What do you get when you mix traditional real estate with the virtual world? A stable market that attracts new investors.
Even without its digital counterpart, the real estate market has always been known for its longstanding stability and growth. Investors are always on the hunt for the next big thing, and real estate transactions in the virtual realm could be just that.
As people find themselves moving their lives online, the demand for virtual spaces has increased. The digital real estate industry is already on the path to becoming a multibillion-dollar industry with predictions to double in value over the next several years. This new reality is opening up a plethora of possibilities for investors, particularly now that the metaverse offers the possibility of owning virtual real estate.
In this article, you will learn about:
- The meaning of virtual real estate.
- Metaverse virtual real estate.
- How investing in virtual real estate works.
- The pros and cons of investing in virtual real estate.
- Why people might invest in virtual real estate.
Virtual real estate can be defined as intangible virtual properties that are made accessible for purchase and investment on the blockchain. Virtual property essentially refers to intangible objects that can be traded in the real world for fiat money or cryptocurrency.
For example, you may trade papers, high-ranking websites, and domain names.
When it comes specifically to virtual real estate, you can obtain plots of land in the metaverse with the purpose of developing property or creating income-generating properties such as leasable buildings or interactive venues.
For crypto and metaverse newbies, virtual real estate can sound like an oxymoron since it requires the blending of physical property and the digital environment. Even though blockchain-based real estate in the digital realm is not quite physical, it provides the same thing to the person purchasing it – the right of ownership to a space.
The fact that there are even virtual real estate developers providing leasing and selling services, advertising these virtual spaces just like regular realtors would, proves that the concept strikes a chord with consumers.
Once you purchase virtual real estate, you own a unique parcel of land. Similar to physical property, virtual land is limited in supply. Therefore, digital land can be just as valuable as land in the real world.
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Even though it may sound confusing at times, virtual real estate investments are really quite similar to real-world property investments and physical properties.
The term metaverse has been tossed around a lot recently.
Ever since Zuckerberg introduced Meta, the notion of a digital world gained massive popularity. It has been obvious from the start that the metaverse will expand markets, soften or totally remove barriers to entry and provide new revenue streams.
The metaverse consists of platforms that make it possible for people to build up fulfilling virtual livelihoods. From video games, marketing, art galleries, shopping centres to business meetings and sport events, the metaverse can provide pretty much everything.
By adding real estate to the metaverse, the virtual world became a three-dimensional space. Real estate in the metaverse is essentially a non-fungible token (NFT) that provides the holder with virtual proof of ownership over land in the digital environment.
Digital land in each metaverse platform is limited to a particular set of numbers similar to real world transactions. That is one of the reasons the metaverse real estate market experienced a sudden boom since investors wanted to get their foot in the door before they lose the best spots. After all, the ‘location location location’ mantra of traditional real estate comes in handy here as well.
For example, Snoop Dogg’s digital real estate attracted a lot of people so Snoop Dogg soon got a neighbour at the Sandbox metaverse that paid the price of $450,000 for a piece of land.
Since virtual real estate is secured with digital proof of ownership in metaverse platforms in the form of NFTs, your purchase is recorded on the blockchain. Therefore, similar to the real world, there is a title for each piece of real estate or land with recorded sales and valid proof of ownership.
To explain the matter further, there are two types of properties you can purchase in the metaverse, namely lands and estates. Digital land, as the name suggests, refers to a broad empty virtual space with nothing on it. On the other hand, estates refer to properties that encompass a plot of digital land plus something extra on the land.
Just as in traditional real estate, extras can be, for example, all sorts of buildings, billboards or parcels of land that are joined together.
Metaverse real estate is a virtual ecosystem in which novel technologies such as augmented and virtual reality blend together to provide a real-world experience to users.
Some major decentralized platforms for buying and selling virtual lands are Decentraland, Otherside, Somnium Space and the above-mentioned Sandbox. These are all competitive metaverse platforms that pose interesting prospects in the virtual real estate market.
We mentioned that similar to traditional real estate, metaverse real estate is not unlimited. This comes to many as a surprise as it would be logical that a digital space created by developers has the capacity to expand without any limits.
However, that is not the case as the amount of digital property is determined beforehand by creators of the metaverse. Metaverse real estate derives a good portion of its value from its scarcity feature. In simple words, if it is limited it is more valuable. In that way, it resembles the traditional real estate market.
$5 million
The biggest metaverse real estate purchase made by Curzio Research for 19 commercial properties in TCG World.
If the metaverse-based real estate market was limitless, it wouldn’t hold any real value and investing in it wouldn’t be a good option. Moreover, most metaverse platforms are not under the control of a central authority. Instead, decentralised autonomous organisations (DAOs) govern them. Hence, even if the developers decided to expand the land and estates on the platforms, the DAO would still need to say yes to such a move.
Trading virtual real estate in the metaverse is really not that difficult. Most platforms can be easily accessed with a laptop or desktop computer, and it is really simple to examine offered virtual property.
The first thing you need to do is to find a piece of virtual estate you like on the chosen platform. The second step requires opening a digital wallet in which you store your digital assets and the cryptocurrency you use to purchase the virtual piece of real estate. For example, if you are on the Decentraland platform, you will need to purchase MANA coins, and if you use Sandbox, you will need SAND coins.
Once the cryptocurrency is in your digital wallet, you can proceed with the purchase. The platform needs just a few seconds to verify the transaction and once that is done, consider that the virtual property is legally yours as it is backed up by an NFT as proof of ownership.
Usually, investments come along with pros and cons. Investing itself is a risky move, but sometimes high risks lead to great rewards.
Similar to the traditional real estate market, the virtual counterpart comes with a bunch of promising features. Without the issues of months of construction, a new revenue stream has been opened worldwide.
For example, you can earn by leasing out your virtual property to companies or brands that need a virtual working space in the metaverse. Taking into account that the supply is limited, if you get your hands on a good location in the metaverse, the investment should be paid off and more.
Additionally, you can sell your land for a price you dictate. Further, purchasing virtual real estate is very accessible since anyone can invest. In addition to its flexibility and decentralisation, there are less barriers to entry.
Even though it sounds exciting, investing in virtual real estate has its cons as well. It is still considered as a risky investment because the metaverse is still in its infant phase. Many consider it to be a highly speculative platform as no one can know what will happen in the next few months.
Taking into account that platforms run on cryptocurrencies and the crypto market still being very volatile, the virtual real estate market within the metaverse is not yet a market with a high degree of stability.
Even though the metaverse is still in an early phase, many believe that the increase in real estate purchases in the virtual environment will make it more lucrative over time.
Digital real estate may turn out to be even more profitable than traditional real estate if you take into account that they provide rental revenue and serve as scarce resources in a market that is growing and attracting a lot of attention.
