According to DappRadar, the ten largest virtual worlds have generated over $1.9bn in digital real estate sales since their conception.
This period included many multi-million pound transactions from metaverse real estate firms and big brands, plus individuals – including one user who spent $450,000 on a plot of land neighbouring US rapper Snoop Dogg. It is now estimated that the digital real estate market will continue to grow 31% year-on-year for the next six years.
Amidst a cost-of-living crisis, the thought of investing cash into owning virtual property in the metaverse might sound absurd. But big brands such as Nike, Gucci, Sony and Spotify have already spotted the opportunity to reach new audiences and are hedging their bets that the metaverse is here to stay.
The spike in average digital property prices also shows that many people may still have disposable income to invest. For younger people unlikely to get a foot on the ‘real’ property ladder any time soon, virtual property is offering a cheaper and more accessible alternative.
For brands and users alike, the potential unlocked by blockchain technology in the metaverse is alluring. Concepts such as decentralised governance and token-based micro-economies have the power to revolutionise transactions and the nature of ownership. Cryptocurrency communities are hopeful of a future detached from current conventions, operating outside of the financial turbulence and uncertainty in physical markets.
Recent data exploring digital land ownership confirmed this shift in attitude towards digital ownership. With the average price of a plot of land at $3,300 in June 2022, research from Virtua found that nearly half (48%) of all Americans and a third (33%) of all Brits are more likely to buy digital land than physical property. The research also found similar figures (46% of all Americans and 30% of all Brits) think that digital property will provide a more significant return on investment than bricks and mortar in five years’ time.
It’s important to remember that, as with any purchase, nothing is guaranteed, and it is always important not to ‘hit and hope’ for profits that may not materialise. Nobody should be spending more than they can afford, especially on assets that they don’t fully understand. So it’s absolutely crucial, especially for first-time buyers, to be well-informed before they take their first steps onto the digital property ladder.
Here are five recommendations to consider before making your first purchase:
Know what you are dealing with
Before you start acquiring digital real estate, you should have a relatively good understanding of the technical mechanisms, for example, smart contracts and land deeds, that impact the buying and selling process. Digital properties are digital assets that come with similar logistical features that you’d expect to see on the printed and digital documentation provided by real estate agents in the physical world. Whilst the blockchain does autonomise this process, the absence of a centralised third party to help manage your acquisitions and activity requires you to assume more responsibility. Whilst you can purchase metaverse property through digital brokers and property managers, there isn’t currently any regulatory or licensing stipulations that they operate under, so working with reliable third parties will also be down to your own due diligence.
Get a wallet
Purchasing a metaverse property means that you are purchasing a digital land deed. The deed itself is a unique piece of code which stores all of the transactional history and values of the property on the blockchain, verifying your right to ownership by adding a layer of code. In order to complete a transaction (whether it be buying the deed or selling the deed on) you will need a digital wallet that is compatible with the specific cryptocurrency that the particular metaverse platform uses. Until you’ve selected and set up the right kind of wallet and relevant cryptocurrency, you will be unable to make any investments – so be sure to do your research and have everything in place.
Choose your metaverse platform wisely
As in the physical world, location is important when choosing your virtual HQ. Naturally, there are influential factors about a place that we weigh up when considering where to live. It’s the same with the metaverse. As with physical property, the value of digital land can fluctuate according to the popularity of its location. Factors such as brand and influencer interaction, user engagement, gamification and creative initiatives within a particular metaverse will all play a factor in determining the value of your digital property now and in the future.
Don’t go in blind
It might sound obvious, but it’s true: know what you’re buying. Firstly, are you buying a plot of land on which you can build a property? Or are you buying a property that is already built? If you’re buying a plot of land without a property, what kind of property are you going to build? Are you familiar with the architectural design tools that will allow you to build something competently? Are you planning to buy a home that your avatar settles in, or are you investing in a property that you plan to develop, customise and either rent out or sell on? These are all questions you should ask yourself. As within the physical world, having a clear strategy for your purchase is totally necessary.
Remember that a digital property and its accompanying land deed is a type of NFT. The greater utility an NFT provides, the more valuable it can be. With digital property utility can come in many forms. The most obvious would be their foundational traits such as flexibility to design and build on and also having space to showcase digital artwork. A metaverse platform might also add exclusive perks to your land deed, adding unique traits and boosting its value. For example, owning a property in a more desirable location might afford users the luxury of having rights to vote on conditions and procedures of that particular metaverse, or perhaps having access to useful resources that can be deployed in gamified aspects of the space. Finding out the utility that your land deed provides should be a priority in your purchasing decisions.
Interested in making your first acquisition? Sign-up to the Virtua Prime white list to learn more.