Now a new form of real estate investment is emerging: digital LAND, a form of non-fungible tokens (NFTs), in metaverse worlds like Decentraland, Sandbox, and Somnium. Various investors, both private and institutional, are now showing interest in digital real estate, according to several media outlets. So what is behind this new interest? We try to answer that along with the risks that such investments may involve. But first, let’s find out more about LAND in the metaverse.

What is LAND in the Metaverse?

LAND in the world of the metaverse is nothing more than blocks of data built on top of a chain of blocks and represented by an NFT of the respective chain of blocks. For example, Decentraland is a metaverse built on top of the Ethereum blockchain.

Said LANDS are sold using NFT technology so that their records can be publicly verified, thus ensuring transparency.

“Metaverse is an exciting concept that can create huge opportunities for the future. Land in the metaverse can be valuable with its demand increasing day by day. But there are only a limited number of plots of land. This does not mean that land cannot be created, it can be created if the selling organizations so wish,” says Edul Patel, CEO and co-founder of Mudrex, a global algorithm-based crypto investment platform.

Why do investors buy LAND in the Metaverse?

NFT-based digital LAND can be used for a variety of purposes by different investors. For example, some companies are using LAND to provide their customers with an enhanced digital experience of their products and services. Some investors use LAND as an investment where they sell it for a profit.

In Decentraland, the lowest price for a LAND is about $15,000. Essentially, you could buy a bungalow with that kind of money in some parts of the real world. A few months ago, a media report said that a buyer spent $4,50,000 to get LAND alongside Rapper Snoop Dog’s LAND in Sandbox, a metaverse ecosystem.

? Won’t you be my neighbor? https://t.co/A3JdUrDEkj

— Snoop Dogg (@SnoopDogg) December 3, 2021

“Metaverse is a virtual world with interoperable elements that are rendered in 3D in real time. It may seem strange to buy virtual land in the metaverse. But if you look at it as just another digital asset that can potentially give you a return in terms of money or entertainment, it becomes clear why so many are buying digital land,” says Ajeet Khurana, former CEO of Zebpay.

So why do users pay so much money for virtual land when they could very well buy real land?

• Make an asset: The amount of LAND available in the Sandbox is only 166,464 parcels. Each plot of land measures 96×96 meters. Therefore, some investors are thinking of buying parcels of LAND and then holding onto them for future capital gains, as there will come a point where there will be virtually no LAND left to buy on the open market.
• Income generation: The EARTH may be virtual but it still has the characteristics of the real earth. Just like in real life, you can rent metaverse LAND, host parties and special events on it, and advertise on your LAND. Basically, users can earn some income by buying land in a metaverse in a popular location like the fashion district, which is home to many celebrities and is quite populated.
• To have an experience: A terrain is nothing more than a block of data unless users build something on top of it. The possibilities are endless. Some users are buying virtual land in the metaverse for this very reason. They are building unique customer experiences on top of their EARTH. For example, singer Paris Hilton hosted her New Years party in the world of the Roblox metaverse.

We are focused on building next-generation platforms that enable customers across industries and geographies better ways to exchange information and value.

— J.P. Morgan (@jpmorgan) October 27, 2020

Why are companies buying LAND in the Metaverse?

Price Waterhouse Cooper (PWC) Hong Kong bought LAND in the Sandbox for $10,000 last year. Portion, an NFT marketplace and auction house, bought $1.2 million worth of LAND from Decentraland last month. JP Morgan bought a lounge in Decentraland, while Samsung bought LAND in Decentraland and named it 837X after its New York flagship store.

So why are big companies buying these virtual land?

• Digital advertising: Many industry stakeholders believe that the metaverse is the next iteration of the web, and therefore companies should embrace this technology. Portion purchased the virtual land to showcase their art portfolio and give users an interactive 3D view of their digital arts and thus sell them. Samsung created its store in the metaverse world to spread awareness of its brand among new age customers. JP Morgan Bank created its virtual lounge to help customers access its Onyx service more conveniently. Similarly, other large corporations have purchased virtual land for marketing and related purposes.

“Many giant companies are using metaverse for their marketing purposes. For example, JP Morgan opened a lounge in the metaverse space to gauge the attention of gamers looking for an on-demand virtual space,” says Patel.

• Product knowledge: Companies like PWC and others have bought LAND to learn more about them so they can better serve their global clientele. “We will draw on our expertise to advise clients looking to adopt Metaverse on the full range of challenges presented by this emerging global digital phenomenon,” a PWC Hong Kong partner said in a press release.

Risks of buying virtual land in the metaverse

Purchasing virtual land carries your own risk. Most investors, corporate and otherwise, buy virtual land to generate income or follow their favorite celebrity.

Experts advise retail investors not to do this, as virtual land only has value when there is a buyer willing to pay a price. They can lose all their investments if the price of virtual land suddenly drops. For example, not all parts of the metaverse world are fully populated. Some specific areas like the fashion district at Genesis Plaza, WonderMine Crafting and others are full of people and businesses, but some areas are like a ghost town.

“Once we reveal ourselves more with data (in the metaverse), the more vulnerable it becomes. This can be misused for profit and manipulate our digital selves which can harm the real world selves. Like any technology, it is revolutionary, but we need to define social, political and psychological boundaries for this and how much control we should allow to share our data”, says Dileep Seinberg, founder and CEO, Thinkchain, a cryptocurrency, NFT and Blockchain company. advisory company.

Experts advise retail investors to use the world of the metaverse as a source of entertainment rather than an investable asset. They also warn against a lack of regulation. “Metaverse is a technology and innovation that is prone to a certain level of danger and has to be regulated in the interest of the investor. I think it’s a collective effort by tech companies and the government to look at investor interests rather than blame technology for its innovation,” says Seinberg.