Blockchain-Secured Digital Land Attracts Real Estate Investors

Kate Morova
June 01, 2021
Blockchain in Real Estate Digital Blue Image

Individual and corporate investors are devoting millions of dollars to the acquisition of digital land; here’s why. In the real world, real estate has historically been seen as a viable investment. Individuals and corporations usually purchase land and property either for development or sale at a higher price in the future.

With the world increasingly digitized, it appears that the trend of ascribing significant value to land and property has spread to the virtual world. At the intersection of emerging technology like virtual reality and blockchain, developers, investors, and hobbyists create a vibrant virtual real estate market.

While VR provides tools to visualize these digital spaces, blockchain technology acts as a base layer for monetization. The consequences of coronavirus caused a pivotal shift towards more digital forms of human communication. Interactive virtual worlds can provide a safe space for preserving numerous social structures.

Second Life, Linden Dollars

Virtual property is by no means a recent phenomenon. SimCity simulators have been around for decades. In 2003, a 3D virtual environment called Second Life probably launched the monetization of virtual real estate. Users rushed to acquire digital land using the native currency, Linden Dollars. Second Life ran before the advent of Bitcoin (BTC); nevertheless, the project saw users buy, sell, and lease properties and run businesses on virtual land.

The platform soon declined with the emergence of other immersive and interactive virtual real estate projects. However, at the height of its popularity, Anshe Chung, the “Second Lifer,” became a millionaire in digital real estate sales.

Virtual – Digital Land as Commodities

With the advent of blockchain technology, VR platforms like Somnium Space and Decentraland enable users to acquire and monetize virtual land plots. Whale, a non-fungible token vault, has recently become the second-largest virtual landholder in The Sandbox Game.

Binance Launchpad hosted The Sandbox Initial Exchange Offering back in August with a token sale event that raised about $3 million. Binance is also an investor in the project, having purchased over 4,000 land tokens earlier in September.

Commenting on the growing popularity of virtual real estate, Joseph Madding, a marketing and PR consultant at The Sandbox, said that investors are becoming more open to the idea of digital land as a viable investment. The Cointelegraph said:

“Virtual Real Estate is definitely becoming more and more popular. Over the last 10 weeks, more than 1,000 percent of users interact with our Telegram chat, Discord, Twitter, and other social media platforms. We have also expanded our community management to meet growing demand. In terms of virtual land as a commodity, land originally sold at around $370, reselling at over $2,000 for what we would sell as a small estate. That’s amazing, and it shows a huge community interest in our NFTs.

Indeed, the rush to virtual land assets is only the latest in the established trend of rapidly selling digital real estate. In March, VR World Somnium Space sold 110 Ethers worth of virtual land in the first week of a scheduled 10-week offering.

Upon opening its platform in February, Decentraland saw users purchase millions of dollars worth of digital acreage. In 2019, a portion of the Genesis Plaza estate in the Decentraland Metaverse, Estate 331, sold for about $80,000. Making it the second-most expensive NFT in 2019.

Expanding the Landscape of Digital Property

While it is common to see real-world commodity tokenization projects, the emerging virtual real-estate space creates a self-contained digital economy. With blockchain technology as a baseline, these platforms can monetize digital land, enabling users to trade assets within the metaverse.

Apart from the early acquisition of virtual land in hopes of seeing assets valued over time, some individuals and organizations have developed them. The process is similar to real estate development by establishing commercial and residential complexes, industrial zones, and parks, among others.

Part of the attraction that drives the desire to own virtual land appears to be based on optimistic projects on VR technology’s viability. According to a study published in August, the combined VR and augmented reality market is estimated worth $20.9 billion by 2025. Companies in China and India are expected to drive this significant growth over the next five years. Head-mounted displays are becoming increasingly popular with game developers and fans alike. With advancements in 3D technology, manufacturers are getting better at creating HMDs that deliver a more immersive and interactive VR experience.

Meanwhile, for blockchain projects, scarcity generally plays a major role in driving their native tokens’ value. As with the real world, for real estate holdings to remain valuable, virtual land on these metaverses needs to be finite.

Another tangible use case for NFTs is the monetization of virtual real estate. Digital land developers create malls, boutiques, shops, and other retail outlets, selling electronic goods such as fashion items, rare cards, concert tickets, etc. For game developers, the marriage of VR and blockchain technology creates an opportunity to enjoy “all-digital” gaming. Commenting on the benefits of a fully digital environment. Madding argued:

“As a game developer, virtual real estate provides an almost no-risk platform for publishing your games. With NFT technology, you’re no longer publishing on the App Store. You’re going to have real ownership of the space in which you design and publish your game. As a consumer, owning LAND feels like buying any physical video game. If you find yourself wanting to do something new, you can either design something completely new with our free tools, or you can resell digital real estate just like selling any physical copy of a game.”

Life after COVID–19

COVID-19 has brought about sweeping changes in human interaction, and the use of virtual forms of communication has taken center stage. As shutdowns continue throughout the world, electronic video conference solutions have been used by organizations for meetings. Tech giants in the United States have even issued work-from-home orders. This, with reports of the practice expected to continue regardless of whether scientists come up with a coronavirus vaccine.

Conferences and meetings are ubiquitous occurrences in crypto and blockchain space. However, due to restrictions on COVID-19, many such events could not be physically attended by people in 2020.

To navigate this hurdle, organizers and participants flocked to the virtual realm, sporting creative avatars to discuss important industry issues. These events push electronic interaction boundaries from third-party messaging services to people interacting in a fully digital space.

To Conclude

According to Madding, the established social construction is becoming more and more open to digitalisation. “With the years, major social events, like in Epic Games’ Fortnite, are likely to be more and more common. We hope to take the lead and see these amazing social spaces emerge in our Metaverse”. For Artur Sychov, the founder and CEO of Somnium Space, the appeal of virtual real estate has been made.

“We do see increased interest in Somnium Land Parcels (PARCEL) because more people realize that they can deploy and use parcels for real use. Examples are talk shows, art galleries, cinemas, fitness clubs, crypto exchanges, and more. These have already been deployed in our virtual reality world.

As developers create more immersive and interactive virtual environments by solving display latency, almost every social activity in the digital space may become possible. Such solutions could be linked to the growing NFT marketplace for items such as concert tickets and theater tickets.

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