Spending thousands to millions of dollars to buy fictitious “land” in Virtual Real Estate in the Metaverse certainly sounds absurd.
However, lately, virtual land investment in the Metaverse has become increasingly popular. PwC, for example, is one of the newest entities to follow this trend by buying properties in the virtual game world of The Sandbox for a nominal amount that has not been announced to the public.
If similar investments made by other investors can be used as a guide, the nominal issued by PwC may be colossal. For example, an investor recently purchased a $450,000 piece of land in Snoopverse – a virtual world developed by rapper Snoop Dogg at The Sandbox.
Connecting the Real World With the Virtual Real Estate in the Metaverse
Let’s refresh what “metaverse” is. This term became widely heard when Facebook decided to change its name to Meta in October 2021. Other companies such as Nike and Microsoft have also taken steps to develop this virtual world.
Metaverse describes a 3D virtual world vision that connects the natural world and the digital world through technologies such as virtual reality (VR) and augmented reality (AR). This immersive environment (which blurs the boundaries between the natural and virtual worlds) will be accessible via VR headsets, AR glasses, and smartphone apps.
In this virtual world, users can meet and communicate using digital avatars, explore new areas, and create content. The basic idea is that the Metaverse is expected to develop into a collaborative virtual space that allows users to socialize, play, work, and learn.
Currently, there are several metaverses in the form of platform games such as The Sandbox and virtual worlds such as Decentraland.
Like a website that is part of the entire two-dimensional world wide web, these Metaverses will eventually form a more comprehensive and interconnected network of Metaverses.
Most importantly, just like in the real world, the Metaverse allows users to buy several virtual goods – including real estate.
Virtual land as NFT
Generally, transactions in cyberspace are monetized through cryptocurrencies. Apart from cryptocurrencies, non-fungible tokens (NFTs) are the primary method for monetization and exchange value in the Metaverse.
NFT is a unique digital asset. Although these are generally digital goods or works of art (e.g., videos, pictures, music, and 3D objects), NFTs can also be assets – including digital real estate. On platforms like OpenSea, which allow users to make NFT buying and selling transactions, there are now digital assets in the form of land or even houses.
To ensure that digital real estate has value, the supply of that asset is constrained – an economic concept known as “scarcity value.” For example, Decentraland consists of 90,000 plots measuring 50 x 50 feet (15.24 meters).
As far-fetched as it may sound, the increase in the value of virtual real estate investments has been proven. In June 2021, a digital real estate investment fund called Republic Realm reportedly spent more than US$900,000 to purchase a plot of land in Decentraland.
According to DappRadar, a site for tracking NFT sales data, the transaction was the most expensive virtual land purchase in Decentraland’s history.
A few months later, in November 2021, Metaverse Group bought a plot of land in Decentraland with US $ 2.4 million value. The total amount of land purchased by the Metaverse Group was only 116 plots, or below the 259 plots purchased by Republic Realm.
Decentraland is not the only platform experiencing asset appreciation. In February 2021, the virtual game world Axie Infinity sold its nine plots of land for the equivalent of US$1.5 million. In November 2021, properties on the platform experienced a valuation increase of up to US$2.3 million per plot of land.
However, despite the skyrocketing value of virtual assets in the Metaverse, investors need to recognize that digital real estate investing is highly speculative. No one can guarantee this investment boom will be a promising future or plunge investors into the digital property bubble
The Future of Real Estate in the Metaverse
What companies and individuals do with the digital land they buy often raises curiosity.
For example, the Metaverse Group purchased land in the fashion district of Decentraland. The land is used to host fashion events and sell clothes for avatars. In other words, this area has potential for business growth in the Metaverse.
While investors and corporations still dominate this virtual space, not all real estate in the Metaverse has to cost users millions of dollars.
The question is, what are the benefits of owning virtual land? By comparison, physical property in the real world brings tangible advantages: a place to live, be proud of, and welcome family and friends.
However, while virtual properties cannot provide physical shelter, there are similar functions in the real world. In virtual real estate transactions, users can buy land to build or buy houses already available according to their tastes.
These digital property owners can also personalize their properties by decorating them with various digital objects. Users can also invite visitors or visit other homes.
This vision still looks far away. However, as improbable as this may sound, we must remember that there are times when people doubt the potential significance of the internet and social media.
Tech experts predict that in the coming years, the Metaverse will evolve into a fully functional economy and provide synchronized digital experiences in our lives like email and social networks we have today.
The Metaverse is a fantasy come true for someone who used to love gaming. A few years ago, my younger consciousness prompted me to stop wasting time playing games, return to learning and focus on “real” life.
However, deep in my conscience, I wish that the game world could complement the real world, like in the movie Real Player One. Now, I feel this dream is getting closer to reality.