Theo Tzanidis, Senior Lecturer in Digital Marketing, University of the West of Scotland.
The idea of spending thousands or even millions of dollars to buy a fictional “land” in a virtual world sounds, to be honest, absurd.
But in recent months, we have seen significant investments in virtual land within the metaverse. PwC is among the latest to dive in, having bought real estate in The Sandbox, a world of virtual games, for an undisclosed amount.
If other reported sales are anything to go by, it would have been a hefty sum. One person recently bought a piece of land at Snoopverse, a virtual world rapper Snoop Dogg is developing within The Sandbox, for $ 450,000.
Meanwhile, the Metaverse Group, a real estate company focused on the metaverse economy, bought land on Decentraland, another virtual platform, for $ 2.43 million.
Let’s refresh on what the “metaverse” is. You’ve probably heard the term a lot when Facebook rebranded it to Meta in October 2021. Other companies, like Nike and Microsoft, have also announced that they will be launching 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 devices such as virtual reality headsets, augmented reality glasses, and smartphone applications.
Users will meet and communicate as digital avatars, explore new areas and create content. The idea is that the metaverse will develop to become a collaborative virtual space where we can socialize, play, work and learn.
Several metaverses already exist, for example on virtual gaming platforms like The Sandbox and virtual worlds like Decentraland. In the same way that a website is part of the larger 2D world network, individual metaverses will form a larger connected metaverse.
Importantly, as in the real world, it is and will increasingly be possible to buy things in the metaverse, including real estate.
Virtual Earth as NFT
Transactions in the virtual world are generally monetized using cryptocurrencies. Apart from cryptocurrencies, non-fungible tokens (NFTs) are the main method of monetizing and exchanging value within the metaverse.
An NFT is a unique digital asset. Although NFTs are primarily items of digital art (such as videos, pictures, music, or 3D objects), a variety of assets can constitute an NFT, including virtual real estate. On platforms like OpenSea, where people go to buy and trade NFT, there are now land or even virtual houses.
To ensure that digital real estate has value, the supply is limited, a concept in economics called “scarcity value.” For example, Decentraland is made up of 90,000 pieces or “parcels” of land, each approximately 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 the Republic Realm reportedly spent the equivalent of more than $ 900,000 to purchase an NFT representing a parcel in Decentraland. According to DappRadar, a website that tracks NFT sales data, it was the most expensive purchase of NFT land in Decentraland’s history.
But then, as we know, in November 2021, the Metaverse Group bought its parcel in Decentraland for USD 2.4 million. The size of this purchase was actually smaller than the previous one: 116 parcels of land compared to 259 purchased by Republic Realm.
It’s not just that Decentraland is seeing appreciation. In February 2021, Axie Infinity (another world of virtual games) sold nine of its parcels of land for the equivalent of $ 1.5 million, a record, the company said, before one parcel was sold for 2.3 million dollars in November 2021.
While values appear to be 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 might be wondering what businesses and individuals will actually do with your virtual land.
As an example, the purchase of the Metaverse Group takes place in the Decentraland fashion venue. According to the buyer, the space will be used to host digital fashion events and sell virtual apparel for avatars, another potential area for growth in the metaverse.
While investors and businesses dominate this space right now, not all metaverse real estate will cost you millions. But what could owning virtual land offer you? If you buy a physical property in the real world, the result is tangible: a place to live, to be proud, to receive family and friends.
While virtual property does not provide physical shelter, there are some parallels. By buying virtual real estate, you could buy land to build on. Or you can choose an already built house that you like. You can customize it with various (digital) objects. You can invite visitors and visit other people’s virtual homes as well.
This vision is at a time. But if it seems completely absurd, we must remember that once, people had doubts about the potential meaning of the Internet and then of social networks. Technologists predict that the metaverse will mature into a fully functioning economy in the coming years, providing a synchronous digital experience as woven into 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 studying and focus on my “real” life. Deep down, I always had the desire to see games overlaid with real life, Real Player One style. I feel this vision is getting closer and closer.
This article has been republished from The Conversation under a Creative Commons license. Read the original article.