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Explained: How real estate is booming in metaverse

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Investors are now flocking to the metaverse, or a virtual immersive 3D world, where anyone can create their avatars and interact with others in real-time and buy/sell products including real estate. A plot in this virtual universe sold for a whopping $2.43 million in what was the biggest real estate deal in Metaverse.

Explained: How real estate is booming in metaverse
A virtual plot of land in the metaverse just sold for a whopping $2.43 million, the largest deal so far in the virtual universe. The Metaverse Group, under the ownership of Tokens.com bought Decentraland’s Fashion District.
Investors are now flocking to the metaverse, or a virtual immersive 3D world, where anyone can create their avatars and interact with others in real-time and buy/sell products including real estate. This is possible by leveraging technologies like Artificial Intelligence (AI), Virtual Reality (VR), and Augmented Reality (AR).
"The market opportunity for bringing the Metaverse to life may be worth over $1 trillion in annual revenue," crypto asset management firm Grayscale said in a report without giving any specific timeline.
There are multiple such virtual platforms—Decentraland, Axie Infinity, Sandbox, among others—from where user-generated digital environments can be bought and sold. Since the deals are in the virtual world, the mode of payment is also digital or cryptocurrency. The Decentraland deal, for example, was done in the native currency, MANA, which is currently trading at roughly $5 on coinmarketcap.com.


How does land derive value if it exists virtually?
The underlying concept here is that although the internet may be infinite, a metaverse is not. There can be multiple virtual worlds, but they will be limited in size. Hence, in every world, only a limited amount of land exists, and it is designed such that more cannot be added later. The rarity contributes to the appreciation in value.
The concept of keeping a limited supply is similar to Bitcoin. Only 21 million bitcoins will ever be released into circulation. Once the number is achieved, there will be no further addition and its supply scarcity will continue to propel its value.
Decentraland, for example, has 90,000 pockets of land, each measuring 2,704 square feet. They were all auctioned in 2017 and 2018 but they are still being resold on the Decentraland marketplace as their value continues to rise. The virtual land that sold for $2.4 million measures 6,090 sq. feet.
The location of virtual land is as important as the location of physical land today. A virtual gathering is likely to be around places bubbling with energy and not on the outskirts of the metaverse. Such parcels of land are valuable to brands.


Can virtual real estate be used for other purposes?
Since the invention of blockchain technology, taking ownership of virtual assets has become a secure and safe transaction. It has since been incorporated into games to facilitate the ownership of in-game assets. Here is what owners of virtual land can do with it:
  • Develop the land (construct malls or shops) - either yourself or by hiring virtual land developers
  • Run businesses or lease the land to other businesses
  • Host professional or social gatherings
  • Re-sell the land for a profit
  • Mortgage property for an alternate source of income
  • Create adventure parks and go on quests
  • Why are brands pumping money into virtual real estate?
    In this day and age, it has become difficult for most to imagine life without technology. Besides, restrictions on social gatherings and physical meetings due to COVID-19 have driven people online.
    Experts believe the younger generation is more likely to increasingly indulge in events, shopping, and other activities in the virtual world. Fashion and entertainment are the two sectors that are likely to leverage the power of the metaverse in the future. Investors want to cash in on this opportunity and therefore, real estate buyers in the virtual world are not limited to just brands but also extend to communities and even individuals.


     
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