of horrible stories. If you don’t know what I’m talking about, you and your investors will definitely be abused.

But the real problem with digital land grabbing games is that they are more than one. In fact, there are many such games, and there will be more tomorrow.

Let us take “Earth 2” as an example. At least Axie Infinity is a real game, and Earth 2 seems to be nothing more than pure speculation. It is a simple virtual representation of the entire earth, divided into small pieces. Players can buy, hold and sell these plots. That’s it, that’s the whole thing. According to the mysterious trailer, the first stage is to collect underwear “Selling and Selling Land”. No one knows what the second stage is, but the third stage is clearly “profit!”

The land supply on Earth 2 may be fixed, but one Earth 3 and one Earth 4 are just around the corner of others. At the very least, you need to provide something more than just a map full of small number squares, you can plug in a small number flag, because everyone else is providing the same thing. This experience requires some other reason than just buying land and hoping to sell it to others. If your experience is easily cloned and there is nothing to do in your game, then any promising early growth numbers you see will not hold. Like Axie, to clear this obstacle, all you have to worry about is the imminent decline of the land, and it will be very happy to suddenly cancel your rainbow journey to the land of the unicorn.

Land speculation punishes builders

If you are committed to a virtual world and promise to provide scarce digital land, land is a necessary factor of production, and the value of land is proportional to its proximity to population centers or “public works”, then you may need to levy a digital land value tax. To ensure that only those who are trying to acquire the land intend to actually use it to do something worthwhile. Especially if you build the entire virtual world on the premise of creating a “distributed economy”, players will “build the Metaverse together” and all other good things. I’m sorry to say that, but a setting like Axie inspires people to do the exact opposite-grab the precious land, hold it forever, not build on it, and give creativity and production to those who really want to build cool things Sex tenants charge as much rent as possible. This “excess burden” causes real losses, makes certain experiences not worth the effort to build, and suppresses creative output.

The good news is that the digital land value tax is strictly calibrated at the laser level to readjust the incentives to make it really cool. If you want your players to make the most of your digital space, this is a good way. Taxes are imposed on land, but not on decoration and construction. If you have any questions about how to evaluate these things individually in the digital economy, I have done a lot of research on this issue and I am very happy to advise you.

Another question that needs to be considered is-why does the value of land rise, both in the real world and in the digital world? In other words-who is generating this value? The answer is community. In the real world, living in a safe and friendly community, with grocery stores on the corner, schools and libraries within walking distance, and good publicly funded roads and sewers, making the land near you more popular and valuable. Communities generate value, and in a misplaced economic system (including the economic system that governs the material world), this value is captured by private landlords and speculators. Therefore, it is worth noting that proponents of land value tax also called for a “citizen dividend” more than a hundred years ago, which is what we now call “universal basic income”. Given that many of these land grabbing games are based on the “play to earn” model, if you impose a digital land value tax on holdings, you can always distribute it as a real monetary reward. This is a Digital UBI. Since your group of players first created the value captured by land prices, you should capture land rents, otherwise these rents will flow to speculators who do nothing but hinder production activities. Then, you can equally share the value created by the community among the people who really created these values-your entire group of players.

Of course, real money payment opens up an additional world of compliance, danger, and risk, so I recommend anyone entering this field to be extra careful and do a lot of due diligence. For games like FFXIV, which use functions such as housing as currency exchanges to combat the digital inflation of the currency in the game, you can directly delete any virtual currency you collect with digital land tax, although this is not so interesting.

The land crisis that kills growth is predictable and unnecessary

Land shortages are not inevitable, they are a predictable result of economic principles that people understand. If everyone wants something, and it is not enough, you need it to participate in core activities, and it becomes more valuable as the surrounding population grows, then people will grab it until others pay Give them a stupid sum of money. Then they will start to collect rent, not from their contribution to production, but from the leverage they hold as the gatekeeper of the necessary resources. This is consistent with the economist Ricardo’s rent law. .

In the digital space, you can cut off by making more of what everyone wants (increasing supply), reducing its hard and soft benefits (reducing demand), or applying the cost of “use it or lose it” (levying rent) The “knee” of speculators solves this problem. All of this will have the effect of making your digital economy more productive, because it relieves the burden of speculation and self-weight losses.

Rents in the real world are too damn high.

George, let us not repeat the same mistakes in the digital economy.

Posted by:CoinYuppie,Reprinted with attribution to:https://coinyuppie.com/an-article-to-understand-the-real-estate-economics-of-metaverse/
Coinyuppie is an open information publishing platform, all information provided is not related to the views and positions of coinyuppie, and does not constitute any investment and financial advice. Users are expected to carefully screen and prevent risks.

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