How to value land in The Sandbox and what drives the price?
Similar to physical real estate, NFTs representing a parcel of digital land inside a blockchain-based virtual world have proven to be assets that can store value. Since Meta’s announcement last October, the demand for these virtual land NFTs has surged, driving their price up.
The Sandbox has established itself among the leading metaverse blockchain projects. It consists of 166,464 ERC-721 tokens representing digital plots where creators can build monetizable experiences like games, events, or parties for players to enjoy for free or by paying a fee in SAND.
With The Sandbox Game Maker – The Sandobox’s free native building tool – this project empowers artists and creators to build user-generated content. While this approach can be found in traditional metaverse games like Minecraft, here lands, avatars and any other game assets are represented by NFTs, ascertaining true digital ownership of a part of this metaverse.
This report intends to dissect the valuation process for lands within The Sandbox or LANDs. What factors play a role in assessing the price of a digital parcel inside this virtual world? Are there LANDs that might be over or underpriced? And how does The Sandbox compare to other metaverse projects in terms of financials, scarcity, and collaborations?
Table of contents
- Understanding lands inside The Sandbox
- How to value Sandbox lands?
- Comparison to other virtual worlds
Understanding LANDs inside The Sandbox
Interest in metaverse-related projects soared when Facebook announced its rebranding to Meta. Ever since, demand for virtual world projects, including The Sandbox, has skyrocketed. The floor price for Sandbox LANDs has gone from less than 1 ETH in Q3 2021 to an all-time high of 5 ETH in January to a consolidated level of 3 ETH at writing. The current floor price brings the floor market cap of The Sandbox lands to $1.27 billion.
But what exactly is land inside The Sandbox? A LAND is actually an NFT acting as a digital piece of real estate where creators can build experiences on top. Each LAND comes with a predefined terrain of 96 meters in width, 96 meters in length, and 128 meters in height. Its owner can build and modify the parcel or rent it out for other players to publish their own experiences.
Besides monetizing experiences, LANDs in The Sandbox have other use cases, including staking to generate passive income and governance voting rights.
In terms of token allocation, 10% (16,704 land plots) from the total land supply will remain in The Sandbox’s hands to host special events and feature exclusive games. A further 16% or 25,920 LANDs will be used as a Reserve, to be distributed to partners, creators, and gamers as rewards. The remaining 123,000 LANDs (74%) are up for sale, with 81% or 100,054 lands already spoken for at the time of writing.
Now that land in The Sandbox has been introduced, it is time to understand which factors play a role when evaluating a piece of land inside this metaverse.
How to value Sandbox lands?
Land valuation in The Sandbox follows the same rationale as real estate in the physical world. The price is dictated by two main variables: location and size. While other factors, like the structural design or land functionality, will eventually come into play, the location and size of parcels dictate their price, especially bearing in mind that this metaverse is still in its early stage, with experiences only just starting to be created.
We analyzed over 25,000 Sandbox LANDs sales between August 2021 and March 16, 2022 to identify trends that provide additional insight on the two aforementioned variables. The analysis only considers 1×1 plots as larger plots are mostly sold via auction, and the secondary market is not representative due to the high price constraints.
Adjacent 1×1 land plots can be grouped in The Sandbox to form estates of different sizes. The largest size (XL) for adjacent lands is 24×24 , comprising 576 LANDs. There are 35 XL lands in total, with 13 of them owned by The Sandbox. Lands of this size cover more than 12% of The Sandbox’s map and boast renowned holder names including Atari, Pranksy, Cyber Kongz, Binance (3), Ubisoft, Socios, TWD, Gemini, Coinmarketcap, Meta Key, Republic Realm (2), Warner Music Group, and South China Morning Post.
Estates with a 12×12 size contain 144 adjacent LANDs and are owned by renowned names like Adidas, Snoop Dogg, CryptoKitties, Ultra, Smurfs, Care Bears, and GuildFi, among others. Finally, Medium and Small plots constitute the most accessible opportunities to own estates, and are available at public sales. For reference, during the recent Metavex sale, the winning bid for the Metavex Medium land was 215,000 SAND or around $630,000 USD, while Small estates were auctioned for 45,000 SAND or $130,000 USD.
The platform’s geolocation model takes the neighbor relation to the next level, adding importance to adjacent plots. While the land size inherently relates to price, its location plays a vital role in the evaluation process.
The highest sale of any 1×1 LAND illustrates this premise. LAND #151499 owned by The Yacht’s King Domain, adjacent to a Medium BAYC plot and a Large Dingaling’s parcel branded as LooksRare, was sold for 100 ETH. This land surpasses the price of small secondary estates like The Crypto Lifestyle which was sold for 71 ETH.
Location is king in The Sandbox
Renowned brands and individuals own several estates inside this metaverse. These virtual parcels were acquired with the aim of building experiences like games or social hubs to attract crowds. The high footfall around these major partners increase the probability of adjacent plots directing visitors to their own experiences, potentially increasing their revenue stream.
One example is the Snoopverse, a Large estate owned by music legend Snoop Dogg. The LANDs surrounding this NFT are highly coveted as this Large estate will be home to exclusive experiences, including games, concerts, and collaborations with neighbors Steve Aoki and SupDucks. The five Small estates sold as part of the second wave of the Snoopverse public sale were auctioned for 78,200 SAND on average or approximately $230,000.
The same can be said for major partners like Atari, CyberKongz, or plots owned by The Sandbox. The latter will play a critical role in the play-to-earn platform. Several of these parcels will become portals to connect the virtual world, allowing players to travel large distances or amenities zones to relax and socialize between games.
The heatmap above indicates the hot spots that relate to higher sale prices. Superposing it on top of The Sandbox map allow us to identify the most coveted zones, like the Snoopverse, the central and south east XL Sandbox estates, the central north Meta Key zone which also includes Sandbox-owned lands, and the CyberKongz and Republic zone in the northwestern part of the map.
Following the same logic of locating zones with high traffic potential, The Sandbox labeled several lands as ‘premium’ – parcels near Large or X-Large estates owned by major brand partners or by The Sandbox itself.
A view of The Sandbox map highlighting the premium zones shows how premium LANDs form surrounding recognized Large estates. However, superposing the price heatmap over The Sandbox premium map shows that there are highly valued non-premium zones, as well as zones marked as premium that are netting below-average sale prices.
Areas like the northeast corner have fielded good sales, but the area surrounding the CoinMarketCap XL estate is more accessible than initially thought. Similarly, the western area that includes seven Large Sandbox plots as well as estates owned by Care Bears, Atari, and Ultra appears to be an accessible premium zone too.
The central part of the map has caught the attention of digital real estate investors. The zone surrounding the XL Warner estate or the central XL Sandbox estate has netted high sale prices around 15 to 20 ETH.
Another aspect to consider is the demand for certain zones. A heatmap analyzing the sales count of 1×1 LANDs indicates that the central west and northwestern part of the map are zones where lands are traded often. Similarly, the XL Sandbox estate north of the Snoopverse is also considered a hotspot; the northeastern section near the CoinMarketCap XL estate and other Sandbox LANDs, too, has been active.
It is important to understand that the increased demand in these zones might bump up the price of nearby parcels as the platform evolves into a more mature play-to-earn metaverse.
All in all, while the size of a LAND is directly related to the price, location plays a crucial role at this early stage. As the game matures, other aspects like the specific utility of LANDs, the designs built within it, or the type of experience will undoubtedly become more important. Yet, for the time being, location is king in The Sandbox.
Comparing The Sandbox to other virtual worlds
While lands have been analyzed within the scope of size and location, other factors affect the price of The Sandbox LANDs as a platform, and can be used as a benchmark when compared to other virtual worlds.
- Utility is one of the most significant value propositions in The Sandbox. Besides entire play-to-earn and social experiences, The Sandbox hosts a complete meta-economy by allowing owners to rent out their properties and stake SAND inside them. It also grants access to governance voting to shape the platform’s future. Projects like Decentraland compete with these experiences, but lack the economic yield. At the same time, other projects like NFT Worlds might have solid passive income mechanics, but lack superior immersive experiences.
- Financially speaking, this play-to-earn dapp also presents a competitive advantage. The Sandbox LANDs have generated over $530 million in historical trading volume, lagging behind only Decentraland. So far in 2022, The Sandbox has been the leading virtual world platform with more than $98 million in trades, and attracting over 6,800 unique traders. Only the WorldWide Webb virtual world has come close to 6,000 traders this year.
- The LAND floor price has consolidated around 3 ETH, which is lower than smaller virtual worlds like Decentraland or NFT Worlds, but almost double that of peer metaverse projects like CryptoVoxels, Webbland, or Treeverse. This floor price gives The Sandbox LANDs a floor market cap of $1.27 billion – 36% higher than Decentraland.
- Although over 166,000 LANDs appears a considerable number, the supply is limited, adding a scarcity element to The Sandbox. Projects like CryptoVoxels have a far lower supply, but lands can be added at any time to freely enlarge its map.
- Partnerships have been one of The Sandbox’s most substantial offerings. The project is fully backed by Animoca Brands, a prominent web3 investment organization. Collaborations with celebrities and big brands from a wide array of traditional industries and web3 projects add to this, with the latest one being with HSBC, which became the first bank to own land inside this virtual world.
- With almost 900,000 followers on Twitter and over 280,000 members in Discord, The Sandbox boasts one of the largest communities in Web3. Something that gains relevance in play-to-earn platforms like this one. To put in perspective Decentraland has 560,000 Twitter followers along with 160,000 Discord members. Not bad for either project, but the size of The Sandbox’s community is a very positive indicator.
After Meta’s announcement, the value of virtual lands soared and hasn’t looked back since. As the metaverse narrative gains interest and steam from traditional and web3 institutions, people invested in this space should acknowledge the value of this type of NFTs. Digital real estate will not only become the place where avatars socialize and enjoy experiences built by the community, but some of these virtual lands carry a passive income feature that enhances their status as investment opportunities.
The Sandbox LANDs should be around the conversation when talking about metaverse type of projects. This play-to-earn dapp empowers creators and has formed a group of impressive partners to build the future of this leading platform. Plus, the staking mechanism and governance for landowners make Sandbox LANDs some of the most appreciated virtual land plots.
When discussing land valuation within The Sandbox, two main variables come into play. Nonetheless, while the size affects the LAND price inherently, the location plays a more critical role in the value equation. It has been proved that a well-located 1×1 plot can net higher sale prices than some 3×3 parcels.
Moreover, the geospatial model adds importance to the adjacent LANDs. A renowned neighbor like Snoop Dogg or The Sandbox itself can create an economic impact in terms of traffic, gameplay, and visibility of the games built on those LANDs, positioning them as ‘premium’ assets.
Still, the play-to-earn platform is on a very early stage. The current value is more about a name than what these brands are actually building. The Alpha season 2 started two weeks ago and will feature 35 gaming experiences for people to join and play inside this virtual reality. Eventually, the value of these lands will fluctuate as certain experiences will become more attractive to high levels appraising their neighbors’ land. We’ll revisit how to value Sandbox down the road, but for now, you can consider this report as a guide to identify potential opportunities in The Sandbox virtual world.