Buying Real Estate in Metaverse
The Metaverse is a combination of augmented, virtual, and physical reality programs, which allow users to work, play and stay connected with friends in the virtual realm. Even though the term ‘metaverse’ recently got traction ever since Mark Zuckerberg, CEO of Facebook, announced the rebranding of his company’s name to ‘Meta’. However, the notion of the metaverse was popularized in pop culture through the sci-fi novel, Snow Crash written by Neal Stephenson in 1992. Later, the metaverse became a recurrently used plot point in many Hollywood sci-fi film projects, for instance, the Matrix films and Ready Player One (Vanian, 2021). It is widely believed in academic and social circles that metaverse is the next phase of the internet, which will enable users to buy and sell real estate virtually. Over the past three decades, internet technology has progressed and developed, and the way we interact with the internet has evolved with it. Amidst the change, the evolution of virtual communities can be divided into three main eras: Web 1.0 is the age of the World Wide Web, Web 2.0 is the era of Closed Corporate Metaverse — centrally owned by big tech companies, and Web 3.0 is the anticipated era of Open Crypto Metaverse—decentralized and owned by internet users (Grider, 2021). The year 2022 is predicted to be the year of metaverse; which became the global buzzword ever since Zuckerberg’s announcement.
This research article by the Iqbal Institute of Policy Studies will discuss the process of buying real estate in the metaverse, the benefits, and the potential drawbacks of investing in the metaverse.
How Can You Buy Real Estate in Metaverse?
Metaverse enables users to invest in real estate using Blockchain Technology. It is defined as a decentralized, distributed ledger technology (DLT), which records the provenances of digital assets. The most prominent use of Blockchain Technology is cryptocurrencies, which are digital currencies or tokens used to buy goods or services in the metaverse. Some key examples of cryptocurrencies are Ethereum, Bitcoin, and Litecoin. As opposed to the traditional banking system, crypto uses blockchain as a ledger to record online transactions. Crypto also uses Blockchain to secure online transactions through its advanced cash cryptographic security system (Built-in, 2021).
An investor can buy real estate on metaverse by signing up with a metaverse platform such as Decentraland, Axie, Infinity, and The Sandbox. The investor then links a compatible digital wallet (e.g. Metamask) and funds it with the specific cryptocurrency of the relevant metaverse. Next, the investor should ideally create an avatar closest to their human form to initiate their metaverse journey. After signing up, the investor can search and compare the prices of various pieces of land in the digital realm. Subsequently, the investor can select the desired piece of digital land and pay it via the linked digital wallet. After the transaction, the digital property is stored in the form of Non-Fungible Tokens (NFT) in the linked digital wallet (CNBCTV18, 2021). NFTs are the digital assets existing on the blockchain which can be traded based on the market value.
Benefits of Buying Real Estate in Metaverse
According to Forbes, the Metaverse is a $1 Trillion revenue opportunity, which has prompted prominent companies including Meta and Google, to gain a foothold in the emerging digital ecosystem. Moreover, investment firms are investing millions in digital real estate on Decentraland and The Sandbox. The metaverse is growing at a rapid rate, opening gateways for a multitude of investors. Recently, a legendary American artist entered metaverse by joining The Sandbox; which contributed to an apparent surge in daily trading volume of NFTs exceeding $180 Million in December 2021 from the previous year’s $800,000/- (Holmes, 2021). These trends are the progressive signs of the emergence of the new digital era (Web 3.0).
There are multiple benefits of investing in the metaverse. Firstly, metaverse allows the investors to earn income with the appreciation of digital land. Secondly, metaverse allows the investors to rent out properties. Thirdly, the input costs are relatively lower as compared to real estate in the actual world (Waterworth, 2021). In the subsequent years, the metaverse is going to become more distinguished and commonplace. Companies like Facebook (now Meta), BMW, and Disney have already ventured into the digital realm and are emerging key players in the metaverse. Perhaps the main benefit of the metaverse is enabling the individuals to be sovereign; in a sense that they will have complete ownership of their virtual assets, contrary to the present system, where digital platforms like YouTube pay only a specific share of money to the user generating income through the platform.
Even though metaverse is the newest revolution of the internet which has provided ample opportunity for investors to buy digital real estate and assets. However, it is not regulated yet and carries potential risks for investors, in case they have not properly researched the suitable metaverse platform. Firstly, metaverse properties are still a niche market in the budding phase. The market is small and limited so the investors should conduct proper research of the market trends before investing large sums. Secondly, if a metaverse platform folds, your investment fails; it disappears from the virtual realm like it never happened. Thirdly, metaverse requires advanced digital technologies, for example, particular types of laptops or phones and better internet connectivity (Waterworth, 2021).
Furthermore, the attachment to the virtual realm and augmented reality may erode the quality of human relationships and the development of society. Another major concern is the prevailing security issues as these virtual platforms collect a lot of data from their users which is insusceptible to being hacked.
The Metaverse is predicted to be the biggest trend of 2022, with digital real estate being one of the lucrative investment prospects. It is a great window of opportunity for people looking to diversify their property portfolio. Metaverse uses blockchain technology instead of the traditional banking system which makes it more secure. With Web 3.0 being the era of the open crypto metaverse, the new phase of the digital revolution is going to be the one where users own the stakes of their assets in the particular digital platform. Currently, the problem with most digital platforms (Youtube, Instagram, Facebook etc.) which allow people to earn income, is that they pay only a specific share of money to the user generating income through the platform; and a large sum of money is reserved for the platform. Web 3.0 will revolutionize this trend such that the users will get everything they earned, without any sums being cut off from the platform. Companies like Facebook and Google are already investing in metaverse to increase their stakes in the virtual realm. However, the metaverse is not risk-averse; it is unregulated which may create potential risks for investors. For people looking for new investment opportunities, the metaverse is a great bet for the future. Any NFTs bought today have the possibility to multiply their value, based on the platform in the future. Proper research, knowledge and understanding of blockchain is key to cracking the code of metaverse.