How to Invest in Digital Real Estate

How to Invest in Digital Real Estate? 

Digital real estate is a real investment opportunity, and prices for owning a piece of virtual real estate are skyrocketing. In this article, we explain how to invest in digital real estate and whether it’s a wise investment? 

According to HipHopDX, world-famous artist, Snoop Dogg has been “developing his interactive world in The Sandbox, an Ethereum-based platform for creating and monetizing online hangout spaces and gaming experiences.” 

Snoop Dogg has created a virtual Voxel Art version of his mansion in Diamond Bar, California, where he hosts “private virtual concerts, parties, art gallery exhibitions and more.” In Snoop Dogg’s virtual world — known as The Snoopverse — there are 22 plots of land, 67 plots of premium real estate, and three estates (fit for virtual mansions). 

One fan reportedly paid $450,000 to own a plot of this virtual real estate next door to Snoop Dogg’s (virtual) mansion. And this is just one example of many, with virtual Metaverse-based real estate empires springing up all over the Internet (Web3, or Web 3.0). 

What is the Metaverse? 

The term “Metaverse” was coined by author Neal Stephenson in his 1992 sci-fi novel Snow Crash. 

Stephenson referred to the Metaverse as an all-encompassing digital world parallel to the real world. Numerous other sci-fi authors and TV and movie producers have created similar versions in science fiction books, TV shows, and movies (e.g. in Star Wars, Avatar, Ian M. Banks novels, and others). This concept is starting to become real, especially since an influx of investment in 2021. 

The Metaverse is a hyper-real, virtual space that allows people to interact in a more immersive way. The Metaverse is hyper-realistic, meaning it is a mirror image of the physical world where your avatar or hologram will exist instead of your physical existence. 

The Metaverse is designed to be completely immersive. If you use an Oculus headset or VR jacket, you exist (as your avatar) in this virtual reality instead of being limited to a 2D/3D experience. 

Companies such as Facebook invest heavily in making it happen, even changing the corporate name to Meta. Even if the dream could still take 10-years to go mass-market, the investment and willpower exist to make this a (virtual) reality. 

IF YOU’VE SEEN THE MOVIE READY PLAYER ONE, the OASIS is the closest fictional embodiment of this vision of virtual metaverse-based reality. 

In this virtual reality, users create avatars in online environments, whether you access them through apps, a laptop, or VR headsets. These avatars exist (as you, in a proxy) in a virtual world, and you control their interactions. Naturally, if there are virtual-based towns and cities, then it makes sense that digital real estate is fast becoming an exciting investment opportunity. 

What is Digital Real Estate? 

Real estate is one of the most valuable investments or asset classes in the physical world. It’s been that way for as long as humans have chosen to live in communities. 

All of this, our physical spaces, are being recreated and replicated in virtual environments known as the Metaverse. Naturally, if digital avatars move around, interact with one another, buy and sell virtual goods, and effectively “live” a virtual life, real estate is needed to house them. 

Virtual real estate is taking off in a big way. According to the Centre for Finance, Technology and Entrepreneurship (CFTE) report, virtual real estate was worth hundreds of millions in 2021. That trend is not slowing down or stopping. 

In 2021, the world’s largest virtual real estate platform, The Sandbox, witnessed 65,000 transactions worth $350 million. People who buy real estate on this platform invest in virtual squares of land, around 40km x 40km, where you can “play games and participate in virtual experiences.”

Decentraland is the world’s second-largest virtual real estate platform, which saw 21,000 transactions worth over $100 million in 2021. According to an article in Republic, when Decentraland launched an ICO (Initial Coin Offering), $24 million was invested in the platform within 35 seconds. That’s how popular virtual real estate is! 

At the start of last year, the average piece of virtual real estate was worth $5,300. However, because demand and interest in this has increased, so has the average price. Now the average value of virtual real estate is worth over $18,000 (as of January 2022).  

In another virtual world the size of Washington DC, known as Genesis City, the average 1,100 square foot plot is worth over $200,000. 

Let’s look at how you can start investing in digital real estate with our how-to guide for beginners. 

How to Invest in Digital Real Estate? 

Step 1: Find a Platform 

For those looking to actively invest in virtual real estate, you first need to create an account on one of the platforms that supports this. Such as The Sandbox or Decentraland. Cryptovoxels, Somnium Space, Axie Infinity, and numerous others are also popular and profitable platforms for investing in virtual real estate. 

In most cases, your virtual avatar (account) needs to be verified and go through KYC requirements (Know Your Customer). 

Once that’s complete, you need to connect a wallet containing however much crypto you are willing to invest in virtual real estate. You can also buy virtual real estate with fiat currency (GBP£, US$, etc.), although this will usually be converted into whichever native cryptocurrency/tokens exist on the platform. 

Step 2: Make an Offer 

Now you’re ready to invest in virtual real estate. Find a plot of land (or property) you want to buy/invest in at a price you can afford. 

Any offers you want to make will either be to the platform directly or to someone selling a property or plot of land. If you are doing this peer-to-peer (P2P), make sure the party selling has proof of ownership. Otherwise, you risk potentially handing over Bitcoin, another native crypto or fiat currency, to someone merely claiming to own a specific property. 

Step 3: Close on your Acquisition 

Purchasing this is completed through the blockchain. Usually, a platform will convert the relevant amount of crypto/native tokens into a Non-Fungible Token (NFT) to complete the purchases, recording ownership on the public ledger, a blockchain. 

Is Digital Real Estate a Smart Investment? 

Only invest what you can afford. As with any investment, there’s always a risk of losing the whole amount you put in. 

Although, in the case of virtual real estate, you aren’t making as risky a bet as, say, leveraging crypto for margin trading. There’s a chance the value of your virtual investment will increase so that if you sell, you could make a profit. 

Another way to earn back the initial investment and profit is to rent out the space. You could rent out a virtual billboard or rent the space for virtual parties, events, or exhibits (such as a museum/gallery of NFTs). As with real estate in the physical world, location is essential. 

People (avatars) wander around virtual worlds, and they’re constructed and organized in a similar pattern to cities and towns. So, if you’ve got the money and are keen to invest, aim to buy a plot of land or building in a good location, especially if you want to make money from your investment or are aiming to sell for a profit in the future. 

How do I Prove Ownership of Digital Real Estate? 

Proof of ownership is secured on the blockchain. Once you’ve bought virtual real estate, ownership of said virtual property is recorded on the relevant platform’s blockchain. As every blockchain is impossible to change, you can rest assured that ownership is as secure as a title deed in the physical world. 

Ownership is also, therefore, a public record. So you can see who owns property, and others can see what you own, making it easier to buy and sell since you can contact (and be contacted) by other people on these virtual platforms. 

Summary: Should I Invest in Digital Real Estate? 

Potentially, yes. It’s certainly a boom time right now. We are living through a virtual gold rush, and those that get in early could make massive gains as the Metaverse, and virtual worlds become more popular. 

However, as with any crypto-based investment, the market could always go the other way. However, at the moment (and according to evolving trends), investors should be aware that there are a lot of opportunities for those wanting to profit from virtual real estate. 

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