Digital land & estate
Metaverse refers to a variety of virtual experiences, environments and assets built on a blockchain.
Humans now conduct much of their lives through a screen, and virtual worlds that exist only on computers have cropped up. These are places where people can meet by using avatars and have interactive social experiences, entirely virtually. These online communities are called metaverses. If you’ve attended a work meeting or a party using a digital avatar, you’re treading into the neighborhood of metaversality.
In many ways, metaverses are structured like “real-world” cities—there are town centres, neighbourhoods, and residential and commercial developments. They just happen to be virtual.
For example, Genesis City is a plot of virtual land inside Decentraland, roughly the size of Washington, DC. Investors can buy parcels in the city the same way as we do in real cities. Once a land was acquired, estates can be designed and built on it. Lands in Genesis City go for obscene amounts of money. Even a simple 1,100 square foot plot can go for as much as $200,000, according to Bloomberg.
Why invest in digital real estate?
Getting in early
Digital real estate is a brand new market with great potential and a lot of future opportunities. Getting in early in new kinds of investments can sometimes result in huge profits (not investment advice).
Transparent
Ownership and market data are fully transparent in metaverses, unlike with real, physical assets. Importantly, more information based on a particular investment might result in better decisions.
No maintenance
Unlike physical properties, digital land requires no or almost no maintenance from the owners. Tenants will never break the boiler or make a huge water bill.
Huge interest in cryptocurrency
As cryptocurrencies are gaining momentum and there's a rapid growth towards mass adoption, prices of the native tokens of metaverses can increase in value significantly over a short period of time. As these digital estates are traded in the currency of the metaverse, a price increase of the token equals a price increase of the real estate.
How to buy digital real estate?
In the transfer of real world real estate, euros are exchanged for real property and the transaction involves banks, finance companies, lawyers, and title companies. In a similar manner, virtual real estate is exchanged, usually for virtual currency, often in the form of Non-Fungible Tokens (NFTs).
Returns on digital real estate
Currency exchange rate
There are several metaverses, each with its own cryptocurrencies. To buy a piece of land in the metaverse, you'll need to use their currency. Let's use Decentraland as an example. Decentraland has an in-game denomination called MANA. As the price of MANA changes, the value of the asset changes too. Also, exchanging currencies multiple times can be expensive.
The sources of volatility in this model are plentiful:
The conversion from EUR to ETH is really volatile in itself.
The conversion of ETH to MANA introduces yet another layer of volatility.
Also, exchange fees can become fairly high very quickly.
Location
Property location works almost the same way as in real cities. For instance, in Decentraland, lands in Genesis City are worth more than the ones in surrounding areas. Also, plots next to roads tend to be valued higher as more people walk by and can see the building on them.
Keep in mind:
The prices of properties can shift dramatically based on the surrounding properties.
Based upon the trends in the marketplace where you can transact, the properties themselves can shift in value.
Rental income
It might be surprising, but digital real estate can be an income-producing asset too. For example, a good-looking building close to a central location can display NFT art on its walls - just like a real gallery or museum. Owners of the art pay a fee to the land owner for displaying it for other people.
Investing in digital real estate is highly speculative. Please invest aware!
Metaverses available on Proptee:
Enough reading, go and walk around in a metaverse now. It's an amazing experience! ;) Alternatively, read Ready Player One from Ernest Cline.
Last updated
