Investing in bubbles or investing in the future? Why are people spending hundreds of millions of dollars on parcels of land that don’t exist in real life?
Whether you believe in a “Ready Player One” type of future or not, virtual land has been booming with more conventional investors looking towards how they can take advantage of the industry. The big question is, should you?
There is no way metaverse real estate could replace actual houses where people live, but could there be another use case we aren’t seeing? Maybe the metaverse isn’t meant to replace reality but to enhance it.
When you buy metaverse real estate, you aren’t buying a home for your physical self to live in. Instead, you’re purchasing virtual space and access to a number of different use cases.
What is Metaverse Real Estate?
Metaverse real estate consists of digital land, including its attached structures, built on a persistent 3D environment, enabling owners to socialize, play games, and build cool stuff. Virtual land is sold in parcels (or plots), each of which is totally unique, and secured by a non-fungible token (NFT).
Creators can buy virtual real estate and make it attractive for visitors so they can charge others for access or promotion.
Why Metaverse Properties Are Selling for Millions?
The main reason why people are spending millions on metaverse properties is that they are believed to be great investments. There are a few loyalists who are primarily driven by an innate desire to support the metaverse movement and be part of its history, but they represent the minority. The bottom line is that people are buying these lands because they think they are worth millions even today and could be much more in the future.
But this begs the question, why would an intangible asset be worth that much? It sounds silly.
But when people first invested in Las Vegas real estate back in the day, others thought they were crazy too. Why buy land in the middle of the desert? Now, most of those lands are worth millions of dollars and are inhabited by some of the biggest casinos in the world.
…buying metaverse real estate right now is like buying real estate and land in Manhattan in 1812.
Arnold, Owner of NFT consulting firm
As pioneers of this new industry, digital land investors are aware of the risk and potential rewards that come with it. As with conventional real estate, there are certain factors that affect the prices of metaverse land:
- Scarcity: Virtual land cost largely depends on its scarcity, which varies by platform. For instance, Otherdeeds has 100,000 parcels while Decentraland only has 90,601.
- Location: Truth be told, location matters less in the metaverse than in the real world since users will ultimately be able to teleport across virtual worlds. But it still counts, and so do your neighbors. For instance, iconic artist Snoop Dogg was selling plots of land on his Snoopverse, a virtual replica of his estate within The Sandbox metaverse where he intends to host events. And somebody paid $450K just to be his neighbor!
- Use Cases: It matters what you can do with the land you acquired. Can you rent it out and earn passive income? Can you create buildings in it today? What are the available functionalities? Since virtual worlds are still in the early stages, we can’t expect many use cases for a while.
Who Are Buying These Virtual Lands?
Ever since Facebook decided to rebrand to Meta, the race towards the metaverse started accelerating. In the case of Republic Realm, there’s a good reason why they decided to spend $4.3 million for land in the metaverse.
Republic Realm plans to develop its 100 “Fantasy Islands” on the Sandbox, which will be home to their villas and a related market of boats and jet skis. 90 out of the 100 islands sold out for $15K on the first day while some were relisted for over $100K.
But Republic Realm is far from the only player in this new field. Here are some of the most popular companies that are investing in the metaverse:
- Acura: Owned by Honda Motor Company – Acura bought metaverse land on Decentraland and became the first to build a virtual showroom for upcoming vehicle lines.
- HSBC: The global financial services provider bought land in The Sandbox with plans to create “innovative brand experiences” that will engage sports, e-sports, and gaming fans.
- JPMorgan Chase: JPMorgan is the first bank to open a branch in the Decentraland metaverse.
- a16z: Andreessen Horowitz is one of the top investors of web3 projects, including metaverses, that has recently rolled out a $600 million gaming fund with a focus on web3 startups as it believes that the coming metaverse will be built primarily by gaming studios.
- Forever 21: The fashion company opened its first virtual store, Forever 21 Shop City, on Roblox in order to turn its retail brand into an entertainment experience.
Other metaverse real estate investors include venture capitalists Metaverse Group, Tokens.com, and celebrities like Paris Hilton, Will Smith, The Weekend, and others.
How Metaverse Land Works
To define metaverse land, we’ll have to do a quick refresher of what a metaverse is. A metaverse is actually a network of 3D virtual worlds where people can interact, do business, and connect through virtual avatars. But since we’re early, people have been using the term loosely to refer to any type of virtual land platform.
Metaverses are built on virtual platforms that consist of plots, which can be sold as NFTs. Owning these virtual plots means owning a part of the metaverse that you can do stuff on. The “big four” metaverse platforms include Sandbox, Decentraland, Cryptovoxels, and Somnium.
Other metaverse projects with land sales include Axie Infinity, Star Atlas, and the Bored Ape metaverse, Otherside.
- Axie Infinity, for example, allows players to host shops, produce resources, and provide access points for dungeons.
- As for Decentraland, the platform provides a Builder Tool that allows users to create houses, buildings, and more. For more advanced users, the platform provides a Software Development (SDK) to code advanced games, animations, and apps within its metaverse.
Buying VS Renting
When you buy virtual land, you gain exclusive ownership of that particular parcel, which cannot be duplicated. Renting, on the other hand, lets other players use your metaverse real estate for a set period.
Metaverse real estate can either be purchased directly from the platform or through third-party vendors like OpenSea, Magic Eden, or Metaverse.Properties.
Metaverse Property Investing
Is Metaverse Real Estate a Good Investment?
Whether virtual plots of land are considered a good investment depends on a number of factors. Like any other investment, there is always risk involved. Metaverse real estate investing, however, doesn’t need to be like a coin toss and can be treated like stock. When looking for a good investment, one should explore its fundamental value.
You must know the company behind it, its early backers and supporters, partner projects, business model, and sales records.
While it’s easy to just look at headlines and listen to the opinions of investors that are bullish on particular projects, one should always do their own research and come up with their own conclusions. This is because most large investors that shill a particular project are likely heavily invested in them, which creates bias. However, it is also important to consider the lineup of investors to see if a project is getting enough support to succeed.
You also need to look into the numbers in order to determine if there is enough demand. A virtual world is nothing without inhabitants. This includes sales volume over time, frequency of sales, and how prices respond to market conditions. Social buzz is also another useful metric. Is the project growing in engagement? Are people talking about it on social media? A simple Twitter search could easily reveal insights, among other methods.
What Metaverse Land Should I Buy?
Choosing the right virtual land to buy largely depends on what you plan to do with it. If you’re in it primarily to make money (let’s be real; most are), then you should be very careful in your selection. Do the necessary analysis as pointed out in the previous section. Unfortunately, there is no shortcut to being a good investor. You have to carefully study the market and learn what drives people to spend.
One should buy properties on the type of metaverse that caters to their desire. As of today, gaming is one of the hottest subsectors in web3, so if you’re into it, you can check out the top gaming metaverses. Since we’re very early, options are a bit limited to the gaming side. However, we might see the first generation of VR-powered virtual worlds very soon, which is also quite interesting for some people.
Where to Buy Virtual Real Estate?
You can buy virtual real estate either directly from the metaverse selling them or from third-party marketplaces. Note that land comes in the form of an NFT. Here are some of the top third-party vendors:
- OpenSea: supports metaverses built on Ethereum, Solana, Polygon, and Klaytn
- Magic Eden: supports metaverses built on Solana
- Objkt: supports metaverses built on Tezos
- Paras: supports metaverses built on NEAR
- JPG Store: supports metaverses built on Cardano
- Binance NFT Marketplace: supports metaverses built on BNB Chain
- Rarible: supports metaverses built on Ethereum, Solana, Flow, and Polygon
Some projects like Axie Infinity have their own built-in marketplace.
How to Buy Virtual Land
The steps for buying virtual real estate depend on the metaverse platform you’re interested in, but here’s a general rundown of the steps you should expect.
Step 1: Pick a metaverse you want to buy virtual land in and identify which blockchain it is built on, whether on Ethereum, Solana, BNB Chain, etc.
Step 2: Set up the right crypto wallet for the metaverse you plan to invest in, depending on its blockchain. For example, Phantom for Solana, or MetaMask for OpenSea. Make sure you have the funds ready.
Step 3: Connect your wallet to the metaverse platform (if they have a built-in marketplace) or a third-party marketplace.
Step 4: Buy plots of land in the respective metaverse (it is recommended that you check within the metaverse itself which land you are planning to buy).
Step 5: Find ways to utilize your land, whether by playing on it (if it’s a gaming metaverse), renting it out to others, or building on it. You may also do nothing and simply wait for a few years to see if the world will catch up by then.
The Bottomline
Investing in metaverse real estate is a risky endeavor, no doubt, as the industry is still taking shape as we write this article. A lot of the early projects we see today will fall in the same way the first internet projects did in the early 2000s if history were to repeat itself. The key to making it rests on your ability to make the right investment choices early on.
And for that, you need to know exactly what it is you are buying. Don’t let the FOMO get to you. Think ahead. Ask yourself, which projects have been able to consistently capture attention and adapt to the changing virtual landscape? Some of them will be the next Amazon, and even if they aren’t, the lessons you’ll learn will be valuable in the long run.
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