I found the WORST thing money can buy: Virtual Real Estate for $200,000

25K views | Sep 1st, 2018 | , , and

I thought we’ve seen it all….but no, we may have just regressed slightly as a human race, because now…people are spending upwards of $200,000 to own a piece of 1100 square foot, virtual, digitalized real estate in the game Decentraland. Enjoy. Add me on Instagram: GPStephan

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Let me explain what Decentraland is. This is a virtual reality world where you can purchase land through the Ethereum blockchain, and have full control over the content of that land that you own. You then have the ability to keep all proceeds from the value that you generate from other users because of the land that you own.

Despite common sense, that isn’t stopping people from spending considerable amounts of money buying and developing virtual land, and so far that’s proved rather profitable for those that got in early. Known as Genesis City, only 90,000 plots of land will be sold. The most expensive plot of land sold, so far, for $200,000, near its Central Plaza, where people first arrive when they enter the game…and guess what, the previous owner only bought that land for only $13,000.

Now this isn’t the first time people are paying exorbitant amounts of money for virtual items, practically all video games now go with the freemium business model by offering the game for free, and once you’re already enjoying the experience, you can pay for upgrades and other features. It’s a really, really smart business move that’s taken over gaming and the way creators are building apps…but how far is too far?

Here’s the problem I see – on one hand, we have the utility value of what something is worth. In a game like Decentraland, this could be how many daily active users there are, how much actual income your land generates in real, usable, currency, and the overall user growth of the game. From there, we can determine what an appropriate ROI is for the land and how that land can be monetized. But where people get carried away is the “Greater Fool” perspective…it’s the thought process that I’m willing to pay whatever price I need to buy something, because I believe someone else will be willing to pay more than I did.

Don’t get me wrong, coming from both a business AND investment standpoint, with some common sense practicality mixed in for good measure, there’s nothing inherently WRONG with buying something within a game – we’ve all done it. If buying an item gives you an edge over someone else in terms of game play, it becomes an ADVANTAGE where that item increases your enjoyment within the game. At that point, you’re simply paying for entertainment, just like you’d pay for a movie or a night on the town, and that purchase has an actual, measurable utility value.

So from that perspective, it’s all good – but how about as an investment? Here we go down the rabbit hole. We’ve seen this time and time again…if there is ZERO utility value, it will eventually fail. In order for something to be a viable long term investment, it needs to have a utility value – if it doesn’t, at best, it’s a speculative gamble. This carries over to ANYTHING you invest in.

So what’s my prediction on Decentraland? I think it’s a generic concept with the potential to be easily copied over and over again within different games. There’s nothing really unique about it, and because of that, there’s no reason why this would be more valuable than any other game out there. If they actually manage to get so big as to compete with Runescape or Minecraft, investors have a chance at really making some serious money – but that also ties back into the game having a utility function and providing more of a service than appealing to investors who want their piece of easy, quick money. The sad reality is that if investors are driving the market, not real, actual users…its destined to fail.

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