Because some people seem confused what the point is -- the point is that right now there are a lot of blockchain/NFT/"metaverse" games that are making ridiculous bank by doing big presales of virtual plots of "land" on the basis that they are going to turn into big UGC-based platforms to rival Steam, Roblox, etc.
I conduct an analysis that looks back over the 30+ year history of MMO's and find that anytime we see true "land-like" assets in multiplayer online games, we also tend to see digital "housing crises" that have a lot of eerie parallels to the ones we see in the real world, and they play out in ways that closely match the predictions of Adam Smith, David Ricardo, and Henry George.
This is interesting for several reasons:
- It suggests that these big blockchain/NFT/"metaverse" games are headed for trouble long term as their user growth stagnates
- It gives us a place to learn lessons about policy interventions that might have something to say about the real world (Henry George's Land Value Tax was independently re-derived from first principles for use in EVE, and it ended the recession that plagued their early launch days)
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TL;DR -- virtual land presales are a great way to make a quick buck and leave your investors holding the bag, but they're not a great way to build a sustainable creator-driven UGC platform.
Making ridiculous bank by doing big presales of virtual plots of "land" on the basis that they are going to turn into big UGC-based platforms to rival Steam, Roblox, etc.
The key words being "presales" and "they are going to turn into". That's an investment.
Back in 2018, the SEC started bringing the hammer down on "initial coin offerings" to US persons. They apply the "Howey test" [1] to determine whether something is an investment.
First the SEC went after the total scammers. Then they sent letters to every ICO advertising in the US, asking them why they hadn't registered with the SEC for an initial public offering. Where's that prospectus and S1 filing? Many ICO promoters frantically returned the money. The SEC continues to go after the ones that didn't, as you can see on the SEC enforcement page.[2] About one ICO per month gets heavily penalized. Some promoters go to jail. Glenn Arcaro, who was behind BitConnect, has his sentencing hearing on Friday.[3]
We don't hear much about ICOs any more.
NFTs were invented mostly as an attempt to create "collectables" which were not regulated investments. Now, that's OK if you're buying something that already exists, like a Bored Ape Yacht Club NFT. But if you're buying a ticket for something that doesn't exist yet, like virtual land in a virtual world that isn't actually running yet, that's an investment.
So far, the SEC hasn't hammered any NFT operators. The SEC is complaint-driven. They wait until the complaints "I lost my life savings buying land in ..." start coming in.
Probably the first promoters who get in serious trouble will be the ones who overpromised what their nonexistent virtual world would do, and delivered nothing.
California Business and Professions Code 22507: "the ticket price of any event which is canceled, postponed, or rescheduled shall be fully refunded to the purchaser by the ticket seller upon request."[1] The seller thus has the financial risk if the event is cancelled. This is coming up a lot during the epidemic.
In the case of UO the game no longer exists commercially so any ownership on servers has vanished as well. You can run your own servers but the populations are generally so small now that there is an abundance of space.
I don't see that as a problem, I see that as an opportunity for other people to offer something equivalent/better at lower price.Both the real and virtual worlds are and could be respectively big.If people try to "merch" the virtual lands so be it, it's one more reason to think of something more affordable for the masses.
Second Life has this problem. There are "land barons".
These come in several types. The most useful ones are land developers. They buy new, empty regions from Linden Lab, which costs $375 plus $175/month, for a square 256x256 meters. There's no limit on growing the world this way. The landowner then subdivides, build some amenities, and resell. These areas are generally quite nice. It's a competitive market. The first person to own a million dollars worth of land in Second Life was Anishe Chung, who has a whole metaverse land empire.[1]
The less useful developers buy up vacant "mainland" land, on the continents created by Linden Lab, and try to rent it out or resell it at ever-higher prices. That crowd is a problem. You can see their FOR RENT signs all over. They seem to be able to make more money by not selling land than by selling it. This results in declining neighborhoods with vacant lots.
This works despite the substantial cost of merely holding land. There is a land tax, called "tier". That's what pays for the servers. Each 256x256 square of land needs about 1 CPU of a server. Beyond one such square, there is supposedly no quantity discount, although there are some "grandfathered" landowners with better rates. So it's not clear that a substantial land tax fixes this problem. If you can push up the price enough, you can still profit even with a big portfolio of unsold land.
(Most of the things the "metaverse" crowd is doing were done long ago in Second Life. Even overpriced non-copyable objects.)
1) Yes, but not connected to the land of others. You have to teleport.
2) It seems to be insufficient. Holding large amounts of vacant land for price maintenance works as a strategy, even though it involves high land taxes, what SL calls "tier".
But land is basically a commodity in SL and prices are basically similar everywhere.
No, it doesn't work that way. The world is not just a flat grid. It has terrain features. Land near nice waterfronts is expensive. Land far from water, roads, or railroads is very cheap. Prices vary by about 15:1, with some very nice areas up to 100:1.
I doubt there is a lot of speculation going on.
There is. This is much discussed on the Second Life forums.
In my experience it's mostly a venue for people to buy and decorate their own digital homes and avatars, and just hang out and talk. SecondLife is a giant archipelago of (infinite?) islands, you can either teleport or just fly between them, and many of them have various degrees of elaborate landscape architecture, shopping malls, and clubs. I just logged in last night after leaving that comment to check in on my old toon and everything is basically the same.
>What makes this all so strange is that digital land doesn't have to be like physical land, in fact you kinda have to go out of your way to do that on purpose.
The fact that the author finds this "strange" tells me that they don't understand that the artificial restrictions are designed to make money. They go on to propose "solutions" for a "problem" that is not a problem to those who are making money. In fact, their "solutions" ARE a "problem" to them making money, because it lowers the artificial value of the digital real estate. If the people making boatloads of money were unhappy with the current situation, it would change.
> The fact that the author finds this "strange" tells me that they don't understand that the artificial restrictions are designed to make money.
Author here! Of course I'm aware.
> it lowers the artificial value of the digital real estate. If the people making boatloads of money were unhappy with the current situation, it would change.
I'm making an argument about long term value versus short term value. Using digital real estate to make a bunch of short term cash? Excellent (if ethically suspect) business model.
Using digital real estate to make a long-lasting UGC platform where you expect players to create value for you? Seems undercooked.
Especially in video games, constraints are part of the gameplay. Without constraints it would be a sandbox without purpose. Now introduce money, and you've got yourself some pretty strong incentives to keep those constraints.
That isn't to say there aren't problems to solve, squatting and speculating may genuinely be bad for moneymaking, because if gameplay suffers, the game dies, and no-one makes money.
Not dissimilar from the real world, it's just that "quiting the game" isn't an option in the real world. Property speculating is ruining "the gameplay" for millions of people worldwide, but money is causing the incentives to be twisted so they don't patch the system.
I think that the artificial restrictions designed to make money are kind of the point. The digital realm is being constrained as if it were physical. These systems are being built on blockchain which is supposed to bring trustlessness and decentralized authority. Instead, virtual land is turning into land grabs the same way physical land does. The players profiting may be different, but the game is the same.
I know that FFXIV, at least, does have actual constraints on supply. Square-Enix is having trouble getting more server hardware at the moment, so they can't easily add more instances.
is that because they can't or are unwilling because of some expensive constraint. the average person can get ahold of a gpu for example if they are willing to pay a premium. I wonder if perhaps SE is stuck a little in the past as japan is with their fax machines. they could have moved to the cloud temporarily but im wondering if their app and scripts are not setup for that.
It's an interesting question. They literally stopped selling the video game due to a server shortage. I assume the money lost from lack of sales during the holiday season outweighs the cost of premium price on servers.
"Since July 2021, in order to accommodate the significant increase in the number of new players, we have been working towards building a new logical data center and adding new Worlds. However, due to the effects of the COVID-19 pandemic, we have not been able to make any additions due to suspension of semiconductor production at manufacturing factories, decrease in production quantities, as well as a shortage of raw materials. Although we are investing much more money than usual, our attempts to alleviate the ongoing congestion situation are being delayed due to the physical shortage of server equipment."
Every person on Earth, using their country's Unique Identifier credentials (like Social Security Number, National Insurance Number) to identify themselves to Facebook, will be entitled to receive their "forty acres" of Metaverse land, at a going rate of $1000 per acre, a value of $40,000. Just for signing in to claim it! Everyone will rush to create Facebook accounts and claim their land. And/or sell their land to others.
Meanwhile, Facebook has found a way to pretend that the "space" in their MMORPG is valuable, and will just be raking in the money, they'll need to hire extra guys with rakes.
Get people to accept a system of Universally Unique identifiers to facilitate population control as a DB query.
Like we don't already have issues enough with people trying to do that.
Libra or whatever was pulled after Facebook was put in the hot seat by Congress and regulators for non-proactive compliance with regulators. Turns out when your the 900 lbs gorilla in the room, the bar is still higher on expected due-diligence when unilaterally upending a regulated space that also happens to play into international policymaking and enforcement.
> Every person on Earth, using their country's Unique Identifier credentials
what about people in countries which don't issue "Unique Identifier credentials"; noting the limitations on the Social Security Number in the US, which was given as the first example?
I live in a country which has a large number of expats. I know multiple people who have 4 or more government issued "unique identifier credentials"
Note: I suspect goobergoo's post has a high level of sarcasm; my reply is a criticism of META not of the post.
EVE Online is referenced in this very article! They had a digital housing crisis and solved it with a digital land value tax (of sorts). That was a long time ago, though.
The current state of EVE sees "land" (read: turf) apportioned by violence, which actually is a very crude (and violent) approximation of Harberger taxes! You must constantly pay something to defend your territory, and that scales with how valuable it is, because others will make escalating bids -- denominated in violence -- to acquire your land from you. So you want to pay enough to defend it without paying so much its no longer worth holding. I'm working on a policy paper about digital real estate and I'm calling this method "Blood taxes" with EVE as the central example.
The computing power (proof of work) required to mine Bitcoin scales according to the current hashrate. Since the supply is fixed, the only way to grab a larger market share of the hashrate is to spend more money on more computing power.
Exactly. The poster's "Blood taxes" -- ownership consensus through escalating violence -- is reminiscent of PoW schemes which establish a distributed consensus through escalating hashrate.
both war and industry in eve are plain old fun for certain types of people. but at the corp/alliance level, the point of industry is to fuel the war machine and the point of war is to defend industry. this is broken up by some occasional massive (and surprisingly expensive in USD) fights that are just for fun.
It may be that war is best played out virtually if it means we can scratch that itch without so much collateral damage, but I’ve also heard it said war is the ultimate “proof of work”, which branch of humanity can afford to burn more resources? Anyway, your comment reminded me of a song I haven’t listened to in some time:
“is war as old as gravity?”
“are there animals that like peace, and animals that like war?”
“is making war an instinct we inherited from our hunting, or our farming ancestors?”
This is the part I don't get from "land rush" in digital worlds. Running out of land? Create new ones! Integer overflow? Build a new world! People can literally move across land/world just a click away, why the artificial scarcity?
Yes maybe it's forced by the backing company for monetary reason (scarcity = higher value), but there are many other companies that can build the same.
> there are many other companies that can build the same.
if facebook/meta grabs mindshare early, and fast enough, the network effect would mean that another startup cannot compete (without an extraordinary amount of luck or innovation i suppose)
IMO the problem with these is that you're not a landowner, you're a sharecropper, living on the "land" at someone else's tolerance and server budget.
I'd like to see self-hosted digital housing. You have your house on your domain, and you can allow people to visit. Your house can be as large or small as you want, looks how you want (you aren't building from a limited set of parts provided by someone else), and has the rules you want.
We already have URLs to facilitate travel between them. We (just!) need a standard protocol for presentation & clients, like HTTP is to the web.
I like to imagine that Musk might announce that his Mars colony will be a socialist society at some point - low-income workers like teachers, nurses, and garbage collectors are going to be needed there but they won't be able to pay to get there. The obvious solution will be a "tax"-based single-payer system where some extra people tag along with the wealthy ones who are funding everything. The reactions of his fan base would be genuinely hilarious.
This strikes me as simple if you kind of reverse it, namely: The ability to do things like "land speculation" in online spaces is very silly but also perhaps harmless.
When you see these patterns show up in real life, you should immediately begin thinking about how to kill them.
I've probably given Square Enix multiple hundreds of dollars at this point paying for a FF14 subscription during months I would have otherwise canceled it for the sole purpose of keeping the house I own.
To expand, "ownership" is a social contract. It's yours until someone else thinks it is worth their trouble to take it.
So there is no such thing as "really" owning something, it is only yours if sufficiently other people agree that it is possible to own and that you are that owner.
Part of paying property tax is an acknowledgement that your "ownership" is a social construct, and the tax is your contribution back to that society.
I wasn't getting that philosophical. I just think "ownership" isn't 100% consistent with property that can be confiscated by the government if you fail to make an annual payment.
on the other hand, I do feel like I "own" my bike. the government won't try hard to help me if someone steals it, but I don't need to pay some central authority in perpetuity to keep it. I guess you could argue that the trouble I go to to avoid theft is in some sense a "payment", but that becomes a bit abstract for me.
> "ownership" is a social contract. It's yours until someone else thinks it is worth their trouble to take it.
> So there is no such thing as "really" owning something, it is only yours if sufficiently other people agree that it is possible to own and that you are that owner.
This argument seems to have some trouble with the concept of theft.
> This argument seems to have some trouble with the concept of theft.
Quite the contrary. If people gang up on you and take your things there may be nothing you can do about it.
Some of your possessions have a “finders keepers” status. You drop a 20 on the floor, too bad.
Some things are worth it socially to protect (house titles and their transfer are elaborate to make them hard, though sadly not impossible, to steal).
Banks get a special level of protection from the authorities but they have to take various steps to reduce risk themselves. It’s worth it because of robbing banks were easy a lot of other things would stop working.
While “society” has decided that fighting bike thefts isn’t generally worth the cost.
(Just used these two as examples)
Theft and ownership are social constructs. A statute of limitations doesn’t mean a crime wasn’t necessarily committed, just that it no longer meets the cost/benefit threshold.
You're talking about what are called Agglomeration effects, which are highly dependent upon transportation methods (this is covered in the article).
If you can teleport any time to any place instantly for free, then where you are matters a lot less. If transportation has costs and limitations, where you are matters a lot more.
The location adjacent to a celebrity is always scarce (assuming the dimension is 3D). This give it value, because even though you (an entity) can visit the location for free easily, the owner of adjacent locations are "associated" with the celebrity and this "association" is what is worth money (of course, this value is in addition to the Agglomeration value imho).
Since the development of popular encoding formats for media and the subsequent creation of DRM it has been clear that digital "assets" will only ever be artificially scarce. The cost of copying 0's and 1's is the cost of owning any computer.
The only reason it would be scarce in the "metaverse" (ugh), would be if the stakeholders of that metaverse/whatever purposefully impose limits that digital computers don't even impose (like DRM).
Cool article, virtual worlds have a way of spontaneously create very interesting enviroments like housing markets an currencies. But I don't agree with much of it, the scarcity isn't (necessarily) artificial. If you don't have an empty space with arbitrary points of entry proximity to game objects determines scarcity (much like in real space, space isn' scarce, location is).
If it's a problem for that specific game the specific devs can think of mechanisms to fix it in a way that make sense for that context. I also don't see speculation as some evil for some unknown reason.
> a period of exciting growth suddenly grinds to a halt once scalpers corner precious digital property and keep it out of the hands of those who actually want to play the damn game
It’s a “crisis” in the context of the game, and it mirrors real life market dynamics.
I think if you eliminate the scarcity the valuable thing online will be topology - it will be expensive to be adjacent to a celebrity's land or some frequented area, but you and your friends can connect infinite amounts of space however you like.
Because some people seem confused what the point is -- the point is that right now there are a lot of blockchain/NFT/"metaverse" games that are making ridiculous bank by doing big presales of virtual plots of "land" on the basis that they are going to turn into big UGC-based platforms to rival Steam, Roblox, etc.
I conduct an analysis that looks back over the 30+ year history of MMO's and find that anytime we see true "land-like" assets in multiplayer online games, we also tend to see digital "housing crises" that have a lot of eerie parallels to the ones we see in the real world, and they play out in ways that closely match the predictions of Adam Smith, David Ricardo, and Henry George.
This is interesting for several reasons:
- It suggests that these big blockchain/NFT/"metaverse" games are headed for trouble long term as their user growth stagnates
- It gives us a place to learn lessons about policy interventions that might have something to say about the real world (Henry George's Land Value Tax was independently re-derived from first principles for use in EVE, and it ended the recession that plagued their early launch days)
---
TL;DR -- virtual land presales are a great way to make a quick buck and leave your investors holding the bag, but they're not a great way to build a sustainable creator-driven UGC platform.