Mark Twain memorably advised, “Buy land—they won't make it anymore.” Twain never imagined that in just over a hundred years we would find a way around this minor inconvenience. Welcome to the world of Web 3.0, where a new land is forged in the metaverse every day.
In the blink of an eye, we jumped from the infancy of the metaverse to seeing tiny fractions of it sell for millions of dollars. When JP Morgan, Adidas, Samsung and a host of other major brands and investors are spending big on digital land grabs, you have to sit up and take notice.
In the mega-popular meta version world, The Sandbox (SAND), we see investors paying upwards of $300,000 to grab certain decks. That's right - in this housing market, people are paying what they would pay for the average American home for land they can never live on.
So, what makes this digital land so desirable? Is it all a bubble or a fad – or does the metaversion offer a chance to build generational wealth in virtual real estate?
Big players are certainly attracted to virtual land now, but the metaverse real estate market will not be able to sustain its dizzying popularity without the presence of three key components – verifiable digital identities, desirable locations, and diverse communities with access to actual use of their virtual land.
Identity is a central component
Our wallet is our Web 3.0 passport. It is our separate, sovereign identity and gives us the ability to fully access the decentralized, interoperable Web 3.0 securely and seamlessly. This identity layer must come first to enable secure transactions. Because what we really need to preserve and prove provenance is a permanent on-chain identity verification mechanism.
Once we can prove who we are to the entire metaverse without having to reveal who we are, we can engage in many projects in good faith. And we can become our own brokers, real estate agents or art dealers.
Think of it this way - if you were to buy a house IRL, you'd need a mortgage broker and put funds in escrow, etc. But in Web 3.0, buying a virtual building wouldn't require a third-party escrow service . All you need is your verified wallet. Holding an NFT (non-fungible token) would become your deed and trust, and these verifiable credentials are immutable and can never change hands unless you initiate them.
In addition to virtual goods, the identity layer also provides the ability to fractionate real-world items whose ownership we need to verify in multiple ways, such as age-restricted ownership of whiskey barrels. Or even more, representing real luxury goods like rolexes and high value collectibles - this shows that combined with a strong identity layer, we can trust NFTs to prove ownership in the meta universe.
This opens the door to endless possibilities of what ownership can mean as it bridges the gap between our digital and analog lives. Now that we have a secure bridge between the two, let's see what exactly we can do with these tools.
Like the turn-of-the-century Manhattan land purchase, generational wealth is seemingly being built in the metaverse through smart real estate purchases.
Investors in this nascent stage of the digital real estate market are making huge profits, and demand should only increase as Web 3.0 matures—because it's decentralized and globally accessible, allowing the world to engage with it. Unlike traditional real estate, which has so many restrictions and red tape, the metaverse is land for people.
Demand remains high as the supply of space in the most desirable worlds and neighborhoods dwindles, causing prices to skyrocket on the most popular platforms. This signals more worlds being built to satisfy the demand of anyone who wasn't too early to pick up the plot in a place like The Sandbox.
And why not? Crypto natives find themselves awash in digital assets – yet they can't easily parlay their hodlings into a "real" house because the vast majority of US mortgage lenders don't recognize crypto assets.
It is both the allure of a new speculative asset class and the path of least resistance to equity that drives much of this speculation and retail investment. So it's no surprise that owners are starting to use their properties to generate passive income in the same way that traditional real estate investors do.
Landowners offer space rentals for events, operational tours, art museum openings, digital interpretation creation, and property rentals. The sky's the limit, and it seems anything can be accomplished with a piece of physical real estate—now it has an analog in the metaverse.
The future of digital cities
As digital real estate follows its real-world equivalent for use cases, pricing, and investment, does this mean we may see certain "bad parts of town" in the metaverse in the future?
Will there be closed storefronts, dangerous back alleys and shabby houses in a state of disrepair? Will there be an urban-rural divide?
Will we see a wave of gentrification sweep through neighborhoods for beautification projects, land buyouts that flip after renovation?
It's hard to say, but anything seems possible at this point.
If the crypto market has taught us anything, it's that in the face of thousands of launched projects, those with a strong tokenomics and those that keep their communities consistently engaged over a long period of time will surely be the most successful.
And who knows - maybe the shortage is being produced. What's to stop the metaverse community from voting to expand, mine more land, and possibly devalue what was once a set amount of availability.
How can something natively digital ever be finite in scope? These are questions that remain open. However, it seems clear that the use cases we are already seeing and the inherent value represented by these assets is real and growing every day.
Perhaps Twain should have said, 'Buy the land now - before the others start making money'.
JP Bedoya, Civic's Chief Product Officer, is a seasoned product leader. He previously served as head of product design at The Climate Corporation, overseeing product experience and user research, and vice president of product at LifeLock, where he oversaw consumer products, new member acquisition and new product development.
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