A primer on Metaverse and Real Estate

A primer on Metaverse and Real Estate

Brands, celebrities and influential creators are all moving into web3. Owning metaverse real estate could allow individuals and brands to construct virtual offices and shops or just simply build a virtual mansion.

Last year, metaverse real estate sales topped $500 million. In the next few years from 2022 to 2026, the metaverse real estate market is projected to grow by $5.37 billion.

What is the metaverse?

 The metaverse refers to virtual worlds that are persistent and 3D, where users such as you and I can interact with each other, attend events, shop, socialise, and even work.

This is made possible with multiple technologies like Augmented Reality (AR) and Virtual Reality (VR), as well as powerful computer hardware to support the graphics and visual experiences crafted in the metaverse platforms.

What are the different types of metaverse platforms?

At present, there are metaverse worlds built “offchain” (off the blockchain) in Web 2 video game environments like Roblox and Fortnite, but also “on-chain” (which means being built on a blockchain). Popular on-chain metaverse platforms include Decentraland and The Sandbox.

Virtual real estate involves buying and owning virtual real estate to develop, lease or sell as you wish. Decentraland is a 3D virtual reality (VR) platform on the Ethereum blockchain, and Sandbox too.

In recent years, Snoop Dogg has made news for purchasing property on The Sandbox, while brands like Samsung and Adidas have set up shop in Decentraland. Earlier this year, HSBC Bank bought virtual land in The Sandbox too.

Why do people invest in real estate in the metaverse?

While some of us out there are still trying to overcome cynicism about the metaverse or maybe trying to understand the concept of it, some real estate investors are already going all in to digital property investments because they see it as an early gold rush moment, similar to Bitcoin a decade ago.

Others get into metaverse real estate because they would like to use these spaces as extensions of their Web 2 personal or commercial brands.

How do you buy real estate in the metaverse?

 To own real estate in the on-chain metaverse, users will have to download a digital cryptocurrency wallet like Metamask or Trustwallet, which will help to hold one’s cryptocurrency. Following that, users have to purchase either $SAND (to buy real estate in The Sandbox) or $MANA token for buying land in Decentraland.

Once you have the relevant digital currency needed, what’s next is to simply head over to Decentraland or The Sandbox or whichever platform you are on. Head over to the platform’s marketplace and choose your plot of land before clicking buy.

After payment, an NFT (Non-fungible token) will be issued to you to document your purchase of metaverse real estate. Should you wish to sell it, you can sell it on a secondary market.

Why consumers and commercial players are interested in metaverse real estate

Both individual and institutional players are moving in on the virtual land opportunity in various metaverse platforms. A key reason would be the flexibility and autonomy virtual real estate ownership affords.

In a Web 3 world, decentralization means that no one platform or entity owns your real estate experience – as an owner, you have full control over how to design and regulate your plot of land. For example, if you would like to turn it into a digital store selling products for your small business, you could. If you’d like to turn it into a virtual clubhouse, you could too.

This is unlike Web 2 platforms for identity and brand building, which are the social media platforms we’re used to – Facebook, Instagram, LinkedIn. On these platforms, brands and individuals alike are confined to platform restrictions.

Designing a well-loved attraction for example, would likely increase value. The opportunity for commercial real estate is there: companies can build whatever infrastructure they wish on their purchased plot of land, whether that’s a nightclub, casino, coworking space, or NFT art gallery.

Owners could also choose to rent their spaces out to companies for advertising purposes. Here’s why: real estate in the metaverse works similarly to the physical real estate world in that there are prime locations where land costs more, and cheaper locations.

Proximity to famous influencers and celebrities may also drive up the prices. In December last year, it was reported that someone paid $450,000 to be Snoop Dogg’s neighbour in the Sandbox platform. In the world of offchain metaverse land, Paris Hilton owns an island in Roblox.

Hence, owning land in a prime area where plenty of virtual footfall happens would mean having more eyeballs on your property, which then means it’s prime real estate for advertisements.

Of course, it’s important to note that the metaverse real estate market is extremely new and volatile, and its unpredictability can make it quite a high-risk investment. Depending on what owners do with the land, the land value changes, but this is also not the only factor influencing value.

Investing in the Metaverse Real Estate market

While it can come with potentially big rewards as first mover advantage or early adopter advantage pays off in the next few years should metaverse properties boom, there could be risks of losing money too should the value of your metaverse property drop due to unforeseen reasons, the logic of which might not necessarily follow real-world real estate market patterns.

As a person or company looking to invest in metaverse real estate, be sure to understand your risk tolerance, the platform, and the potential risks that you might face.

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