In 2010, the domain name Insurance.com made headlines as it is broke records after its sale for $35.6m. the domain name was one among many domain names sold for millions in the past two decades, even though they were registered for little to no money in the early days of the internet. We are now witnessing a rush comparable to the domain name rush, but it is for virtual land.
The past year had more than its share of new tech trends, but one of the most important was the metaverse getting mainstream attention. Even though the metaverse is still widely undefined, it is responsible for the millions spent on virtual land.
The whole virtual real estate market is still in the early stages; it may prove nothing but a fad, a costly one at that, or it may be the domain name market 2.0. Major investors and firms are betting their money on this, so there might be a method to the madness.
The not-so-real estate
Usually, real estate refers to property like land and buildings, differentiating such assets from not-so-obvious assets like stocks, bonds, and bank accounts. Thus, the phrase virtual real estate is self-contradicting.
Virtual land or virtual real estate refers to land and real estate available to purchase in virtual representations of our world; the metaverse. In the final week of November 2021, following Facebook’s announcing its name change to Meta, the virtual real estate market boomed to unprecedented heights; only four among metaverse projects had sales of $106m in virtual land plots.
Almost all of the impressive virtual real-estate sales are happening on a few platforms; The Sandbox, Decentraland, and Axie Infinity are among the most in-demanded. Yet, the fact is there is no intrinsic value to the land bought on any of these platforms. It is all speculative at best and can be considered gambling at worst.
A real value of virtual land?
Even though many people may find it weird that NFTs are bought and sold for real money today, this is by no means a new phenomenon. For decades, MMORPGs (Massive Multiplayer Online Role-Playing Games) have shown that people are willing to pay large sums to get a sought-after item, a rare weapon, or a unique skin.
Games like World of Warcraft and others have such intricate economies; that economists study them, as they may suffer economic crises like inflation. That gives credence to the idea of future metaverse economies with high real estate values.
Even though virtual land plots are considered NFTs, they may have a more objective value if and when the metaverse kicks into high gear.
Imagine a metaverse platform hosting millions of concurrent users. Like the real world, such a place would have hot spots where people like to visit and gather for multiple reasons. It might be a well-known virtual party arena or even the virtual headquarters of a big club with connected, influential members.
Such a place will have a real value connected to its popularity and type of visitors the same way websites have real value for virtual content and usage. Like websites, companies can make use of the popular virtual real estate. They can use it to market its products, rent out ad space, or even rent out the opportunity to use the venue to host events.
For now, even the most popular metaverse projects barely reach a few tens of thousands of daily users. That’s very light traffic that does not explain the prices paid for land on these platforms. Yet, the buyers are betting that the metaverse is quickly growing, and as it grows, locations in the virtual downtown will be just as busy as real-world downtowns.
According to a report by Market Research Future, the metaverse market will grow from its $21.91bn evaluation in 2020 to a whopping $715bn by 2030. If the insights proved accurate, it is not far-fetched to visualize land in popular metaverses changing hands for tens of millions of dollars at a time, but alas, there is a catch.
The elephant in the room
No matter how lucrative virtual land might become in the future, there is a lot of speculation in this field. Even if we take the rise of the metaverse as a given, we have no clue which metaverse will end up being dominant. It might be one of the current ones, a newcomer from the world of big tech, or a future not yet established startup.
Like it was virtually impossible to predict what social media platforms will dominate in 2004, it is impossible to predict the dominant metaverse platform of tomorrow, as the whole field is still in its infancy.
Most current metaverse platforms will die out, leaving a few dominant ones, and land on a platform that lost the metaverse race will be as good as worthless. Furthermore, not all metaverse projects are alike, and some major ones like the Facebook Meta metaverse do not seem to have a defined map with tradable plots of land.
The idea of virtual land having real-world value is not as alien when we understand its background and the revenue streams that may come from it. But the market is speculative at best, and it is most likely early to seriously invest in buying a virtual piece of land.