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. F i nanc i a l Innov a t i on & F i nTech 38 Finance Monthly.
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