This isn’t the first time the world has replaced the old ways of doing things. Human progression has led to a shift from face-to-face conversations to phone messages, and then to instant messages. But the metaverse’s new shift from the real world to a virtual reality world is nothing short of a major generational shift.
For a conventional investor, retirement plans, term deposits, precious metals, and stocks were the options for increasing wealth. The new generation, led by millennials and millennials, are looking for new-age options, including virtual assets.
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From virtual currencies to virtual real estate
Virtual currencies or blockchain-based cryptocurrencies have already become a common investment instrument. Big banks in the United States are making it easier for their customers to sell and buy crypto, and S&P Dow Jones now tracks Bitcoin and Ether prices.
But in the same way that 2020 was the training year for cryptos, which then exploded in 2021, the year 2022 can be seen as the training year for a new investment option – virtual real estate. . We can see other movements in this area and find individual and institutional investors buying land and other facilities like gas station or garage in the world of virtual reality.
The year 2021 has taught investors that every cryptocurrency – regardless of its high market capitalization – is volatile in terms of price. From Bitcoin to Dogecoin, almost all cryptos exhibited this unpredictability. Can this drive investors to the new asset class – virtual real estate? After all, just like gold, real estate is generally a safer bet over a medium to long investment horizon.
Why are people exchanging real dollars for virtual land?
The answer is quite simple. If people can trade dollars on crypto exchanges to buy virtual currencies, can bid millions to acquire a Beeple artwork or a cryptopunk NFT, it is understandable that they could buy virtual land in anticipation of the price appreciation of the asset in the future.
It is the same FOMO (fear of missing out) that prevents part of the investors from exiting the crypto market even when prices are plunging very sharply. FOMO is now making its way into the virtual real estate space.
Virtual real estate transactions of 2021
Two transactions in 2021 are enough to realize how metaverse real estate captures everyone’s imagination.
A piece of land on the Decentraland metaverse sold for over US $ 2.4 million in November, which was quickly followed by a property sale of over US $ 4 million on The Sandbox’s metaverse.
Image Description: Metaverse Token Market Cap
Data provided by CoinMarketCap.com
It has been a busy year for real world real estate. House prices in the United States, Canada and almost every other advanced economy hit new highs in 2021. Analysts even warned of a housing crash at the start of the year, but even the correction didn could not be felt in the market. Soaring property prices are one of the reasons central banks are looking to raise policy rates, which can make mortgages a bit more expensive, thus curbing the frenzy.
But have high real-world property prices prompted people, especially the new generation of investors, to explore virtual reality assets? Bidders lose out in the real world, but in the virtual real estate market there is something for everyone.
What started with the digital home of a Canadian-based artist selling for nearly US $ 500,000 in March, has reached new dimensions with each passing month of 2021.
Read also : These play-to-earn cryptos that could explode in 2022
Earn money with virtual real estate
PolkaCity is a project offering the ownership of virtual assets in the form of non-fungible tokens. It is said that a few of the owners of these assets – ranging from gas stations to motorcycles – make their fortunes from their operations. What happens is that other users of the same platform are using their services, for example a bicycle owner would buy gasoline or use the bank’s ATM which becomes a source of income. for owners.
By this measure, the ownership of virtual real estate is not only a question of capital gains. It’s like recurring income for the asset owners without having to sell the stake for profit. This contrasts with cryptocurrencies where the investor essentially has to sell the holdings in order to make a profit.
Plots of land are for sale on several metaverse platforms. Investors who pay high prices for these assets, which only exist in the fictional world, could write a new chapter in the blockchain-based ecosystem. All of the metaverse platforms, including Decentraland, The Sandbox, and PolkaCity, are based on the decentralized blockchain ledger architecture. Moreover, they also have NFT foundations.
How to buy virtual real estate?
It can be as simple as buying cryptocurrency from a crypto exchange.
Typically, this involves signing up on a platform like The Sandbox, selecting the plot of land or other real estate assets, and paying the same in cryptocurrency, which can either be the native token of the platform like SAND, or Ether, which is the native crypto. of the Ethereum blockchain.
Purchased virtual real estate exists as an NFT, typically on the Ethereum network. The owner of the asset lists the NFT on an exchange like OpenSea to sell it at a valued price or holds it to make money if the platform has monetization possibilities like at PolkaCity.
Read also : Bitcoin vs Ethereum – Everything You Need To Know Before 2021 Ends
Where to buy virtual real estate?
Here are three flagship platforms.
From Nike to Paris Hilton, Roblox’s blockchain metaverse has captured the attention of many prominent companies and celebrities.
Lately, Paris Hilton announced her entry into the Metaverse, where she will build a “world of Paris” using the Roblox platform. Its mansions will be replicated in the virtual reality space, and visitors who purchase virtual clothes and other assets from here will have to fork out cash.
Nike created NIKELAND on Roblox.
Decentraland is a typical virtual real estate platform, which allows users to buy and sell land using crypto assets.
Decentraland’s native MANA token won when Facebook announced the name change to Meta. Times Square owners are reportedly using Decentraland to celebrate the arrival of 2022.
Image Description: MANA crypto price movement in the second half of 2021
Data provided by CoinMarketCap.com
3. The sandbox
If Nike chose Roblox, Adidas chose The Sandbox to create its metaverse. SoftBank, a leading investor in tech startups, has also invested in the platform.
The sandbox, just like Decentraland, has its native token, called SAND. SAND has also gained traction at the same time that Facebook’s meta-movement has put blockchain and metaverse gaming projects in the limelight.
Read also: Cryptocurrencies vs stock market: which may be the best choice for 2022?
And then ?
Things change very quickly. No one could have anticipated the rise of cryptocurrencies and their becoming a $ 3 trillion market capitalization asset class in just a few years. But at the same time, cryptocurrency price volatility remained a concern.
Virtual real estate, which borrows a bit from blockchain, a bit from NFTs, could become the new love of investors in 2022. These virtual assets allow them to generate income through their gaming features to win. Additionally, since each of these assets is an NFT, its price is independent of other assets.
Risks, however, also underlie these assets. Most real estate platforms in the metaverse are very new, and any broader downtrend in the blockchain ecosystem can negatively impact the prices of virtual assets held by investors.