The Newest Way to Earn Passive Income in Crypto? Rent Out Land in the Metaverse.

When most investors think of earning passive income with crypto, they immediately think of staking. But there are a variety of other ways to generate passive income, especially if you are active in virtual metaverse worlds such as Decentralized country (MANA 1.61%). In early December, Decentraland formally launched a new passive income option that may appeal to metaverse users: virtual property rentals for owners of digital land.

In other words, if you already own digital land in the virtual world of Decentraland, you can now rent it out to others who may want to set up a short-term presence in the metaverse, perhaps for festivals, product launches, or community events. It’s an interesting concept because it works similarly to real-world rental property, which has always been a popular source of passive income. So is this metaverse-inspired passive income opportunity right for you?

High risk

While buying virtual land in the metaverse sounds interesting, it also has a high entry barrier. If you’ve never explored a metaverse world like Decentraland, you’ll need to be familiar with how these worlds work and how they differ from traditional role-playing video games. You’ll also need to familiarize yourself with metaverse land prices, which can range from a few thousand dollars to more than $1 million, and then familiarize yourself with a map of Decentraland, which has more than 90,000 parcels of land.

Since all transactions in Decentraland take place using MANA, the in-game management token, your rental income will be in the form of Decentraland tokens. This comes with some risk and volatility, given the price swings that are possible in metaverse cryptos. So you will have two things to worry about: falling land prices and possible currency devaluation.

At the end of 2021, the metaverse was all the rage, and Facebook even rebranded itself as Meta platforms (META 0.49%). Celebrities and big brands announced their involvement in the metaverse, and the future seemed limitless. Paris Hilton headlined the first ever Metaverse Festival, which featured more than 80 artists in Decentraland. But then came 2022, and things looked a lot tougher for the Decentraland token, which dropped 88% in price this year.

High reward

However, this high risk comes with potential high rewards. Experts such as consulting giant McKinsey, for example, continue to predict that the metaverse will be a nearly $1 trillion market opportunity within a few years. And there is certainly a lot of interest in what the metaverse is, and how to engage with it. According to the latest study by Capgemini, a multinational information technology services and consulting company headquartered in Paris, more than 90% of consumers are curious about the metaverse.

Image source: Getty Images.

The way I see it, the Decentraland passive income opportunity boils down to this: Get in early while people are still figuring out the metaverse, buy land while it’s relatively cheap, and then transform your piece of land into something that brands and creative influencers will want to use for one-time events. If you’re lucky enough, you might find some brands, artists, musicians or small businesses keen to rent Decentraland land parcels from you for brand launches, festivals or conferences.

Is renting virtual property worth it?

For now, this new “passive” income opportunity sounds way too “active” to catch the attention of casual investors. And it certainly requires too much of an upfront investment to be viable for most people just getting into crypto for the first time. The average cost of a parcel of land in Decentraland today is $2,380.

Unless you are already an active user within Decentraland and have a social network in place, I don’t see how this can be a recurring source of passive income. Renting virtual property is not like real rent where you can lock in rent for 12 months at a time. Even though DJs, fashion designers and streetwear brands are beating down the digital door to rent from you in Decentraland, it looks like you’re going to have to push quite a bit to make recurring rental income a reality.

Why not just put MANA on the line?

Rather, it may be easier to just stake your Decentraland tokens to earn passive income. For example, right now you can earn 3% stake rewards on your Decentraland tokens via some popular cryptocurrency platforms. It might not sound like much, but it’s easy and it’s passive.

So, as of now, I am looking into renting out virtual property as a source of passive income. While Decentraland is certainly an interesting crypto to consider as a possible recovery candidate in 2023, I need to see more activity within the metaverse before I can recommend the Decentraland token as a buy, or to rent virtual property as a viable source of passive income.