Earth2 – New Investment Opportunity or Scam?

This post might be a bit of a different direction than my previous posts, but I found it particularly interesting so I thought I would share and offer my thoughts. I have seen a bit of buzz about Earth2 within the gaming community (not that I am really a part of it, but my partner is, and I have heard second hand from them), so I decided to check it out for myself and let me tell you, it is a real rabbit hole when you start looking into it.

What is Earth2?

The summary from the website is:

Earth 2 is a futuristic concept for a second earth; a metaverse, between virtual and physical reality in which real-world geolocations on a sectioned map correspond to user generated digital virtual environments. These environments can be owned, bought, sold, and in the near future deeply customized.

A virtual 1:1 scale version of Earth is inevitable, and Earth 2 is the beginning of this exciting future. Phase 1 is now live and represents the central global body that aims to determine ownership of digital assets and property inside this futuristic virtual metaverse of Earth.

You can see a bit of a YouTube video explaining how it will work HERE

Well, that sure is a lot of fancy sounding words, and it definitely sounds impressive. According to their website, you can think of it like “The Matrix” or the virtual world from “Ready Player One” – I will at least give them points for ambitious goals. The development of the game will be undertaken over Three Phases.

Phase 1: Claim Land
Phase 2: Resources
Phase 3: Terrain

Phase 1: Claim Land

Phase 1 involves the official launch of the Earth 2 in game trading platform. Initially this trading platform allows people to buy and trade virtual land inside Earth 2. Because Earth 2 is geographically linked to the real world then popular places on our physical earth will attract more virtual interaction in Earth 2.

Essentially, there is a grid of 10m x 10m tiles laid over Earth (think of Google Maps) and you can “buy” one of these tiles and have ownership of it for future Phases of the Earth 2. I will go into more later about how the tiles are bought, traded, and the prices derived.

Overall, there will be over 5.1 trillion uniquely identified virtual land tiles spanning the entire surface of Earth. Tiles are categorised into Classes 1,2,3 etc – to be honest I am not sure exactly what this is for, I assume it is just because the first ones are deemed Class 1 and hence more prestigious/valuable than subsequent classes. I suppose it adds a bit more a scarcity factor.

Phase 2: Resources

Resources will be released in the first half of 2021 at the earliest possible point. It will involve the ability for Virtual Land to begin generating different types of resources that will be vital for building and economic purposes in Earth 2. These resources will be tradable between users for other resources or credits. In the future users requiring resources to build or for other purposes will need to generate or gather resources or buy them with credits from users who have stock. We will also be releasing details about general uses for the varying resources.

Each block of land you then own will allow you to generate resources (iron, fresh water, sand etc). I have no idea how these resources are meant to be used, but I assume that when the game is complete (after Phase 3) that you will be able to use these resources “within the game.”

Phase 3: Terrain

In Phase 3, users will be given first access to the Earth 2 terrain system!

As you can see, they are fairly limited in the details they provide for their Phase 3. But the general consensus from the online community is that at Phase 3 will be when people will be able to go “into” the world using some form of Virtual Reality or Augmented Reality. This is when it will be reaching something similar to the world seen in “Ready Player One.”

I will not go too far into Phase 2 and 3, because they seem to be a long way off (despite Phase 2 promised in the first half of 2021, I guess they still have a couple weeks left as I write this). Instead, I will concentrate on Phase 1 and how using Earth2 is a potential investment alternative or is it more likely to be a scam. I definitely have my own opinions on the matter, but I will present the arguments and facts as best as I know them and let you decide for yourself.

How Does This World Look?

To give you some idea of how this world looks currently, here is a screenshot of what you will see at the moment when you enter “the game” and look at purchasing “tiles”.

There is a zoomed-out view of Sydney, looking incredible as always. When you zoom in however, you can see the grid overlayed onto the may and see which tiles are already owned. They will be identified by the flag from the country of the person who bought them.

Once zoomed in, although it is hard to see, you can see that just about all the tiles within the CBD have already been purchased by people from all over the world.

People have used real money, transferred it to the currency used within the game (E$ = EDollars) and purchased tiles of land all over the world.

I will say that it is only really the CBD of Sydney that has all the tiles sold like that, if you go away from the city (to the inner west for example) then you find lots of areas without any tiles sold.

If you want to see how the World will look after Phase 3 is completed, then they have a bit of a YouTube video HERE. It is at least a relaxing thing to watch.

Currency in Earth2

To purchase tiles within the game, you need to use E Dollars ($E). 1.00USD = $E1.00

All transactions within the game are carried out using E Dollars.

How is Price Determined?

There are currently two ways you are able to buy tiles in this game. The first way is to buy currently unclaimed tiles directly from Earth 2. These prices are categorised by country, with every tile in the country (or geographical area) at the same price. For example, as I write this, all the tiles in Australia if I was to buy them from Earth 2 would cost be E$12.506.

This price is determined by an algorithm based on demand for the tiles, basically the more popular an area is, as well as availability of supply, will determine the price the tiles sell for. Prices for all geographical areas when sold from Earth 2 started at E$0.01. Australia is one of the highest, with currently the highest valued country being Vatican City where the cost is E$130.00 per tile.

The other way to purchase tiles in the game is the marketplace, which is trading between other users, and buying tiles that are already owned by someone else within the game. The price here can be whatever the seller wants to set it as and the market will determine the value. As you can imagine, there are some absolutely ridiculous offers currently on the marketplace (at least a few dozen where people are asking for E$10,000,000.00 for their tiles). But you can also pick up tiles within Australia at the “bargain” price of only E$3.59 per tile.

How Can You Make Money?

At the moment, I am only talking about Phase 1, so the only way to make money is to trade your tiles for more money than what you paid for them. In future phases there is meant to be other ways to generate money, but as they currently do not exist, I am not going to really go into them.

You may be asking that surely if the remaining Phases were in the not-too-distant future, that surely it would be important to include the ways to make money once they are implemented in this section. I will explain later on why I believe there is a significant flaw in their overall plan and that I do not believe Phase 3 will be a possibility in the next couple of decades at least.

How Does Earth 2 Make Money?

This is the more important question, because of the way it is set up, Earth 2 actually cannot lose money, at least not from their game. They have created a completely isolated marketplace where they have control of all the money that is changing hands and simply skim profits as the users trade.

Every time a tile is bought, there is a transaction fee, every time there is a trade between users, there is a transaction fee. Whenever you want to withdraw money, there is a fee involved (both a flat fee and a % fee). With all these fees involved, it is literally impossible for them to lose money, as long as they stay in Phase 1 of the game, even if they do get into Phase 2 and 3 of the game, I doubt there is any possibility of them losing money, but the stakes definitely become higher.

I think the best way to compare Earth 2 is to a Poker Game being held by Casino. Normally in a casino, although the House “always wins”, there is of course a chance that you can beat the house, you can get really lucky at roulette for example and win a few times and never play again. Over time, the odds of losing will catch up with you and probability says you will end up losing overall. This is the same as any other game at the Casino where you play against the House.

Poker is different however, you do not play against the House, you play against other players. For the casino, it is impossible for them to lose money as their money is never at stake, and a similar thing happens with Earth 2. For those of you who are not really familiar with Poker, I will go over a bit of a summary and compare where it is similar to Earth 2.

Both Poker and Earth 2 require you to convert your Dollars into a difference currency (either $E or Casino Chips)

At the end of each hand in poker, a rake is taken by the Dealer on behalf of the casino, this is their profit and is the equivalent of a transaction fee that is done when buying/selling tiles in Earth 2.

Earth 2 also has withdrawal fees when you convert the money back from $E back to Normal Dollars, this is not similar to poker, but is another way they will make money.

Where Does Profit Come From?

At the moment, Earth 2 is a completely isolated marketplace, as soon as you convert your currency into E$, there are no external influences that can change the total pool of money within the system (of course money is taken in and out, but that is irrelevant for this point).

This means that any profit you may make from “investing” in tiles, means that another user has made a loss. This is similar to Poker again, where if you have a single table with no new money bought in or taken out, then the same amount of chips is just transferred around the table where some people win, and some people lose.

Obviously, this is on a much larger scale, and money can always keep coming in over time, but it is the same principle where there is no income producing assets associated with the game, so in the end you are limited by the amount of money that is within the game at any one time. The only way you can make money in the game, is for other people to lose money.

As I said before, Earth 2 will still make money whether you make money or lose money, their profit margins are still secured so it does not affect them at all.

What Are You Actually Buying?

This is the main problem I have with this game, at the moment, as the game sits in Phase 1, all you are buying is a 10m x 10m section of Google Maps essentially. It really has no inherent value, it can easily be replicated and as it currently stands, there is nothing you can really do with it.

The only way you are able to make money out of it is to sell it to someone else for more money than what you paid. That means someone else needs to be convinced that what you own (which in my opinion is essentially worthless) is worth something of value.

Until Phase 2 and Phase 3 are released, I do not see any actual value in the tiles, and any value that  could be determined is speculative in the hope that Phase 3 is actually completed and the tiles can actually become income producing, or at least hold some sort of intrinsic value.

You could argue that there is some sort of scarcity (although over 5.1 trillion tiles does not exactly make it scarce), which might give it some sort of rarity value. But there is nothing stopping other people developing their own “Virtual World” and essentially doing exactly the same thing. Arguing that there is scarcity is not really an argument to me, and even then, just because it is rare, does not mean it is of value.

How Likely is Phase 2?

This is the potentially million-dollar question. Phase 2 is meant to be out in the first half of 2021, and I have not heard any hints that it is coming soon. It looks to be almost certainly delayed to an unknown time into the future.

What would actually change in Phase 2? At this stage, if Phase 2 was released, it would mean resources would become a thing and I assume depending on the location of your tile would mean how accessible different resources would be. This would then allow you to collect resources within the virtual world, I imagine that then a marketplace for these resources would be developed, and resources would be assigned values based on supply and demand (similar to how the tiles are currently valued). This will allow the trading of resources between the users of the game to happen constantly.

In my mind, I cannot envisage any way these resources could provide real-world value until Phase 3 is released. There is every chance that I am missing something, but just from my current position it just looks like imaginary resources within a virtual world. It would be the equivalent of obtaining all the Monopoly Dollars without actually playing the game.

I believe that Phase 2 will become a thing in the not-too-distant future, the developers of Earth 2 make their money out of transactions, by developing a new commodity to be traded, generating more transactions would only help their financial cashflow.

How Likely is Phase 3?

If Phase 2 was the million-dollar question, then the likelihood of Phase 3 would be the billion-dollar question. If Phase 3 ever came to fruition, and it was exactly as the game developers said it would be, then it would be one of the most significant achievements ever to happen within the gaming world (maybe in the world in general – I am not exaggerating, it would be an incredible achievement).

Let’s look at some numbers of what actually needs to be achieved for Phase 3 to become reality.

Earth 2 once it has reached Phase 3, aims to create a fully immersive, 3D virtual reality version of Earth that can be explored by millions of players, with players owning virtual land, building virtual buildings and having virtual adventures.

A spokesperson from Earth 2 has claimed it will “show the Earth 2 terrain system which is like MS Flight Simulator 2020 + more detailed than Red Dead Redemption 2.”

Without knowing too much about games, basically MS Flight Simulator 2020 is a real-world flight simulator where you can fly all over the world, however the maps are only estimated based from satellite view where you do not interact with the world below as you fly over it. Red Dead Redemption 2 is an action-adventure game where you can explore a small area (relative to the size of Earth) and interact with the environment and surroundings.

To put Earth 2 in perspective:

MS Flight Simulator 2020 is 150GB large and covers 510 million square km(the size of the Earth)

Red Dead Redemption 2 is also 150GB large but it only covers a map size of 75 square km.

To get a game which would be the size of MS Flight Simulator 2020, with the level of detail of Red Dead Redemption 2, the game would need to be 1,020,000,000GB. I am definitely not a gaming person, but that number is obscenely large and even with my limited knowledge I know it is simply not feasible with current technology.

I looked up the largest video games, and currently the largest one is Call of Duty: Modern Warfare at 231GB. Earth 2 would need to be over 4 million times larger than the largest game to meet what it has claimed.

With current technology, ultimately, I cannot imagine that Phase 3 is even a remote possibility within the next 10 years. There may be significant improvements in the next 20 years or so, that might make it achievable.

To compare it to 20 years ago, in 2000, Diablo II came out and it had a file size of approximately 1GB. There has obviously been significant steps forward within the gaming industry and now a game may take up to 100GB. That is still only 100x larger in terms of file size, and Earth 2 is over 4,000,000x larger than current game sizes.

Just for fun, I want to go back even further, let’s look at Pac-Man. Pac-Man first came out in 1980 and had a file size of 24kb (I know, incredible right, even now a screenshot is at least 10x larger than a whole video game).

Red Dead Redemption 2 is 150GB, compare this to Pac-Man’s 24kb, Red Dead Redemption 2 is over 6 million times larger than Pac-Man. This is the sort of scaled up comparison that needs to be considered to even begin to accomplish Phase 3 of Earth 2. Think of the step up between Pac-Man and current video games, this is what needs to happen to current video games to be able to achieve Phase 3.

There are other reasons why I do not believe Phase 3 is likely to happen, but this is definitely the most significant. I am always happy to be proven wrong, and if they were able to achieve Phase 3, as promised, then it would be incredible, and I would be more than happy to admit that I was wrong in my judgements. As it stands now however, I do not see this sort of thing being even remotely feasible within the next 20 years.

Competition

You might be thinking, that alright, well it might be a couple decades away that the game can fully take off. Maybe it would be worth getting in early and holding and expecting prices to skyrocket once Phase 3 does come to fruition. This makes sense, and while it may be a speculative approach to investing (probably more gambling at this stage), it would be comparable with buying shares of low-priced resource companies, hoping they strike Oil/Coal/Gas/Gold or whatever they are looking for, only for their price to then rocket to the moon.  

The issue then arises however, is that these sorts of games can easily be replicated, and mass produced, leaving you with countless options to pick from. And without being able to look into the future, I could predict that Earth 2 has such an ambitious goal that it will take too long to be realised and be able to be the first product to reach the completed stage. I imagine that a similar product will arise, on a smaller scale – maybe just the size of a medium country. Already the file size requirements are dramatically reduced, and all the work needed to put into it is exponentially reduced, meaning it should be available earlier, even if it started later.

In fact, already there are these following options which provide something very similar to Earth 2. It does not take long for others to realise that Earth 2 is a money-making machine, that other people can come in and exploit for their own gains, in fact it reminds me a lot of cryptocurrencies, which I believe at last count is approaching almost 10,000 different types.

PLANETIX
After Earth
Mars Genesis
vPark
Meta Earth
Decentraland

I will give some credit to Decentraland however, in that game you are able to actually enter a virtual world, but it is quite basic and gimmicky, but at least it exists.

All of the others are essentially the same as Earth 2, you are purchasing tiles or blocks, or whatever you want to call them, in a virtual world with the hope of one day being able to use virtual reality to enter the digital world. I have no doubt that over the next few years, more of these will pop up regularly, promising the world (virtually anyway).

I also have no doubt that one of these (or more likely one that does not exist yet) will take off and become extremely popular, but at this point in time it is unknown which one will be the winner. Remember all the earlier social media sites before Facebook became the dominant one (MySpace, Google+ just to name a couple). Earth 2 could easily become the equivalent of MySpace – poor Tom.

Conclusion

There is definitely a way that you can make money out of Earth 2, and that is at the expense of other users. If you do get involved and purchase tiles in the game, then all you need to do is wait for someone to come along and pay more for your tiles. Easy as you like, you have made money. But what happens when the buzz stops? What happens when there is nobody there who wants to buy your tiles? Suddenly, there is plenty of supply, but there is no demand. As with any market force, the price drops.

The goal of the game during Phase 1, is to not be holding onto the tile when the demand drops, because then you might find yourself holding something that is worthless. To me, for these reasons I cannot imagine Earth 2 is any sort of way to invest and realistically expect long term gains. I believe it is the equivalent of speculative cryptocurrencies which at the moment only go up and down based on market demand, there is no real value of these in the world, they are only assigned a price because of what someone is willing to pay for them. I am not including the more mainstream cryptocurrencies (like Bitcoin and Ethereum) in that analogy because you can at least use those as currency to purchase goods.

At this stage, until Earth 2 reaches Phase 3 (which I do not believe is likely, but happy to be proven wrong), you will not be buying anything of value, you are only buying something that has been created virtually, that can be replicated easily and offers no value as an asset at all.

I am not going to go as far as say that Earth 2 is a scam, because at the moment they are not lying about what they are providing, and I will give the developers the benefit of the doubt that maybe something in the vicinity of Phase 3 might be on the horizon, but I just fear that the horizon may be a long way further off than people would hope.

Further Resources

There are other people on YouTube who know a lot more about gaming and feasibility of Earth 2 than I do. I have linked a couple examples of some videos that have been made that will go into some more detail on some aspects of the project below.

BigfryTV – Earth 2: A Deep Dive into the Biggest Scam in Gaming History

Josh Strife Hayes – Earth 2 – Deep Dive (is it a scam?)

Skiazos – Earth 2: Super SHADY Terms and Conditions! Extensive Deep Dive

There are other videos available online as well, but I will warn you now, that there are a lot of people out there spruiking Earth 2, believing it to be the best thing to ever happen to the gaming industry. It is worth nothing, that these people are also financially invested within the game, and already own tiles within the game. As I said earlier, the only way for them to make money is to get other people to buy their tiles, so they want to keep the buzz and excitement going within the community.