Last year, a buyer shelled out $450,000 to become Snoop Dogg’s neighbor — not in real life, but in Snoopverse, a metaverse that boasts a virtual replica of the rapper’s house.
Let that sink in for a minute. People are willing to spend hundreds of thousands of dollars on real estate that exists nowhere on planet Earth, but entirely over the Internet.
Nor is there a single, universal metaverse, but instead multiple versions of a virtual reality landscape a few major players dominate.
Welcome to the new world, where physical real estate is so last century and virtual land swaps transact in cryptocurrency rather than dollars. The idea behind the metaverse is that eventually this becomes the next phase of the Internet, in which people socialize and conduct business virtually and need better places to go than Zoom.
Confused yet? Just ask your kids to explain the game platforms Fortnite and Roblox, a type of virtual reality that has already taken over the universe, er, metaverse.
But if metaverse real estate ever gains traction with the broader public, how does one even go about pricing it?
In real life, Boston is a highly expensive real estate market in large part because of the scarcity of available housing. But the metaverse theoretically could never see a housing if you can just keep coding out more space.
“Scarcity has been the major component in defining the price of land over the course of time,” said James Scott, director of the MIT/CRE Real Estate Technology Initiative. “Does that scarcity exist in the metaverse? Or is it just the illusion of scarcity? Regulation and policy will need to be more clearly defined and implemented before this scarcity becomes a reality.”
It appears the illusion of scarcity is already driving up sales volume, even though the metaverse is still a ways off from becoming a product for everyday users. Today, it is akin to a digital frontier where early operators run on some modern iteration of “Go West, young man.”
Real estate sales across the four major metaverse platforms (Sandbox, Decentraland, Voxels, and Somnium Space) totaled $501 million in 2021, according to MetaMetric Solutions. Prior to the crypto crash of recent weeks, sales were projected to top $1 billion this year.
Arguably the best-known example of expanding focus on the metaverse arrived last year when Facebook rebranded its parent company as Meta, signaling where future resources would largely center.
But a lot of this is vague big-picture stuff. How big is this going to get, and how many Bostonians are actually going to care? There are only so many plots of e-land to buy next to a hypothetical virtual Tom Brady mansion.
“The buyers of these things tend to be crypto speculators,” said Janine Yorio, CEO of Everyrealm, a metaverse real estate investor and advisory firm. “The price of Metaverse real estate ranges from about $500 per parcel to as much as $10,000. So while it’s expensive, it’s still very attainable for the vast majority of people who have an interest in doing this sort of thing —so there are both individual buyers and larger corporate entities.”
The pool of buyers also tends to be small: A report earlier this year by Everyrealm found that only 25,000 crypto wallets held metaverse real estate.
“While there are many different entities that hold the asset class, it is actually
concentrated in the hands of a very small number of people and companies.”
Of course, a lot has transpired in the economy since many of the metaverse real estate sale deals took place earlier this year. The overall cryptocurrency market experienced a roughly $2 trillion valuation wipeout between November of last year and early June, Bloomberg reported.
But not everyone is blaring a warning siren for the metaverse just because a huge source of its financing cratered.
“While the crypto market crash is certainly not a good thing for the market as a whole, we do believe long-term the metaverse is very independent from crypto since it’s more about social media, video games, and a new media channel than it is about crypto speculation,” Yorio said.
So what are the nuts and bolts of buying virtual real estate? Transactions usually involve cryptocurrencies linked to one of the leading metaverse platforms. For example, MANA cryptocurrency is used to buy property on Decentraland.
A potential buyer could put an offer on any land listed on Decentraland’s marketplace. When a seller accepts a bid, the purchase is recorded via a nonfungible token (better known as an NFT). Buyers need a digital wallet capable of holding NFTs to store the ownership record. (MetaMask is a popular digital wallet.)
But some analysts caution that for the average investor, it may still be too early to make significant business or personal real estate investment choices in the metaverse.
“If you’re talking to a number of people within the real estate world, certainly on the [venture capital] side, who generally are at the high end of finances when it comes to this element of investment, they would say themselves that they feel that it is still too early to make big investments in the area,” said Scott, from the Real Estate Technology Initiative at MIT. “The technology, the regulation, and the understanding are not yet there to consider this a true value investment.”
Long story short: The average Bostonian probably isn’t thinking about a metaverse land grab in lieu of buying a house in the suburbs.
“There are too many unknowns to overcome with respect to what role real estate plays in the metaverse at this moment in time,” Scott said. “But there is no doubt [that] social interaction, collaboration, retail, and individual experience will lead the movement towards adoption of this innovation.”
Yorio urges caution before novice investors even consider making a deal for real estate in the metaverse.
“It is ultimately an early-stage venture investment built on top of a crypto layer,” she said. “It is both highly risky and highly volatile and, despite the fact that there may at some point in the future be the opportunity to generate recurring income in the form of a rental stream or something similar or some other kind of monetization, the fact is it’s a highly volatile, highly risky investment, and, in that way, is nothing like real world real estate.”
The metaverse real estate game is certainly a long one, but experts say it is also a generational one.
“Think about how much time kids are playing on Roblox, and they’re just going to come to expect to live in these virtual worlds,” said Jake Steinerman, head of community at cultural metaverse platform Spatial. †[They] are spending so much money on their virtual clothing [and] on worlds that they’re building. They’re spending crazy amounts of money.”
The days of building with an entirely fictional wallet on Sim City? We hardly knew ye — but maybe don’t discount the metaverse as a viable place to do real estate deals sometime in the future.