Should You Buy Virtual Real Estate in the Metaverse?
What is the metaverse? Should you buy real estate in the metaverse? What does that even mean? We will learn from a metaverse expert who will be enlightening us on what this is all about, and why it is important to at least start learning about it, and why it could be the next big thing in real estate.
Tell us a little bit about you.
I got into crypto four years ago, and for the past two years, I've gone from an investor to an avid crypto researcher, community creator, and content creator. I've developed this passion by learning about and teaching crypto to people of all walks of life, and levels of experience and expertise.
Why should we start looking at buying real estate in the metaverse?
Metaverse is definitely a buzzword, I'm sure most people are familiar with as of the past six weeks or so. It kicked off the global awareness when Mark Zuckerberg announced that he was renaming Facebook to Meta, short for metaverse. He sees the direction of the world going to people interacting in the metaverse increasingly over time. He announced that he's planning to hire 10,000 engineers in Europe, specifically to work on the metaverse for Facebook. So he's heavily invested. However, metaverse isn't new, it's been around for years. Decentraland and Sandbox are the OG's of the metaverse space, if you will. I do own digital real estate, or virtual real estate in both of those projects, I started investing in that virtual real estate in the last couple of months. If you take the appreciation of real world real estate, and you compare it to virtual real estate, say over the past year, I'll throw out some rough estimates, you may have a better idea for the real world real estate numbers than me. But I would hazard a guess that the appreciation in real world real estate has increased, depending on where you live of course, in the Bay Area, where we're located maybe, let's say 20% in the last year.
And some of these metaverse projects, again, don't quote me on this, but we're looking at orders of magnitude higher appreciation rates. A year ago, you could purchase a plot in Sandbox or Decentraland for hundreds of dollars. And right now, the cheapest land parcel in these projects, is at least $13,000-$15,000. As you can see, the returns are astronomically higher in virtual real estate than in real world real estate. And that's what really got my attention and interest. And that's why I'm starting to heavily invest into virtual real estate.
What does that mean to own land that doesn't exist, in a magical world?
The ownership is via what's called an NFT, which stands for non fungible token. It's basically something that is digital, has scarcity, and is verifiably authentic on the blockchain. In addition to that, it's also a way to verify ownership of a digital asset. Virtual land plots or parcels exist as entities on the blockchain, so your ownership is verifiable. That's how it's represented to the world. And the blockchain is a transparent public ledger. So everyone has visibility into it.
But I'm still not understanding why I should buy a piece of land that doesn't exist.
There's the appreciation component, and because it exists as an NFT, you can also easily flip it on the blockchain. You can list it for sale on different entity marketplaces, the most popular and the largest being Opensea, kind of like the eBay of NFT's. You can easily list it for sale by connecting your digital wallet, MetaMask being the most popular digital wallet. There are other ones as well. It's as simple as listing it, putting a listing price, and then someone else connects their digital wallet to that NFT marketplace, let's say on Opensea, and they click a button that says Buy Now. As long as they have the currency that it's listed in, whether it's Ethereum or USD, stable coin or sand tokens in the case of Sandbox, or Mana tokens, in the case of Decentraland, it's that simple. You click Buy Bow, you pay a transaction fee, and then magically, it transfers into your digital wallet. And now you're the owner. And now your name is on the blockchain to prove ownership, it's that simple.
In addition to the appreciation, the fact that it's easily transferable, or sellable, other reasons to purchase an own virtual real estate are that you can do much more with it in the metaverse than you can in the real world. For instance, you can advertise on it. You can advertise your own company, unlike the physical world, anyone in the world that has an internet connection is able to put eyes on those advertisements as they explore the metaverse and they happen upon your property and your billboards. The exposure opportunity is much higher. You can also rent out your property to, let's say, people that want to host events on it. You can design and build any space, any environment that you can imagine. Unlike the real world where there are constraints.
And then also there's varying levels of real estate. There are highly influential figures, celebrities, musicians that have bought up a lot of land in some of these Metaverse projects. Snoop Dogg is one example. He owns a massive section of land in the Sandbox. He has created what's called the Snoopverse. It's basically a metaverse within the metaverse specific to Snoop Dogg, where he hosts live concerts where you can watch them as your avatar with other avatars and get access to other exclusive opportunities like NFT drops, play in the Snoop Dogg casino, check out his 200 car virtual car collection, get higher staking rewards on your tokens. Snoop Dogg is selling these early access passes, and they cost 525 Sand tokens. That's the native token for the Sandbox. And these exist as NFT's also. So you can trade these with people, you can flip them, or you can hold on to them and retain those membership benefits over time.
The reason I brought up Snoopverse in relation to real estate opportunities is just like in the real world "Location, location, location" the cheapest parcel in the Sandbox right now is going for approximately $13,000. In the past couple of weeks, parcels adjacent to Snoop's property, Snoopers, I think there is a string of three adjacent land parcels, if you take the minimum price $13,000 times three, you'd get $39,000. But those sold for $450,000, more than 10x the minimum price for land parcel in the Sandbox because of the proximity to this highly influential celebrity.
Why does that matter? Why is it worth 10x the price of minimum real estate values? Because Snoop is going to attract so much traffic to his land area, you are therefore going to get a lot more traffic to your plot of land, and so you're going to get more eyes on it. Therefore, the advertising potential is higher, or the number of interactions you can expect on your property are much higher. You can also create games on your properties for people to play, and you can generate revenue off that. Lots of passive income opportunities with virtual real estate, more so than in the real world because the same things you get in the real world, you can do in virtual real estate, and then some. You can rent it out. You can advertise on it.
You're not dealing with city laws like San Francisco and waiting three years to get something approved. You're not cleaning toilets.
Exactly. There's are overhead costs, zero.
There is never decay, no need for a new roof when it snows.
Exactly. You don't need to clean the sheets. You don't need to vacuum it. You don't need to do all these things that an Airbnb host has to do today in the real world. So high appreciation rate so far, at least in the last year or so, no maintenance costs, no headaches, no hassles, easily transferable, flippable, unlimited advertising opportunities. You can really stretch your imagination, get super creative with it, build anything.
Is there any height limits for building over there?
Yes, I think it's in the Sandbox. Each parcel in the Sandbox is "96 meters by 96 meters". Length, width. I can't remember the height, but there is a height restriction. You can only build so high. And so that is similar, I guess.
They're already starting to impose some restrictions, might as well get on it now, before it gets too crazy.
Another really key factor that contributes to the value of virtual real estate, not really dissimilar from real world real estate, is that there is a finite supply. So there is a finite amount of land, at least speaking about the Sandbox and Decentraland that will ever exist and be available for purchase and ownership. In Decentraland, there's a ceiling of 90,000 land parcels. And in the Sandbox, there's a little over 166,000 land parcels that will apparently ever exist. So there's extreme scarcity. These are available to everyone around the world that has an internet connection, essentially. So the market is a lot larger than real world real estate. It's very accessible. It's supply and demand, you've extremely scarce supply, and just an increasing demand that I foresee, at least that's been the trend to date. And I don't see that stopping for a long time.