Should you invest in Earth 2?
Earth 2 was launched in December 2020 with a similar premise like the Second Life social network where users would be interacting over a digital copy of the real world. Although there are not many ways to interact with this digital world, the website has attracted millions of users in just weeks. Individuals are also investing in digital real estate and speculate on how much money they might make.
It is worth it to invest?
You should expect to lose your initial investment as with all investments. However, it is not certain that Earth 2 will succeed.
We have so far seen that digital currencies can be as strong as their digital worlds. Given that Earth 2 is not a world for real estate speculation, it seems like a risky bet.
Second Life and World of Warcraft are two examples we consider to be comparable. We don't believe there is any value in buying land in Earth2 as it doesn't offer the same level of interactivity or game play as these other games.
Earth 2 may develop these game mechanics in the future and create a valuable virtual economy. However, we did not see any instances of successful in-game economies without first launching a winning game.
It is difficult and risky to build a game that has a virtual economy. There are hundreds of successful game developers. We looked into the Earth 2 team and noticed that they have accomplished advisors like Dillion SEO. Although they appear to be a well-rounded team, the size of their team is not comparable to other companies that have created successful virtual economies. There were however other successful games, such as Minecraft, that were developed by small teams.
Capabilities & assets
The land bought on Earth 2 has no economic or utility value. The Earth 2 team created a marketplace for reselling land, and other users could buy up land to make profits for investors. We were unable to find independently verified metrics about the market's liquidity and we would like to learn more.
This is a risky investment from both a value investing and underlying assets standpoint. This is more risky than investing in a startup, where the investor would be entitled to claim on the startup's equities. It's also more risky than bitcoin investments where the bitcoin supply is not programmatically fixed. Virtual land investments offer no benefits other than the possibility of being able to sell the land at a later date.
Earth 2 launches a winning game
The game is successful enough to create a virtual economy
The land you have purchased is valued higher
Or if someone would purchase your land before any of these things happen. These sentences contain a lot of ifs, even compared to risky investments like early stage startup investing.
Is it a Ponzi Scheme?
While it may look like one at the moment, it’s important to consider this - Bitcoin could initially be considered a Ponzi scheme. However, a decentralized network such as Bitcoin has superior dynamics to an in-game currency.
The supply is limited and managed decentralized.
Transactions can be done via P2P and exchanges
Transparency is possible in transaction history
It allows value creation through new use cases, such as instant, free money transfers
If developers can create useful applications on top the Earth2 software it will no longer be considered a Ponzi scheme. As with any investment, you should be prepared to lose anything you invest in it.
