Shock Stat: More People Own Items in Second Life Than Own NFTs

One advantage of writing about Second Life for so long is it gives me a unique perspective from which to compare the relative strength of any other virtual world/virtual economy phenomenon. Based on official reported numbers and inside sources, there are currently about 500,000 to 600,000 active Second Life users* -- i.e. people who regularly log into SL, interact with other users, and use Linden Dollars to buy unique virtual items.

Which brings us to NFTs, which are supposed to be the latest transformative technology. However, as the Financial Times just reported:

Chainalysis found that NFTs have introduced a huge number of retail investors to the crypto world, with small transactions of under $10,000 accounting for more than 75 per cent of the market. But much like the market for cryptocurrencies, it remains dominated by a few large players, or “whales”. Between late February and November, there were 360,000 NFT owners holding 2.7m NFTs between them. Of those, about 9 per cent — or 32,400 wallets — held 80 per cent of the value of the market, Chainalysis found.

Emphasis mine, because it bears emphasis. There are more people who own unique virtual items in Second Life (about 500,000 now) than own NFTs (360,000). Second Life hasn’t been “hot” in the tech world since 2008, but its virtual economy is still larger than the supposedly hot NFT market? (And that's setting aside the report that less than 10% of those NFT owners -- i.e. under 36,000 people -- dominate that economy.)

This should be the kind of figure that makes people in tech excited about NFTs deeply question their assumptions. We read about various NFTs selling for many millions of dollars worth of Ethereum, but it's rarely mentioned how small the market for NFTs actually is.

Or to put it another way: If there was a small city of 380,000 people where painted beer caps were highly, highly valued, but they were only valuable to people in that city, and generally considered worthless to the other 7.75 billion people in the world, would you consider painted beer caps the next greatest thing in the global economy? Or just a quirky anecdote about that one small city?

Hat tip: Dare Obasanjo.

The unintuitive thing about the NFT market is how relatively small it is (360,000 wallets) yet how rich the participants are.

32,400 wallets hold over $32B in NFTs. That averages out to about a million dollars in NFTs for each of those big wallets.https://t.co/imDbzYJhEN

— Dare Obasanjo (@Carnage4Life) January 3, 2022

*This is only counting monthly active users. The number of Second Life users who briefly return after extended absences to check in on friends, places, and their inventory of content, is probably around 1-2 million people.

Image via the Financial Times.

Comments

[seph]

Not to defend its existence, but the whole point of NFTs is to create digital scarcity. For the few to have a few.

Second Life isn't really comparable for a lot of reason, but if you tried to equate the way NFTs work with Second Life's asset system, Second Life would need to be entirely no-copy/trans based, with the additional constraint of only one of something is ever sold. Like a really expensive gacha machine that allows 1 win per product ever. If Second Life were that way, it'd be a lot smaller and niche if it still existed at all without its predominant copy/no-trans culture.

Most of Second Life's users are in it for digital plenty, not scarcity. If you peruse Marketplace for limited quantity, no-copy/trans products...they exist, they're often expensive, but not too many people are into it at all. In that way, NFTs are way more successful than the most comparable concept in Second Life.

[Joey1058]

When the concept of NFTs was new and equal across the board, I was excited to the potnetial. Imagine having your SL inventory anywhere you wanted to be. And then the whales found out it was a perfect digital asset to park their money. And Linden Lab shows zero interest in working with NFTs. The biggest innovation I saw was when IMVU created their VCoin. And nothing from them about NFTs either. So as far as I'm concerned, NFTs are a rich man's toy.

[Rin]

Its not only a rich man's toy. I would say its more like a toy for people with more money then sense or for those looking for large scale money laundering.
It is the same sort of pyramid scheme as crypto currencies developed into. All those lofty ideas and hopes people had when it first appeared got thrown out in favour of greed, speculation and illegal activities. People might sometimes still talk about those lofty ideas, but if you look around, no one is doing it. There is just too much money in those other uses to actually even try to do something good with it.

In the end, I guess I should not be surprised. Our society revards that sort of behaviour and the people investing into that sort of stuff are often the same ones who will harp around how paying taxes or doing something of benefit to the society as a whole (actually working a day in their life might be a good start in many cases) is evil and restricting their rights to be ... well ... I wont write where I think they should stuff their crypto money and NFTs into.

And as I see this all happening, I am sad, that this is the only use we seem to have found for this sort of technology.

[Thatkidlbs]

https://youtu.be/b0ke9gzHvHk

Above is the short version of how Play-To-Earn is helping people in developing countries. I don’t think NFTs or crypto is a scam. We’re just early. Also if you wanna see a change in the world posting articles like this one causes people to think and question. I just hope they do more than just that.

[Brian]

If anything, the small market size of NFTs is what should make someone BULLISH, not skeptical. It shows you how early it is and the success of in-game assets that literally have zero value in traditional gaming should also show you why real assets on a blockchain in real markets should be even bigger. This is the NFT market before Meta, Microsoft, Disney, etc even enter into the space.

[Grace]

@seph: I agree with your observations but have a totally opposite takeaway, interestingly.

Firstly, you mentioned that equating how NFTs work with SL's asset system would mean that all items in SL need to be no copy/trans based. I would challenge why "all items" is a necessary condition. Every item created in SL has a unique identifier (UUID) recorded on a public database, along with a live record which is accessible by anyone who knows LSL. The record includes who is the creator, who is the current owner, whether the item is available for sale (and the price if so), and whether the next owner can modify/copy/transfer it.

As you pointed out, ordinary residents can set an item they create as no-copy/transfer for next owner. In addition, a scripter can (by means of adding a script) decide if they would want to make their item fungible, or non-fungible (by testing the item's UUID before executing some function). So it can be argued there is already a system that can support NFTs in a way, except that the record is not stored on a blockchain but in a public database (anyone can query it using LSL).

Hence when you say "If Second Life were that way..", I would argue that it is already that way. But only a small portion of creators/scripters have _opted_ to set their creation to be "one of it's kind". The functionality for digital scarcity is there. But economically, most creators have opted for digital plenty (no marginal cost of producing another unit), rather than digital scarcity.

Second, your observation is that while there are limited edition items on MP, not many people are into it. I agree with that observation but my takeaway is opposite to yours - maybe that tells us that majority of SL residents are not into speculation of those digitally scarce items. For example, if 50,000 SL residents are collectors (including gacha traders), then it would be 10% out of population of about 500,000 active residents in SL. Out in the real world, that would be 36,000 NFT owners out of 3.8 billion internet users, which is many times smaller than 1%. Well, both groups are relatively small compared to their user base, which is not a bad thing.

There is value in being able to have a 'one of it's kind' digital asset but perhaps a lot of that value is being overblown in the NFT market, whereas what we're seeing with the 'limited edition' digital items on MP is representative of the more sustainable level of valuations (enabled on a public database) without the excessive speculation associated with blockchain.

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