Having Real Estate in the Metaverse is a Dream Come True for Many People. How?
March 01. 2022
The Metaverse is a constantly changing realm made up of numerous digital realities. As individuals spent more time online during the epidemic, curiosity in the Metaverse and its features grew. The most recent primary real estate market is in the Metaverse, where a growing number of investment corporations are paying millions of dollars to acquire digital land. In addition, users may purchase metaverse real estate in 3D communities to imitate real-life activities such as shopping, gaming, and attending virtual concerts. The concept behind buying digital land is that you can generate money by developing it and renting it out once you have it.
Only a few sites exist where investors may purchase and sell real estate, each with its own cryptocurrency with a limited number of parcels available for purchase. So far, real estate transactions have been controlled by the Big Four: Sandbox, Cryptovoxels, Decentraland, and Somnium. The Sandbox, an online game in which players may buy land plots, has received much attention. The platform received $86.56 million in blockchain-linked non-fungible token land sales from November 22 to November 28. Another virtual marketplace, Decentraland, finished second with $15.53 million in digital land parcel sales. A lesser competitor, CryptoVoxels, sold $2.68 million in digital real estate, while Somnium Space, a metaverse platform, sold $1.10 million.
According to MetaMetrics Solutions, real estate transactions on the four major metaverse platforms totaled $501 million in 2021. Sales might reach over $1 billion in 2022 if sales continue at this rate. From 2022 through 2028, the metaverse real estate market is predicted to increase at a compound annual rate of 31% each year.
This leads to the question: why to buy land in the metaverse for the same price as plots in the real world? The “real estate” in the metaverse is intended to allow participants to market their content and products as well as hold virtual events in the metaverse, and as such, virtual real estate looks to be positioned to be a valuable asset regardless of whether it is “actual” real estate or not.
NFTs may be used to market digital real estate in both the virtual and real worlds. NFTs representing virtual real estate are traded on NFT marketplaces in more efficient and transparent transactions than real-world real estate transactions. The tokenization of real estate has a significant benefit: it makes the world’s most illiquid asset class available to many investors. Once again, technology democratizes an exclusive system, allowing formerly exclusive asset classes to participate. In addition, the tokens offer the path for regular folks to invest in money traditionally reserved for professional investors. Unlike typical real estate funds, which have substantial management costs and demand specified minimum investments, transaction fees in this context are pretty minimal. Aside from this evident benefit, tokenization has another advantage that should not be overlooked: Blockchain technology prevents unlawful activities such as tax evasion and money laundering in real estate transactions that were previously opaque.
Land in the Decentraland metaverse was purchased for $1.4 million by the Plein Group (approx.) The transaction was valued at 510,000 MANA, the native coin of the metaverse platform. In total, 65 pieces of land in Decenterland were purchased (over 150,000 square feet in real life). The property’s ambitions include an art museum, a hotel, and retail outlets. In recent months, the price of virtual lands has increased by 500 percent. This form of investment provides a significant benefit. The primary rationale is that the return on investment is far higher when compared to real-world plots. The return on investment (ROI) might be as high as 1000% in a short period.
In December, Haim Israel, a strategist at Bank of America, stated that the metaverse is a huge possibility where cryptocurrencies would be extensively utilized as currencies. “I definitely believe this is a massive, massive opportunity,” he opined.
Taking possession of virtual assets has become a secure and safe transaction with the development of blockchain technology. Here’s what virtual landowners can do with it:
– Develop the land (build malls or businesses) either on your own or with the help of virtual land developers.
– Run your own company or rent out your land to others.
– Organize business or social meetings.
– Resell the property for a profit.
– Real estate may be used as a supplemental source of income.
– Make amusement parks and embark on missions.
Only bitcoins may be used to purchase lands in the metaverse. This is due to the high transaction costs of fiat currencies, whereas crypto assets may be swapped globally without the involvement of a third party or broker. Consider how convenient it would be if you could acquire your dream piece of property with the help of DeFi. Decentralised Finance, or DeFi, is a type of company that may permit the borrowing and lending of bitcoin in exchange for collateral. The collateral in the instance of metaverse might be an NFT that you purchased or your crypto assets. It is not, however, as straightforward as it looks. Many factors are at play, including the speed with which loans may be issued and the security of a multi-blockchain network that allows for speedier liquidity deployment at a cheap cost.
The vast majority of envisioned metaverse activity will be financial, and much of it will be free of today’s technological, regulatory, legal, and even logical/ethical constraints, allowing an army of fraudsters, large and small crime cartels, cyber criminals, thieves, spies, blackmailers, and every vice in between to thrive. In addition, due to a lack of regulation in new technologies, fraudulent arrangements are based on utilising cash from new investors to pay off previous backers. Scammers are increasingly leveraging the metaverse, cryptocurrencies, and non-financial tokens (NFTs) to defraud investors. They take advantage of the fact that many customers are still unfamiliar with cryptocurrency, despite its touted “get rich quick” promise. Ponzi scheme is a type of fraud. It’s a deceptive investment scheme that relies on a steady stream of new investments to keep paying out profits to existing investors. The strategy breaks apart when this flow runs out. According to Chainalysis, a single Ponzi scheme in China pulled in at least $2 billion in 2021, making it one of the largest ever. Regulation is essential to protect the reputation of the metaverse, bitcoin, and NFTs marketplaces. It also safeguards investors from deception by ensuring a level playing field and fair competition.
As a result of the digital revolution, consumer behaviour has shifted. More individuals are buying, working, playing, and learning online, thanks in part to the coronavirus outbreak. A “phygital” solution is promised by the metaverse. It aims to blur the border between actual and virtual reality to alter our environmental perceptions. For businesses, this is an opportunity to reach new audiences, boost customer confidence, and test a new income source. Only a few investors remain suspicious of the metaverse’s long-term sustainability, while others have already invested. While the hype around the metaverse can be overblown at times, investor confidence in virtual real estate is rising. As a result, investors must carefully choose digital real estate projects free of excessive risks to earn significant profits.