What is Virtual Real Estate?

The term “real estate” emerged in feudal times when the king owned all of the lands in and surrounding their castle. It was created to describe property that was immovable and affixed to the king’s land. Fail to pay the rent on your real estate and the king takes possession of it no matter how nicely you spruced up your house.

In early America, real estate took on a meaning of its own. Finally, a “real” asset that a person could aspire to own – in contrast to the fluctuating value of currency or possessions that could be stolen or broken. Land and the buildings on it were real, tangible, and valuable. Real estate became a major goal. To finally be able to own the land you lived on was not hard. The government gave out land pretty inexpensively for people to inhabit and develop. And so it became an aspiration of everyone, and still to this day, to own a piece of real estate.

This makes virtual real estate somewhat of an oxymoron. How can virtual and real be used to describe the same object? But remember, real estate represents a property that is immovable and affixed to a plot of land. Virtual real estate is therefore the digital equivalent, just found in virtual worlds and decentralized video games instead.

How can something be “affixed” or “immovable” in the digital world? Couldn’t it just be replicated or deleted in a keystroke?

Not for the virtual real estate we’re referring to. The virtual worlds where you can purchase these digital assets are designed in such a way where the land in the game is partitioned off into plots and then sold as NFTs on the blockchain (often the Ethereum blockchain). Anyone with a digital wallet and some ETH can go on an NFT marketplace and purchase plots of virtual land. You receive an NFT in exchange which encapsulates your smart contract and rights to ownership.

If you’d like to know more about the technology making virtual real estate and digital ownership possible, head over to this article: https://ethereum.org/en/nft/

Virtual real estate represents an entirely new frontier for the digital native world we’re collectively building and inhabiting. And this new frontier brings with it a lot of untapped opportunities and early innovators breaking ground.

Why Virtual Real Estate?

Sandbox games have a rich history of capturing the interest of hundreds of millions of gamers. A sandbox game is one in which the user is given a high degree of freedom to build and express themselves in whatever way they please.

Minecraft and Roblox are by far the most popular sandbox games today, boasting over 175 million users between the two games. Each allows the gamer to carve out their own estate and develop their property into houses, games, monuments, etc. They are these massive, expanding worlds with complete freedom of play. But for all the time you spend building things in the game, you don’t actually own what you create. They are centralized to the companies that develop the games.

This is where decentralized, blockchain-based sandbox games fill the void: ownership. Games such as The Sandbox, Decentraland, and Axie Infinity are laying the blueprint for how users can own a part of the games they play through NFTs. They are decentralized in the sense that the users buy the land in the game and can build whatever they want to build there. The companies that create the games have no preconceived notion of how the game will look or be experienced. It’s entirely up to the users who buy the land in the game.

It’s only natural that users would want to get something in return for the time they spend in these games. But there’s something greater at play here. Because for every one player in these games scooping up land, there are two opportunists who don’t play the game that is speculating on the assets inside the game.

There’s a belief that some of these blockchain-based games will grow into massive virtual worlds with hundreds of millions of users that will find value in the game whether through entertainment, building revenue streams, connecting with friends, or another reason we cannot conceive now. It’s a concept known as the metaverse, where we’ll essentially create economic opportunity in virtual shared spaces much like the physical world. It’s a long-time coming, but the early investors and innovators have a leg up on the rest of the world if it comes to fruition.

The Numbers

1. Republic Realm is raising a Virtual Real Estate Fund, with 30% committed of their $1m goal (link)
2. Artist Krista Kim sells a digital house in SuperWorld for over 288 ETH (link)
3. The blockchain game Decentraland has transacted more than 98,000 ETH worth of virtual assets (link)
4. Eight plots of land in the virtual world Axie Infinity sell for a combined 888 ETH (link)

The Opportunity

• On Wall Street, risk-taking investors will pour capital into buying land and funding development in the virtual world on a grand scale.
• On Main Street, game users will find ways to build out value-providing products and services.
• On Side Street, visionaries will show us what’s possible in these virtual worlds by exploring strange businesses and ideas.

On Wall Street

We’re not far off from seeing REITs in the virtual world. Investing opportunists with success in the physical world are beginning to scoop up lots of land and allow others to buy in and earn along with them.

For example, Republic Realm is raising a $1m fund for buying up virtual real estate. Although it’s only available to accredited investors with a minimum investment of $25k, if their first fund pans out we imagine it would be open to everyone. Especially considering Republic Realm was created by the people behind Republic – the platform that allows retail investors to invest in everything from startups to video games and real estate.

This brings us to another interesting vertical for those with big money backing them and that is building a Virtual Real Estate Development Firm. Essentially, they’ll operate as a development company, taking on virtual development projects. However, instead of contracting out engineers, designers, and construction companies, they’ll work with digital designers, web engineers, and 3D modelers to create things in the virtual world. Maybe it’s a shopping mall, a casino, movie theatres, chain restaurants, arcades, etc…

For instance, Republic put up their own money to buy more than 30 parcels across four different metaverses. And now they’re actively seeking real-life hospitality brands to co-develop a hotel and bar on one of those sites. Not only would it be a huge PR run from this ground-breaking idea, but Republic would simultaneously charge the hospitality brand to develop the land – since Republic is the one who owns the scarce land.

The main sentiment shared by this class of early buyers, investors, and developers of virtual real estate are that getting in on virtual real estate now will be akin to buying land in Manhattan in the late 1700s. Very few can envision what this will look like a decade or century from now, but the high growth potential is there.

Virtual Real Estate on Wall Street

Right now, investing in virtual real estate is all about volume and location. Nobody knows exactly what people want in these games, so it’s better to acquire as much land volume as possible now and allow the users to dictate what is needed there. With the average plot of land in Decentraland going for over 8 ETH, it costs a good chunk of money to make a bet on virtual real estate now. This means that Wall Street incumbents have a better shot at acquiring volume now.

Wall-Street-Worthy Business Ideas:

1. Virtual Real Estate Funds – Crowdsource funds to purchase revenue-generating virtual real estate (Republic Realm)
2. Virtual Real Estate Development Companies – Virtual-first development companies that employ web developers, engineers, and 3D modelers to develop virtual real estate for landowners.
3. Decentralized Virtual Worlds – Developing entirely new virtual worlds (The Sandbox, Decentraland, Axie Infinity, Bit.Country, SuperWorld)

On Main Street

The “little guy” still has an advantage over the big-money trying to get in here. And that is in their ability to actually go into a virtual world and learn the culture there. Whether it’s understanding which locations in these games are ideal or what people want to experience, the average person has the advantage of time. To actually observe the spaces and turn that knowledge into value.

Krista Kim is an interesting case study to look at. She’s an artist who developed property in SuperWorld (a decentralized virtual world) and went on to sell her digital house for 288 ETH. Named the Mars House, Krista took her knowledge of digital design and created an artistically unique property that you might see someone on the Forbes list living in one day.

Granted, not everyone will have this opportunity. And her sale is probably more reflective of her ability to connect with buyers that would spend this much money. However, it represents the average person being able to hit it big in decentralized video games.

Regardless, the knowledge of understanding how these games work, how people interact in them, and what people want will go a long way in the future, whether it’s as a consultant to others trying to get in on the action or becoming a Virtual Real Estate Agent that helps people list their properties and communicate the value of a given property to buyers.

Just being a player in a decentralized game is a great place to start for the average person.

Virtual Real Estate on Main Street

Although the chance to own land in virtual worlds may be monetarily out of reach for most people, it doesn’t mean that users cannot still experience the game and acquire valuable knowledge of these virtual worlds – knowledge that may be helpful in the future for building new experiences and creating personal revenue streams.

Main-Street-Worthy Business Ideas:

1. Virtual Real Estate Agent – If you know a virtual world better than others, you can communicate the value of the property better than someone who wants to buy in but has never stepped foot in one of these decentralized games.
2. Independent Developer – Anyone has the opportunity to create something special in these virtual worlds and ultimately strive toward creating an income-generating experience.

On Side Street

What a lot of people don’t realize is that it’s not going to be IKEA that creates the IKEA of these virtual worlds. It’s going to be some 3D modeler who has always aspired to design furniture that will create the biggest digital furniture company. That person is way hungrier, probably already spends time in The Sandbox or Decentraland, and understands the people and culture there.

Side Street is always responsible for the moonshot ideas that come out of left-field. They create the things or experiences that no one is expecting.

Everyone is thinking about how they can rent their land in these virtual worlds, create a digital art gallery, or lease their space to advertisers. There will be people that win big with this line of thinking. But Side Street is where the refreshing ideas come from.

There’s probably someone thinking about how they can create a daycare in Decentraland so that people’s kids can spend time in the game safely. These are the types of wacky ideas that will have a crazy impact in virtual worlds.

Virtual Real Estate on Side Street

The beauty of Side Street is that it’s unpredictable. There are power users of decentralized games who recognize a void in the market and build a product or service that fills the need.

Side-Street-Worthy Business Ideas:

1. Virtual Designers – “Things” need to exist in these virtual worlds and 3D modelers that can produce unique goods will win here
2. Virtual Daycare – Give parents the security in knowing their young kids are safe exploring these virtual worlds
3. Undiscovered Services – With time and expansion of the virtual world user bases, a whole slew of unpredictable services will emerge