Passive income opportunities in metaverse

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Key points: 

• In the Web3 space, the term "metaverse" is used to describe the digital world in which people own assets.
• One of the best-known ways to earn passive income is to own properties in it and rent them out, like in Decetraland.
• Another way is to rent out assets, as some users may not want to buy expensive NFTs outright, like Axie Infinity.
• Like an NFT artist, you can earn royalties through the secondary market in the metaverse, as your creations are traded among collectors.
• Most metaverse worlds are entirely dedicated to gaming. Some involve gambling, while others generate income in other ways.
• The final way we earn passive income on the Metaverse is through advertising. You can buy a billboard and sell its place to the advertiser.

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As new technologies and platforms are created, economic activity eventually gathers momentum and creates an incredible phase of discovery. The Metaverse is arguably in a discovery phase, with many entrepreneurs looking for ways to generate passive income from it.

As economic activity in the metaverse increases, new passive income opportunities, as well as active income opportunities, seem to be created regularly. While what works and what doesn't is up for debate, there are a few in the metaverse that is at the forefront of passive income.

What is the Metaverse?

Before delving into passive income opportunities in the Metaverse, it's important to analyze the reality first. Over the past few months, the term “Metaverse” has been one of the most popular buzzwords in the Web3 space, with millions of people in the digital economy following it.

The term "Metaverse" comes from Neal Stephenson's 1992 cyberpunk science fiction novel Avalanche. In the Web3 space, the term is used to describe the digital world in which people own assets.

The Metaverse differs from previous digital worlds, such as those created in video games through the use of non-fungible tokens (NFTs). These unique blockchain-based tokens can be freely traded by users, but cannot be duplicated or copied. What can be done in virtual worlds is still being investigated, but so far, real companies have been created in these virtual worlds.

Another defining characteristic of the Metaverse is interoperability. Virtual worlds such as the popular video game Roblox can be thought of as metaverses, but unlike newer blockchain-based iterations, players do not exercise control or ownership over their assets.

Various companies have entered the metaverse, with Walmart seemingly poised to enter the space, while fashion brands such as Ralph Lauren and Gucci have indicated that virtual clothing could be a key area of ​​their growth. Many companies are entering the space because it is growing rapidly and is expected to be an $800 billion industry within two years.

Given the potential size, earning passive income in this space could be a great opportunity. Taking advantage of passive income opportunities is easy for those already deep in the metaverse, but how long each opportunity will keep an entrepreneur earning is unclear.

Lease of Metaverse land

One of the best-known ways to earn passive income in the Metaverse is to own properties in it and rent them out. Metaverse platforms like Decentraland and The Sandbox allow users to rent out land to others for a fee.

Right now, there isn't much data on what kind of income Metaverse landlords can expect, because that information isn't widely shared. Still, the Metaverse is known to be an attractive market as companies look to host events on it.

Pavel Sinelnikov, co-founder and CEO of Ethereum's Metis DAO layer-2 scaling solution, told that metaverses are designed to enable “digital land tenure and the ability to buy, sell and lease 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 in metaverses like Decenraland and The Sandbox are impacting “a larger, more authentic DeFi ecosystem [decentralized finance],” while offering more opportunities for interoperability.

Asset leasing

Another way to earn passive income in the Metaverse is to rent out assets, as some users may not want to buy expensive NFTs outright.

A famous example of NFTs being rented out to other users to generate passive income comes from the popular game Axie Infinity. The game is based on NFTs called Axies, which were once quite expensive when the game exploded in popularity during the bull run.

In the game, Axies compete against each other for rewards in the form of Smooth Love Potion (SLP) tokens. Players who couldn't afford Axies acquired them from so-called team managers in exchange for some SLP tokens they could earn. Managers earn passive income from their Axies as other players (called Scholars) use them to earn rewards. The practice is so popular that some "scholars" in Venezuela make a living renting Axies.

Other Metaverse assets can be leased according to the platform. Sinelnikov commented that lending, leasing, and asset splitting are interactions that have taken shape on the Metaverse, and the best part is that “no single provider can limit access or control the market because the asset belongs to you, not you.” 

Secondary Market License Fee

Some NFT artists earn handsome royalties through the secondary market as their creations are traded among collectors. The same type of interaction is possible in the Metaverse as well.

Prakash Somosundram, co-founder and CEO of blockchain game startup platform Enjinstarter, told “Any wearable device creator can earn royalties if the assets they create are sold on the secondary market.”

John Burris, head of the strategy at the Metaverse app IMVU, told that the Metaverse is “rife with opportunities to make money,” explaining that while some Metaverse worlds are game-earning and others “have Gig-like economies,” nearly all These both offer to create and sell items:

“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.”

According to Burris, virtual worlds are “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 make, own and sell things opens up opportunities for people they wouldn’t otherwise have .

Virtual games

Gaming is one of the largest use cases for the Metaverse, and most Metaverse worlds are either entirely dedicated to gaming or have a large percentage of users dedicated to gaming. Some involve gambling, while others generate income in other ways.

Decentral Games' virtual casino ICE Poker is one of the most popular Metaverse gambling companies, and because it's based on the Metaverse, it doesn't have many of the costs of traditional casinos.

However, other games have nothing to do with 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 that one of the firm’s portfolio companies launched a tower defense game to generate revenue through the Metaverse.

The game, called Spark Defense, allows users to “monetize their lands and complete quests to collect, earn and own NFTs to use throughout the game,” van der Graff said.

Advertising

The final way we earn passive income on the Metaverse is through advertising. Placing large billboards in popular areas can attract advertisers who want to attract the attention of crowds to sell their products or services, whether they are inside or outside the Metaverse.

Finding advertisers for these billboards could mean that revenue isn't entirely passive since after the event, advertisers might lose interest and the billboard owner might have to find someone else to hire.

Most of the above options may require the involvement of entrepreneurs. On the other hand, there is no real passive income because even the most passive investments require monitoring from time to time.

Is It Worth Tracking Passive Income In The Metaverse?

Unless the income generated is entirely passive, some may find it not worth it because of the downside. According to Burris, some of the downsides are speculation and dealing with the volatility of the cryptocurrency space, since most transactions are in NFTs or 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. Is the team experienced? Is the metaverse active? Can it sustain itself through economic downturns?”

The sustainability of the revenue stream "depends on the success of the particular metaverse and/or game in which you generate passive income," Somosundram said, which can often mean switching to different companies.

It's also worth noting that entrepreneurs may end up betting on a virtual world that is later abandoned, rendering their investment worthless, since any passive income opportunity in a virtual world relies on heavy traffic.

On the bright side, Somosundram said passive income from the Metaverse is “an important tool for diversification alongside traditional financial instruments,” and the number of opportunities could grow rapidly as the Metaverse industry grows.

Since accurate data isn't widely available, it's up to entrepreneurs whether they want to take advantage of the Metaverse and generate revenue based on it, or prefer to focus elsewhere. However, those venturing into the metaverse may need to innovate to stand out.

Get connected in the digital world

While rental real estate or digital billboards don't require major innovations, some more productive earners are taking other approaches. Somosundram told the story of a Singaporean entrepreneur who started a GameFi guild that builds a pool of assets that can be rented out for a fee.

In another possible example, he points to a service used by tattoo artists to "print wearable tattoo art, generating passive income from secondary market royalties."

Burris noted that the platform he represents has "more than 200,000 active creators and more than 350,000 new items for sale every month." He explained:

 “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 or not entrepreneurs want to get a head start on the Metaverse passive income idea, it should be noted that as the field continues to evolve, there is no guarantee that the time or money invested will yield a return.

Economic activity in the Metaverse is still nascent as many people are still figuring it out. As the Metaverse continues to evolve, new opportunities will likely emerge in the same way they have emerged in the broader cryptocurrency space.