Why Virtual Real Estate is Worth So Much

  • 2021-09-09

Whether you’re hoping for a new home or a place to locate your business, we’re all infatuated with the idea of having a plot of land that we can call our own. While these dreams of owning land have always been solidly located within the real world, in the 21 st century things have shifted seeing many purchase plots of “virtual real estate”.

While virtual real estate has been around for a surprisingly large portion of gaming’s history, with the invention of NFTs the game has changed greatly allowing for more secure, future-proofed purchases.

Let’s try to unpick exactly why people are paying so much for these virtual plots of land.

The Evolution of Virtual Real Estate

While “Virtual Real Estate” can apply to a variety of things—from buying physical properties without the intention of ever visiting them to taking a VR tour of a physical property—here we are talking about buying a plot of land in a digital system. Whether that be a game or a purpose-built system for virtual real estate. And this is not something that the classic games have, this isn’t something like buying your desired house on a GTA V account, these Virtual Real Estates have actual value and is acting almost the same as in real life.

Historically, the concept behind virtual real estate has been to give people virtual environments within which they can enjoy a fully-fledged second life. It’s apt, then, that Second Life has been one of the key players in virtual real estate.

Launched in 2003, Second Life is a virtual world developed by Linden Lab, giving people virtual spaces to do anything from conferences and classes to exhibiting their own art. To do this and more within Second Life players can purchase private plots and then build what they like upon it.

Similar to Second Life, Entropia Universe became famous for its incredibly high transactions for virtual real estate throughout the 2000s and 2010s. Most famously, the company SEE Virtual Worlds purchased Entropia’s Planet Calypso for a landmark $6 million in 2011.

While both Second Life and Entropia Universe are still alive and well, there is a relative newcomer to the world of virtual real estate which has changed the game. And that is Decentraland.

Distinct from previous titles, Decentraland combines the idea of virtual real estate with that of blockchain technology—integrating its purchases and currencies into the world of cryptocurrency. Bringing in an entirely new demographic of individuals who existed outside of the world of Second Life-style games.

The idea behind Decentraland builds upon the models which came before it with the hopes of creating virtual environments which mimic the real world—from high streets to cinemas and schools. While such virtual realities may feel farfetched, many theorists such as Ray Kurzweil believe that in a matter of years physical workplaces will become a thing of the past being almost entirely replaced by virtual ones.

This has seen Decentraland’s limited space be ambitiously planned to create virtual metropolises which house naturally occurring districts for users to traverse and partake in. However, with individuals and business piling into the virtual space, simple 10x10 metre plots have already been sold for as much as $200,000 in Decentraland.

Why Would You Want to Invest?

If our future is going to be a virtual one, you’ll want to get in quick.

Consider this, if the future of entertainment, commerce and business is going to take place on a virtual high-street, you’re going to want to have your storefront there. Put this way, it’s understandable why countless individuals and business have already purchased their plots of LAND in Decentraland.

Those who got in incredibly early saw the benefits of being early adopters years ago. At launch 10x10 metre plots would go for around $2,000, but just two months later prices had already shot up to over $175,000—seeing many early adopters make handsome returns on their initial investments.

With blockchain-based real estate, such as Decentraland, value is determined by scarcity as well as desirability. And seeing as there is a set amount of land to be had, just like in the real world, the idea of prices skyrocketing once demand goes up is one that’s easy to grasp.

Thus, one can look at investing in virtual real estate in one of two ways. Either it’s a base investment, just like investing in plots of land in the real world, or it’s a way to secure a place for your business in the virtual world of the future.

But, why would I buy virtual land built by someone else, can’t I just build my own?

While it may seem ludicrous to some to be purchasing plots of virtual land within someone’s system, let’s take a step back. As we’ve already established, it’s not just the land that you’re buying into.

Of course, many of us would be able to jump into a game engine and create our own slice of virtual real-estate. But let’s take a look through the lens of an analogy. Here we can draw parallels between virtual real estate and platforms such as Facebook or Instagram, while self-made virtual systems are like a website.

Sure, having your own website will be beneficial for those who turn up. But for outreach, you’re better off within an already populated app.

Similarly, buying land in Decentraland, or any other virtual real estate application, promises to gain the attention of its already booming user base while creating your own form of virtual real estate (or application) requires you to do the legwork in attracting users.

In sum, once we get over the fact that the virtual world is not physical, the reasons for purchasing virtual real estate show themselves as remarkably similar to real-world real estate. To house a business, have a second home, have a social space, to host events, and much more. And with that understanding, it’s easy to see how the usual rules of supply and demand will affect prices within these virtual worlds.

But beneath the facts of virtual real estate, we have to ask one question: is the virtual world really the world of the future? As the answer to that question will most certainly inform us on whether investing in virtual real estate is future proof, or not.

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