Metaverse: Is Virtual Land the next Property frontier?
In the metaverse, virtual real estate is being sold as NFTs, and it's already generated a billion-dollar market. We explain why, and what the future looks like!
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Hello Metaverse: Is Virtual Land the next Property investment?
Property investment in the metaverse
What is virtual real estate?
A significant portion of most people's investing portfolios has traditionally included real estate. Most of that property investment, if not all of it, has been "real." But the modern property investor might also be thinking about something a little less tangible: virtual land. For investors who aren't hesitant to take a risk on cutting-edge technology, building a virtual real estate portfolio may be the next big thing.
The real estate investment market really has seen a change as a result of the introduction of the metaverse. That's because it's now possible to purchase digital land in the virtual world, and doing so has a surprisingly high value.
Since the creation of the metaverse, non-fungible tokens (NFTs) representing virtual land have gained popularity. Some virtual land plots are selling for millions of dollars, proving that there is gold in those digital hills.
All virtual property and land exists in a digital environment called a metaverse - a very simple comparison would be a game such as The Sims. In a typical metaverse, you can communicate with other players through a character that represents you in a video game or digital life simulation.
The digital landscape, or the geography and actual area, that players can travel through in the metaverse is then referred to as virtual land.
A virtual property can be as basic as a 2D pixelated setting, as abstract as a white or black 3D box space, or as detailed as a 3D landscape filled with mountains, oceans, and pretty much anything else you can think of.
Property in the metaverse, or should we say virtual estate, is already a lucrative industry. Well known and influential celebrities like Snoop Dog and major corporations like JP Morgan, HSBC, and Samsung have already purchased virtual areas of property that they plan to use for a variety of projects. Early investors have already reaped significant rewards—at least on paper. On Decentraland or the Sandbox, two of the largest metaverse platforms, the average cost of the smallest plot of land up for sale was less than $1,000 less than a year ago. It currently stands at about $13,000.
Every activity we can perform in the real world will have a "digital twin" in the metaverse that we can interact with without leaving our homes. We will use these spaces more and more for work, play, socialising, and education. This includes making investments and earning money, and just like in the real world, purchasing real estate will be one of the most well-liked methods of doing so.
How does it all work?
Much like 'real' property investment, unique land with a deed that exists in the virtual realm is known as virtual real estate. As we mentioned, this environment can be compared to a video game, but with more social and communal elements.
One of the reasons it's so popular is because virtual areas don't require cryptocurrency - many video games have provided a kind of virtual land for decades. Virtual property might feel "open" or "closed" depending on the design of a particular metaverse. For example, while some metaverses, like "World of Warcraft," offer a more smooth, open-world experience, others, like the first two "The Sims" games or VR Chat, will display loading screens when players switch between environments.
How to invest in digital land
Plots of virtual land sold as NFTs can either be purchased from the developer's website or purchased on a secondary NFT marketplace like OpenSea, however the buying process might vary greatly depending on the game and corporation behind each metaverse.
This virtual property investment is actually a NFT that belongs to you, proving your ownership as each one is unique and has a different digital signature.
What makes virtual land so unique?
It's important to remember that the idea of virtual land has been around for a while. Expanding on our earlier example, life-simulation environments in "The Sims," which was published more than 20 years ago, were a major sensation because they allowed users to create characters, purchase virtual land, build homes, and essentially live a virtual "life." Since then, it has given rise to three fruitful sequels with increasingly intricate and expansive virtual worlds—all of which are single-player games.
Why are people buying it?
In a post-pandemic world, the metaverse has transformed how people attend online events and, in the process, has made it possible for owners of virtual properties to generate additional income. For instance, people can now earn enormous income without ever leaving their living rooms by renting out or selling their digital property to prospective customers. Many individuals are thrilled about the possible advantages, especially because some virtual pieces of land are being offered for sale for as much as $2.4m.
Virtual land space is receiving more attention in part because of its lower entrance barrier. Property can cost a lot of money in the 'real' world, but anyone can purchase a basic plot of virtual land for just a few hundred pounds. Not to mention how simple it is to purchase virtual land as no paperwork or taxes are needed. You are even able to rent it out just like you would physical land, and you don't even need to maintain it.
Pros and cons
Benefits of investing in metaverse property
There are two major reasons you might desire to own land in the metaverse. The first option is generally the safest; you want to use it for yourself, for something like constructing a home or place of business. In the metaverse, "dwelling" refers to having a location to call home where you can display your belongings and perhaps even invite people over to hang out. In the early days of the internet, before everyone switched to social media, it's similar to having a personal website. Or, it's like your home in Animal Crossing.
Another motivation is as an investment, and this is where things could become a little dicey as there is obviously no guarantee that its value would increase like with any investment. The average price of metaverse real estate has increased by a factor of 10 over the previous year, so we certainly appear to be in the midst of a gold rush. Due to the simple belief that it will become increasingly valuable as more people become interested, many people are purchasing digital land now. Even more people are buying to rent now that a strong rental market is developing. Your virtual real estate NFT guarantees your ownership and allows you to resell the property to another owner. It also records all the transactions for that property automatically, eliminating the need for title work. It is basically a 21st-century digital deed.
Challenges and Risks of Investing in the Metaverse
Although the metaverse is predicted to expand significantly over the coming years, it is still a young industry that is far from being stable. One reason is that all of your land and assets on a metaverse platform vanish if it goes permanently down.
The question of valuation is another one. How to evaluate a piece of land with artificial scarcity and an unknowable future worth is a persistent conundrum! Metaverse land is vulnerable to fluctuating situations since its value depends on extremely volatile cryptocurrency.
What is the outlook for property investment in the metaverse?
This will ultimately rely on how the metaverse develops in the long run. Undoubtedly, a number of extremely significant and powerful companies, like Microsoft, Nvidia, and Facebook (now, of course, known as Meta), are placing significant bets that this is effectively the "next generation" of the internet. Digital real estate is likely to become an increasingly interesting and practical asset if that turns out to be the case and the metaverse ends up being as significant to business and society over the next 20 years as the internet has been over the last 20.
We clearly get excited by the different ways that digital technology offers us to grow audiences and develop innovative new products and services, and the metaverse may be the next big thing since it is even more immersive and time-consuming than the web and social media that came before it. This suggests that the market for digital land and real estate could have a bright future.
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