That’s a tricky question. It’s very much like asking whether a non-fungible token (NFT) is real. No, as it’s just a series of 1s and 0s that a computer converts into a visual we can understand; and yes, ownership is documented via blockchain so it can be bought and sold. But I think we can all understand that an NFT is a piece of art, although there are more than one type of NFT, including text-based strings, assets in video games, sports NFTs, and others.
Virtual real estate in the metaverse is one of these, but it is different from what we normally think of as NFTs. Anyone can buy land on the Metaverse using cryptocurrencies. That land is an asset class on the blockchain that cannot be exchanged for other items. To put it simply, each NFT is unique and has inherent value. An NFT holder can retain ownership or sell it to another buyer for the same or different price.
So, what’s up with the virtual land market?
“Up” is the operative word. It’s a seller’s market for virtual real estate. Demand is booming, and metaverse land sales topped $500 million in 2021. It’s predicted that sales will double in 2022, and already big players like Pwc, Samsung, JP Morgan, and many others are investing heavily. But why, and what is virtual real estate?
In the Metaverse, space is divided into virtual land segments (parcels) that can be “developed” for use. What that means is that an individual or a company can build something on the land to attract users, perhaps a concert venue, office space, an art gallery, or other spaces where people can gather. Buildings on the parcel can have features that make it “livable,” such as a pleasant view, tools for collaboration, entertainment systems, etc.
Monetizing virtual land is what drives the market. For example, Tokens.com (a publicly-traded blockchain company that recently purchased space on the Metaverse platform Decentraland) buys virtual land worth over $2 million to host fashion shows. It will use the land to host an online fashion show featuring labels like Tommy Hilfiger, Dolce & Gabbana, and others. But you don’t have to spend $2 million to get in on the action. As in the real world, you can invest in a virtual Real Estate Investment Trust (REIT). In a REIT, investors indirectly purchase a stake in the underlying property or properties. In February 2022 the world’s first MREIT (Metaverse REIT) was launched in order to allow investors to trade in virtual land stocks.
Why is land in the metaverse so valuable?
Parcel size refers to the basic number of pixels in a metaverse real estate plot. That determines how much or how little one can develop in this space. But also, as goes the old real estate sales saying, it’s location, location, locations. When you plot is close to plots owned by large corporations or celebrities, the market value increases.
The size and location will determine in what ways the land can be used. For instance, plots next to a VR street can be valuable due to display ad opportunities. And the popularity of the platform itself determines the price. Widely adopted ones will drive more users to the land, making it more profitable.
VR technology is developing quickly.
VR is maturing faster than previous kinds of technology. It is estimated that in less than ten years, one billion users will subscribe to Meta’s metaverse platform. And while virtual real estate is definitely a high-risk asset, it can also yield high returns. Investors can turn a sizable profit through monetizable parcels, both in the short- and mid-term.
This growth reflects how the number of options and entry price points has grown. A few thousand dollars? Most investors can afford that, rather than the multi-million-dollar parcels that the big players are gobbling up. And, just as in the real world of real estate, there are even metaverse mortgage lenders to reduce the entry barriers.
What’s next?
That’s hard to say. Once virtual real estate’s potential has been fully realized we may find it wasn’t worth it. Or that it’s a virtual real estate bubble about to pop. But it could be similar to the dot com boom of decades past, when technology and public acceptance caught up with the hype, and now the most valuable companies are Alphabet, Facebook, and a few other tech/metaverse firms that were able to capitalize on the Internet.
For now, you should be careful about how much you invest as well as making sure you know as much about the multiverse’s workings as possible.
Why is land in the metaverse so valuable?
Parcel size refers to the basic number of pixels in a metaverse real estate plot. That determines how much or how little one can develop in this space. But also, as goes the old real estate sales saying, it’s location, location, locations. When you plot is close to plots owned by large corporations or celebrities, the market value increases.
The size and location will determine in what ways the land can be used. For instance, plots next to a VR street can be valuable due to display ad opportunities. And the popularity of the platform itself determines the price. Widely adopted ones will drive more users to the land, making it more profitable.
VR technology is developing quickly.
VR is maturing faster than previous kinds of technology. It is estimated that in less than ten years, one billion users will subscribe to Meta’s metaverse platform. And while virtual real estate is definitely a high-risk asset, it can also yield high returns. Investors can turn a sizable profit through monetizable parcels, both in the short- and mid-term.
This growth reflects how the number of options and entry price points has grown. A few thousand dollars? Most investors can afford that, rather than the multi-million-dollar parcels that the big players are gobbling up. And, just as in the real world of real estate, there are even metaverse mortgage lenders to reduce the entry barriers.
What’s next?
That’s hard to say. Once virtual real estate’s potential has been fully realized we may find it wasn’t worth it. Or that it’s a virtual real estate bubble about to pop. But it could be similar to the dot com boom of decades past, when technology and public acceptance caught up with the hype, and now the most valuable companies are Alphabet, Facebook, and a few other tech/metaverse firms that were able to capitalize on the Internet.
For now, you should be careful about how much you invest as well as making sure you know as much about the multiverse’s workings as possible.