From time beyond record the land has been the most vital of all assets: the apple of discord in all the wars and the backbone of the economy for many centuries. The desire to open new lands and possess better territories instigated humanity to discover space and to create digital imaginative worlds. Even though the latter were not taken seriously at first, we have now come to a point where the digital world has penetrated into the economy a great deal and digital currencies get the key positions in the world of investments.
The best investing asset of the last 10 years was neither the real estate market, nor the stock market. The best investing assets turned to be cryptocurrencies, traded completely outside the traditional banking system. Crypto – once regarded as a fantasy for gamers and developers – has become so mainstream that anyone with a smartphone can buy and sell coins or tokens, and large financial institutions are finally taking it seriously. The NFT frenzy has raised interest in blockchain-based online Metaverses like Decentraland, Cryptovoxels, Somnium Space and The Sandbox, where virtual real estate prices are hitting top record levels.
This year the average price paid per virtual parcel in Decentraland was US$2,703 – more than triple what it was in 2020, according to sales tracking of NonFungible.com. In the metaverse called Cryptovoxels, land prices went further and quadrupled from US$821 a parcel last year to US$3,895 in March of 2021. The same source refers to the eight lots of the Axie Infinity gaming platform having been sold for a combined US$1.5 million – the most expensive deal ever recorded in February this year.
Especially with the isolation caused by coronavirus pandemic restrictions the gamers are inspired to spend more time and money playing in their imagined realities and average users are in search of alternative ways to interact with each other. Thus investing in virtual land is gaining momentum rapidly, whereas the real land loses its positions and there are some good reasons for this.
The investment into the real-world real estate has always been highly profitable, but the current situation in real estate is very uncertain. It’s hard to predict the future trends of renting and sales in this field due to the pandemic. Housing prices are at their maximum price, but offices and hotels are empty. As the distance working and home offices have come into play, people changed their preferences. More than that the real-world real estate has more hidden hazards such as:
- It requires great sums of money to start investing in real estate, including the ongoing expenses like property taxes, insurance, mortgage payments, and property maintenance.
- Real estate requires time: actively managing your rental properties or construction sites is very time-consuming to manage. It is also a tangible asset that you can’t quickly liquidate for cash, so it’s a long-term investment only.
- Tenants can cause problems that threaten you with loss of money and even time in court.
- There are other financial and management risks such as: buying property in a wrong place and risk of getting overleveraged, because of the monthly payments on your debt despite market dips, tenant problems, building project errors, property vacancies, unexpected repairs, maintenance costs etc.
Whereas virtual real estate (that are NFTs) are free of those risks:
- You can buy a plot of virtual land starting from 300-400 USD which is quite affordable.
- The NFTs are exchangeable through transactions that are much more streamlined and transparent than real estate property purchase.
- Prices for such assets are multiplying rapidly because more and more people believe that this virtual real estate is scarce and highly valued and they are spending meaningful amounts of money on it.
- There is no maintenance and no damage from tenants and no running around the city to manage everything concerning the rent and the estate property.
- The price of online real estate rises as it correlates with the digital art or other collectibles popularity of which grows rapidly day by day and people need a place to exhibit them. A lot of artists and designers are coming to the virtual world to host what they create, as their consumers start to spend more time there.
All of virtual land is basically real estate plots that are sold daily in online Metaverses with their own economy, currency and social events calendar, accessible to anyone with a Web browser. Users do not just simulate real-life social interactions there, but create new communities, businesses and new types of valuable experiences, on which attention is starting to focus. All of this is raising the land prices way up high. As more people converge in these environments, plots of land in central locations will be highly sought-after because of the amount of new visitors.
Today it is safe to say that, with the profit that is on par or even much higher than with the real estate the virtual plot of the Metaverse land becomes not just a status symbol among early adopters, but mostly a good intellectual investition and a perfect portfolio diversification tool.