Metaverse virtual real estate encounters "first cold winter": price drops from 180,000 to 18 yuan

Due to the policy environment of "housing for living, not for speculation" in the real world, some speculative funds have turned their attention to virtual real estate in the Metaverse. However, at the end of the year and the beginning of the next year, the Metaverse "real estate fever" since the second half of last year is experiencing the "first cold winter" after the Metaverse fever.

At the end of November last year, Chinese pop idol JJ Lin bought three virtual properties on the foreign metaverse product Decentraland for $123,000 (nearly 800,000 yuan in RMB). Decentraland was one of the metaverse products that was very popular abroad last year.

In addition to Distributed Continent, Sandbox is also one of the more popular metaverse products abroad. The common feature of these two products is that virtual real estate can be purchased and traded on these two products. If Lin Junjie's transaction is calculated based on the transaction volume of Distributed Continent, apart from the star effect, the amount is not too impressive - as early as half a year ago, a piece of land on Decentraland was sold for a sky-high price of US$913,000.

On December 6, a piece of virtual land on the sandbox was sold for US$4.3 million (approximately RMB 27.39 million), setting a new record for the transaction price of real estate in the "Metaverse", breaking the US$2.43 million record set by the Decentraland platform, and the price is far higher than the housing prices in Manhattan, New York.

However, amid the craze of "Metaverse real estate speculation", some industry insiders pointed out that the expected appreciation of Metaverse real estate is based on the expectation of the continuous growth of the Metaverse platform. Once no new players enter the market to "pass the parcel" for continuous transactions, the value of the "virtual real estate" in the hands of investors may become worthless.

It is worth mentioning that there are also related manufacturers in China that have produced similar "metaverse" products, and the "Rainbow Universe" of the listed company Tianxiaxiu has attracted much attention. The reporter of "Science and Technology Innovation Board Daily" noticed that the gameplay of the virtual real estate of Rainbow Universe is actually similar to that of Decentraland and Sandbox, but its value logic is substantially different from that of foreign competitors. Under the heavy blow of domestic supervision, the once hot real estate transactions of Rainbow Universe are returning to silence, and the real estate of Rainbow Universe, which was hyped to a sky-high price, has also shrunk significantly in the "cold winter" at the end of the year.

The normal value logic of “Metaverse Real Estate”

Several blockchain industry insiders told the Science and Technology Innovation Board Daily that the value of metaverse real estate on foreign platforms is supported by internal logic.

Taking the foreign metaverse product "Sandbox" as an example, as of now, the floor price of a Sandbox virtual plot is 3.73 Ethereum (ETH), which is roughly $12,000. From the measurement unit, it can also be seen that the Sandbox product is a blockchain application running on a foreign public chain.

Applications running on the blockchain will also comply with the inherent characteristics of the blockchain, including but not limited to users creating their own assets and ownership belonging to the users, user-defined rules of life, web3 identity, decentralized monetary assets, etc.

Because of this, the asset prices on the Sandbox are completely determined by the supply and demand relationship on the blockchain. Without supervision and legal restrictions, the price of a piece of virtual real estate will also reflect the current supply and demand relationship. This is also the reason why the "sky-high virtual real estate" transactions reported by the media come from this.

A blockchain industry practitioner told the reporter of "Science and Technology Innovation Board Daily" that he bought a virtual plot of land worth US$1,200 on Sandbox earlier, and soon after sold it to the next buyer for US$14,000. This plot of land was taken over for 2,200 sand coins (virtual tokens issued by Sandbox) two months ago, and the current market price is only US$9,000.

In this link, all transactions are conducted with virtual currency in the blockchain, which means that the pricing of all assets on the chain is determined by the rules on the blockchain and cannot be tampered with by the issuer or a third party, thereby ensuring the transparency of its transactions. In other words, even if there is a sharp drop in the value of assets, it is a normal fluctuation based on market laws.

Domestic players' hype

However, in China, due to the lack of a "public chain", it is impossible to guarantee the fairness and transparency of its transactions. Moreover, as virtual real estate transactions are under regulatory scrutiny, domestic metaverse real estate speculation has also been broken down into small pieces, hiding in QQ groups or one-on-one private transactions.

In October 2021, the "Hongyu Universe" APP released by A-share listed company Tianxiaxiu began internal testing. This is also one of the first metaverse products in China. The difference between this and other domestic metaverse products such as Xirang is that users can obtain virtual real estate through activities and tasks, and the rarity of virtual real estate is distinguished according to the level of activities and tasks.

Although according to the official statement of Rainbow Universe, virtual real estate cannot be traded between accounts, this does not stop users from "speculating" on these real estate privately. The popularity of speculation in the early days of its release can be seen from some data - "Rainbow Universe" has already had more than 100,000 people make reservations before it was opened for registration; a real estate originally priced at 88 yuan became 100,000 yuan after the first inquiry on Xianyu; after refreshing the Xianyu transaction page several times, it became 180,000 yuan, and even at this point, there were still 13 people who "wanted" it.

However, with the abnormal expansion of the transaction amount, Hongyu Universe has also attracted great attention from regulators. In the investor response, Tianxiaxiu announced that Hongyu Universe is only a test product so far. All data is still in the internal testing stage, which has great risks and uncertainties. In order to curb the "land speculation" transactions, they even banned a batch of internal testing accounts for various reasons.

Although Tianxiaxiu's Rainbow Universe product is infinitely close to the sandbox and distributed continents abroad in terms of gameplay and form, there is a world of difference in the intrinsic value logic.

The aforementioned blockchain industry practitioner told the reporter of the Science and Technology Innovation Board Daily that Tianxiaxiu's Rainbow Universe product is not based on any public chain on the blockchain, but only exists in the existing mobile Internet. Searching the official page of Metaverse also shows that Rainbow Universe is not even based on any small-scale alliance chain.

The result of not "going on the chain" is the collapse of its pricing logic. This is manifested in the following ways: the initial value is completely determined by the official activities of Rainbow Universe; at the same time, the data ownership of the real estate owned by users in Rainbow Universe is essentially still in the hands of Rainbow Universe officials. The unit price in the private secondary market does not fluctuate with the free transactions of the blockchain, but is self-priced by private sellers based on their feelings and expectations of the market conditions.

Digital assets without blockchain support are equivalent to "streaking"

In a Hong Universe communication QQ group, a reporter from the Science and Technology Innovation Board Daily also found that the transaction of Hong Universe real estate is completely driven by the release of transaction information by buyers and sellers, and this price often cannot reflect the true value of virtual real estate in the Hong Universe world.

From the price of virtual real estate, we can also see that compared with the previous hundreds of thousands of Hongyu virtual real estate, the current price has shrunk to a few hundred to tens of yuan, and even as low as 18 yuan. Many sellers shouted "discounts", but still almost no one is interested. Hongyu itself has also been "named" by many parties, and its activity is not as good as before.

Another person in the blockchain industry told the reporter of the Science and Technology Innovation Board Daily that it is not surprising that this situation has occurred. In essence, Tianxiaxiu’s Rainbow Universe is not based on any public chain, so it cannot be called a true metaverse product. At the same time, due to the relevant domestic policies on blockchain, even if there is a certain scale of "metaverse asset" transactions, without blockchain as a criterion for asset pricing, it will cause the transaction to deviate from the fundamentals of its asset value and show a considerable degree of deviation. This kind of transaction may exist for a while, but it will not last too long.

"Digital assets without blockchain support are almost worthless," the person said.