New technologies and platforms create incredible discovery phases that lead to economic activity. Many entrepreneurs are finding passive income opportunities in the metaverse, which is where we find ourselves.
As the metaverse economy grows, passive income opportunities as well as opportunities to actively make income seem to be increasing. While what works and what doesn’t is still up for debate, there are some in the vanguard of metaverse passive income.
What is the metaverse?
Before digging into passive income opportunities in the metaverse, it’s first important to analyze what is actually is. The term “metaverse” has been one of the most popular buzzwords in the Web3 space over the last few months, while millions are moved in digital economies focusing on it.
The word “metaverse” comes from Neal Stephenson’s 1992 cyberpunk sci-fi novel Snow Crash. This term is used in the Web3 space to refer to a digital world in which people own all the assets.
Nonfungible tokens (NFTs) are used to create a metaverse that is distinct from previous digital worlds such as those created in videogames. These tokens, which are blockchain-based, can be traded freely by users. However they cannot be duplicated or copied. While there are many possibilities for the metaverse, few businesses have yet been established.
Interoperability is another key characteristic of the metaverse. Virtual worlds like that of popular videogame Roblox could be thought of as metaverses, but unlike the new, blockchain-based iterations, players don’t exercise control or ownership over their assets.
Many companies are moving into the metaverse. Walmart is reportedly looking to enter the space. Fashion brands Ralph Lauren and Gucci indicate that virtual clothes may be a lucrative growth area. As the industry grows quickly, more companies are entering it. Within two years, it is expected to grow to $800 billion.
The potential for passive income could be huge given the space’s size. Taking advantage of passive income opportunities can be easy for those already deep into the metaverse, but how long each opportunity will allow entrepreneurs to earn isn’t clear.
Renting out metaverse land
The best way to make passive income in the metaverse, is to own property and rent it out. Metaverse platforms like The Sandbox and Decentraland let you rent land for a small fee.
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There currently isn’t a lot of data on what type of earnings metaverse landlords can expect, as that information isn’t being widely shared. Nevertheless, it’s known to be an attractive market as companies look to host events on the metaverse.
Pavel Sinelnikov, co-founder and CEO of Ethereum layer-2 scaling solution Metis DAO, told Cointelegraph that metaverses aim to achieve “digital land ownership and the ability to buy, sell, and rent land and other virtual items,” adding:
“Metaverses create an abstraction of real-life, where there is a living virtual economy in the game that is not locked and restricted to the digital domain, but instead extends outside of it; these are real and valued assets, holding value outside of the digital realm.”
According to Sinelnikov, the economies seen within metaverses like Decenraland and The Sandbox impact the “greater and real-world DeFi [decentralized finance] ecosystem,” while allowing for more interoperability opportunities.
Leasing assets is another way to generate passive income in metaverse. Some users might not want to purchase NFTs.
A popular game called Axie Infinity is a good example of NFTs being leased out to other users in order to make passive income. The game is based on NFTs called on Axies that were, at one point, rather expensive as the game’s popularity exploded during the bull market.
Axies were required to compete in order to win rewards in the form SLP tokens. In exchange for the tokens that they earned, players who couldn’t afford Axies would be given them by their team managers. The managers were, in essence, earning passive income from their Axies as other players — called scholars — used them to earn rewards. The practice was so popular that some “scholars” in Venezuela were making a living off of leased Axies.
You can lease other metaverse assets, depending on which platform. Sinelnikov commented that lending, renting and asset fractionalization are interactions that have already been formed on the metaverse, with the best part about them being that “no single provider can restrict the usage or control the market, since the assets belong to you and not to an individual provider.”
Secondary market royalty payments
NFT artists have made substantial royalties from the secondary market, where their creations can be traded among collectors. Metaverse interaction allows for the same type of interaction.
Prakash Somosundram, co-founder and CEO of blockchain game launchpad Enjinstarter, told Cointelegraph that “any wearable creator can earn royalties when the assets they create are sold on the secondary market.”
John Burris, chief of strategy at metaverse app IMVU, told Cointelegraph that the metaverse is “filled with opportunities to earn,” stating that while some metaverse worlds are play-to-earn and others “host gig-like economies,” almost all of them offer item creation and sales:
“With blockchain and NFTs we’ve finally unlocked a true ownership and royalty model where royalties can and will continue to flow back to the original creator, providing well-deserved passive income as those items change hands.”
Per Burris, the metaverse “serves as a great way for people to make money no matter who they are, or where they’re from, in the real world.” The ability to create, own and sell goods, he said, opens up opportunities to people that they would not get otherwise.
Gaming is one of the metaverse’s largest use cases, with most metaverse worlds either being completely focused on gaming or having a large portion of users focusing on it. While some involve gambling, others make their money in other ways.
Decentral Games’ ICE Poker virtual casino is one of the most popular metaverse gambling operations out there and since it’s based in the metaverse, a lot of the costs traditional casinos have aren’t present.
Other games, however, aren’t related to gambling at all. Some games generate revenue through asset sales or secondary market royalties. Roderik van der Graff, the founder of global investment firm Lemniscap, told Cointelegraph that one of the firm’s portfolio companies has launched a tower defense game to generate revenue through the metaverse.
The game is called Spark Defense and allows users to “monetize their land and complete quests to collect, earn and own NFTs which they can use across the game,” van der Graff said.
Advertisements are the last way to earn passive income in metaverse. Setting up large billboards in popular areas can draw in advertisers looking to get the crowd’s attention to sell their products or services, whether these are in the metaverse or outside of it.
Finding advertisers for these billboards may mean the income isn’t completely passive, as after a campaign ends, an advertiser may lose interest and the billboard owner may have to start looking for someone else to rent.
Many of the above options will require the involvement of an entrepreneur. Then again, true passive income doesn’t really exist, as even the most passive investments have to be monitored from time to time.
Is passive income worth chasing in the metaverse?
If generated income isn’t entirely passive, some may consider it not worth chasing, given the drawbacks. Burris says that there are downsides to investing in speculation or dealing with volatility in the cryptocurrency space. Most transactions are done in NFTs and crypto tokens.
“It’s important users and creators looking to create income in the metaverse examine the platforms and metaverses they use, and look at the product as a whole. Does the team have experience? Is the metaverse alive? Can it sustain itself through economic downturns?”
Somosundram said that the sustainability of an income stream “depends on the success of the specific metaverse and/or game where you generate your passive income,” which may mean often moving on to another venture.
It’s also worth pointing out that entrepreneurs may end up betting on a metaverse world that is later on abandoned, making their investment worthless as every passive income opportunity in the metaverse relies on heavy traffic.
On the bright side, Somosundram said that passive income from the metaverse is a “great means of diversification along with traditional financial instruments,” and there can be a rapidly expanding number of opportunities out there as the metaverse industry grows.
As exact figures aren’t widely shared, it’s up to entrepreneurs whether they want to bet on the metaverse and start building their income streams on it or whether they prefer to focus their attention elsewhere. To be successful in the metaverse, those who are willing to take risks may need to invent.
Digital world: Making it work
While renting property or a digital billboard won’t require significant innovation, some of the more prolific earners are taking different approaches. Somosundram spoke to Cointelegraph about the story of a Singapore-based entrepreneur who started a GameFi guild and built a collection of assets that could be leased for a small fee.
In another potential example, he pointed to tattoo artists using a service to “mint wearable tattoo art that generates passive income from the secondary market royalties.”
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Burris noted that on the platform he represents, there are “over 200,000 active creators, making over 350,000 new items for sale every month.” He stated:
“As more and more people spend their time in virtual worlds, and begin looking toward it as a way to earn a living, it’s important to have both passive and active income opportunities — just like in the real world.”
Whether entrepreneurs want to move forward with passive income ideas for the metaverse, it’s worth pointing out that there are no guarantees that the time or money invested will generate returns, as the space is constantly evolving.
The metaverse’s economic activity is still in its embryonic stages. Many are still trying to figure things out. As the metaverse evolves, new opportunities will likely present themselves the same way they’re presenting themselves in the broader cryptocurrency space.
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