Remember “Ready Player One,” the 2018 movie directed by Steven Spielberg and based on Ernest Cline’s bestselling novel? It’s about a virtual reality platform called the Oasis, where people use headsets to see, feel, and explore a digital landscape. And four years later, it remains one of the best examples of a “metaverse” — a catch-all term for the virtual reality and augmented reality platforms that companies like Meta (formerly Facebook) and Microsoft are turning into the next big digital frontier.
You can already play games, shop, and interact with friends in the metaverse, but now some companies are selling virtual land in their metaverses and igniting a new digital investment frenzy. Cryptocurrency asset management firm Grayscale estimates the metaverse will eventually generate $1 trillion of revenue annually, while the CEO of Epic Games says it could be a multi-trillion dollar investment opportunity.
Some metaverse properties are drawing big bucks from cryptocurrency investors. Republic Realm, a metaverse real estate development company, recently spent a record $4.3 million on a virtual plot in Sandbox, a gaming metaverse. Cryptocurrency investing platform Tokens.com purchased a virtual plot in Decentraland, a 3D virtual world, for $2.5 million.
Virtual or not, investing in a piece of property comes with its own set of risks. Metaverse property is at the mercy of the markets. Just like in the real world, you will always run the risk of buying a piece of property that becomes worthless in a few years.
“It's still a game,” says Irina Karagyaur, head of metaverse growth at Unique Network, a NFT blockchain platform. “Maybe the [metaverse company] lasts six months to one year, and then it just disappears. So you would just simply [be left with] a bad investment.”
As with any alternative asset, only invest what you can afford to lose. There's little track record for investments in metaverse real estate, so there's no predicting whether you'll get a payoff on what you put in, or lose it all.
While digital real estate could one day have value for branding or marketing purposes, right now, it's purely largely speculative, says Marcus Blanchard, a certified financial planner.
"Personally, I would wait a bit to see how this world pans out for true investing," Blanchard says.
Some platforms are offering virtual property for a few hundred dollars so people like you and me can afford to own it. But is it worth it?
How can I buy virtual real estate?
Most virtual property for sale in the metaverse platforms requires cryptocurrency to purchase. So the first step in becoming a virtual landlord is creating a crypto wallet.
You probably have a digital wallet of some type already. Your Apple Pay, Google Pay, and even Venmo are digital wallets. But to start investing in cryptocurrency you’ll need to use a crypto-specific digital wallet provider like Gemini or Coinbase.
You’ll also want to consider which metaverse platform you want to invest in. For example, SuperWorld is selling digital plots of land on virtual earth for as little as 0.1 ether (a type of cryptocurrency), or around $340 as of Wednesday. Similar to the real world, some virtual blocks cost more than others. You can own Sandbox property without paying millions of dollars — the cheapest plot of digital land in Sandbox is 3.7 ether, or around $12,500.
Once you purchase your plot, the transaction will be recorded on the blockchain and the property will become a NFT stored in your crypto wallet. You’ll also create a unique key, or password, that lets you access the virtual world and your property. “That’s how you ensure the ownership of that piece of land,” Karagyaur says.
Is virtual real estate a legit investment?
The metaverse is like the Wild West. It’s uncharted land and people are eager to discover its financial potential. And it comes with the same amount of risk — is there really gold in this new land?
Buying land in the metaverse has nothing to do with land in the real world. For example, SuperWorld is selling digital blocks of land on its version of virtual Earth. The 64.8 billion plots for sale include landmarks like the Taj Mahal and the Eiffel Tower.
But “just because you bought the virtual land on top of Buckingham Palace doesn't make you The Queen,” says Hrish Lotlikar, co-founder and CEO of SuperWorld.
Instead you are buying the virtual land that is “mapped on top of the real world in augmented reality,” he says. What you’re actually buying is a digital asset structured as a NFT that is recorded on the blockchain.
That means that you can buy the virtual block with your apartment building on SuperWorld, but your landlord can still demolish the building and turn it into a parking lot in real life. “Owning virtual land doesn’t give you ownership of the physical things,” Lotlikar says.
But there is potential to make money from your virtual property. If a business opens a digital location on a piece of virtual land you own, you could receive a portion of the sales, Lotlikar says.
You can also sell a virtual plot at whatever price you see fit. Like other assets, real world or digital, metaverse real estate can appreciate and depreciate in value. It’s important to do your research on the cryptocurrency you’re interested in investing in. Make sure it's something you think is worth having in beyond a virtual real estate purchase. And only invest what you can afford to lose.
Just remember that if you make money off the sale you will be subject to capital gains taxes. You’ll also face the same risks as any other blockchain user: hackers, Karagyaur says.
Scammers stole $7.8 billion worth of cryptocurrency in 2021, an 82% increase from 2020, according to Chainalysis, a blockchain analytics company. She says the biggest threat is digital wallet security.
It’s important to keep any assets you don’t want “online” in a cold wallet with strong passwords or a vault. This includes cryptocurrency, virtual property, and NFTs alike. Even if you’re online, only keep assets in a hot wallet that you plan to access, trade, or sell.
At the end of the day, purchasing a piece of property is an investment. You have to do your due diligence on a company offering the investment to see if they’re delivering on their promises and use your best judgement, Karagyaur says.
Image: tolgart / Getty