TLDR Summary: Non-fungible tokens, or NFTs, are a hot technology sector for blockchain investors. Similarly, there has been immense interest in the creation of the Metaverse. This blog will discuss the combination of the two – Metaverse NFT real estate – and how you can buy, sell, and trade these digital properties.
Sales of property in the Metaverse topped $500 million in 2021, setting a new record, and are projected to increase further, according to figures issued by realtor Raymond S. Beckford.
“It’s not just your basic 9-to-5 crowd buying into the Metaverse real estate market, either,” Beckford said. “We’re talking about people investing their spare time as well. One of our agents recently closed a sale with a guy who makes a full-time living playing golf in the metaverse.”
Real estate is about location, location, location – not emotions. This is accepted as true for the physical world, and a similar principle applies for virtual real estate: think of the long-term value of the “location” (i.e., the platform, scarcity, and neighborhood) before investing. (See below for more tips on Investing in the Metaverse.)
What is Metaverse NFT Real Estate?
NFTs are digital assets that cannot be replicated.
Metaverse NFTs represent digital ownership of property within a virtual world. (Think of them like deeds to virtual land.)
The Metaverse is (or will be) an immersive virtual reality network where users interact with each other and experience their customized environments. According to Matthew Ball in his excellent book The Metaverse, blockchain technology will be important for managing payment and ownership in the Metaverse.
NFTs, like a plot of land, are unique and cannot be replicated. In addition, since they are programmable software, they can perform complex functions such as transferring ownership or receiving payments automatically when specified conditions have been met.
Comparing ownership of digital land with physical land highlights several differences:
- There are no real estate agents involved in purchasing and selling Metaverse NFTs.
- No commissions are involved with Metaverse NFTs (although there are transaction fees to consider).
- No mortgage companies, title services, or other expensive third parties are involved in transactions.
- Transactions are conducted with cryptocurrencies.
This means buyers and sellers can use their digital wallets to send and receive payments, using cryptocurrency. In addition, this allows people who don’t have access to traditional banking services access to digital real estate.
Further, each NFT can be used to track the ownership and provenance of an asset. This ensures authenticity and uniqueness, since no one can replicate the token.
A real estate NFT is a virtual deed that guarantees the uniqueness of your virtual plot of land.
This uniqueness potentially makes NFT tokens extremely valuable — much like any unique item in the physical world. An NFT is like a virtual deed to ownership, which guarantees the uniqueness of any asset (and yes—you can use this type of token in place of traditional legal paperwork).
The Leading Metaverse Projects
There are a lot of exciting projects working to build the Metaverse, but we’ll be discussing the four most popular: Decentraland, The Sandbox, Somnium Space, and Voxels.
Market Cap: $1.54 billion
Total Items: 97,600
Floor Price: 2.65 ETH
Volume: 228,600 ETH
Decentraland is an immersive VR platform powered by the Ethereum blockchain where anyone can create, experience, and monetize content and applications. Users can create, experience, and monetize content and applications by buying land or renting plots of land in a vast virtual world. It’s like Second Life meets Minecraft meets Ready Player One (with the added benefits of being decentralized).
The company has raised $25.5M in funding over four rounds. Their latest round was a Secondary Market round raised on Nov 18, 2021. It included Broslyn Capital and Digital Currency Group as investors. (Browse Decentraland properties on OpenSea.)
Market Cap: $1.08 billion
Total Items: 142,100
Floor Price: 1.90 ETH
Volume: 159,700 ETH
The Sandbox is a toolkit for creating social VR experiences. It enables developers to build multiplayer games with cross-platform support for Oculus Rift and HTC Vive headsets and desktop PCs via SteamVR. It also allows users to create their own social VR experiences with tools like the Unity 3D game engine.
In addition, the project has raised a total of $95M in funding over four rounds, with the latest round raised on Dec 9, 2021. Some of the top investors include Adrian Cheng, Softbank, and Blue Pool Capital. (Browse Sandbox properties on OpenSea.)
Market Cap: $19.3 million
Total Items: 5,800
Floor Price: 0.50 ETH
Volume: 27,000 ETH
Somnium Space is another open-world metaverse focusing on socializing and building your avatar. You can dress up how you want and interact with others through chat rooms and group activities while exploring an expansive universe full of planets, asteroids, starships, and more.
Somnium Space is a rocket ship for your dreams.
The startup has raised $1 million in funding so far, with the latest fundraising round taking place on May 8th, 2019. (Browse Somnium Space properties on OpenSea.)
Voxels (formerly Cryptovoxels)
Market Cap: N/A
Total Items: 7,900
Floor Price: 0.90 ETH
Volume: 25,100 ETH
If you love Minecraft but want something more immersive than just playing with blocks in 2D space, Voxels might be up your alley. This metaverse brings all of the creativity of Minecraft into an interactive environment that lets users create their worlds using 3D models or importing existing ones from popular online repositories like Sketchfab or MyMiniFactory.
The platform is regularly ranked just behind Decentraland and The Sandbox in terms of its popularity and user base. According to MetaCat, Voxels ranks fifth ($38MM) in total parcels sold. (Browse Voxels properties on OpenSea.)
Investing in the Metaverse
First, look for real estate NFTs with a good reason to increase in value. Look for NFTs with unique stories or purposes, not just copies of other NFTs. Originality counts, as does being “first to market” with some successful formula or approach.
Second, find out when the NFTs were first released—and by whom. Suppose a company like Disney released an NFT for real estate in a virtual Disneyland. Due to the enduring power of the Disney brand, it would likely be a good long-term bet.
Third, check whether the NFT has a high perceived value. Is it rare? Is it difficult to obtain? Do people want it? Think of NFTs as collectibles (see our Guide to Investing in NFTs for more).
Fourth, look for NFTs in platforms with a solid ecosystem. Decentraland is one such platform: its crowdfunded event sold out in under two minutes. The project raised $25 million worth of MANA tokens during the sale, and continues to grow. And it’s not just for fun: Major brands like Coca-Cola, Samsung, Nike, and Atari are using the Decentraland platform to build out their presence in the Metaverse.
Finally, when investing in the Metaverse, watch out for volatility. NFTs are non-fungible tokens—so they’re not interchangeable like stocks or bonds. They’re also not representative of real-world assets like gold or oil, so you can’t just buy them and sell them for cash at any time. This means it could take some time for an NFT to sell. These are not highly liquid assets.
Investing in the Metaverse is risky, but it does offer the potential for high rewards. Our philosophy is to let NFTs make up no more than 1% of your overall investment portfolio, and be ready to hold for the long term (5+ years).
It’s easy to let trends and popularity influence your decision-making, but thinking carefully about what you’re actually buying – like any collectible – will help you make a better real estate NFT investment.
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