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18 Feb, 2022 10:09

Digital Wild West: How people get rich on virtual NFT land and valuables

When very real millions are being shelled out for land inside a video game, you know this NFT thing is more than a fleeting fad
Digital Wild West: How people get rich on virtual NFT land and valuables

In this era of high-flying real estate, a parcel of land selling for $2.48 million isn’t international news. When that land doesn’t physically exist in any manner outside the digital world, it’s a historic and potentially market-altering sale. 

The video game ‘Axie Infinity’ set a record in the new world of NFT gaming late last year, when an “extremely rare” plot of in-game land sold for $2.48 million. The sale rocked the blockchain world and opened the door for similar sales for everything from other game maps to in-game features such as characters, weapons, costumes or vehicles.

NFT roots in art

The NFT movement caught fire in 2021, as art produced in the online world became something the crypto environment could stamp as original and sell as a commodity. Whether the art, photo or other sort of image is produced virtually or in the real world before being transformed into a digital format, it can become a Non-Fungible Token.

Even once minted as an NFT, that artwork can proliferate throughout the internet and end up just a simple screen capture away from your computer. However, a digital stamp, once christened by an accepted blockchain clearing house, attaches to the digital artwork permanently and marks the NFT as the original, official and unique item.

That NFT allows any buyer to own the original artwork, even if copies of it exist on hard drives and servers elsewhere. In physical art terms, there might be a million posters of Van Gogh’s Starry Night on the walls of dorm rooms around the world, but the original hangs at the MOMA in Manhattan. If the painting was an NFT, it would contain a code certifying its genuine article status.

In the last year, cryptocurrency NFT sales boomed throughout the art world. According to the ranking site CryptoSlam, the top five NFTs sold in January and February 2021 generated more than $366 million. Now, that buying craze is finding its way into the video game world.

Crypto Wild West

Marc Craig, a successful London artist and NFT art guru, sold more than 12 of his original pieces as NFTs in less than two weeks when the original craze hit. He discovered this crypto market through online news articles, realizing the potential to create individual digital art pieces stamped as exclusive entities. Over the following months, he became an expert in various crypto currencies and website marketplaces for NFT sales. Now, artists eager to learn the secrets of this young market come to him for help.

“Even a year into the NFT movement, it still feels like the Wild West,” Craig says. “Originally, artists were actively looking for ways to not only make money, but also to connect in the online world. The NFT art community is now growing and supportive.”

Craig often describes an NFT world of unusual synchronicity in which artists buy and sell NFTs from other creators. Meanwhile, collectors compete with each other bidding on hot NFT art everywhere from fringe sites to Sotheby’s auction events.

“It’s only natural that (the NFT art movement) would grow into other areas such as video games,” Craig adds. “If an image can be minted, there’s no reason in-game or metaverse items such as virtual real estate can’t become just as popular.”

Virtual economy, real bubble

In the case of the ‘Axie Infinity’ sale, the game that hosted the big sale originated with the Vietnamese developer, Sky Mavis. The company’s video games use the Ethereum cryptocurrency to fuel in-game economies that buy and sell gameplay elements while competing for additional crypto funds. While some critics describe the gameplay as a form of online gambling, the rush toward buying everything from virtual NFT land to in-game NFT guns continues. Daniel Yurcho, blockchain entrepreneur and NFT consultant, confirms that a virtual real estate boom is already underway with no signs of abating.

“We’ve certainly experienced an incredible couple of months since Facebook announced their name change to Meta,” Yurcho says. “Virtual land selling for millions of dollars is wildly speculative at this point.  It’s a gold rush of sorts, and companies don’t want to be left out in these metaverse experiences and opportunities.”

Yurcho confirms that each parcel is a unique NFT within a game. ‘Axie Infinity’, for example, only has 220 ‘genesis’ land plots (the kind that sold for $2.48 million). Still, unlike physical real estate, there are technically no limits as to how much virtual land (or virtual anything) game developers can create.

“It’s revolutionary to think about how virtual land can be utilized and monetized in the future,” he says. “With that said, prices have gotten out of touch with the reality of where many of these games stand at the moment. The in-game experiences, graphics and user bases of the current metaverse options certainly does not justify the current virtual real estate prices.”

Yurcho believes we’re seeing the early signs of what a completely virtual economy will look like because much of our current economy is already virtual and functions almost completely online.

“What we will end up seeing from metaverse experiences is that each game will have its own unique economy,” Yurcho adds. “You can already see the framework for in-game economies in games like ‘Grand Theft Auto’ and ‘Fortnite’. Players use virtual currencies unique to those games to purchase coveted in-game items.  When these in-game items or virtual land are also unique and scarce NFTs, it’ll add another layer to these virtual economies.”

Yurcho warns that in-game and in-sim items will be subject to the same kind of volatility we see in the NFT market when they are viewed as collectables: “I doubt prices will reach the levels seen in virtual real estate, as those prices reflect the potential for future profits from those land parcels. I don’t believe this to be a passing fad, but rather the emergence of new technology that has people very excited. Similar to the dotcom bubble, investors are eager to jump in with the potential of lucrative profits in the future. Prices will come back down to reality one way or another, but the underlying technology and user experiences are here to stay.”

Real-world connections

Over in the video game racing world, Helsinki-based crypto game developer Supremacy Games announced their new title, ‘Apex Kings’ – a racing title including virtual NFT cars that faithfully recreate their real-world counterparts. According to a statement by Supremacy Games CEO Jari Pauna, the ‘Apex Kings’ development team has a background in both cars and games. The company hopes players will find value in owning real brand cars in the play-to-earn format. The company confirmed it already secured the interest of numerous global car manufacturers and will announce deals during the spring of this year.

The company will release limited sets of NFT cars with the maximum number of virtual cars offered mirroring the number of vehicles produced in real life. The proposed goal is to give players a connection to the real world and benefit those players who know about cars, their value and their collectability. Car aficionados could have an edge spotting rare vehicles for low prices in the game before they increase in value in an NFT resale environment.

“Our aim is to create the definitive play and earn racing game for the metaverse,” Pauna says. “This is much more than your regular car game. ‘Apex Kings NFT Racing’ players can purchase, race and trade supercars, classic cars, rally cars and all varieties of regular cars. This creates a meaningful incentive to grow the player’s garage with interesting cars.”

In the same statement, Pauna and Supremacy Games revealed they are planning several NFT games and limited-edition NFT collections that are connected to global brands such as automakers and other corporations: “Working with huge global brands is exciting, and we can’t wait to announce all the titles we have in the pipeline,” Pauna adds. “We aim to create games where the NFT functionality gives true value to the players and fits perfectly with the brands.”

Fueled by greed

Rolf Illenberger, managing director of virtual reality developer VRdirect, believes these new economies will continue to blossom, fade and reemerge for years to come: “There is absolutely a new and sustainable economy emerging around the metaverse. Why do people buy big houses, fancy cars or invest in high-end fashion brands in the real world? Because at its core, every human has the desire to demonstrate their individuality and character, through these luxury items.”

Illenberger insists the virtual real estate world and NFT economies feed off the very real world of greed and the desire to possess. He believes a digital Rolex, ensured by NFT, will have the same status as a real-life Rolex.

“You are what you own,” he says. “You are what you wear. How can you stand out in the virtual world with theoretically everything easy to duplicate? Individual digital goods, those that help one stand out among the masses, have a significant shelf-life.”