NFTs Spark a Digital Land Grab in Videogames
BY MARCO
QUIROZ-GUTIERREZ Investors are pouring millions of dollars into land. But these lush fields and rolling hills exist only within video-games.
Just as physical land appeals to investors, digital real estate is luring both investors and dedicated gamers, said Craig Russo, the co-founder of Polyient Games, an investment fund and startup incubator focused on the intersection of electronic games and so-called nonfungible tokens. Those are digital identifiers that help verify the authenticity of an asset.
NFTs work on the block-chain, similar to cryptocurrencies such as bitcoin. The difference is that each bitcoin can be exchanged for another bitcoin while one NFT cannot be exchanged for an identical NFT. Just this month, a digital collage by the artist Beeple sold at Christie’s for $69.3 million.
The market for digital real estate was bolstered recently by a pandemic-fueled climb in gaming and excitement around cryptocurrencies. Many see NFT-enabled games as a boon for the multibillion-dollar videogame industry.
Gamers for years have spent big on gear—such as weapons, armor or tools to strengthen their characters— in games such as “Fortnite,” “Minecraft” and “World of Warcraft.” NFT-enabled games allow players to trade game assets for cryptocurrency, selling them for a coin that can be converted to dollars when they score something better or switch to a new adventure.
In some games, players can buy digital deeds for real estate in the form of an NFT, which proves the authenticity of a plot in a specific
game. The real estate will appreciate as more players join the game and scarce land is sold to other players who require the plots for certain tasks and missions. Players can rent out land to other gamers, charge others for using it or sell it—either within the game or on a third-party exchange such as Open-Sea. The transactions are usually backed by a game’s unique cryptocurrency, which can be converted to ethereum and then into U.S. dollars.
Digital land purchases have brought in millions of dollars. A group of people last month paid $1.6 million for Citadel of the Stars, a large kingdom in the unreleased fantasy roleplaying game “Mirandus,” said Eric Schiermeyer, a co-founder of Zynga and chief executive of “Mirandus” creator Gala Games. That purchase topped the $1.5 million paid for nine adjacent plots in the virtual pet universe “Axie Infinity.”
Last month, virtual world “The Sandbox” sold about $2.8 million of land in a pair of sales that have the company valuing its digital properties at about $37 million.
The land in this virtual world hosts different games within each plot and players can move from plot to plot, changing the game they play as they explore the world. Digital land owners can build games within their borders. Games within “The Sandbox” world will be playable for early users when the team releases the product in April.
“The first landowners and games in ‘The Sandbox,’ and that are playable, are also potentially the ones that have the highest chances of monetizing early on,” said Sébastien Borget, co-founder and chief operating officer.
Some real estate in the unreleased fantasy role-playing game ‘Mirandus’ has sold for seven figures. GALA GAMES
Mr. Russo of Polyient Games said his firm invested $800,000 in Citadel of the Sun, another kingdom in “Mirandus,” which is set to release a test version later this year. Polyient is considering charging gamers who traverse its kingdom as part of a mission— the digital equivalent of a toll road.
Several analysts said the long-term viability of NFT-enabled digital games requires attracting mainstream users who aren’t deeply versed in cryptocurrencies or NFTs.
Mr. Schiermeyer of Gala Games said two dedicated players in the Philippines are in the process of buying a house—in the real world— with their earnings from another NFT-enabled game by Gala, “Town Star.”
“I see a really interesting opportunity to provide a meaningful income for people around the world to tap into the games market,” he said.
