- People are buying digital land in the metaverses in what is the latest craze to sweep the tech world.
- But experts say this virtual real estate is more of a crypto asset than physical land.
- The digital land will be more useful for brands to build experiences, not for investors who want to appreciate it.
If you’ve been keeping up with the batch of buzzwords invading the tech world lately, you’ve almost certainly heard of the Metaverse.
And if you’ve heard of it, you might know that some people buy real estate using non-fungible tokens (NFTs) in the digital world.
$450,000 plots of land in rapper Snoop Dogg’s ‘Snoopverse’ at video game giant Atari’s crypto-casino in Decentraland – where a buyer recently shelled out $2.43 million for a single plot of land land — more than $100 million has been poured into the purchase of metaverse real estate, according to predictive analytics firm NWO.ai.
But there’s a problem with equating digital real estate to physical: the primary sources of value that apply to real-world properties don’t apply in the metaverse, which means your virtual land may not not increase in value.
Experts told Insider that these purchases are more of a crypto asset than anything else, a speculative and “risky” asset to buy, like anything currently on the metaverse — or anything blockchain-based for that matter. .
“I’m sure there are people who will make a lot of money in the short term,” Louis Rosenberg, a 30-year veteran of AR development and CEO of Unanimous AI, told Insider. “But in the long run, it doesn’t make sense.”
It may be too early to speculate on metaverses
One of the main factors driving people to invest in digital real estate is the growing popularity of metaverses and NFTs.
People enter a metaverse, like Decentraland, and can use the ecosystem’s digital assets to buy land. Then they can either buy, sell or rent the space.
Like everything in the crypto sphere, “if there are enough people who want to spend money on it, then it becomes a market,” Dexter Thillien, technical analyst at the Economist Intelligence Unit, told Insider.
But there are two main things that are supposed to give metaverse real estate its value: scarcity and location, two fundamentals of physical real estate.
Experts said they don’t exactly apply to the metaverse, because you can’t artificially introduce scarcity.
This is why experts say potential investors should be aware that their virtual land may not appreciate as they expect. Instead, the space will be used more by brands to create social experiences, Janine Yorio, CEO of metaverse real estate company Republic Realm, told Insider.
“Those who buy land simply for the purpose of capital appreciation, I believe, take a greater risk than those who develop attractive businesses and experiences on it,” Yorio said.
Fixed supply scarcity is already the primary source of value for much of the crypto world, such as for bitcoin, which has a limited capacity of 21 million coins.
“Proximity to important things, events and entertainment venues, also creates value in the metaverse,” Stan Miroshnik, partner and co-founder of 10T Holdings, told Insider, which may explain why the owner Snoopverse landowner wanted to be virtual neighbors with the rapper.
But Owen Vaughan, research director at blockchain firm nChain, told Insider there needed to be guarantees that these platforms wouldn’t change the rules of the game or affect the value of people’s property.
“Physical real estate is changing slowly, but what could a metaverse platform change in a click?” said Vaughan.
Miroshnik said the investment may be speculative, but it was still a “visionary” move – even though many investors don’t even do anything with the land they buy.
“You log in now and it doesn’t blow your mind — it’s basically Roblox or some version of Second Life that we had a decade and a half ago,” Miroshnik said. “So you kind of have to imagine the possibility of what’s there.”
Whether visionary or misguided, the metaverse real estate market feels forced because it doesn’t make sense to speculate on land just yet with this technology, Rosenberg said.
“In the metaverse, we don’t even know which platforms are going to be popular, let alone which places on which platforms,” Rosenberg said. “And it’s like someone buying land anywhere in America and hoping it becomes San Francisco or New York.”