The Metaverse is making enormous waves and this is why
The Metaverse is yet to be clearly defined and as a result, many people working in or interacting with the Metaverse have multiple different definitions of what it actually is. VC Investor and author Matthew Ball provides a simple definition, "the Metaverse is a 3D version of the Internet and computing at large," whereas Oli Walsh of polygon.com describes a more complex idea, describing, "a graphically rich virtual space, with some degree of verisimilitude, where people can work, play, shop, socialise." Wikipedia expands further defining the metaverse as, "a collective virtual shared space, created by the convergence of virtually enhanced physical reality and physically persistent virtual space, including the sum of all virtual worlds, augmented reality, and the Internet."
The metaverse is a new concept and as such it would be easy to ignore, especially given so many so-called experts have different ideas and opinions about what actually constitutes the metaverse, what industries it will impact and what effects these will have on our day to day personal or professional lives.
And that's what we're here to do. Within this blog, we aim to investigate the metaverse and consider what impact this will have on real estate now and in the future.
Metaverse and Real Estate
The metaverse has the potential to profoundly change how businesses and customers interact with products, services, and each other. As it is both new technology and a new concept many business leaders don't yet have a strategy of how their business can maximise value from the metaverse. Many would consider the metaverse too risky or not worth their time or any investment but this is a narrow viewpoint. Frequently trending it is apparent that consumers are intrigued by the possibilities of the metaverse and whilst it presents a risk to businesses it requires new strategies, new communications, new methods of engaging an audience and new processes to connect and build trust with consumers.
Source: Reuters Archive
Land and real estate are important assets in the real world. In the 21st century the oldest asset class of all, bricks and mortar, still dominates global wealth. The metaverse has global reach and enables the real estate to be presented and conceptualised in a way humans have never experienced. In short real estate whether a home, commercial building, investment or land has always been physical. The metaverse blurs the lines between the physical and virtual enabling the real estate to become entirely virtual within its realms. Whilst technically there is an unlimited supply of real estate in the Metaverse most anticipate the metaverse to mirror and adopt characteristics of the real world, and the concept of supply and demand to affect the value and price of virtual land and real estate.
In its current iteration, several different platforms make up the metaverse and enable real estate transactions to be carried out. These platforms include The Sandbox, Decentraland, Cryptovoxels, Earth2, Nifty Island, Superworld, and Wilder World among others. Mirroring the real world, location is a key price driver affecting the value of property in the metaverse. The two factors that determine the value of the location are the distance from the centre of the metaverse and the quality of neighbours. In recent times there have been many headline-grabbing transactions on these four platforms with Sandbox generating over USD86m. Clever celebrity marketing campaigns are fuelling interest in purchasing real estate within the metaverse whilst driving up the value of current investments. A buyer recently transacted on a USD450,000 property for the bragging rights of being Snoop Dog's neighbour within his Snoopverse world located on the Sandbox platform.
Digital Real Estate and NFTs
Whilst these transactions are referred to as real estate or virtual property the assets that are being traded are (Non-Fungible Tokens (NFTs). NFTs are managed by digital ledgers called blockchains and contain metadata that describes the asset. This relationship is comparable to the ownership of real-world real estate being documented in public records with deeds that contain the legal description of the property. Blockchain-based cryptocurrencies, NFTs, and other blockchain-based assets and exchanges will likely underlie all value exchanges across the Metaverse. In order to conduct lending and facilitate real estate investments and transactions in the metaverse governments and digital-first companies will need to build trusted digital monetary systems.
Transactions are governed by smart contracts which are programs coded into the blockchain that is automated with predetermined conditions. These contracts follow the “If/when … then” rule. Participants are certain about the outcomes without additional intermediary involvement.
Smart contract templates are simple forms that allow users to buy, sell and rent their real estate. When a digital property is sold the smart contract will ensure the platform automatically transfers control of the NFT to the seller once the payment has been processed.