Investing in physical or virtual real estate: 9 key differences
JThere’s a lot about real estate in the metaverse that can be equated almost directly to that of the real world, especially when it comes to physical characteristics like immobility and uniqueness and economic characteristics like rarity and the location. But for as much in the metaverse as being similar to the real world, there are many, many things that are different.
It is important to consider these differences when purchasing land in the Metaverse or planning an investment in the Metaverse. From purpose and limits to development cost, I have listed the key differences between the two that are essential for an investor to be aware of.
1. The Metaverse Has Specific Uses
Real-world real estate is absolutely everything to all of us. This includes places to eat, breathe, and exist, as well as do boring things like sleep and do laundry. It’s very difficult to live without real estate, even if you don’t own it. Metaverse real estate is about retail, leisure, and social activities, all of which can be a lot of fun but aren’t necessary for life.
2. Metaverse data is limited
We have real estate records that sort of go back thousands of years for some corners of the world. The Metaverse, on the other hand, didn’t really exist in any form until around 2003 (which is when Second Life was born). The more well-known platforms are even newer, many have sprung up in the last five years or so. This means that there simply isn’t a whole lot of data to model to help determine values or future potential right now, making it all highly speculative.
3. There is no central authority to register your property
Although there is an entry into the blockchain when you purchase an NFT, there is no central governing body that tracks your ownership; it’s essentially anonymous to anyone but you. Your ownership record stays with you in a virtual wallet. A few people have made the very costly mistake of losing their wallet passwords – and all of their NFT assets – because there is no central authority to maintain some sort of master list.
4. Lots are limited, but platforms are not
Although there are limited bundles in any given metaverse platform, there is potential for unlimited platforms. So while the Scarcity Principle applies to each specific platform, users may still not think the platform you are using is forever hot and may choose to migrate elsewhere. It’s important to think of the metaverse as an endless series of planets that people can move between rather than a limited amount of land on a lone round ball hurtling through space.
5. There is always a risk that metaverse platforms will shut down
Listen very carefully, because it is vital. There is always the risk that metaverse ownership will simply cease to exist if a platform were to fail due to lack of funding or interest. It’s not a real-world risk, at least as far as we understand how physics works.
6. Few Rules Apply to Metaverse Properties
There is no gravity in the metaverse, and little planning and zoning, so the structures you erect are only limited to what you can imagine and what will suit your terrain. There are also no taxes currently, so that’s pretty cool.
7. Metaverse Structures Can Be Simplified
There are no fire codes or public health hazards in the metaverse, so event space and even storefronts can be more streamlined, with no unnecessary space devoted to things like storage, bathrooms or additional square meters for social distancing.
8. Construction costs are very low
It can cost a fraction of what it would cost in the real world to build a new property in the metaverse, since most of the cost is in the design and not the physical materials (which are free in every collection). platform, or at low cost if purchased elsewhere and imported). Land is also usually cheaper in comparison, and you don’t need any infrastructure, like water pipes or sewers.
9. The Metaverse is not limited by geography
Because the metaverse exists in all places at the same time, events like the virtual New Year’s Ball drop in New York last week immediately become more accessible to anyone from anywhere on the planet. In addition to making events more accessible, this could also work in favor of legacy regional brands, as they don’t have to invest in global infrastructure to expand their reach.
The Metaverse Is Different, But It’s Not So Different
While it’s absolutely vital to understand the functional differences between real estate and virtual real estate, it’s more to maximize utility and your return, and not so much because you have to choose an investment over a other. Metaverse is the next 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 small Metaverse property with your real world real estate portfolio. In fact, it could create quite an interesting balance.
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