Why on earth does “digital” real estate matter?

The image above may look like something you’d find in Roblox - but don’t let its appearance fool you. Investors across the globe have started to pour millions into owning digital plots of land like this one in the metaverse.

What even is the Metaverse?

Originally coined in Neal Stephenson’s science fiction novel, Snow Crash, the metaverse was slated to be a virtual world. Stephenson imagined people creating and manipulating their own avatars to interact in a digital space.

The “metaverse” today expands on Stephenson’s vision. The term captures the idea of a virtual world parallel to our physical one. Although the metaverse may feel very new, it’s actually existed for a long time. Think about every popular mobile adventure game such as the Sims, Roblox or Fortnite. In each, we get the chance to customize our own avatars - representing ourselves - and play with others in new places.

The metaverse promises the ability to overlap our digital and real lives even more, such as having the ability to walk past a restaurant and being immediately able to view its menu and ratings from friends. Using these new spaces, we can create opportunities and experiences that would never be available in the real world.

Why the Metaverse?

Envisioning the metaverse feels like imagining a hyper-realistic video game. Why are investors so interested in owning estate in this digital scape?

Investors are interested in digital real estate for many of the same reasons they’re interested in normal estate - to acquire passive income by owning property. There’s a big difference, though, in how each accrues their value. Scarcity of land is less important in the metaverse. Since this world is digital, space can infinitely expand. What matters more is demand for a virtual plot and how plots are placed relative to one another.

The value of metaverse land depends on what users want, more so than in the real world. If people really want a virtual H&M store, the value of owning an H&M storefront increases. Where things are placed is even more important. Say there’s a virtual concert space that’s really popular for users. If you own a shopping mall right beside it, you’re going to get more activity. This phenomenon already exists in our real world, but being in the metaverse exaggerates its effects simply because people are less restricted by their geographical location. Anyone with the technology to enter the metaverse can visit these shops at any time from anywhere, meaning your customer base has suddenly expanded from just people living in the US, for example, to users from all around the world.

At its core, investing in the metaverse is placing a bet that the digital world you own will be highly used by people in the future.

What Could the Metaverse Look Like?

There are a lot of ways the metaverse could evolve. For one, gaming and entertainment takes on a whole other level. Instead of downloading different platforms, you could instead join one centralized world and bounce around several games at once. Virtual gaming also introduces the idea of “play to earn,” where people can make money just by playing games. Blockchain technologies and NFTs play an important role, too. Users are given irrefutable certificates of ownership over specific in-game items and products, protecting players from losing their efforts. In the entertainment world, artists can find cool ways to meet their fans. Ariana Grande and Snoopdogg, for example, have already hosted incredible virtual concerts which also featured special edition minigames and products. You could also imagine a new wave of virtual amusement parks, theaters and digital storefronts that you could visit with your friends around the world.

The metaverse could transform a lot of important areas such as learning and education. When reading about the pyramids in Egypt, for example, students could virtually travel to historical sites and directly interact with artifacts. The COVID-19 pandemic has shown us that virtual options are super impactful and could streamline the way we teach.

Virtual meetups in the metaverse could foster more support groups. Surgeons are also using virtual ways to visualize and automate traditionally difficult procedures, making really cool improvements to healthcare.

The possibilities of the metaverse feel endless, and it’s up to us to fill these new spaces.

Summary

There’s a lot to think about. Should we be moving to such a virtual world in the first place? How is it going to affect our personal relationships and the way we interact with each other? Investors are already placing their bets with metaverse real estate topping $500 million in the last year. It’s important to be optimistic and keep reflecting about the direction of our future.

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This is not financial advice.