Real Estate in Metaverse: What is Digital Real Estate?

What is a Metaverse?

There are several metabases. Some are built on blockchain, others are built “off-chain” in traditional video game environments. In common is a continuous virtual environment where all users can interact in a three-dimensional world, attend real-time dynamic events and purchase digital goods similar to in-app purchases. On the Metaverse network, digital real estate can be purchased for cryptocurrencies on various Metaverse platforms, but the market is currently saturated with major platforms such as Sandbox, Descentronland, Cryptoboxel and Somnium. Today, about 95% of all virtual real estate sales in Metaverse take place in “sandboxes” or “descentrandoms.”

Each Metaverse platform consists of a code divided into a limited number of plots, similar to the longitude and latitude of the map. After a plot is sold, information about the buyer is recorded in a non-functional token (NFT) encoded in a publicly accessible blockchain. This code acts as a unique identifier and provides a secure chain of title. In other words, the purchase of NFTs and related blockchains functions similarly to transactions and related chains of ownership in typical real estate transactions.

Why the Commercial Real Estate Industry Should Pay Attention

Ownership in Metaverse is absolute in nature, and owners can develop, lease, sell or use virtual property as they see fit. Digital property owners can build office buildings, manage storefronts, rent property for events and install billboards.

As demand and land prices rise, Metaverse has begun to finance virtual real estate. In January 2022 Terajero Technologies offered one of the first “mortgage” loans to buy virtual real estate from Metaverse.[3] Terazero first evaluated the borrower’s business plan to generate income from the virtual property, and then held the title until the borrower repaid it and the NFT was transferred to the borrower.

Metaverse’ largest digital real estate deal to date was bought by a cryptocurrency-based investment company. Everyrem (formerly Republic Realms) bought 792 fields of digital real estate in Sandbox for $4.3 million and plans to develop some of the land with the Atari game company. Tokens.com acquired for $2.4 million from Detrancentand, which it plans to develop for fashion events and retail.

Major companies in the traditional real estate market are also taking notice. J.P. Morgan Chase advertised the entrance to Metaverse this year by opening a lounge in Dentraland with portraits of tigers and Jamie Dimon. HSBC bought digital real estate in the Sandbox, which is expected to be turned into a stadium for virtual sports events. Other well-known companies such as Adidas, Gap, Hulu, PricewaterhouseCoopers, Nike and Verizon, as well as our Arentfox Schiff, are picking up digital assets.

Advertising spending is expected to rise as consumers and businesses adopt Metaverse. J. A major investment firm. Morgan Chase and Grayscale expect Metaverse to generate $1 trillion a year in revenue over the next few years. Many large companies around the world believe this growth will be inevitable because Metaverse and its underlying blockchain technology are better understood, similar to the rapid growth experienced by today’s social media giants and search engine giants. Therefore, many investors believe that a growing user base will reduce the limited supply of digital land, and that the price of digital property will rise rapidly in the short term as digital land owners benefit from advertising costs.

How much is Metaverse virtual real estate worth?

The value of virtual real estate is volatile depending on demand, but is still on an upward trajectory. When Descentrand, one of the “big four” Metaverse property owners, opened its first auction in 2017, the price of a piece of land was only $20. In 2021, it sold for $6,000, and in early 2022, the price rose to about $15,000. In Metaverse, the compartment size is 106 yards x 106 yards and is determined by the number of pixels on the chart.

With the increased interest in the platform, the potential price of Metaverse real estate seems endless. While most real estate prices range from $6,000 to $100,000, anomalies can occur. For example, one of the biggest sales was the purchase of a property next to Snoop Dogg’s sandlot for $450,000.

How will Metaverse Real Estate affect the industry?

Metaverse means big changes in real estate. Here are some things to consider:

It makes real estate open to more investors. Metaverse offers properties of all shapes, sizes, locations and price ranges. It can be purchased in a variety of currencies. The low price and affordability allows almost anyone to invest.

Emphasizes size and location more than utility. In real estate in the real world, size, location and utility are all important factors. In Metaverse, the purpose of buying land is to develop it or rent it out. This takes precedence over size and location, while utilities are on the side of the road.

It can serve as a platform for real activities. In the future, people may hold more real activities on Metaverse, including trade shows, exhibitions, weddings and other community events. This could reduce the demand for the performance of the bricks and motors used for this purpose.