How is The Sandbox land valued? What drives land prices?

Since Meta announced its entry into the Metaverse last October, demand for virtual land parcel NFTs has surged, driving up prices. The Sandbox has established itself among the leading Metaverse blockchain projects. It consists of 166,464 ERC-721 tokens, allowing creators to create profitable experiences for players, such as games, events, or parties.

This article will take you through the valuation process of The Sandbox plots. In this virtual world, what factors determine the final price? Are there plots that are too high or too low? How does The Sandbox compare to other metaverse projects in terms of funding, scarcity, and cooperation?

Understanding Parcels in The Sandbox

When Facebook announced its name change to Meta, interest in projects related to the Metaverse surged. Since then, demand for virtual world projects, including The Sandbox, has skyrocketed. The minimum price of The Sandbox plots has risen from less than 1 ETH in Q3 2021 to an all-time high of 5 ETH in January, and has reached an average of 3 ETH as of this article. The current floor price gives The Sandbox a minimum market value of $1.27 billion.

What exactly are plots in The Sandbox?

Plots are actually NFTs, which play the role of a digital real estate on which creators can create experiences. Each plot has a predefined terrain that is 96 meters wide, 96 meters long, and 128 meters high. Its owner can build and modify it, or rent it out to other players to make money with the experience. In addition to profitable experiences, The Sandbox has other use cases, including generating passive income through staking and governance voting rights.

In terms of token distribution, 10% of the total land supply (16,704 plots) will be held by The Sandbox to host special events and feature exclusive games. Another 16% will be used as a reserve to be distributed as rewards to partners, creators, and players. The remaining 74% (123,000 plots) are for sale, of which 81% (100,054 plots) have been sold at the time of writing.

Now that we’ve covered Land in The Sandbox, let’s take a look at the factors that influence the value of Land when evaluating Land in the Metaverse.

How to value The Sandbox land

The Sandbox parcel valuation follows the same principles as real-world real estate. Prices are determined by two main variables: location and size. Other factors, such as structural design or parcel functionality, are what make parcels attractive to users in the first place, but the location and size of parcels determine their price. The Sandbox metaverse is still in its early stages, and experiences are just beginning to be created.

We analyzed more than 25,000 The Sandbox plot sales between August 2021 and March 16, 2022. This analysis only considered 1×1 plots because larger plots are mostly sold through auctions and the secondary market is not representative due to high price limits.

Adjacent 1×1 plots can be divided into plots of different sizes in The Sandbox. The maximum size (XL) of adjacent plots is 24×24, with a total of 576 plots. There are a total of 35 XL plots, of which 13 belong to The Sandbox. Plots of this size account for more than 12% of The Sandbox's territory. "Celebrities" who own plots include game developer Atari, famous NFT collector Pranksy, NFT project Cyber ​​Kongz, Binance, Ubisoft, fan token company Socios, Gemini, Coinmarketcap, Meta Key, Republic Realm, Warner Music Group and South China Morning Post.

The 12×12 size contains 144 adjacent plots, owned by well-known brands such as Adidas, Snoop Dogg, CryptoKitties, Ultra, Smurfs, Care Bears, and GuildFi. Finally, small and medium plots are the most accessible home ownership opportunities and are available for public sale. According to reference materials, in the recent Metavex auction, the winning bid for the Metavex Medium plot was 215,000 SAND, about $630,000, while the auction price for the small plot was 45,000 SAND, about $130,000.

The Sandbox’s geographic model increases the importance of neighboring plots. While plot size is intrinsically linked to price, its location plays a crucial role in the valuation process.

This is illustrated by the highest price paid for a 1×1 plot. Plot #151499 owned by The Yacht’s King Domain, which is adjacent to a medium-sized BAYC plot and a large plot called LooksRare, sold for 100 ETH. This plot outstripped the price of a smaller secondary plot like The Crypto Lifestyle, which sold for 71 ETH.

In The Sandbox Metaverse, Location is King

Well-known brands and celebrities have real estate in this metaverse, acquiring these virtual plots with the goal of creating experiences such as gaming or social hubs to draw crowds in. High foot traffic around these key partners increases the likelihood that neighboring plots will direct visitors to their own experiences, potentially increasing their revenue streams.

Snoopverse, a large virtual plot owned by music legend Snoop Dogg, is very attractive for its plots around NFTs because this large plot will be a garden of exclusive experiences, including games, concerts, and collaborations with neighbors Steve Aoki and SupDucks. As part of the second round of public auctions in Snoopverse, the five small plots were auctioned for an average of 78,200 SAND, or about $230,000.

The Sandbox map can help identify popular areas, like the Snoopverse. Following the same logic of locating areas with high traffic potential, The Sandbox marks some plots as “premium,” owned by major brand partners or The Sandbox itself.

The Sandbox premium areas represent how premium plots are recognized as large plots at the top. However, overlaying the price map on The Sandbox premium map reveals the presence of high-value non-premium areas, as well as premium areas with net sales prices below average.

Parcels in different areas have different values. As the platform develops into a more mature money-making metaverse, increased demand in these areas may drive up the prices of nearby parcels.

To summarize, while the size of a lot is directly correlated to price, at this early stage, location plays a vital role. As the game matures, things like the specific uses of lots, the design within them, or the types of experiences within them will undoubtedly become more important. However, for now, location is king in The Sandbox.

Comparison with other metaverses

While parcels have been analyzed within a range of size and location, The Sandbox as a platform is also impacted by other factors and can be used as a benchmark in comparison to other virtual worlds.

• Utility is one of the most important value propositions in The Sandbox. In addition to the entire play-and-earn and social experience, The Sandbox also has a complete micro-economy by allowing owners to rent out their properties and hold SAND in them, also granting access to governance voting. Projects like Decentraland compete with these experiences, but lack the economic benefits. Other projects like NFT Worlds may have solid passive income mechanisms, but lack excellent immersive experiences.

• Economically, this play-and-earn Dapp also has a competitive advantage. The Sandbox has a historical transaction volume of over $530 million, second only to the decentralized area. So far in 2022, The Sandbox has become the leading virtual world platform, with a transaction volume of over $98 million and attracted more than 6,800 unique traders.

  
  

• The floor price of the plot has stabilized at around 3 ETH, which is lower than smaller virtual worlds such as Decentraland or NFT worlds, but almost twice as much as peer metaverse projects such as CryptoVoxels, Webbland or Treeverse. This floor price gives The Sandbox a floor price market value of $1.27 billion, 36% higher than the decentralized zone.

• Limited supply. The Sandbox parcels have scarcity. Projects like CryptoVoxels have much less supply, but parcels are free to expand their footprint at any time.

• Partners have always been one of the focuses of The Sandbox. The project has received full support from Animoca Brands, a well-known web3 investment institution. Collaboration with many celebrities and big brands in traditional industries and web3 projects, plus the latest HSBC, has made it the first bank to own a plot of land in the virtual world.

  
  

• With nearly 900,000 followers on Twitter and over 280,000 members on Discord, The Sandbox has one of the largest communities in Web3. Decentraland has 560,000 Twitter followers and 160,000 Discord members. Both projects have great potential, but the size of The Sandbox’s community is a very positive indicator.

Summarize

As the metaverse narrative gains interest and momentum from traditional and web3 institutions, people investing in this space are beginning to recognize the value of plots. Digital real estate will not only become a place for avatars to socialize and enjoy community-built experiences, but these virtual plots also come with a passive income feature. In addition, the mechanism and governance of plot owners make The Sandbox plots the most popular virtual plots. While area itself affects plot price, location plays a more important role in value. A well-located 1×1 plot can fetch a higher sales price than some 3×3 plots.

Geospatial models increase the importance of neighboring parcels. Celebrity neighbors like Snoop Dogg or The Sandbox can create economic impact from traffic, gameplay, and exposure of the game on those parcels and become “premium” assets.

The increase in experiences in VR will ultimately fluctuate the value of these plots of land as the experiences will become more attractive than the valuation of their neighbors’ plots. You can use this report as a guide to identify potential opportunities in The Sandbox virtual world.

This article is from Dappradar, the original author is Pedro Herrera, and translated by Odaily Planet Daily translator Katie Gu.