By now you are probably already familiar with NFTs. You probably already know that these “non-fungible tokens” took the art world by storm, thanks to the groundbreaking sale of Beeple’s $69 million artwork at Sotheby’s. But what you might not know is that this cryptocurrency-powered stored data has made inroads into real estate. In fact, you can currently buy blockchain properties that only exist in the digital realm.
Virtual real estate is gaining momentum, but you have to find your way around the market. Game pros are one step ahead. The most popular “metaverse” terrain includes Decentraland (which recently sold land for $283,567 on March 21) and Somnium Space (which sold a domain for more than $500,000 on March 16). The buying and selling of virtual properties is tracked on a website called NonFungible.com.
With NFT real estate comes digital real estate brokers. Republic Realm is a private investment firm focused on acquiring, managing, and developing virtual land (and recently a financing round of $36 million which was run by crypto investment firm Galaxy Digital). The pandemic has certainly contributed to this virtual real estate boom.
“Everyone was heading to digital spaces for gatherings and socializing,” said Julia Schwartz, who works in real estate business development at Republic Kingdom. “On the heels of this NFT movement, we’ve seen support for digital lands, which are bought and sold in NFTs.”
Here’s how these investments work: when a metaverse launches (like The Sandbox for example), the developers will pre-sell and drain some “parcels” (how NFT properties are sold) at the start and give them a better price (more there are plots are assembled the more you can build a building with plots together). After that, both primary and secondary sales help increase the market value.
The beauty of digital earth is that, just like regular real estate, there is a shortage. Many metaverses 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,” Schwartz said. “As value is created on the plots we buy, it will generate value for the metaverses in which we work.”
If you understand real estate, the virtual version isn’t that different “Just as a real estate investment fund is going to acquire various assets and have a certain investment thesis, we take the same approach for digital real estate and c interesting because the asset class is so nascent,” Schwartz adds. is a good space to be in.”
Right now, the most popular properties are 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. “Content will be important,” Schwartz said. “We take a serious approach to developers on our land that will drive foot traffic and drive engagement. User engagement and growth is what we focus on. »
Who’s 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’re seeing a lot of interest from traditional real estate investors who understand the fundamentals of real estate investing,” she adds. “They are 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 before it picks up steam. There are promising signs: at 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 appeal to different audiences, depending on what already exists. It’s not just about skyscrapers or houses, but about the personality of each virtual city. There are virtual malls and art galleries. Neighborhoods develop, each with a different personality. “The metaverses that work best are the ones that have 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,” Schwartz said. For example, there is a Times Square type space 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 accustomed to socializing through play, which helps inform our thesis that if children are already operating in these metaverses, then when they grow up, this will result in certain types of crypto-based metaverse interactions.” , she said.
Even at the advertising level, it’s great visibility for a brand. “When you advertise on Madison Avenue, you only reach those who pass by, but the advertising space in the metaverse is unlimited,” Schwartz said. “Anyone on a computer can see it. It’s a branding or marketing exercise where you can reach existing fans but also new audiences you may 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, he worked with a team of architects and 3D visual artists to create this NFT house on the moon, which has its own 3D map, an interior and exterior visualization, and a complete layout of the house. It is considered “a work of digital art”.
“The popularity of NFTs has already prompted many artists to test their creativity and come up with new trends, with some more successful than others,” Kropachek said.
The Moon House isn’t a fantasy McMansion, it’s a very spatially practical house that could work on the planet. “The house has two main blocks with designated areas for living, working, kitchen, laboratory, gym, technical rooms and even a greenhouse,” Kropachek said. “It’s a very detailed layout of what a real house on the moon might look like.”
Not fungible but fully functional? May be. But that’s just the beginning for Kropachek. “I think we’ll definitely see more architecture concepts created and sold as NFT art in the months to come,” he said. “I also think it would not be limited to just houses, like the house on the Moon, on Mars, or both the house sold as NFT and the real house which is a package.
He adds: “I guess we’ll see new ideas for urban design, like museums and galleries, facilities and public recreation areas, but also completely original ideas, just like a house on the Moon, like your imagination. did it.no limits to create this.