$500 million was spent in 2021 on metaverse real estate. That figure is expected to double to over $1 billion in 2022. Virtual properties on various metaverse platforms (like Sandbox) are being purchased by businesses, investors, and those interested in the nascent technology. Are you also considering a metaverse real estate purchase? If so, you’d be wise to consider 5 things in particular before making a decision. We’ll cover them in this article.
A Metaverse Real Estate Primer
One of the most common investment mistakes people make is purchasing assets that they don’t fully understand, usually due to FOMO (fear of missing out). This mistake is especially rampant in the blockchain and crypto space. People see tremendous growth in promising technology and get excited by the notion that prices are rising and will continue to do so. With that in mind, let’s get into some background information on metaverse real estate before we cover the list of 5 things to consider before making a purchase.
What is the Metaverse?
If you’re confused about the literal meaning of “metaverse,” you are far from alone. While people and companies confidently throw the term “metaverse” around, the reality is that we’re still figuring out what it actually means. In fact, perform a simple Google search for “metaverse” and you’ll see that we can’t even fully agree on whether there is just one metaverse or many.
For the purposes of this article and practical understanding, let’s go forward with two premises that will allow us to build a clear, albeit general and simplified, picture of what people are talking about when they refer to the “metaverse”:
- In the same way that there is 1 internet, there is 1 metaverse. As stated above, there are some who speak of multiple metaverses, but the “metaverses” they’re referring to are basically just different metaverse platforms. Continuing with the internet analogy, we could say that competing metaverse platforms – like Sandbox, Decentraland, and SomniumSpace, for example – could be compared to competing websites like Google, Facebook, and Reddit.
- The Metaverse is explored via Virtual or Augmented Reality. Again, this is a simplified statement. VR/AR is not absolutely mandatory for accessing the metaverse. However, when people discuss the metaverse, they’re generally referring to a VR/AR world experienced in three dimensions rather than a two-dimensional experience like the internet..
With these two premises forming the basis of our idea of the metaverse, we can envision using VR headsets and visiting different spaces in the metaverse in a way that’s not so different from visiting different websites on the internet.
How Does Metaverse Real Estate Have Value?
One of the most obvious differences between physical, real world real estate and metaverse real estate is scarcity. When we envision land in the real world, we can clearly see that there is a limited supply. Once all of the land on Earth is owned or inhabited, there is none left. The metaverse does not operate with this same scarcity. In the same way that the number of internet websites is (practically speaking) limitless, there can never be a true shortage of metaverse real estate.
Lack of scarcity does not necessarily limit the value of real estate in the metaverse, however. Consider the value of the domain Google.com. There’s nothing stopping you from spending very little and owning as many new domain names as you want, but we all understand that Google.com is extremely valuable, despite the fact that there’s no limit to how many websites can be created.
Now, imagining the metaverse, consider the value of owning digital property right next door to Google’s metaverse real estate. Although there is no scarcity of total real estate in the metaverse, we can easily see why real estate in prime locations is valuable.
Why are People Purchasing Metaverse Real Estate?
In this section, we’ll identify three key reasons people are purchasing metaverse real estate. Even before we discuss these reasons individually, however, it’s worth noting the fact that all three reasons have the same theme: an investment in metaverse real estate is almost always an investment in the future of the metaverse.
As is the case with most crypto and blockchain-related assets, the value of metaverse real estate today is largely speculative. People currently purchasing metaverse property are mostly doing so with the hopes that their investments will appreciate in value with time.
Already, certain metaverse platforms have emerged as leaders. Again, like domain names, there’s nothing stopping capable developers from creating an entirely new metaverse platform tomorrow. However, any new hypothetical metaverse will struggle to achieve value comparable to the established metaverse platforms. As a result, property on leading metaverse platforms is the most valuable.
In addition to speculation, individuals and businesses are also purchasing metaverse real estate for advertisement purposes. Just like in the physical world and on the internet, certain locations in the metaverse will generate huge amounts of traffic.
Earlier, we imagined hypothetical metaverse real estate next door to Google’s metaverse property. A business hoping to increase its reach would be able to expose itself to countless new individuals with a property like that – by placing a virtual billboard or other type of attraction in such a heavily trafficked area.
Curiosity and Forward Thinking
Curiosity and interest in the future of the metaverse may drive many people to purchase property in it. Unlike speculative investors who have the main goal of re-selling their property at higher prices than they bought it for, individuals purchasing from a curiosity standpoint may be acting more from a desire to be involved in exciting new technology.
What Should You Consider Before Purchasing Metaverse Real Estate?
Since we’ve now established a firm ground of understanding the metaverse, why its real estate has value, and why people are purchasing metaverse real estate, we can comfortably proceed. Without further ado, here are the 5 most important things you should consider in your metaverse real estate purchasing decisions.
1. What are your goals?
In the last section, we identified the three main reasons for purchasing metaverse real estate as speculation, advertising, and curiosity. Before you jump into metaverse real estate purchasing, you should spend some time getting clear on your own reasons. While it’s OK to have multiple intentions driving your decisions, you should understand your priorities – and act accordingly.
If your goal is advertising, for example, your decisions on which platform to choose may be different than if you’re simply curious about the metaverse and wish to participate in it.
2. Which Metaverse platform will you choose?
Recall that we discussed different metaverse platforms earlier in the article – and the fact that some are leading the space already in terms of popularity. Those same platforms also lead the space in real estate property prices!
Regardless of your personal reasons for purchasing metaverse real estate, you’ll make the best and most informed decision by exploring the different platforms yourself and getting a feel for what makes them unique. If you’re investing from a speculative perspective, for example, you may be able to find a newer platform with cheaper prices and more room to grow – like investing in altcoins rather than Bitcoin.
3. Does location matter to you?
Although it might seem odd the first time you think about it, location of real estate in the metaverse is important!
Many people feel that metaverse property location is irrelevant given the idea that individuals can essentially teleport across space. There are no commutes in the metaverse. On the other hand, if your goal is advertisement or speculation, you may decide that the higher price of a property in a more popular and higher traffic area is worth it.
4. Diversification? Or “All-In?”
This consideration is especially important if your goals are speculation or advertisement. Just like with physical real estate, metaverse real estate prices exist on a huge spectrum. If you decide you have a certain amount of capital you’re willing to put into metaverse real estate, you should take some time to consider whether you want to put all of it into one property you really believe in – or perhaps a portfolio of smaller investments.
5. Would you be OK if your investment went to zero?
Like consideration #4, this one is critical for individuals who are hoping to make financial gains from their metaverse real estate. If you’re simply curious and looking to join in the fun, perhaps you view your property as something like entertainment and you’re not concerned about its monetary value.
If you do have dollar signs in your eyes, however, you need to understand that the value of metaverse real estate is far from stable. As the old adage goes, “The higher the risk, the higher the reward.” We’ve already seen that people can make huge profits from buying and selling metaverse real estate; the risk of loss is there, too.
So before you invest in metaverse real estate – especially for speculation – make sure to ask yourself if you’d be OK with losing the capital you use to purchase it. If you can withstand the risk, you could be in a position to reap substantial benefits when the metaverse really blows up.
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