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No Deal: Why Growing Metaverse ‘Real Estate’ Buzz Could Set The Whole Space Back

By Zain Jaffer. Originally published at ValueWalk.

Metaverse iBuying

Most people believe we’re at a turning point comparable to the first rise of the internet. The comparison seems well-warranted. The rise of cryptocurrencies and blockchain technology is enabling downstream developments like web3, the metaverse, and large-scale decentralization. It’s certainly something for investors to be excited about.

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It’s also something to prepare for. Like most watershed events, these developments have the potential to push some early adopters into incredible wealth and advantage. They also run the risk of leaving competent but confused onlookers behind.

Communication seems to be one of the best risk strategies we have. At this stage, everything matters. It matters what we call the new developments and platforms that are taking over. It matters how we hold a collective conversation geared toward people of different levels of understanding. And from those conversations, it matters where we direct our energy, time, and resources as we all place our bets on the future that’s unfolding.

To that end, there’s recently been one area of confusion that feels imperative to clear up. A real estate boom has taken over the metaverse; one that seems all too similar to the ballooning housing market that’s been a product of the pandemic. Pure speculation is leading investors to snatch up expensive ‘real estate’ in the metaverse. The ‘digital land’ is being bought, sold, rented, and developed as more and more onlookers buy into the potential for an increasingly inflated digital real estate market.

While there are many examples of metaverse activity that’s mirroring our physical lives—metaverse concerts, fashion, and shopping malls are becoming more and more common—there are a number of crucial differences between real and digital land that need to be addressed. The trend of overlaying the laws and language of our physical real estate market with what’s happening in the metaverse has the potential to lead to dangerous misunderstandings and misplaced capital that could direct attention away from the actual promises of the space. Below are some of my thoughts about the dangers of digital metaverse real estate.

Manhattan: A Real World Case Study

Manhattan is an island that’s just shy of 23 square miles. Even if every inch of it was covered with corporate offices and single or multi-family housing, there would be a limited amount. The natural scarcity through which all physical real estate markets source their value is markedly different from the manufactured scarcity that metaverse platforms have introduced.

Governing bodies of various metaverse worlds have coded ‘zoning restrictions’ into their platforms. They’ve also created ‘luxury’ offerings like mansions and picturesque, pixelated views. But none of those invented offerings have any resonance with the value of physical land.

First, the physical world comes with physical conditions. To contend with those, people need shelter. Shelter, like anything, is a good that can scale in its value. Not everyone needs to live in a Manhattan penthouse or work in an office in the financial district, but a lot of people want to, some people can afford to, and a small subset of that population choose to do just that. That choice gives Manhattan penthouses and Wall Street offices their value; there are only so many, and they represent a luxury interpretation of necessary acquisitions like a space to live and to work.

Much of the metaverse is speculation, and it can be confusing as to why people are paying real money to buy virtual designer bags or attend 3D concerts instead of seeing a show in their town. But concerts and fashion make a lot more sense in the metaverse than real estate ever will. Fashion is a form of self-expression, concerts are a form of entertainment; that they’re happening virtually isn’t making them any less real.

But shelter as a need doesn’t translate to the metaverse. There’s no cause to have a roof over a digital avatar’s head, and no possible way that binary code can provide an individual with shelter, making the metaverse real estate craze markedly different than traditional real estate. There is not – and should not be – a way to privatize a metaverse ‘view.’ Not everyone in New York can look out their window and see an unobstructed view of central park, but any user can – and probably should, if we’re acting in the spirit of the metaverse as a democratizing force – have access to a block of pixels that looks the same.

Watching Our Words

Working to understand and participate in the dawn of the metaverse makes sense. There’s a viable audience, mostly a gaming community, that can transact and become a useful consumer base for advertising, and there are thoughtful people that are convening there to think about how we leverage these technologies best. But the surge in interest, and the headlines that have started adopting the language of real estate, are causing investors to flock to the state for fear of missing out. Believing in this as the next big way to make money, and maybe burned by the recent housing boom in our real world, people have jumped on the bandwagon, and they risk getting seriously off track in their investment strategies.

We’re living at a time during which change is accelerating; it really matters that we’re careful with our worlds. Using language that’s traditionally associated with the physical real estate market – ‘breaking ground,’ ‘buying up,’ and ‘virtual land’ – makes people overlay their understanding of the physical real estate market onto what’s happening in the metaverse. To do so is to miss the point. Right now, the metaverse is home to a lot of cutting edge gaming experiences that are leveraging the power of cryptocurrencies and blockchain technologies. Moving forward, many more developments could continue to change and improve the space. But the best offering of the metaverse is certainly not real estate, and bringing a traditional investment strategy into digital land is not the right way to interact with this next world as it forms. Investing in relevant cryptocurrencies, understanding the value propositions of tokens, DAOs, and other entities that are new to the space, are great ways to begin. Otherwise, observers should avoid the fear of missing out and save their portfolio for land, views, and wealth in the physical world.

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