There’s a new form of real estate investment that is emerging now—digital LAND, a form of non-fungible tokens (NFTs), in metaverse worlds such as Decentraland, Sandbox and Somnium. Several investors, individual and institutional, are now showing interest in digital real estate, according to various media reports. So, what’s behind this new-found interest? We try to answer that along with the risks such investments may entail. But first let’s find out more about LAND in metaverse.
What is LAND in Metaverse?
LAND in the metaverse world is nothing but blocks of data built upon a blockchain and represented by an NFT of the respective blockchain. For example, Decentraland is a metaverse built on the Ethereum blockchain.
Such LAND is sold using NFT technology so that its records can be verified publicly, thereby ensuring transparency.
“Metaverse is an interesting concept that can create enormous opportunities for the future. The land on metaverse can be valuable with its demand increasing day by day. But there are only a limited number of plots of land. This does not mean the land cannot be created, it can be created if the seller organisations want to do so,” says Edul Patel, CEO, and co-founder of Mudrex, a global algorithm-based crypto investment platform.
Why Are Investors Buying LANDS In Metaverse?
NFT-based digital LAND can be used for a variety of purposes by different investors. For example, some companies are using LAND to provide their customers an elevated digital experience of their products and services. Some investors are using LAND as an investment wherein they are selling it for a profit.
On Decentraland, the lowest price of a LAND is approximately $15,000. You could essentially buy a bungalow with that kind of money in some parts of the real world. Some months ago, a media report said that a buyer spent $4,50,000 to get LAND beside Rapper Snoop Dog’s LAND in Sandbox, a metaverse ecosystem.
“Metaverse is a virtual world with interoperable elements that are rendered in 3D in real time. It may seem bizarre to buy virtual land in the metaverse. But if you think of it as just another digital asset that can potentially give you a yield in monetary or entertainment terms, it becomes clear why so many are buying digital land,” says Ajeet Khurana, former CEO of Zebpay.
So why are users paying such top dollar for virtual lands when they could very well buy real land.
Why Are Companies Buying LAND In Metaverse?
Price Waterhouse Cooper (PWC) Hong Kong purchased LAND in Sandbox for $10,000 last year. Portion, an NFT auction house and marketplace, purchased LAND worth $1.2 million from Decentraland last month. JP Morgan purchased a lounge in Decentraland, while Samsung bought LAND in Decentraland and named it 837X after its flagship New York store.
So why are major companies buying these virtual lands?
“Many giant companies are using metaverse for their marketing purposes. For instance, JP Morgan opened a lounge in the metaverse space to gauge the attention of the players looking for virtual space which is on-demand,” says Patel.
Risks Of Buying Virtual Land In Metaverse
Buying virtual land comes with its own risk. Most investors, corporate and otherwise, are buying virtual land to generate an income or to follow their favourite celebrity.
Experts are advising retail investors to not do this since virtual land only has a value when there is a willing buyer to pay a price. They may lose all their investments if the price of virtual land suddenly drops. For example, not all parts of the metaverse world are fully populated. Some specific areas like the Fashion District in Genesis Plaza, WonderMine Crafting, and others are full of people and companies but some areas are like a ghost town.
“Once we reveal ourselves more with data (in metaverse), the more vulnerable it becomes. This can be misused to gain profit and manipulate our digital self that may harm the real-world self. Like any technology, it is revolutionary, but we need to define social, political and psychological limits to this and how much control we should allow to share our data,” says Dileep Seinberg, founder and CEO, Thinkchain, a crypto, NFT and Blockchain advisory company.
Experts are advising retail investors to use the metaverse world as an entertainment source rather than an investable asset. They also warn against lack of regulation. “Metaverse is a technology and an innovation which is prone to some level of danger and it has to be regulated for the investor’s interest. I believe it's a collective effort of tech companies and the government to look into investor interests rather than blaming the tech for its innovation,” says Seinberg.