All over the world, there's a real estate boom.
Properties are overpriced, selling for tens
of thousands to millions of dollars.
And no, these aren't houses in Miami or Tokyo.
This is virtual land in the Metaverse, as major
names like Snoop Dogg, Adidas and Atari bought virtual
land, some argue that there's a kind of gold
rush for digital properties as we speak.
JP Morgan just issued a report stating that they expect
the metabolic to generate a trillion dollars per year.
Seriously, trillion with a T.
But is virtual land a good investment?
Better than physical real estate?
Are the risks different than real real estate?
And most of all, is this the start of a
revolution or a big bubble that's about to pop?
There's a race between big corporations
and high profile individuals to pour
millions of dollars into virtual land.
They either went nuts and that happens occasionally.
Or there's something here.
And hold on, because if you think
digital land is insane, wait until you
hear about virtual property developers, architects, mortgage
lenders, and realtors all within the Metaverse.
Now, the term Metaverse means many different things, but
in this context, it's a digital land full of
opportunities that are both social and economic in nature.
It's a place where you can interact with
people and create experiences, but also start a
business and even pay your bills.
The big bet that tech companies are making
is that the Metaverse will be the successor
to social media, meaning all the social interactions
that currently are stored on Facebook, Instagram or
TikTok will soon transition to the digital space.
Well, a more digital space.
That's where the Metaverse gets weird.
The key difference is that unlike current platforms, in
the Metaverse, the financial side of things is ingrained
within the system so deeply that it's actually one
of the defining characteristics of this universe.
Normal people can make money in the Metaverse more
than any other social media site or video game.
And it also applies to land owning,
owning your very own piece of the Metaverse.
Now, famously, the term Metaverse comes from a
Cyberpunk novel by Neal Stephenson called Snow Crash.
I remember when I first read Snow Crash and my
first thought was, wow, this guy is a fortune teller.
Like he nailed it on the head.
In this novel, people escape their bleak,
dystopian everyday life and use their avatars
to jump into virtual reality.
And protagonist, whose name is actually Hiro Protagonist,
lives in this miserable storage unit type home.
But when he joins the Metaverse through a
pair of goggles and headphones, he goes into
an online world where he becomes this big
shot that can afford top real estate.
So we surely get why this idea is
attractive and even more so since the pandemic.
If I had to choose between crappy real estate
on a busy street and a virtual mansion by
how you live defines who you are.
So in other words, it's a matter of status.
So in a sense, the same applies
when you buy your virtual property.
So you want to make sure that you're able to
monetize it eventually or benefit from it, and that you
choose the right district with the right neighbors.
Right now, there are several Metaverses.
Some of the most popular are Decentraland
and Sandbox, where people can own assets
and create experiences on the blockchain.
In both Metaverses, buying virtual property is pretty
fast and easy, a whole lot easier than
dealing with agents and showings and escrow.
In real real estate, virtual
land is bought with cryptocurrencies.
And just like real land, there is
a fixed number of properties in some
areas have much higher demand than others.
So if you take Decentraland, for example,
they have their own marketplace where
you can view their properties.
The smallest and the cheapest plot of land right now goes
for 4,600 Mana, so around $13,000 and the highest? Not much.
Just a few million dollars. In the sandbox,
the cheapest piece of land that you can find
currently goes for around $10,000, more than some real
lots of land in the real world.
Once you purchase your virtual real
estate, the sky's the limit. You can build on it,
you can decorate your home, or you
can create all sorts of experiences.
This could be a business, a game, a gallery to sell
your NFTs, or just hang around in your digital underwear.
By the way, the rumors are true.
Victoria's Secret is planning a line
of digital lingerie for avatars.
So line up.
The legal title that proves
you're the owner of your virtual property is
a non fungible token, or NFT.
Your NFT is essentially your property deed.
It's on the blockchain.
It's written on this big, super secure
ledger, so it's safe and transparent.
Just imagine if buying a real house was that easy.
Instead of having this Niagara Falls of paperwork,
you could just pay this guy like $50
in transaction fees and it's done.
Now what about the risks?
Physical real estate is a relatively
safe investment most of the time.
Before diving into the risks,
let's talk about opportunities.
Two major thoughts here.
The first is price.
If you feel that the prices are crazy, which
arguably they are, some people feel the opposite.
They feel that this is a bargain.
In 2021, virtual real estate
sales were over $500 million.
And in a recent interview with the Wall
Street Journal, the CEO of Tokens.com stated that
owning land now in the Metaverse is like
buying land in New York 250 years ago.
And at first it made me choke when I first read
that they paid $2.4 million for a plot of virtual land.
But real estate agents know how powerful the
first mover advantage is in the real world.
His company is not the only one
investing heavily in Metaverse real estate,
believing that this is just the beginning. Many other
investors seem to think exactly that, and not just
Zuckerberg, who also owns plenty of real land himself.
Just recently, JP Morgan became the
first bank to join the Metaverse.
So if you want to drop by and say
hello, their virtual land is located in Decentraland.
Inside, you'll be welcomed by the portrait of their
CEO, and you'll notice the Tiger security guard.
Because why not?
Meanwhile, the legendary investor Kathy Wood thinks basically
the same, that this stuff will be worth
a whole lot more in the near future.
Now my second thought is strategy.
Virtual real estate, NFTs and physical real estate
have more in common than you might think.
Keep that in mind.
Obviously, the size of your plot
of land impacts the price.
But the first key factor to keep in
mind is the location of your parcel.
In fact, what makes a piece of land hot
is how close it is to places that matter.
In other words, downtown areas will be more expensive
than suburbs, just like in the real world.
Do you want to be Snoop
Dogg's Neighbor in the Sandbox Metaverse?
Well, how bad do you want to wake
up to Gin and Juice at 2 AM
because someone paid $450,000 for that honor?
Or maybe you want to live next to the new
venue created by Warner Media to host concerts for top musicians.
There's a fat price for that, too.
Proximity matters.
Even if you can fast travel outside of Snoop's
house, the second and absolutely essential factor is scarcity.
This is rampant in physical real estate.
In our real world, there are only so
many properties on the beach or downtown.
You can't make more beachfront unless you're Dubai.
You can make more beachfront.
Bad example, take Central Paris.
It's valuable because it's Central Paris.
You can't just magically make it bigger.
So the fact that the prime land on
our planet is limited is what ultimately makes
it a great investment for most people.
Now a legitimate question arises,
Because one might say that if the land is
virtual, you can just make more of it.
It doesn't really even cost anything.
So Where's the value and scarcity in that?
Well, to solve this problem or to create
the problem, however you want to frame it,
in Metaverses, like the Sandbox or Decentraland the
number of properties is intentionally limited, thus providing
that scarcity that's needed.
So the digital supply is fixed while the demand
so far has been growing and this increases value.
Now, of course, unlike our physical planet,
the Metaverse scarcity is purely artificial.
So how does it play out in the future?
It's really a matter of how you look at it.
Once you purchase your pretty land and you paid
top dollar for it in the Metaverse, can you
monetize it or does it monetize you?
We said that more than any social media or
game, the Metaverse is a place for business.
According to JP Morgan, NFTs currently have
a market cap of $41 billion.
What's revolutionary in the Metaverse and play-to-earn games is
Compare this to traditional video games, where you grind
for XP to earn money and items, but that
value is ultimately restricted within the game itself.
I got some words for you.
Rent, advertise, host and sell.
You can actually turn into a landlord
and rent out your virtual land.
There's already companies that list virtual
properties up for monthly rental.
You can advertise, let's say your digit house is
in a sweet location with lots of eyeballs.
You can actually put up billboards
and advertise for interested companies.
Then you can host virtual events
and charge people for admission.
Or you can use your space to
showcase your products and sell your NFTs.
If you're a brand, the potential
for an ecommerce segment is enormous.
As we speak, top brands like
Gucci are buying virtual land.
These are just some examples.
And you can really be creative, because the
chances of monetizing virtual properties are ultimately endless.
Just like physical properties actually, maybe
more so than physical properties.
So back to the original question.
The blockchain as well as virtual real estate aren't
just a technological shift, but a social shift.
And if you think about it, in political philosophy, one
of the main reasons why the state exists in the
first place is to help safeguard private property.
If you're certain as an individual that no one's going
to come and steal your property from you, you're more
likely to be entrepreneurial and help grow the economy.
It's better for everyone.
The problem is, even the state isn't
perfect because people aren't perfect, so governments
can be overbearing and occasionally corrupt.
This breeds the desire for a new
system, DeFi, free from human intervention, a
potentially more honest system, if you will.
Of course, this is all new and unexplored territory,
but the idea is less power to governments, and
it seems to be starting to work.
Virtual real estate is opening up
new business opportunities and jobs.
There are mortgage lenders that can help
you buy property and even tax accountants
in the Metaverse. There are architects that
can design your Metaverse home according to
your vision, and then video game developers
who can actually render that building.
A lot of this is going to stay because the Metaverse
is very likely to be a big part of the future.
But the issue to consider here is timing.
Right now, there's a lot of hype, and according to
Metaetric Solutions, sales in virtual real estate may boom as
high as $1 billion in the coming year.
And they might be right.
But the point is that this
phenomenon is still in early development.
We don't have a lot of data to understand
how this will play out in the future.
Not to mention sales of real real estate
is thousands of times larger, so it's kind
of hard to compare the two.
All of this makes digital real estate
a highly volatile and speculative investment.
That isn't to say it's impossible to make money.
It's just very volatile and
speculative in terms of scarcity.
It's true that the number of plots of land is limited
in the Metaverse, but the number of Metaverses is not.
In fact, many of them are waiting to be launched as
we speak, and likely many others will be developed soon.
This means users might decide to abandon
one Metaverse and move on to another.
This makes it extremely hard to guess which
Metaverse is the one worth investing in.
We can't necessarily say the first will be the biggest.
Imagine if you could buy one
Pixel of a traditional video game.
When Pong came out, people would have
gone crazy buying up those pixels.
But technology has advanced and
we've upgraded and moved on.
That's really the concern of mine.
That very few games last the test of time.
There's always this new shiny
technology that attracts new users.
More realistically, we saw something
similar during the late 90s, the .com bubble.
People were investing big money in this
new frenzy for Internet based companies and
equity markets absolutely touched the sky.
In a matter of just a few years, there were
tons of new companies, and this was extremely exciting.
Then the bubble popped, the market crashed,
and most of those .com companies went down.
But it wasn't all for nothing
because the Internet was huge.
It became the future, and a few players
emerged from that scenario that became absolute Giants.
Similarly, it's pretty likely that we'll see many of
these Metaverses today completely disappear, but some new ones
will emerge, and there'll be some giants.
So right now, we just don't know
which Metaverse will be "the one".
Will there be just one massive Metaverse, or will there
be many different Metaverses for different use cases, one focused
on ecommerce, another one more focused on live music or
whatever these niches might pan out to be?
We just don't know.
There are also several other major question marks.
When will the hardware advance enough to
create a truly immersive, comfortable experience?
Will there be regulatory changes?
The Metaverse is almost certainly the future of
social media and the future of the internet.
These new ideas like virtual real estate are
extremely powerful and we might see a big
transition in just a few years.
Meanwhile, it's interesting to jump in, check
out the discord communities of these companies
and monitor how it evolves.
There is possibilities to money here.
It's just highly volatile and we can't be certain, but
those people in digging deep in the communities are going
to be the ones who make the massive profit.
But what we know for sure is
that this is just the beginning. So buckle up.