To be honest, the concept of investing hundreds or even millions of dollars on imaginary “land” in a virtual environment seems ridiculous. However, we have seen major investments in virtual land within the metaverse in recent months. PwC is one of the most recent to go in, having paid an unknown sum for real estate in The Sandbox, a virtual gaming universe.
It would have been a sizable sum if other reported sales were any indication. One person recently paid US$450,000 (about £332,500) for a block of land in the Snoopverse, a virtual environment developed by rapper Snoop Dogg within The Sandbox. Meanwhile, the Metaverse Group, a real estate firm focused on the metaverse economy, said to have paid US$2.43 million for a plot of land in Decentraland, another virtual platform.
Let us review what the “metaverse” is all about, When Facebook changed its name to Meta in October 2021, you probably heard the term a lot, Nike and Microsoft among the corporations who have indicated plans to enter this market.
The metaverse is a concept for a connected 3D virtual environment in which actual and virtual worlds are blended utilizing technologies like virtual reality (VR) and augmented reality (AR). VR headsets, AR glasses, and smartphone apps all be used to access this immersive environment. As digital avatars, users will meet and converse, explore new locations, and create content. The metaverse will evolve into a shared virtual space where humans can socialize, play, work, and study, according to the theory.
There are already a number of metaverses, such as virtual gaming platforms like The Sandbox and virtual worlds like Decentraland. Individual metaverses will form a bigger, connected metaverse, similar to how a website is part of the broader 2D World Wide Web. Importantly, in the metaverse, as in the real world, it is and will continue to be possible to acquire things, including real estate.
Cryptocurrency is commonly used to fund transactions in the virtual world. Non-fungible tokens (NFTs) are the primary way for monetising and trading value within the metaverse, aside from cryptocurrencies. A NFT is a one-of-a-kind digital asset. Although NFTs are primarily works of digital art (such as films, photos, music, or 3D objects), any asset, including virtual real estate, can be an NFT. There are already plots of land, or even virtual residences, on platforms like OpenSea, where individuals go to buy and trade NFTs.
Supply is controlled to ensure that digital real estate has value, a concept known as “scarcity value” in economics. Decentraland, for example, is made up of 90,000 “parcels” of land, each measuring 50 feet by 50 feet. We have already seen examples of virtual real estate’s value increasing. Republic Realm, a digital real estate investment fund, reportedly spent more than US$900,000 in June 2021 to purchase an NFT representing a plot on Decentraland. It was the most costly purchase of NFT land in Decentraland history, according to DappRadar, a website that records NFT sales statistics. Nevertheless, as we all know, the Metaverse Group purchased their Decentraland plot for US$2.4 million in November 2021. This purchase was actually less than the previous one – 116 land pieces against 259 for Republic Realm.
Appreciation is not limited to Decentraland. Axie Infinity (another virtual game world) reportedly sold nine property parcels for the equivalent of US$1.5 million in February 2021 – a record, according to the firm – before selling one land parcel for US$2.3 million in November 2021. While it appears that values are rising, it is crucial to remember that metaverse real estate investing is still very speculative. No one knows whether this surge will be the next big thing or the next enormous bubble.
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