Who Is Buying Metaverse Lands — And What Is Their Value?
Metaverse

Who Is Buying Metaverse Lands — And What Is Their Value?

Created 6mo ago, last updated 6mo ago

Just like in the real world, digital land investors are speculators who believe their property will go up in value.

Who Is Buying Metaverse Lands — And What Is Their Value?

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Blockchain-based metaverse platforms like Decentraland are 3D virtual worlds that offer users the chance to buy their land as an investment. 

Just like in the real world, digital land investors are speculators who believe their property will go up in value. They will sell it when the asset becomes more valuable — or will become real estate developers and build urban life with residential apartments, hotels, theatres and more, all in the metaverse.

The first city built on Decentraland is made up of 90,000 parcels, or non-fungible tokens (NFTs), of land. The asset’s value depends on its location and size: the closer the plots are to landmarks or plazas, the more valuable the assets are — just like in the real world.

Who Is Buying Metaverse Lands?

On June 21, a virtual plot of land was sold on Decentraland as an NFT for 1.3 million MANA, the platform native cryptocurrency, equal to $913,228.20 at the time. 
Digital real estate investment firm Republic Realm, whose investors include Binance, bought the equivalent of around 66,304 virtual square meters (16 acres) of digital land — the most extensive digital land ever traded. 

The land will be used to build and develop metaverse buildings and premises where people can meet, attend exhibitions, events and generally live a virtual reality in parallel with real life.

Around the same time, The Sandbox — another metaverse-type game — was the second blockchain-based metaverse platform to secure another record sale of virtual land for around $650,000.

Only a few days ago, a record $2.43 million was paid for a plot of land on Decentraland again, and this time, the amount was well above the average price of high-end homes in London or New York City. 

The valuable purchase was made by metaverse real estate company Metaverse Group, a subsidiary of Token.com, which will use the plot of land to expand within the Fashion Street district and get a presence in the clothing industry. 

What Is Driving the Rise of Digital Lands?

The metaverse buzz has set the ground for the rise of a new type of economy based on the marketing and trading of digital assets. 

Long before Facebook announced its rebranding to Meta and embraced the new technology, events like metaverse concerts and NFT ownerships were already sparking interest and enthusiasm among investors, speculators and consumers.

Undoubtedly, Facebook played a significant role in accelerating the adoption of the metaverse. However, industry experts had already caught the essence of the business and made plans accordingly.

The simultaneous rise of NFTs only made it easier for investors to firmly believe in projects that already have a significant use case among consumers. The industry is already worth billions of dollars, and experts have anticipated that it could be worth as much as $82 billion by the end of 2025. 

Digital Lands vs Physical Lands

Digital lands are sold as NFTs, and are therefore scarce by design. The original token is the only one that has real value, and its scarcity is what makes it more valuable and accrues appreciation over time. Metaverse lands become valuable assets just like physical lands, and people can make money by selling them, leasing them or building on them. 

The main difference between the two is that users can now own digital land from the comfort of their homes without having to incur the legal and insurance costs or lengthy bureaucratic procedures that it takes to buy land in the real world.

 Also, the typical concerns that arise with physical lands, like natural disasters, are no longer an issue with digitally created real estate (although perhaps some play-to-earn metaverse games might include natural disasters on your land in the future, who knows!).

The Metaverse Business Model

The business model applied to the metaverse is relatively simple and ethically aligned with blockchain and NFT technology principles. Digital networks decentralize profits by incentivizing users to trade NFTs — or digital lands — while contributing to the development and growth of the platform. Ownership of the platform and its earnings are then distributed among the user base and are no longer only under the prerogative of shareholders.

Most people will find it challenging to come to terms with this new type of investment. However, it's only a question of time before the network effect will reach a broad audience and such ventures become the norm. 

When contemplating metaverses, we can think back to how the internet started its journey to global adoption. Despite the initial skepticism, it soon became apparent that we would run most transactions and activities online and digitally. Another example is our literal money: money has recently become more digital in the last few decades, while it was previously unimaginable that it could not be physical cash.

Cryptocurrencies are more suited to an environment like the metaverse where decentralization and a certain degree of anonymity can only help drive up the industry's success. 

Of course, the risk in investing in metaverse lands with cryptocurrency is primarily related to cryptocurrency volatility. However, digital assets are expected to be profitable in the long term, if investors can hold on to them. (This is not financial advice!)

What Defines the Value of Metaverse Lands?

Digital or metaverse lands are finite assets, just like physical lands. Their scarcity is one of the first components that affect the price. 

Location is another. Premium locations on the metaverse are more valuable, just like in the real world. Posh neighborhoods, luxurious penthouses, expensive villas — they're all ingredients that populate the virtual world.

Premium location lands bought early will likely yield significant returns, especially when choosing an area to build thriving businesses and valuable activities. If a neighborhood becomes populated with luxurious brands, it's fair to think landowners will obtain great gains one day. 

Buying pieces of land in the virtual world is nothing new. For years, games have proliferated among enthusiasts who could purchase virtual lands and build on them.

However, these early virtual worlds are highly centralized and usually operated by a central company, and all the lands and content belong to these companies’ servers. Therefore, players simply considered these assets part of the game. They never regarded them as profitable investments, since the central company could go out of business or change protocols and regulations. 

On the other hand, in a decentralized metaverse built on a blockchain, there's no central authority imposing any rules or limits — landowners are free to do whatever they want with their lands. Their decisions and the content uploaded on the platform cannot be removed by anyone, not developers nor governments. This aspect is considered highly advantageous for investors who feel more involved in the whole enterprise and the development process.

Ultimately, the metaverse’s ability to attract consumers who spend cryptocurrency in this parallel world will determine its success. 

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