• Tue. Jun 21st, 2022

Real estate investments the size of a byte

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By now you are probably already familiar with NFTs. You probably already know that these “non-fungible tokens” have taken the art world by storm, thanks to the groundbreaking sale of Beeple’s artwork at Sotheby’s auction for $ 69 million. But what you might not know is that this cryptocurrency-fueled stored data has made a foray into real estate. In fact, you can currently buy blockchain properties that only exist in the digital realm.

Virtual real estate is growing, but you have to know how to navigate the market. Gaming pros have a head start. The most popular “metaverse” land includes Decentraland (which recently sold land for $ 283,567 on March 21) and Somnium Space (which sold an estate for over $ 500,000 on March 16). The buying and selling of virtual properties is tracked on a website called NonFongible.com.

With NFT real estate come digital real estate brokers. Republic Realm is a private investment firm that focuses on the acquisition, management and development of virtual land (and recently a funding round of $ 36 million which was run by crypto investment firm Galaxy Digital). The pandemic has certainly helped this virtual real estate boom.

“Everyone was moving towards digital spaces for gatherings and socializing,” said Julia Schwartz, who works in real estate business development at Kingdom of the Republic. “In the wake of this NFT movement, we have seen support for digital lands, which are bought and sold in NFTs. “

Here’s how those investments work: When a metaverse is launched (like The Sandbox for example), developers pre-sell and drain certain “plots” (how NFT properties are sold) at the start and prices more favorably (the more. a more plots are put together plus you can build a building with plots together). After that, the primary and secondary sales help to increase the market value.

The beauty of the digital land is that just like regular real estate, there is a shortage. Many metavers have a limited number of plots. The hard part is knowing which metaverse will become popular. “We want to create a diversified portfolio, actively manage it, buy and hold,” said Schwartz. “As more value is created on the plots we buy, it will generate value for the metaverse we are working on. “

Some metaverse properties may even have corporate sponsors.

If you understand real estate, the virtual version isn’t that different. asset class is so nascent, ”adds Schwartz. “All the trends that are pushing people into online spaces, the dynamics of the crypto market, which NFTs are aligned with, that’s a good space to be in.”

Right now, the most popular properties can be found in the downtown neighborhoods of each metaverse. The casino is often the busiest place, according to Schwartz. The more content a metaverse has, the busier it is and the more it is worth. “The content will be important,” Schwartz said. “We are taking a serious approach to developers on our lands that will boost foot traffic and engagement. User engagement and growth is what we focus on.

Who is in virtual real estate, you ask? Many investors are early adopters of cryptocurrency, as well as investors who believe in the future of virtual real estate. “We are seeing a great deal of interest from traditional real estate investors who understand the fundamentals of real estate investing,” she adds. “They’re interested in more crypto-focused arenas. We are still very early. As this technology continues to grow and advance, we will see it become more mainstream. “

It might take a while for it to gain momentum. There are a few signs of promise: in Decentraland, where land that sold there in 2019 for $ 500 is now worth $ 8,000. “It’s speculative, but we have reason to believe it’s not just a passing trend,” Schwartz said. “The first players will be financially rewarded for taking the first bets. Some plots of land sell for prices comparable to real estate. It’s interesting to watch it unfold.

In the metaverse, different neighborhoods attract different types of people. This explains why there are different virtual “cities” that attract a different audience – by what already exists. It’s not just skyscrapers or houses, but the personality of each virtual city. There are virtual malls and art galleries. Neighborhoods are developing, each with a different personality. “The metaverse that works the best are the ones with the most content, the most ways to engage their users. We want to create an arts and culture district, for example, and we are always looking to build new developments with interesting partners, ”said Schwartz. For example, there is a space similar to Times Square in the Central District, where Bloomberg News is broadcast. “It suggests the metaverse is here to stay.”

She compares what’s happening with digital real estate to the early days of social media. Much of the institutional investing world doesn’t realize how much time younger generations spend socializing online. “Younger generations are used to socializing through play, which helps inform our thesis that if children are already operating in these metavers, then when they grow up it will result in certain types of crypto-based metaverse interactions. “she said.

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Even at the advertising level, it is a great visibility for a brand. “When you advertise on Madison Avenue, you only reach those who pass by, but the ad space in the metaverse is limitless,” Schwartz said. “Anyone on a computer can see it. It’s a branding or marketing exercise where you can reach out to existing fans but also new audiences you might never have been exposed to.

NFT to the moon

In another interesting example of virtual real estate, the very first NFT house was recently sold on the moon in an auction with Open Sea. Created by Roman Kropachek, co-founder of data recovery software company CleverFiles, it worked with a team of architects and 3D visual artists to create this NFT house on the moon, which has its own 3D map, interior and exterior visualization, and a complete layout of the house. It is considered “a digital work of art”.

“The popularity of NFTs has already prompted many artists to test their creativity and come up with new trends, some of them more successful than others,” Kropachek said.

A render showing what the completed lunar house would look like.

The Lunar House is not a fantastic McMansion, it is a very practical space age house that could work on the planet. “The house has two main blocks with areas designated for living, working, cooking, laboratory, gym, technical rooms and even a greenhouse,” Kropachek said. “It’s a very detailed presentation of what a real house will look like on the moon.”

Non-fungible but fully functional? May be. But that’s just the start for Kropachek. “I think we will definitely see more architectural concepts created and sold as NFT art in the coming months,” he said. “I also think it wouldn’t be limited to just houses, like the house on the Moon, on Mars, or both the house that is sold as NFT and the real house that is a package deal.

He adds: “I guess we’ll see new urban design ideas, like museums and galleries, public facilities and recreation areas, but also completely original ideas, just like a house on the moon, like your imagination. did. no limit to create this.

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