The idea of spending thousands or even millions of dollars to buy fictitious “land” in a virtual world sounds, to be frank, ludicrous.
But in recent months, we’ve seen significant investment in virtual land within the metaverse. PwC is among the last to dive in, having bought real estate in The Sandbox, a virtual game world, for an undisclosed amount.
If other reported sales are taken into account, it would have been a good sum. A person recently bought a piece of land in the snoopverse – a virtual world that rapper Snoop Dogg is developing within The Sandbox – for US$450,000 (around £332,500).
Meanwhile, Metaverse Group, a real estate company focused on the metaverse economy, reportedly bought land on Decentraland, another virtual platform, for $2.43 million.
Let’s refresh what the “metaverse” is. You’ve probably heard the term a lot when Facebook rebranded to Goal in October 2021. Other companies, such as Nike Y microsoft, have also announced that they will launch into this space.
The metaverse describes a vision of a connected 3D virtual world, where the real and digital worlds are integrated using technologies such as virtual reality (VR) and augmented reality (AR). This immersive environment will be accessible through VR headsets, AR goggles, and smartphone apps.
Users will meet and communicate as digital avatars, exploring new areas and creating content. The idea is that the metaverse develops into a collaborative virtual space where we can socialize, play, work and learn.
There are already several metaverses, for example in virtual game platforms like The Sandbox and virtual worlds like Decentraland. In the same way that a website is part of the larger 2D World Wide Web, individual metaverses will form a larger connected metaverse.
Importantly, like the real world, it is and will be increasingly possible to buy things in the metaverse, including real estate.
Virtual terrain as NFT
Transactions in the virtual world are usually monetized using cryptocurrencies. Aside from cryptocurrencies, non-fungible tokens (NFTs) are the primary method of monetizing and exchanging value within the metaverse.
A NFT it is a unique digital asset. Although NFTs are primarily digital art items (such as videos, images, music, or 3D objects), a variety of assets can constitute an NFT, including virtual real estate. On platforms like Open sea, where people go to buy and trade NFTs, there are now land or even virtual houses.
To ensure that digital real estate has value, supply is limited, a concept in economics called “scarcity value.” For example, Decentraland it is made up of 90,000 pieces or “parcels” of land, each about 50 feet by 50 feet.
We are already seeing examples where the value of virtual real estate is increasing. In June 2021, a digital real estate investment fund called Republic Realm reportedly spent the equivalent of more than $900,000 to buy an NFT that represents a parcel in Decentraland. According to radardapp, a website that tracks NFT sales data, was the most expensive purchase of NFT land in Decentraland’s history.
But then, as we know, in November 2021, Metaverse Group bought their land in Decentraland for US$2.4 million. The size of this purchase was actually smaller than the previous one: 116 parcels of land compared to the 259 purchased by Republic Realm.
It’s not just about Decentraland seeing appreciations. In February 2021, axie infinity (another virtual gaming world) reportedly sold nine of its land for the equivalent of $1.5 million, a record, the company said, before one land sold for $2.3 million in November 2021.
While it appears that values are on the rise, it is important to recognize that real estate investing in the metaverse remains extremely speculative. No one can be sure if this boom is the next big thing or the next big bubble.
The Future of Metaverse Real Estate
Financial incentives aside, you may be wondering what companies and individuals will actually do with their virtual land.
As an example, the Metaverse Group purchase is in the trendy Decentraland precinct. According to the buyer the space will be used to house digital fashion events and selling virtual clothing for avatars, another potential area for growth in the metaverse.
While investors and businesses dominate this space right now, not all real estate in the metaverse is going to cost you millions. But what could owning a virtual land offer you? If you buy a physical property in the real world, the result is tangible: a place to live, to take pride in, to welcome family and friends.
While virtual property does not provide physical shelter, there are some parallels. By buying virtual real estate, you can buy a piece of land to build on. Or you could choose an already built house that you like. You can customize it with various (digital) objects. You can invite visitors and also visit the virtual homes of others.
This vision is a time away. But if it seems completely absurd, we must remember that once upon a time, people had doubts about the potential meaning of the Internet and then of social networks. Technologists predict that the metaverse will mature into a economy in full swing for years to come, delivering a synchronous digital experience as intertwined with our lives as email and social media are now.
This is a strange fantasy come true for someone who was a gamer in a previous life. A few years ago, a younger version of my conscience told me to stop wasting my time playing video games; go back to school and focus on my “real” life. Deep down I always had this desire to see the games overlaid with real life, real player one style. I feel that this vision is getting closer.