There is an opportunity in the metaverse for those willing to learn more about this new space.
According to Brand Research, the digital real estate market is predicted to grow by around 31% year on year for the next six years, after booming in 2021, while data from DappRadar shows the 10 largest metaverse platforms have generated nearly $2bn (£1.6bn)in digital real estate sales since their conception.
With the metaverse still an emerging space, some are concerned about its volatility and liquidity. But big brands such as Gucci, Nike and Warner Brothers are not fazed, with many others also investing in digital land to open virtual stores and host virtual concerts and exhibitions.
The obvious questions are whether the bubble will burst and if purchasing virtual property is a viable venture.
Our recent report looking at digital land ownership in the metaverse found that one third (33%) of all Brits are more likely to buy virtual property than physical due its affordability. A similar figure (30%) think that digital property will provide a more significant return on investment than bricks and mortar in five years’ time.
The metaverse is expecting to see the digital real estate market increase by $5.37bn by 2026
This shifting attitude is likely a result of a growing belief in blockchain technology and the power that token-based economics could hold in revolutionising the nature of asset ownership. By recording and storing transactional data on a decentralised ledger, the blockchain grants consumers more control over their assets by eliminating the need for third parties in the acquisition process.
Others may simply be looking to ‘be there’ and have a personalised space in a world that they plan to frequently interact with, while some investors may just sniff an opportunity. Regardless of their motives, first-time purchasers should be doing their due diligence before getting on the digital property ladder.
Below are five things for virtual property investors to consider.
First, know what you are working with. Research the technicalities of digital property investment and understand token-based economics. Each plot of digital land has a non-fungible token (NFT) attached to it – an irrevocable digital certificate that authenticates and verifies ownership by adding a layer of coded data each time a transaction is complete.
Second, get a wallet. Having a Web3 wallet is essential as this allows you to transact and store your assets in a secure place. Each metaverse runs on a different blockchain and will only be compatible with certain wallets and currencies. Before you invest, you will need to select and set up the right kind of wallet to enable you to transact and secure your assets.
Third, choose your metaverse platform wisely. Choosing which virtual world you buy a physical property in is important. Each metaverse will have different levels of brand, influencer and user interaction, as well as different creative initiatives and games – all of which affect the price of property. Getting familiar with different metaverses before you decide where to buy should be part of your process.
Armed with information
Next, make sure you don’t go in blind. You should ask yourself some simple questions when identifying what property to purchase. For example, do I want a property that is already built or a plot of land I can build on? Am I buying this with a view for a return or do I genuinely want this to be my home in the metaverse? Having a clear strategy will aid your decision-making.
Finally, consider utility. Find out the utility of the land or property – each plot will vary. Ideally, you want a digital property that can be used beyond providing residency. A property’s value will be increased by aspects such as increased flexibility to customise; unique privileges such as voting rights or VIP features to other initiatives; or access to gamified resources.
While there are no guarantees of profit, as with any investment, the continued growth of the metaverse is expected to see the digital real estate market increase by $5.37bn (£4.4bn) in value by 2026. We can anticipate that big brands across all sectors will continue to utilise digital property in their efforts to connect with forward-thinking audiences.
Whether it be a desire to settle in a second virtual home, or an inclination to wager their fiat currency on decentralised digital assets, any individual motives to purchase land and property in the metaverse should be informed by a thought-through strategy and ample research.
Jawad Ashraf is chief executive and co-founder of Games metaverse Virtua