Gm and welcome back! This is the first post since our 3-piece series on Metaverse land in which we outlined our current thoughts on valuation, in-house DAO squads, and revenue generation. PangeaDAO is focused on developing and building on our land assets while connecting with brands as long-term tenants. The purpose of this article is to share PangeaDAO’s current Metaverse land investment thesis that will guide our initial treasury allocations post-launch. It will be a living document that we will be evaluating actively and will regularly undergo updates through monthly reviews and community calls to reflect any adjustments in Pangea’s views.
The Metaverse has a long way to go. Aside from a few extreme cynics that believe it’s merely a fad, we can mostly agree there’s plenty of upside and growth opportunity. It doesn’t feel like all that long ago that there were few options across the ecosystem of decentralized digital worlds. Today, the long-tail of digital worlds is growing exponentially and the testing grounds should continue expanding for the foreseeable future.
We believe the investment entry into Metaverse land is quite good in terms of timing. Facebook’s rebrand to Meta set blue chips’ digital land on a tear back in October 2021, which has cooled off considerably while in-world building and content development has begun. Despite overall decreases in sales, the average price per parcel has not followed that trajectory. Land has changed hands over the last several months from flippers into more steady hands and now begins the development.
We at PangeaDAO are elated to play an active role in democratizing access to the Metaverse through our token launch, followed by active Commercial development of the Treasury’s Metaverse land assets. Our positioning at this ultra-nascent stage is critical to ensure that the trajectory of PangeaDAO’s success aligns with the growth of the Metaverse. The truth is that we cannot be everywhere and no one can be (or should be). In order to strategically position PangeaDAO (and our squads PangeaCreators & PangeaPartners), we have 4 key principles by which our initial allocations will follow.
Metaverse digital land is a type of NFT; fundamentally, it’s just space in a specific digital world. There are different flavors of space within the Metaverse digital land category including general purpose, gaming, homes, storage, advertising, etc. Some of these spaces have limited functionality in terms of what can be designed, written, built, executed or shared. The web3 game Crypto Unicorns, for example, offers land that has zero functionality outside of the game, meaning a brand could not advertise or sell a product on the space and there are no build-to-suit structures on the land. In addition, digital land within the gaming vertical is pegged to the demand of the game due to the limited functionality.
The digital land that Pangea will focus on has the commercial viability to both attract long-term tenants and offer functional flexibility to build storefronts, advertise, and provide customers with unique, customized experiences in the Metaverse. There are 200 million businesses on Earth; many of these have meaningful marketing budgets that will find a consolidated, ultra-impactful return on investment in a dynamic digital space. It is worth noting that augmented reality parcels overlaid on Earth could play as much of a role in our strategy as immersive digital worlds. Depending on AR glasses technology and the operational rollout (which remains unclear), we may be experiencing the Metaverse on many different levels. In either type of experience, it must be commercially viable.
Pangea believes that “the land is the moat”, meaning that ownership of the digital space provides the differentiation and protection from external value extraction and/or leakage as well as providing opportunities to create value on the land. As we said in Edition Two of Pangea’s Virtual Land series, “Content will transform virtual land from an inert, speculative asset into a productive one.” A portfolio of unused ‘blue chip’ land does have value as collateral, but that would be leaving too much potential on the table. Content gives these spaces life and purpose. If “the land is the moat”, then what get’s value over the moat and onto PangeaDAO’s side of it? We believe it is the skilled creators that plan, design, and execute the builds on the land. The architects, designers, 3D asset builders, copywriters, event planners, musicians, and Metaverse consultants that lower the drawbridge to attract and activate brands, clubs, services, etc. PangeaCreators and PangeaPartners make our digital properties within the Treasury sing. PangeaDAO professionalism and operational excellence are essential to executing for our customers and stakeholders.
An essential characteristic for our assets is compatibility with Decentralized Finance (DeFi). The value that can be unlocked within our digital land while vacant or occupied is a key driver in growing Pangea. To the uninitiated, DeFi is a new system of interlocking protocols and applications that interact with one another, giving layers and layers of utility to digital assets. A single digital asset can engage lending, borrowing, staking, yield farming, liquidity providing, and more. ETH, USDC, WBTC, and other fungible (identical) ERC-20 tokens are the most common liquid assets in DeFi. Today, ‘blue chip’ NFTs are entering DeFi as legitimate pieces to the puzzle. In March, 101 NFTs from the CryptoPunks collection were used as collateral to borrow 8MM DAI (on-chain native currency near $1 USD) at 10% APR for a 30 day duration from MetaStreet. One day, those NFTs were sitting idly in a wallet; the next day, the owner is yield farming with 8MM DAI, presumably at a greater yield than 10%. As this market becomes more liquid and more competitive, 10% APR may become 3% APR. In time, more NFTs outside the ‘blue chips’ will earn the right to enter DeFi. Specifically, we’re interested in how Metaverse digital land NFTs enter DeFi… and more importantly, when. The order by which these opportunities arise are vitally important to Pangea’s operational strategy. Pangea plans to engage as many digital assets as possible. A $100MM Treasury of digital assets may have the financing power of $170MM, depending on collateralization rates on blue chip digital land. To this end, the assets that we select for our Treasury will have this potential.
PangeaDAO intends to exist forever; fundamentally, a DAO can exist forever. In order to position Pangea for the long haul, the majority of our Metaverse land allocations will be in the top 10-15 digital worlds. We do expect the top 15 to look very differently over the years, but we will be allocating brainpower to continually researching both emerging and in-line worlds. It is impossible to know which digital worlds will be around in 20 years; that may not be the appropriate time horizon to determine long-term viability. Decentraland, for example, has enough critical mass in terms of community, development, investment, and marketing to safely make it through the next 3-5 years. This principle is less of a science, but there are some factors to look at to triangulate and form an opinion.
The 4 key principles above are intended to strategically position PangeaDAO shortly after launch with initial allocations into Metaverse digital land. On an ongoing basis following our launch, there will be opportunities to re-allocate or execute on special circumstances. Of course, we’ll seek to remain as agile as our governance proposals and voting allow. Things happen quickly in Web3. As Web3 natives, we intend to do interesting things that leverage our knowledge of the space and relationships with other natives.
In our Edition One on land valuation, we discussed various factors that could lead to differentiating parcels across and within digital worlds. These include and are not limited to location, size, scarcity, popularity, team & roadmap, leadership structure & investors, and DeFi compatibility. Some of these are embedded in the 4 principles we described early in this thesis, but some have been omitted. These omitted factors simply may not be how we declare that a digital world is in our wheelhouse, but may be incredibly helpful when we narrow down our search for particular parcels within that world.
While Pangea will invest in land that has untapped potential that can be unlocked through various custom builds, we will also look to invest in liquid assets in the form of floor land and prefabricated builds. These assets will be easier to appraise, which will make realizing opportunities such as collateralizing or fractionalizing Pangea’s land much more efficient, as well as making Pangea’s treasury value more tangible, transparent, and accurately displayable to our community. These types of assets will diversify Pangea’s land holdings, allowing us to have exposure to entire virtual worlds rather than just specific districts/areas within them. These liquid assets will also form a synergistic relationship with our prefabricated builds, which we see as a significant opportunity for PangeaCreators. Leveraging scene “skins” for digital land that can be modified, bought, sold, traded, rented, and more will allow potential customers to dip their toes into the Metaverse without making sizable and restrictive commitments.
At this point, you may be wondering what digital worlds fit within our framework principles for initial allocation. Due to the endless news cycle and also competitive disadvantage, it wouldn’t be in Pangea’s best interests to share exactly what we intend to do on Day 1, nor would it remain accurate. What we can offer is a short list of digital worlds that fit within our framework. It is not exhaustive and it is not indicative of our plans. We may strategically leave a few out because, at the end of the day, we want to win.
In alphabetical order: Decentraland, Fluf Burrows, Highstreet, Monaverse, Otherside (BAYC), OVR, Portals, Sandbox, Somnium Space, SuperWorld, Voxels (formerly Cryptovoxels), Wilder World, and Worldwide Webb.
Thank you for reading Pangea’s Investment Thesis, we hope you enjoyed and have a better understanding of how Pangea thinks about Metaverse land and the most effective commercial opportunities. Make sure to follow our Twitter and engage with our Discord to stay up to date with all the opportunities to get on the allowlist. See the roadmap on our website to understand our plans following the token launch. Stay tuned for more updates to come as we rapidly approach our launch date!
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