Am I Crazy to Buy Metaverse Real Estate?

She’s holding her new investment. Doesn’t look as great in the real world.

Metaverse has seen big air time with Zuckerberg’s Facebook being renamed to Meta and their massive billions of dollars of investment in it. The idea is that a person can create an avatar online and do, well, nearly anything programmable. The metaverse is at its basic just a computer game. Of course, Facebook is involved, which means advertisement.

What is the Metaverse?

First, we need to discuss the idea of metaverse real estate. Real estate is the land and anything permanently attached to it. There isn’t any actual land in a computer game, so real estate doesn’t exist. A better term would be to say metaverse virtual estate.

The idea is that a computer game is created with little bits of land that are parceled off and can be sold, but there wasn’t a way to keep track of who owned what and when it was purchased – kind of like the chain of title on real estate. That changed when cryptocurrency was created. The next step was NFTs (non-fungible tokens), which allowed anyone to create a kind of unique digital signature and attach it to anything. Now, owners of the NFT code representing a token could claim to own whatever virtual or real thing people agreed it was attached to. When the NFT changes hands, usually accompanied by an exchange in a cryptocurrency, a log is permanently placed in the NFT to show it now belongs to a new person or company. It’s all digital, and as long as most others agree that the transaction was legal, there is a proud new owner of some bits of code representing ownership of something else.

Unfortunately for Zuckerberg, the metaverse has been around for more than 10 years and others have beaten him to the punch. The Metaverse really doesn’t exist. It’s actually multiple metaverses and that is the crux of the problem. Now, anyone with some coding experience can create a metaverse and begin selling land or avatars or virtual items or really anything else they can think of.

Large metaverses like The Sandbox have had years of head start. They realized that in order to have a market, they needed to create scarcity. To this end, they limit the amount of land that can ever be sold (at least that is what owners hope). The scarcity is thought to drive the price up. It also helps that early-adopters like Warner Music Group and Snoop Dog are owners. Anyone who wants to advertise can purchase land and be seen on the map. But is there really scarcity?

Many metaverses are now in existence. There are all kinds of digital things to purchase. Just like the physical world, the value of an object is dependent on whatever someone else will pay for it. If no one is going to your particular metaverse any more, then the value of your land goes to zero. This is the risk of investing in the metaverse. Nothing is scarce, so value plummets.

On the other hand, it is entirely possible that one metaverse will emerge as ‘the one’, such as Facebook did with social media. If that happens, then there will be money to be made. If you are an early owner, you will have made a fantastic investment. The risk is in picking the right one. It’s a gamble on appreciation. That’s not bad in itself, but it loses one main benefit of real estate investing – having control over the asset. Not just being able to hold it – which you can’t do in the digital space – but control over how to rent it and to use it. You may have a little with a metaverse, but those behind the code are the actual ones in control. Look to see law suits in the next five years about whether people actually can own land on someone else’s server or if they are just leasing it.

I don’t own anything in the multiverse, except for a small amount of cryptocurrency. I don’t have any plans to buy but I do think there is money to be made there. If you have a wad of cash that you can afford to lose, and are ready to take a gamble, go ahead, and tell me how you did.

Dr. Equity