The past year has seen an absolute explosion in digital real asset value. Investors, speculators, and institutions are literally spending millions worth of real money to buy up what is essentially non-existent. Land rush is inarguably taking place in the metaverse right now, where there is essentially no land. Lars Doucet, a consultant-cum-blogger warns of destructive implications on metaverses if this phenomenon is not controlled, and introduces a potential solution: metaverse land tax + citizen dividends.
Doucet advocates that highly speculative virtual land can ruin metaverse economies. This scenario is similar to past virtual land crises such as in Ultima Online, Final Fantasy XIV and EVE Online. Essentially, speculators will hoard scarce land within a certain metaverse, watch the price shoot up, and reel in the big bucks. However, these hoarders will curb productive activities within that metaverse because users that actually want to utilize the land will not be able to afford it.
For instance, land prices in popular P2E game Axie Infinity are already sky high even though they have completely no utility at the moment. At the time of writing, the cheapest land available is 2.4 ETH. Last year, one of these plots actually sold for a whopping $2.5 million. To this, Doucet thinks that these speculators will eventually halt the growth of the economy since productive activities are limited.
However, solving this crisis is easier said than done. For starters, metaverse projects need to decide between effective early-stage marketing schemes or long-term growth strategies. As the metaverse progresses, there will also be a constant debate between sustaining the metaverse economy or protecting the interests of early adopters.
Land Tax and Citizen Dividends
To date, various locations in notable metaverses are already commanding insanely high prices. This may be due to land scarcity, a certain celebrity just bought land in that area or other factors that have propped up the value of a certain location.
In such cases, a metaverse land tax is one of several solutions that can overcome a virtual land crisis. This digital land value tax basically ensures all land buyers actually want to do something productive with the land. For instance, tax the land, but not the buildings and improvements on the land. Without this, speculators and early adopters will just hoard prime locations and charge expensive rent to actual creators and builders.
The other half of the equation is where the tax money should go to. For a sustainable economy, Doucet suggests that they go towards the consumers that make up the metaverse economy: the citizens of the metaverse. Even in the real world, landlords and speculators reap most of the value produced by everyday spenders. Therefore, a citizen dividend will reward participants that create value in the metaverse. Hopefully, this can incentivize them to stay on and create further value within the digital ecosystem.
On the other hand, there are also other options available, although not as promising. Companies can create more land in their respective metaverses. Companies can also develop metaverses in a way that makes land less valuable.