Metaverse Weekly: An Overview of the Digital Real Estate Boom
The metaverse is firing on all cylinders so far in 2022, with numerous global corporations flocking to the space. A particularly valuable part of this new emerging digital economy is none other than real estate.
Land ownership inside the metaverse is becoming exceptionally popular, with some virtual land plots selling for millions of dollars. Land plots in Axie Infinity (AXS), The Sandbox (SAND), and Decentraland (MANA) have been appreciating in value considerably over the course of 2021 and 2022.
Some organizations such as the World Economic Forum have speculated that land in the metaverse could become worthless in the future, so what virtual and what is driving high prices?
What is Virtual Land?
Virtual land is bought and traded as non-fungible tokens (NFTs). The NFT records precisely who owns the land directly on the blockchain, minting ownership for everyone to be able to verify publicly.
Each piece of virtual land within a protocol like The Sandbox is a small section of the protocol represented by the NFT. This land can then be traded or sold on secondary markets. In fact, virtual properties are highly transactable with an average of 8,000 properties changing hands every month at an average price of 3.5 ETH (~$10,000).
Virtual, purchasable land is broken down into parcels of which the number available varies between platforms. The Sandbox, for example, has just over 166,000 parcels of land presently available. Each parcel is a 96×96 meter plot.
These parcels of land can be developed to create buildings, gaming experiences, advertisements, and other use cases that mimic real-world activities.
Purchasing and building out land in the metaverse is becoming increasingly more popular. While risky, this is comparable to developers buying and developing land in places that are speculated to have substantial future growth. The metaverse is no different.
Since the onset of the real estate boom in the metaverse, properties have gone for hundreds of thousands of dollars. As of January 2022 per the Centre for Finance, Technology, and Entrepreneurship (CFTE), virtual land sales represent $100 million of the $2 billion per month spent within the NFT market.
Individuals and companies alike are investing in metaverse land – and generating income. The valuations vary depending on location and use case. There are a few different use cases that metaverse landowners can explore.
- Becoming a landlord
- Developing infrastructure
- Hosting virtual events
- Integrating advertisements
Land ownership gives the user the ability to explore multiple revenue streams, the most obvious being as a landlord that rents the land out to developers or other users. The idea of hosting digital events inside the metaverse is also an arising concept, just like the Travis Scott concert held entirely on Fortnite that saw 27 million users attend.
The metaverse real estate boom has showcased the increasing demand for both users and companies to secure their own parts of the arising metaverse space. While individual land parcels are still highly speculative in relation to their prices, the overall trend of institutional investment into metaverse real estate shows that the trend is real.