If someone told you he spent millions of dollars on a property, you might think he bought some kind of luxury home or in a good location. Wouldn't you be surprised if the house actually had no way to live in it because it wasn't even physical? The virtual property located in the meta-universe is exactly such a property. Since the Facebook name change, the meta-universe concept has become a big hit, and the price of virtual real estate has doubled several times in just a few months, drawing a lot of attention.
Token.com is a Toronto-based real estate investment firm, but instead of investing in physical real estate, it primarily invests in metaverse virtual real estate and digital assets associated with non-homogenized tokens (NFTs). Andrew Kiguel, the company's CEO, says that metaverse is the next generation of social media.
In the metaverse, real people interact through avatars, similar to today's real-time multiplayer video games. But while today people have to enter the metaverse through a computer screen, in the future people will be able to enter the metaverse by putting on virtual reality VR glasses and feel the 360-degree immersive experience.
His company just bought a plot of land on Decentraland for $2.5 million, and the property is said to have gone up four or five times in the last few months. Singer John Lam also bought three virtual plots of land on Decentraland for a total of about $123,000.
Another big hit metaverse platform is Sandbox, on which digital real estate investment fund Republic Realm bought a plot of land for $4.3 million last November. The company also sold 100 virtual private islands last year at a price of $15,000 each. The price of these islands has now risen to $300,000 per unit, on par with U.S. home prices. Similar to physical real estate, the location of virtual real estate is important.
Popular places are more valuable to advertisers and retailers, and then land prices are higher in that area. Singer Snoop Dogg is building a virtual mansion on the metaverse platform Sandbox. And a few days ago someone paid $450,000 to become his neighbor, a record price per square meter. For his part, New World Development Group Executive Vice Chairman and Chief Executive Officer Stephen Cheng announced the purchase of Sandbox's largest piece of virtual land last December for about $5 million.
Sebastien Borget, co-founder of Sandbox, said the company's total virtual real estate sales have reached $211 million so far in 2019, with rapid growth in recent months in particular. sand's cryptocurrency has risen by 9,000 percent in the last year.
Boje says the feedback from thousands of players so far has been good, but this is just the beginning. He envisions a digital economy with virtual concerts, virtual art galleries, virtual museums and virtual architecture practices.
While users' transactions in the Sandbox metaverse are made through cryptocurrency, the company takes a 5% fee on each transaction, which is also very profitable. According to Boje, partnerships with big brands are key to creating a vibrant metaverse economy to attract users. Although museums and art galleries are still a bit away, the Smurfs, the Love Bears and the Walking Dead have all signed up with the platform so far. Bo Jie thinks the meta-universe will be a bit quirky but very fun.
But Decentraland has already managed to attract galleries to the site, including a Sotheby's showroom where you can walk up to any exhibit and click through to see its NFT artwork. It's just that if you want to buy it, you'll jump to an external site to trade, like an existing trading platform like OpenSea or Rarible.
According to a recent report released by crypto asset management firm Grayscale, it is estimated that the digital world could be a trillion dollar business in the future. In the future, people will be able to make and sell goods, play games to earn tokens, trade real estate, and more in the metaverse. Well-known artists including singer Justin Bieber, Ariana Grande and DJ Marshmello have already given concerts on the metaverse platform through their digital incarnations. And on the occasion of the New Year 2022, celebrity Paris Hilton even threw a New Year's Eve party on her own virtual island.
While the market is hot and virtual real estate offers great rewards, it also harbors huge risks.
Janine Yorio, CEO of Republic Realm, a digital real estate investment fund, says you should only invest money you're prepared to lose in full. For his part, Mark Stapp, a professor of real estate theory and practice at Arizona State University, says he won't invest money in things he doesn't care to lose. He believes that if the meta-universe real estate fever continues, it will likely become a bubble, and people are buying things that have nothing to do with reality.
Investors are keen to describe the metaverse as a single metaverse with limited room for development, and that metaverse real estate is therefore scarce and able to retain its value. But others see it as a pull and sell scheme, where the designer puts money in at a low level and then hype the concept to pull it up, and then sells it at a high level to cut the leeks. Because in the sense of the Internet, there is no single meta-universe. there is no interconnection between Meta's Horizon world and Microsoft's Mesh, they are just independent VR (virtual reality) applications.
The strange thing about metaverse descriptions these days is that if a company says their VR app, video game, or social platform is "part of the metaverse", just because the metaverse is the future, then their product must be the future too. It's like saying that AR (augmented reality) is the future, and then Google Glass is an AR product, so Google Glass is the future.
The property boom in the metaverse also emerged within the framework of this narrative. The head of Metaverse Group, a virtual real estate company, even compared buying land on the metaverse platform to circling the drain before land prices skyrocketed in the big Manhattan development in New York.
More specifically, platforms like Decentraland or Sandbox sell assets in virtual worlds based on non-homogenized tokens (NFTs), but these virtual spaces do not intersect with each other. Network researcher Dan Olson (Dan Olson) points out that the purchase of real estate in the metaverse actually buys the services provided by that platform. And if the platform's operations go awry, the investment will be lost.
As mentioned earlier, metaverse real estate is compared to buying a house in Manhattan, but anyone can actually create countless Manhattan's within reach of the metaverse. This means that the only reason a user would buy a Manhattan on this platform instead of a Manhattan on that platform is simply that the platform offers a better service than others.
Tokens.com (which owns 50% of Metaverse Group) says they have broken ground on a tower on the Decentraland platform, a description that is like talking about real life real estate. Yet don't forget that it actually describes designing a 3D model or virtual environment. According to software engineer Stephen Diehl, this narrative is more about constructing a story rather than depicting a technical process. People need this kind of story because in the end they are buying just some numbers in a computer.
The currency users use to buy and sell land in Decentraland isn't dollars, and most plots can't even be purchased with the popular bitcoin. The platform has its own cryptocurrency, called mana, which is technically an ERC-20 token. This also means that even though Decentraland is built using the ethereum blockchain, the value of mana's coin may be more volatile than ethereum.
In late December last year, the cheapest plots on Decentraland were selling for around 4,000 mana, which is equivalent to about $15,000. Assuming you buy a plot, you hold that plot until the next buyer buys it, because the non-homogenized token mana, unlike bitcoin, is not fungible. But on the other hand, if a user holds a large amount of mana, he can sell the mana, including to people who want to buy plots. And since the market for mana is so small and land is so expensive, the price of land can easily fluctuate dramatically.
In fact mana's coin value has skyrocketed a few times. After Facebook changed its name to Meta, the mana coin value suddenly shot up to $3.71 from the previous rarely breaking $1. In late November, Lot 116 was sold for 618,000 mana, known as the largest meta-universe land acquisition in history, when the mana price was about $4.10. Two days later it rose again to US$5.79. The value of the currency went up more than five times in just one month. It is doubtful whether the cryptocurrency value is a plan to pull up and cash in. At a time when mana's coin value is at an all-time high, the cryptocurrency is also trading at a staggering $11.4 billion, making the $2.4 million price of the plot sale seem a bit insignificant.
These meta-universe platforms may or may not be the future of the Internet, but a lot of money has been invested in the platforms, and once they break there will be people trapped, people who may have just been caught up in a good story to begin with. The target of these stories, Olson believes, may be the vulnerable middle class, those who feel they are being squeezed by the system and whose solvency is spiraling out of control. The platforms sell them on the idea that this is an opportunity and that you just need to bet on the right windfall at the right time to cash out and leave.
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