Is buying a house in the Metaverse an investment in the future or a bubble speculation?

If a year ago, someone offered to spend millions on a house in a virtual world, it might have been considered crazy. But a year later, not only many companies, celebrities, and even professional institutions like PricewaterhouseCoopers have joined the “Metaverse Real Estate Speculators” army, which confuses many people – is it true that the virtual world is real estate speculators? Is it really worth it?

Celebrities and professional institutions have successively entered the “Metaverse Real Estate Speculation”

In the past few months, the news of numerous companies and celebrities spending millions to buy real estate in the virtual world has been reported from time to time, shocking people’s nerves:

Metaverse Group, a subsidiary of digital asset investment group Tokens.com, purchased a piece of digital land on the virtual platform Decentraland for $2.43 million (about 15.45 million yuan) ;

Pop singer JJ Lin bought three virtual lands on Decentraland for about RMB 780,000 ;

Metaverse real estate company Republic Realm bought a piece of land in the virtual world of Sandbox for about $4.3 million (about 27.42 million yuan) — the world’s most expensive virtual land deal to date.

In late December, even professional services firm PricewaterhouseCoopers bought a piece of digital land in the Metaverse for an undisclosed price.

Is buying a house in the Metaverse an investment in the future or a bubble speculation?

JJ Lin shows off the Metaverse land he bought online

Real estate prices on the digital platform Decentraland have risen by 400% to 500% in the past few months, surrounded by numerous digital asset investment firms and celebrities. If calculated in terms of price per unit area, the price of many digital land is already comparable to the average land price in first-tier cities in the United States—or even higher.

In the Metaverse world, buying a house usually uses the platform’s own tokens – such as Sandbox’s token SAND and Decentraland’s token MANA. As the price of digital land gets more and more expensive, so does the price of the tokens themselves. At the beginning of March last year, the exchange price of SAND was only 25 cents, but by the end of last year, SAND had risen to 8.51 US dollars. Point to sell, then you will be able to make about $850,000.

The inner logic of “Metaverse real estate speculation”

If we take a closer look at the “real estate speculation” in the virtual world, we will find that this boom actually has its own internal logic.

First of all, the most basic logic supporting the boom in virtual real estate lies in the prospect of the “Metaverse”.

After Facebook changed its name to Meta, the popularity of the concept of “Metaverse” was instantly ignited. “Metaverse” is regarded by many people as the next form of the Internet world after the Internet and social media, with huge development potential.

For example, Andrew Kiguel, CEO of digital asset investment firm Tokens.com, is adamant that “the Metaverse is the next iteration of social media.” A recent report from crypto asset management firm Grayscale estimates that in the near future, digital The world’s business could grow to $1 trillion.

Other well-known consulting firms have similar views. Bloomberg Industry Research predicts that the Metaverse will reach a market size of $800 billion in 2024, while PwC expects the Metaverse market to reach $1.5 trillion in 2030.

Although under the constraints of technical productivity, we are still far from the 360-degree immersive digital world envisioned by Meta, but buying a piece of digital asset in advance to “occupy the pit” and “enclosure” may be regarded as ” A means of investing in the future”.

Is buying a house in the Metaverse an investment in the future or a bubble speculation?

Exchange Hub in Decentraland

Secondly, similar to the “real estate speculation” in reality, the “real estate speculation” in the virtual world is also largely based on the “scarcity” of real estate supply , and “scarcity” is the most essential source of speculation.

In the current hottest virtual “real estate speculation” platform, the supply of digital land is capped, and this setting itself is precisely to ensure that the value of virtual real estate will not depreciate wildly.

For example, on the Sandbox platform, a total of 166,464 plots are available; on the Decentraland platform, there are a total of 90,601 plots, and only about 44,000 of them are allocated for private buying and selling. If you want to open a new land, it must be voted by all currency owners and all property holders on the platform – which is almost impossible.

Third, the real estate in the virtual world also has functional value.

Although properties in the virtual world are not as habitable as real properties, they are not worthless and investors can use them for business or rental purposes. For example, the digital land purchased by PricewaterhouseCoopers mentioned above is to establish relevant professional service consulting centers; in addition, many well-known companies have purchased virtual land on the Metaverse platform to advertise their brands.

Given that the land plots on the virtual platform are all limited, after all the digital land is sold out in the future, if there are still companies that want to advertise in the virtual world, they will have to lease the land from the existing owners. The benefits may be beyond imagination. Moreover, this scenario does not seem to be far away: currently on the Sandbox platform, 70% of digital land has been sold.

It is for this reason that digital land, which is usually close to business districts and has a larger flow of people, can often be priced at higher prices—usually good plots can be priced 1 to 2 times higher than ordinary plots.

Is buying a house in the Metaverse an investment in the future or a bubble speculation?

“Kung Fu Ice Room” in Sandbox World

Additionally, digital land prices around celebrity residences can be hyped up even higher. For example, someone paid $450,000 to buy land next to rapper Snoopverse’s virtual home just to be neighbors with celebrities.

The way to make money for virtual real estate speculators

Usually in the digital world, digital assets are bought and sold in the form of NFTs – which means buying virtual land is very simple compared to real estate transactions – either directly from the platform or through a developer.

After buying the land, the virtual asset investment company handles it in a similar way to the real world: some plots will be left idle and sold until the price soars; for some plots, real estate companies will hire designers With a game development company to design and build a house or a shopping mall, then sell it retail or collect rent – no different from a real estate developer.

In fact, the layout of some virtual real estate development companies has begun to take shape. For example, Republic Realm, a digital asset investment company mentioned above that spent 27.42 million yuan to buy Metaverse land, already owns about 2,500 pieces of digital land on 19 different Metaverse platforms, and some of them have started to develop. Projects currently under development by the company include a shopping mall primarily leased to virtual fashion retailers, and a large luxury residential community consisting mainly of about 100 villas, which the company is ready to sell retail to individual players.

Is buying a house in the Metaverse an investment in the future or a bubble speculation?

Villas, shopping malls, marinas and other projects currently being developed by Republic Realm

Another digital asset investment firm, Tokens.com, is currently developing an 18-story commercial building in Decentraland, which the company is preparing to lease to a cryptocurrency exchange. And they bought another piece of digital land in the fashion district, ready to be leased to fashion companies – according to the company’s CEO, buying this fashion district land now “is like buying Fifth Avenue in the 19th century.”

The risk of high speculation in “Metaverse real estate speculation” cannot be ignored

As tempting as all of the above may sound, it has to be noted that this is all in the ideal case of building a growing “Metaverse” platform. This means that if a single “Metaverse” platform loses traffic and attention, or if virtual currency fluctuates sharply, it may affect the value of “virtual real estate” in the hands of investors, and may even lose everything.

In addition, lack of regulation is also an important issue. Different from real real estate transactions with mature regulatory systems, real estate transactions in the Metaverse still face many regulatory gaps. For example, how to define the nature of the Metaverse real estate, how the law protects the Metaverse real estate, and how to mediate in the event of a transaction dispute… In the absence of solutions to these problems, investment risks can be imagined.

Even Janine Yorio, co-founder of Republic Realm, who specializes in Metaverse real estate speculation, admits that investing in digital real estate is risky.

“(It’s) very, very dangerous. You should only put in those funds that you are prepared to lose all of,” Yolio said. “It’s highly speculative and it’s also blockchain-based. We all know that cryptocurrencies are very uneconomical. Stable, although it can also pay big dividends.”

Posted by:CoinYuppie,Reprinted with attribution to:https://coinyuppie.com/is-buying-a-house-in-the-metaverse-an-investment-in-the-future-or-a-bubble-speculation/
Coinyuppie is an open information publishing platform, all information provided is not related to the views and positions of coinyuppie, and does not constitute any investment and financial advice. Users are expected to carefully screen and prevent risks.

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