Virtual land in the metaverse: Digital property for millions
Why are more and more people buying virtual property in the metaverse? In the digital universe, trading real goods with cryptocurrency is not the only trend.
In addition to buying real real estate with Bitcoins & Co, trading real estate in the metaverse is also playing an increasingly important role. But how does virtual real estate purchase and digital property trading work?
What is the metaverse and how does it work?
What is the Metaverse all about? How does a world that only exists in digital space work?
Virtual world and digital land
Mark Zuckerberg sees the boundaries between the real and digital worlds becoming increasingly blurred. His vision of the future is a reality of life in which real action and digital action merge fluidly. This sounds complex, but it can be explained relatively easily with the help of a few examples.
Web 3.0: Life in the digital world
The digital world is developing rapidly. Faster connections and new technical standards make things like virtual properties in the metaverse possible in the first place.
From 1.0 to 3.0: The evolution of the internet
The first step into the digital world was Web 1.0. This early internet is characterised by the fact that it mainly depicts and also entertains. It provides the user with information, but offers little interactivity. In this early form of the internet, only chat rooms and e-mail were used for exchange and networking. The further development of technology makes it possible to exchange more and more data in real time. The focus of Web 2.0 is on communication. We interact in social networks, exchange information and also pictures and videos. Digital conferences with simultaneous participation of different people from all parts of the world are now normality. We use Web 2.0 to network and exchange. The further development is Web 3.0, in which we no longer just exchange information. We actively transfer part of our actions into a purely digital virtual world. In this way, we create virtual living spaces and also trade in digital goods.
From the web to the metaverse
This new reality is the metaverse. It is a world that merges real and digital spaces into one big entity. Second Life was a simple and early form of such a digital universe. Here, a second life was created playfully by means of avatars, which, however, functioned as a pure game, detached from real existence. In the metaverse, real and digital events are linked. The virtual world becomes part of our reality. Virtual reality is here.
The new Virtual Reality
In the future, people like Mark Zuckerberg see our real lives as inseparable from a parallel digital world. Cryptocurrency already exists as a real means of payment, which means that the virtual and real worlds are already merging. Digital works of art fetch horrendous prices and even virtual properties are already sought-after objects of speculation.
Are we increasingly visiting historical sites, castles and temples purely virtually? Do we walk through them with our avatar instead of travelling there in real life? Do we visit digitally prepared buildings as well as those that exist purely virtually? And is the idea of owning virtual land and buildings in the metaverse becoming more and more commonplace?
Metaverse: Decentralisation instead of a platform
What distinguishes the Metaverse from previous virtual worlds is its decentralised organisation. No central administration or platform are the basis, but each member acts independently here. Thus, no central banks control cryptocurrency trading. It is not for nothing that the virtual world powered by the Ethereum Blockchain is called “Decentraland”. Like The Sandbox, for example, it is part of the Metaverse. MANA are the names of the cryptocurrency tokens used for trading in Decentraland. Users anonymously buy and sell goods, virtual properties and also digital real estate. Like all cryptocurrency trading, this takes place directly via the participants and without central control. We describe this in detail in our previous article on cryptocurrency.
Virtual real estate worlds
Another virtual world of the metaverse is “The Sandbox”. In the blockchain industry, Decentraland and The Sandbox are currently the largest metaverse projects with a combined market value of over $10 billion. Numerous new construction projects are also emerging in Meta’s Horizon Worlds, Mark Zuckerberg’s vision of the digital world. But the investments do not belong to a company like Meta, formerly Facebook. The owners are all the users who participate here with their own digital products and currencies.
Buying property in the metaverse?
So how does trading digital property ownership work? How is the value of land in the metaverse determined?
Virtual value of immaterial goods in the metaverse
Many find it difficult to imagine a world for purely virtual goods in real terms. For younger people, the transition already feels much more natural. Older generations, for example, still bought music as records and then as cassettes or CDs. Today, young people pay for digital music files as a matter of course. A real good that exists to touch no longer exists here. With digital music, we pay for the creative performance, not for materials. However, the trade here does not yet take place in the metaverse, but on the internet. It is not only the artists who earn money from music, but also an entire industry. The situation is different with digital works of art, which are traded via cryptocurrency, so-called NTF (Non-Fungible Tokens). It is the exclusivity of the non-exchangeable, unique digital token that the buyer acquires. Its most important characteristic is that it cannot be replaced or copied. Uniqueness or limitation and the associated supply and demand determine prices. Virtual land in the metaverse also receives its value in this way.
Digital property and virtual real estate in the metaverse
Virtual property therefore also only has value if it is unique and exclusive. Digital land that is in a sought-after location in the virtual universe costs accordingly much. Even exclusively equipped properties in prime locations are limited, hotly contested and therefore perfect speculative objects. For many, it is hard to imagine that these plots and properties only exist digitally in the metaverse. And indeed, they are by no means cheap. The company Republic Realm recently paid $4.3 million for a plot of land on the gaming platform The Sandbox.
Real estate financing with cryptocurrency instead of a mortgage
But why do people invest in land they don’t actually occupy and houses they don’t live in? For many, it is a good way to invest a grown fortune in cryptocurrency. Early entrants to cryptocurrency and digital worlds in particular have made huge profits from this currency. In the virtual universe, buyers pay for their properties directly with various cryptocurrencies. It is only possible to spend what the digital wallet has to offer. The large price fluctuations of the digital currencies also pose a risk when buying land and real estate directly in the metaverse. The high volatility of Bitcoin and Co is so unpredictable. Long-term financing is hardly conceivable here at present.
Virtual land ownership with blockchain instead of land registry
So what does such digital ownership look like? The important thing is that any virtual land ownership is a one-time token. Open Sea is a platform through which users sell land in the metaverse. This is done through direct sales, but often also through auctions. The new owner receives the one-time NFT-based token. This contains access to the data of his virtual property. Instead of a land register entry, the digital signature on the blockchain seals the acquisition here.
What is the use of property in the metaverse?
But why do people spend a fortune on properties that only exist digitally in the metaverse? Some use them purely as speculative objects. Unfortunately, these transactions are also suspected of laundering money. Nowhere do large sums change hands more easily and anonymously than in the digital universe. Others, however, are planning the new virtual world and are realising visions of the future with digital land purchases and virtual real estate. Projects like virtual art galleries are being created. Others see the future in installing advertising on buildings in order to get high returns on their investments. An online article by the cryptocompass magazine BTC-Echo shows how the value of properties in the metaverse is determined. What standards set the price of digital land ownership here? The article shows this very well.
Is there a future for property in the metaverse?
Our world is becoming increasingly digital. Pandemics like Corona mean that many meetings take place more in the digital space than in person. This has moved a lot in our working world and way of thinking. Virtual properties in the Metaverse are not exposed to dangers such as increasing storms, floods and environmental disasters.
Profit opportunity or risk?
High volatility brings dangers, but it also brings the opportunity to multiply wealth quickly in times of low interest rates and lack of returns. The high risk of investing for land in the metaverse makes
The high volatility brings dangers, but also the opportunity to quickly multiply a fortune in times of low interest rates and lack of returns. However, the high risk of investing in land in the metaverse makes this form of investment rather something for very wealthy people. Those who have enough money left for long-term and gambling investments simply sit out extreme price fluctuations. Due to the anonymity, the digital world also offers less protection against hackers or fraudsters. Despite all the uncertainty, the trend is nevertheless towards an increasing digitalisation of our world. Business is shifting to virtual reality, including real estate speculation. Nevertheless, there is always the possibility that the bubble will burst. If properties in the metaverse lose their value, there is nothing left, not even real land, that can be used in any other way.
