Mark Twain memorably advised, “Buy land they’re not making it anymore.” What Twain never imagined was that in little over a hundred years, we’d find a way around that minor inconvenience. Welcome to a Web 3.0 world, where new land is minted every day in the metaverse.
In the blink of an eye, we jumped from the infancy of the metaverse to seeing tiny fractions of it sell for millions of dollars. When JP Morgan, Adidas, Samsung and numerous other high-profile brands and investors are spending a lot of money in the digital land grab, you have to sit up and take notice.
In the mega-popular metaverse world, The Sandbox (), we see investors paying upwards of $300,000 to snatch up certain parcels. That’s right n this housing market, people are paying what they would for an average American home for land they can never really live on.
So, what makes this digital land so desirable? Is it all a bubble or a fad or does the metaverse offer the chance to build generational wealth in virtual real estate?
Big players are certainly attracted to virtual land now but the metaverse real estate market will be unable to sustain its meteoric popularity without the presence of three key components verifiable digital identity, desirable locations and diverse communities with access to real utility for their virtual plots.
Identity is a central component
Our wallet is our Web 3.0 passport. It’s our self-custodied, self-sovereign identity and provides us the ability to fully access a decentralized, interoperable Web 3.0 safely and seamlessly. This identity layer must come first to enable the possibility of safe transactions. Because what we really need to keep and prove provenance is a persistent on-chain mechanism for identity verification.
Once we can prove who we are across the metaverse, without having to reveal who we are, we can start to engage with a multitude of projects in good faith. And we can become our own brokers, real estate agents or art dealers.
Think of it this way f you were to buy a house IRL, you’d need a mortgage broker and you’d need to place funds in escrow, etc. But on Web 3.0, buying a virtual building would not require an escrow service. Your verified wallet is all that’s needed. Holding an NFT (non-fungible token) would become your deed and trust, and these verifiable credentials are immutable and can never change hands unless you initiate it.
Beyond virtual goods, an identity layer also provides the ability to fractionalize real-world items that we need to be verified to own in numerous ways, like age-restricted ownership of whisky casks. Or even beyond that, representing the real-world luxury goods like Rolexes and high-value collectibleshis shows that when combined with a strong identity layer we can trust NFTs to prove ownership in the metaverse.
This opens the door to infinite possibilities for what ownership can mean as it bridges the gap between our digital and analog lives. Now that we have a secure bridge between the two, let’s see what exactly we can do with those tools.
Location, location, location
Like buying land in Manhattan at the turn of the century, generational wealth is seemingly being built in the metaverse via savvy real estate purchases.
Investors have been turning huge profits at this nascent stage of the digital real estate market, and demand should only go up as Web 3.0 matures because it is decentralized and globally accessible, allowing the entire world to engage with it. Unlike traditional real estate that has so many strictures and rolls of red tape wrapped around it, metaverse land is for the people.
Demand remains high as the supply of space in the most desirable worlds and neighborhoods is dwindling, causing prices to soar on the most popular platforms. This signals to more worlds being built to satisfy the demand of all those who weren’t early to grab a plot in someplace like The Sandbox.
And why not? Crypto natives find themselves flush with digital assets yet they can’t easily leverage their hodlings for a ‘real’ house, as the vast majority of mortgage lenders in the US do not recognize crypto assets.
It’s both the allure of the new speculative asset class and the path of least resistance to own property that is driving much of this speculation and investment from the retail side. So, it’s no surprise to see owners start to leverage their properties for passive income generation in all the same ways traditional real estate investors do.
Landholders are offering rentals of venue space for events, operating tours, opening art museums, creating digital storefronts and leasing property. The sky’s the limit, and it looks like anything one can accomplish with a piece of physical real estate now has an analogue in the metaverse.
The future of digital cities
Since digital real estate is following its real-world equivalent for use cases, prices and investment, does that mean in the future we may see certain ‘bad parts of town’ in the metaverse?
Will there be shuttered storefronts, dangerous back alleys and shabby houses in states of disrepair? Will there be an urban/rural divide?
Will we see a wave of gentrification sweep through neighborhoods for beautification projects, buying up parcels to flip once renovated?
It’s hard to say, but at this point anything seems possible.
If the crypto market has taught us anything, it is that in the face of thousands of projects launching, those with strong tokenomics, and those who keep their communities engaged consistently for the long-term will certainly be the most successful.
And who knows perhaps the scarcity is manufactured. What’s to stop a metaverse community to vote on expansion, minting more land and possibly driving down the value of what was once a set amount of availability.
How can anything natively-digital ever be finite in scope? These are questions that remain open-ended. However, it seems clear that the use cases we already see and the inherent value represented through these assets is real and is growing larger by the day.
Perhaps Twain should have said, ‘Buy land now before they start making more.’
JP Bedoya, chief product officer at , is a seasoned product leader. He previously served as head of product design at The Climate Corporation, overseeing product experience and user research, and VP of product at LifeLock, where he oversaw consumer products, new member acquisition and new product development.
Featured Image: Shutterstock/Dario Lo Presti/herryfaizal
