Real-world real estate is easy to understand — it’s all around us every day. We engage without even thinking about it. Metaverse real estate is a little different.
Key Points
- Metaverse real estate and real-world real estate operate on many of the same economic principles.
- However, not everything can be assumed to be the same.
- Knowing the important differences can help avoid serious missteps and create opportunities.
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There’s a lot about real estate in the metaverse that can be equated almost directly to that in the real world, especially when it comes to physical characteristics like immobility and uniqueness and economic characteristics like scarcity and location. But for as much in the metaverse that’s similar to the real world, there are many, many things that are different.
It’s important to consider these differences when buying land in the metaverse or otherwise planning a metaverse investment. From purpose and limitations to cost of development, I’ve made a list of the main differences between the two that are vital for an investor to be aware of.
1. The metaverse has some specific uses
Real-world real estate is absolutely everything to all of us. It includes places to eat, breathe, and exist, as well as doing boring stuff like sleeping and doing laundry. It’s very hard to live without real-world real estate, even if you don’t own any. Metaverse real estate is about retail, recreation, and social activities, which can all be very fun but are not necessary for life.
2. Metaverse data is limited
We have real estate records of some sort that go back thousands of years for some corners of the world. The metaverse, on the other hand, didn’t really exist in any form before about 2003 (that’s when Second Life came into being). More well-known platforms are even newer, many springing up in just the last five years or so. That means there is just not a lot of data to model to help determine values or future potential right now, making it all highly speculative.
3. There’s no central authority to record your ownership
Although there’s an entry made in the blockchain when you purchase an NFT, there’s no central governing body tracking your ownership; it’s essentially anonymous to anyone but you. Your record of property ownership stays with you in a virtual wallet. A few people have made the very costly mistake of losing their wallet passwords — and all their NFT assets — since there’s no central authority to keep a master list of sorts.
4. Lots are limited, but platforms aren’t
Although there are limited lots in any given metaverse platform, there is potential for an unlimited number of platforms. So, while the principle of scarcity will apply within every specific platform, users may still not think the platform you’re using is hot forever and could choose to migrate elsewhere. It’s important to think of the metaverse as a series of endless planets that people can move between rather than a limited amount of land on a lonely round ball hurtling through space.
5. There’s always a risk that metaverse platforms will close
Listen very closely, because this is vital. There is always the risk that metaverse property will simply cease to exist if a platform were to fail due to lack of funding or interest. This is not a risk in the real world, at least as far as we understand how physics works.
6. Few rules apply to metaverse properties
There’s no gravity in the metaverse, and not much in the way of planning and zoning, so the structures you erect are only limited to what you can imagine and what will fit on your lot. There also aren’t currently any taxes, so that’s pretty nice.
7. Metaverse structures can be streamlined
There’s no fire code or danger to public health in the metaverse, so event space and even storefronts can be more streamlined, without unnecessary room devoted to things like storage, bathrooms, or extra square footage for social distancing.
8. Construction costs are very low
It can cost a fraction of what it would cost in the real world to construct a new property in the metaverse, since the bulk of the cost is in the design and not in physical materials (which are free within each platform’s collection, or low cost if purchased elsewhere and imported). Land is also generally cheaper by comparison, and you don’t need any infrastructure, like water lines or sewer.
9. The metaverse isn’t limited by geography
Because the metaverse exists in all places at the same time, events like last week’s virtual NYC’s New Year’s Eve ball drop become immediately more accessible for anyone from any place on the planet. Along with making events more accessible, this could also work in favor of formerly regional brands, since they don’t have to invest in worldwide infrastructure to expand their reach.
The metaverse is different, but it’s not that different
Although it’s absolutely vital to understand the functional differences between real-world real estate and virtual real estate, this is more to maximize utility and your return, and not so much because you must choose one investment over the other. The metaverse is the next up-and-coming investment opportunity for real estate investors looking for something a little different to sink their teeth into, but that doesn’t mean you can’t mix a little metaverse property in with your real-world real estate portfolio. In fact, doing so could create a pretty interesting balance.
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https://www.fool.com/real-estate/2022/01/06/9-main-differences-between-virtual-real-estate-vs/