The metaverse is a Newsletter without bank for weekly updates on NFTs, virtual worlds and collectibles
Dear nation without a bank,
The metaverse may be just beginning to form, but virtual land crises have been around for 30 years.
The problem? Make the virtual earth mimic the physical earth too close regarding scarcity can lead to economic problems that can kill the growth of games and virtual world endeavors.
I wrote about this topic earlier this year and noted how NFT projects might consider an older concept, the digital property tax + citizen dividend combo, as a way to solve these over-speculation issues.
However, the NFT space has now produced a new mechanism that could apparently bring sustainability to virtual land sales as well. For today Metaverselet’s take a closer look Dutch Gradual Variable Rate Auctions and how NFT metaverse projects could use them.
Paradigm is a crypto investment firm whose research arm is made up of some of the brightest minds in the Web3 ecosystem.
Over the past year, Paradigm researchers have published many innovative NFT primitives and mechanisms, including Perps on the ground, RICKS, mortys, RICKS, MultiRaffleand Gradual Dutch Auctions (GDA).
The latest innovation from these researchers, Variable rate GDA (VRGDA), notably allows NFT issuers to “sell tokens close to a custom schedule over time by raising prices when sales are ahead of schedule and lowering prices when sales are behind schedule,” as explained by the creators.
Paradigm has developed VRGDAs for art eatersa digital art experience they helped incubate alongside Justin Roiland, the co-creator of rick and morty.
With Art Gobblers, the idea is to launch an autonomous ecosystem centered on the creation and collection of art, which the project drawing tool will take into account. Art Gobblers will be released as a finished product, so once its basic free mint is complete, it should be able to handle additional NFT shows, i.e. creations, in a sustainable way without manual human intervention .
Here, report VRGDAs, which are designed to allow two NFTs to be issued – one with a fixed bid, say 10,000, and the other with an uncapped bid that is released indefinitely and regularly over time – without having to rely on scheduled auctions.
In their article describing VRGDAs, the Paradigm researchers gave this general example of how the mechanism works:
“Imagine a simple schedule where we want to sell 10 NFTs per day. We have set a starting price of 1 token for the first NFT.
Suppose we are currently on day 5, so we should have sold 50 NFTs. However, demand was high and we sold 70 NFTs. We weren’t supposed to sell 70 NFTs until day 7, so we are two days ahead of schedule.
Therefore, we want to charge a higher price in the future. We use an exponential curve to determine how much higher. This can vary depending on the settings, but in this case let’s say we are running 2 days ahead of schedule so we are increasing our price by a factor of 2*2=4, so since our original price was 1 token, the new price will be 4 tokens, which makes it harder to buy more NFTs.
Ten days later, on day 15, we should have sold 150 NFTs, but users only bought 120, the amount they should have bought on day 12, which means we are three days behind. We adjust the price [downward]which makes it easier for users to purchase more NFTs.”
As I mentioned in my introduction, virtual land crises are not new. Over the years, we’ve seen them raise their heads in mainstream franchises like Ultimate On line, Final Fancyand STANDBY On line.
But how do these land crises arise? Historically speaking, they occur when the virtual earth is modeled too closely on the physical earth. Virtual land need not be rare or necessary for gaming experiences, but when virtual land is made too scarce artificially, significantly advantageous, and too valuable relative to the context of its location, speculators tend to take the top, and their high prices and rent-seeking then block real users and builders.
One avenue to potentially tackle this problem is a metaverse property tax, which works to chase away excessive speculation. But if that approach isn’t your style, I think variable-rate GDAs are an interesting new way to similarly turn off metaverse overspec.
Why do I say? Because with the two-token approach of variable-rate GDAs, virtual world projects can introduce an element of infinite earth supply in a flexible and sustainable way so that essentially anyone can buy at any time. This ‘free supply’ aspect can mitigate aggressive land grabbing mentalities that have caused virtual land crises in the past.
For example, suppose a virtual world NFT project uses a variable rate GDA system to release 10,000 “Capital City” NFTs + a constant, uncapped supply of “Countryside” NFTs over time. Capital NFTs will undoubtedly trade at a premium and have more prestige, but their prices and limited supply wouldn’t stop regular users from joining the world with the endless supply of “Countryside” price curve NFTs. “, which can act as a pressure relief valve for demand and prevent excessive speculation. Growth would not be stifled, but always facilitated.
Variable rate GDAs are attractive because they allow a project to issue NFTs on a custom schedule while making it easy to purchase at any time. As such, the mechanism can be used for many things, and I think sustainable virtual land sales are absolutely one of them.
At the same time, Variable Rate GDAs are brand new. Art Gobblers isn’t live yet, so we don’t have an approach example to inspect in the wild yet. However, Paradigm’s Transmissions11 has already published a reference implementation with several possible issuance schedules, so it’s only a matter of time before we start to see more variable rate GDA projects coming in. In the metaverse ecosystem, let’s see which upstart project makes the leap first!
William M. Peaster is a professional writer and creator of Metaverse—a Bankless newsletter focused on the emergence of NFTs in the cryptoeconomy. He has also recently contributed content to Bankless, JPG and beyond!
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