MIC MANN: Virtual land, the new gold rush

In two record-shattering transactions at the end of 2021 a plot of virtual land in Axie Infinity, an animated, metaverse play-to-earn blockchain game, was sold for $2.5m. This came a few days after an estate of 116 virtual land parcels fetched $3.2m in the Decentraland metaverse. Also last December, multinational Softbank invested $92m in The Sandbox, another virtual reality platform. While these terms may seem foreign to traditional investors, the sheer magnitude of these transactions should be a calling card to take note.

In an interview with CNBC, Ark Invest CEO and chief information officer Cathy Wood described the metaverse as “the next trillion-dollar marketplace”. For those not familiar with the realm, the metaverse is a network of always-on virtual spaces that enable users to interact with others in carefully crafted synthetic environments. The term is a portmanteau of “meta”, meaning transcendent, and “verse”, from universe. This persistent reality is now integrated with blockchain technology that allows for digital ownership of virtual assets ... and this is the playground for a new generation of investors.

While a few years back this space was dominated by tech-savvy cyber elites, mainstream backers have now entered the fray. In October 2021 Facebook announced its corporate name change to Meta to signal an increasing focus on the sector. These environments have surged in popularity in 2021 as the pandemic caused people to spend more time online, with an estimated 100-million users worldwide engaging with these platforms. Virtual land is now attracting the attention of deep-pocketed venture capitalists and established banking houses alike.

The virtual space is welcoming traditional investors with open arms and inching closer to legitimisation every day. In the Decentraland metaverse users can buy land, visit buildings, walk around and meet people as avatars in a shared live experience. As in other metaverses, land and other items such as art pieces or fashion items are sold in the form of nonfungible tokens (NFTs), a kind of crypto asset. Investors can buy land using Decentraland’s cryptocurrency, mana. The Grayscale Decentraland Trust has been set up to enable investors to gain exposure to mana in the form of a security, while avoiding the challenges of buying, storing, and safekeeping the cryptocurrency directly. The trust is supported by a network of trusted service providers with legal counsel and audited financials.

In what is expected to be the next step in their corporate duel, Mark Zuckerberg’s archrivals, the billionaire Winklevoss twins, plan to dive deep into the metaverse after recently completing a $400m funding round for the next venture for their crypto exchange Gemini. Notably, the Commonwealth Bank of Australia, which partnered with the initiative to launch the first crypto trading services offered by a big four Australian bank, also backed the round. The twins explained that the company is embracing a decentralised path with plans to develop Gemini experiences across multiple metaverses. Their portfolio is held by the Gemini Frontier Fund.

The Sandbox, a Hong Kong-based gaming platform that allows users to build a virtual world using NFTs, has raised $92m from investors led by SoftBank’s Vision Fund 2. This comes just more than a year after its last round, as the company saw fast growth in monthly active users and crossed $144m in transaction volume. Majority-owned by blockchain gaming developer Animoca Brands, The Sandbox has announced multiple partnerships with brands and celebrities, including rapper Snoop Dogg, who will create a digital replica of his mansion in the Sandbox’s metaverse. Three estates surrounding Snoop Dogg recently sold for $450,000. Adidas has described the metaverse as a “world of limitless possibilities”.

Seoul will soon be the first city government to join the metaverse. The South Korean capital announced a plan to make a variety of public services and cultural events available in the metaverse, scheduled for completion by the end of 2022. If the plan is successful Seoul residents will be able to visit a virtual city hall to do everything from touring a historic site to filing a civil complaint by donning virtual reality goggles.

Back home Africarare, Africa’s first metaverse, recently concluded an agreement with artist Norman Catherine to develop a bespoke collection of 3D Avatars that players can invest in and inhabit to experience the platform in virtual reality. The platform will shortly be launching the $UBU token through which Ubuntuland can be bought, built on and traded. Ubuntuland will contain various virtual villages housing community hubs focused on various sectors such as art, finance, sport, health, tech, gaming, creativity, crypto and more. Ubuntuland wants to revolutionise virtual Africa and invite the global community to take part.

As with all emerging technologies and investment vehicles, it is essential to understand the hype cycle and where this landscape is sitting at the moment. On the upward curve, with mass innovation triggering inflated expectations, there is naturally a proliferation of new metaverses being conceived daily. Be cautious of investing in new virtual worlds that are still establishing themselves, or new digital currencies that don’t yet have gravitas. The delineation of solid powerhouses and new entrants is already visible.

If you haven’t dipped your toe in the water yet, read, watch, explore, learn and experiment. One of the most prolific features of this space is its openness to new participants and willingness to welcome all. There is an abundance of literature and learning resources available.

Nobody in this arena will dispute the volatility that is associated with the vehicle, but don’t let that hold you back from sharpening your sensitivity to what is undoubtedly the new frontier in investing. There are exponential margins waiting to be made, and the time to start is now.

• Mann is co-CEO at SingularityU SA and CEO of Africarare, Africa’s first metaverse.