Are you aware of the latest investment hype that is dominating headlines?
Have you heard about the rush to acquire pieces of virtual real estate?
Is it just another step in the world’s evolution towards Web 3.0 or The Metaverse, and does it have deep connections to the crypto world?
For many legitimate businesses, cryptocurrency has often been seen as a three-alarm fire, something fascinating yet best left to professional risk-takers.
However, with an increasing number of mind-boggling investments in virtual real estate making the news, is it becoming evident that this trend is no longer limited to fringe investors?
Everything You Need to Know About Virtual Real Estate
In this blog, we will explore the recent hype surrounding virtual real estate, examining its workings and how it compares to traditional real estate investments in the physical world. We will also discuss the risks and rewards associated with investing in digital real estate tied to non-regulated and decentralized currencies.
What factors have contributed to this virtual land grab?
And why are prices for virtual land reaching such high values?
Let’s start with The Metaverse
To begin, let’s delve into The Metaverse. However, it is important to note that referring to “The Metaverse” as a singular concept can lead to misconceptions about its current state and its future potential. In fact, the true nature of the Metaverse is highly speculative and subject to debate, which we will explore further in our subsequent articles.
Currently, numerous companies are developing various Metaverses using different codes, gaming engines, and cryptocurrencies, suggesting that the concept of a unified Metaverse is unlikely in the near future.
While the vision of a singular virtual world, akin to Ernest Cline’s novel Ready Player One, may be appealing, it is more probable that such a world would be owned and developed by a single company. However, let’s focus on what we do know about virtual real estate in the present.
In many aspects, owning and purchasing virtual real estate shares similarities with real-world property transactions, and the competition in this space is equally fierce. Buying virtual land within existing Metaverse worlds resembles acquiring properties in a board game like Monopoly.
The objective is to obtain as many land parcels as possible, considering that the play area within each Metaverse is finite. Each Metaverse has a set number of land parcels and commits not to create additional ones, establishing value based on the belief in scarcity, just as in the physical world.
Similar to the historic gold rushes, the current frenzy for virtual real estate focuses on acquiring and owning prime locations, intending to develop them for future use.
Explore the prominent Metaverse worlds
In the unregulated landscape of the Metaverse market, many crypto and Metaverse projects have gained followers and investors primarily through social media and word of mouth.
Interestingly, some of the industry giants like Disney, Meta, Apple, Microsoft, and others that are now venturing into Metaverse initiatives may be considered latecomers to the scene.
Discover emerging Startups
In the current landscape, numerous Metaverse companies are offering land parcels within their respective virtual worlds. These companies often have their own associated cryptocurrencies, and individual land parcel ownership is recorded and safeguarded through blockchain technology.
Here are some noteworthy Metaverse worlds to take note of:
1. The Sandbox
Originally created as a mobile game by Pixowl, a San Francisco-based gaming company, in 2012, The Sandbox has undergone several transformations and acquisitions over the years.
Notably, in November 2021, Softbank invested a substantial $93 million in The Sandbox, which resulted in the release of an alpha version of The Sandbox Metaverse during that same month.
2. Decentraland
Launched in 2015 by Argentinians Ari Meilich and Esteban Ordano, Decentraland stands out among its competitors due to its distinctive governance model.
Unlike others, Decentraland is overseen by the nonprofit Decentraland Foundation.
3. Nifty Island
Nifty Island, developed by Nyft Studios, is a player-centric open-world gaming universe that made its debut last year. It is part of a larger series of interconnected worlds known as the Nyftverse.
What sets Nifty Island apart is its unique approach to land distribution, where land parcels are given to players rather than emphasizing scarcity. The business model revolves around the player marketplace for non-fungible tokens (NFTs), adding an intriguing dynamic to the virtual real estate experience.
4. Superworld
In contrast to the fictional Metaverse realms, Superworld distinguishes itself by aiming to replicate the Earth. Within Superworld, users have the ability to purchase, trade, and sell real-world plots of land and landmarks.
If your company is interested in owning NFT versions of iconic structures like the Taj Mahal or the Great Pyramid of Giza, Superworld offers an enticing solution.
5. Wilder World
In addition to enabling the acquisition of land, the Wilder World metaverse expands its offerings to include the buying and selling of NFT assets. Positioned as a 5D metaverse, Wilder World serves as an innovative international art platform, curated by artists who explore the fusion of art and technology through novel business models and artist representation.
It aims to push the boundaries of artistic expression and redefine the relationship between art and technology within the metaverse.
Location, Location, Location
A significant factor driving the hype surrounding land within metaverses is the age-old adage of “location, location, location.” Similar to the real world, parcels of land in metaverses gain value not only due to scarcity but also based on their strategic location.
Areas that are centrally positioned, densely populated, or in proximity to desirable landmarks or celebrity-owned land tend to command substantially higher prices.
For instance, in November 2021, Republic Realm made headlines by acquiring a land parcel in The Sandbox for a staggering $4.3 million.
Notably, just a week prior, the Metaverse Group, a subsidiary of Tokens.com, purchased virtual land in Decentraland for an impressive $2.43 million. These notable transactions exemplify the premium placed on prime locations within metaverses.
By February of this year, sales of land across various Metaverse worlds had surpassed the $500 million mark. In a notable transaction, someone paid $450 thousand for a small parcel of land in The Sandbox, situated adjacent to a larger section owned and developed by none other than Snoop Dogg, fittingly referred to as the Snoopverse.
The resemblance between these virtual real estate market dynamics and the processes observed in the traditional real estate market, where competition for a finite amount of land is fierce, is striking.
However, there exist a couple of significant differences between investing in the “real world” and virtual real estate markets. The first distinction lies in the development process, while the second resides in the aspect of regulation.
From Land to Development
The initial stages of development in virtual spaces bear similarities to real-world processes. A landowner might engage an architect to analyze the space, envision potential uses, and create mood boards and architectural designs.
However, a crucial difference emerges when considering how the universe, structures, and occupants can defy conventional physics. Factors such as building height, shape, and framework must account for gaming elements like avatar flight capabilities, jump height, and the size limitations of player avatars.
It is at this juncture, with the consideration of traditional gaming characteristics, that we witness the integration of specialized architectural expertise. This progression leads to the next phase of development, wherein design plans are handed over to a game designer and developer.
Various gaming engines or code libraries exist, each serving as a foundation for creating assets within a gaming world. These engines typically do not seamlessly cooperate, necessitating the expertise of a developer skilled in building assets using the specific code of a chosen gaming engine.
Risk vs. Reward
The second, and perhaps most apparent, difference between real-life and virtual real estate is that regulations are determined by the parent company of the respective Metaverse world, rather than government oversight.
As those familiar with the cryptocurrency market will attest, it is highly volatile and speculative. Given that many Metaverse worlds are closely tied to cryptocurrencies, they inherently share the same high-risk, high-reward characteristics.
These Metaverse land parcels are subject to the fluctuating nature of crypto markets and the risk of specific Metaverse worlds or areas within them losing popularity.
Nevertheless, it is the wild-west, gold-rush nature of this market that entices many early adopters in the Metaverse. For those who accumulated significant wealth from early crypto investments, this represents a natural progression and another adrenaline rush for those who enjoy the thrill of high-stakes, win-or-lose markets.
Initially, these Metaverse worlds primarily served as playgrounds for the crypto-rich. However, the surge in online presence during the pandemic and Facebook’s rebranding as Meta have recently propelled these playgrounds further into the commercial spotlight.
Dedicated virtual real estate companies have emerged, diversifying their investments across multiple Metaverse worlds to maximize the potential of appreciating land parcels as the Metaverse hype continues to escalate. This approach also mitigates their risk in the event of a cryptocurrency crash or the waning popularity of a specific Metaverse world.
According to Grayscale Incorporated, a prominent crypto giant, they estimate the Metaverse to represent a future $1 trillion opportunity. Many are placing their bets on the potential for lucrative brand deals and advertising opportunities on the virtual land they own as the Metaverse continues to flourish.
Our Perspective
Every day, the news is filled with reports of significant investments in Metaverse-related technologies and innovations. Naturally, these reports fuel further speculation regarding the investment potential, which could arguably categorize this article as well.
It is evident that the concept of the Metaverse will play a fundamental role in humanity’s future, and the surrounding hype is, in many ways, contributing to a self-fulfilling prophecy.
However, as history has shown with the transition from Web 1.0 to Web 2.0 or the transformative impact of social media on the advertising industry, being an early adopter does not guarantee success.
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