Metaverse is a new frontier for earning passive income
As new technologies and platforms are created, there are incredible discovery phases where economic activity eventually picks up and begins to take shape. The metaverse is arguably in that discovery phase, with many entrepreneurs finding ways to earn passive income.
As economic activity in the metaverse increases, seemingly new passive income opportunities are created on a regular basis, as are opportunities for active income. While what works and what doesn’t is still up for debate, there are some at the forefront of metaverse passive income.
What is the metaverse?
Before digging into passive income opportunities in the metaverse, it is first important to analyze what actually is. The term “metaverse” has been one of the most popular buzzwords in the Web3 space in recent months, while millions have moved in digital economies focusing on it.
The word “metaverse” comes from Neal Stephenson’s 1992 cyberpunk sci-fi novel Snow crash. In the Web3 space, the term is used to describe a digital world where people actually own the assets in it.
The metaverse differs from previous digital worlds, such as those created in video games, by the use of non-fungible tokens (NFTs). These unique blockchain-based tokens can be traded freely by users, but cannot be duplicated or copied. What can be done in the metaverses is still being explored, but so far real businesses have been created within these metaverses.
Another defining characteristic of the metaverse is interoperability. Virtual worlds such as the popular video game Roblox can be considered metaverses, but unlike the new, blockchain-based iterations, players do not exercise control or ownership over their assets.
Various companies have moved into the metaverse, with Walmart seemingly poised to enter the space, while fashion brands such as Ralph Lauren and Gucci have signaled that virtual clothing could be a big growth area for them. Companies are entering the space as it is growing rapidly and is expected to become an $800 billion industry within two years.
Given the potential size, earning passive income in the space can be a great opportunity. Taking advantage of passive income opportunities may be easy for those already deep in the metaverse, but how long each opportunity will allow entrepreneurs to earn is not clear.
Rent out metaverse land
One of the most well-known ways to earn passive income in the metaverse is by owning property in it and renting it out. Metaverse platforms such as Decentraland and The Sandbox allow users to rent land to others for a fee.
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There is currently not much data on what kind of earnings metaverse landlords can expect, as this information is not widely shared. Nonetheless, it is 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 aims to achieve “digital land ownership and the ability to buy, sell and rent land and other virtual objects,” adding:
“Metaverses create an abstraction of real life, where there is a living virtual economy in the game that is not locked and confined to the digital domain, but instead extends beyond it; these are real and valued assets, which have value outside the digital realm.”
According to Sinelnikov, the economies seen in metaverses like Decenraland and The Sandbox affect the “larger and real DeFi [decentralized finance] ecosystem”, while also opening up more interoperability possibilities.
Another way to earn passive income in the metaverse involves renting out assets, as some users may not want to buy expensive NFTs outright.
A well-known example of NFTs being rented out to other users to earn passive income comes from the popular game Axie Infinity. The game is based on NFTs called Axies which at one point were quite expensive when the game’s popularity exploded during the bull market.
In the game, Axies were required to compete and earn rewards in the form of Smooth Love Potion (SLP) tokens. Players who couldn’t afford Axies would receive them from so-called team managers in exchange for some of the SLP tokens they managed to earn. Managers essentially earned passive income from their axes, as other players – called Scholars – used them to earn rewards. The practice was so popular that some “scholars” in Venezuela profited from hired Axies.
Other metaverse assets may be rented, depending on the platform. Sinelnikov commented that lending, renting, and fractioning assets are interactions that have already been formed on the metaverse, with the best thing about them being that “no single provider can limit its use or control the market, since the assets belong to you and not to an individual provider.”
Secondary Market Royalties
Some NFT artists have earned extensive royalties through the secondary market as their creations are traded among collectors. The same type of interaction is possible in the metaverse.
Prakash Somosundram, co-founder and CEO of blockchain gaming startup Enjinstarter, told Cointelegraph that “any wearable creator can earn royalties when the assets they create are sold on the secondary market.”
John Burris, chief strategy officer at metaverse app IMVU, told Cointelegraph that the metaverse is “full of monetization opportunities,” 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 have 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 these 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 come from, in the real world.” The ability to create, own and sell goods, he said, opens up opportunities for people that they wouldn’t otherwise have.
Gaming is one of the metaverse’s biggest use cases, with most metaverse worlds either entirely focused on gaming or having a large portion of its users focused on it. Some involve gambling, while others generate their income in other ways.
Decentral Games’ virtual casino ICE Poker is one of the most popular metaverse gambling operations out there, and since it’s based in the metaverse, many of the costs traditional casinos don’t have.
However, other games are not related to gambling at all. Some generate income through asset sales, secondary market royalties or donations. 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 missions to collect, earn and own NFTs that they can use throughout the game,” van der Graff said.
Our last way to earn passive income in the metaverse is through ads. Placing large billboards in popular areas can attract advertisers who want to get the public’s attention to sell their products or services, whether in the metaverse or outside of it.
Finding advertisers for these billboards can mean that the income is not entirely passive, as after a campaign ends an advertiser may lose interest and the owner of the billboard may have to start looking for someone else to rent.
In fact, most of the options above will probably require some involvement from the entrepreneur. Then again, true passive income doesn’t really exist, as even the most passive investments need to be monitored from time to time.
Is passive income in the metaverse worth chasing?
If the income generated is not entirely passive, some may consider it not worth chasing, given the downsides. According to Burris, disadvantages include engaging in speculation and dealing with the volatility of the cryptocurrency space, as most transactions are conducted in either NFTs or crypto-tokens:
“It’s important that users and creators who want to monetize the metaverse examine the platforms and metaverses they use, and look at the product as a whole. Is the team experienced? Is the metaverse active? Can it sustain itself through economic downturns?”
Somosundram said the sustainability of an income stream “depends on the success of the specific metaverse and/or game in which you generate your passive income,” which can mean you often move on to another venture.
It’s also worth pointing out that entrepreneurs can end up betting on a metaverse world that is later abandoned, rendering their investment worthless as any passive income opportunity in the metaverse relies on heavy traffic.
On the bright side, Somosundram said passive income from the metaverse is a “great means of diversification alongside traditional financial instruments,” and there could be a rapidly growing number of opportunities out there as the metaverse industry grows.
Since exact numbers are not widely shared, it is up to entrepreneurs whether they want to bet on the metaverse and start building their revenue streams on it or if they prefer to focus their attention elsewhere. However, those who risk making it in the metaverse may have to innovate to stand out.
To do so in the digital world
While renting real estate or a digital billboard won’t require significant innovation, some of the more productive incomes take different approaches. Somosundram told Cointelegraph the story of a Singapore-based entrepreneur who created a GameFi guild that built a pool of assets to rent out for a fee.
In another potential example, he pointed to tattoo artists using a service to “design wearable tattoo art that generates passive income from royalties on the secondary market.”
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Burris noted that on the platform he represents, there are “over 200,000 active creators, creating over 350,000 new items for sale every month.” He stated:
“As more and more people spend their time in virtual worlds, and start to see it as a way to make 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 is worth pointing out that there are no guarantees that the time or money invested will generate returns, as the space is constantly evolving.
Economic activity in the metaverse is still at an embryonic stage, as many are still figuring things out. As the metaverse evolves, new opportunities will likely present themselves in the same way that they present themselves in the broader cryptocurrency space.