Digital real estate in the form of digital properties in virtual worlds is part of the metaverse, and this is evolving into a new asset class on the one hand and a multi-billion dollar market on the other. Results using the example of one of the biggest crypto game projects at the moment: The Sandbox.
Similar to real estate, owners of virtual real estate can build on it, use it, sell it, or rent it. However, so-called “digital real estate” is still hard to grasp for much of our society. Many people ask themselves questions like what is the point of owning a piece of land in Metaverse The possession you can’t get into or why a digital lot should be worth more than another. Additionally, there is the issue of whether one cannot simply copy the digital country.
This report is based on the study “country it is! Metaverse digital real estate as an emerging asset class“Perish. These and other questions are addressed here. The study also explored the motivation behind owning virtual land and how its prices are regulated.
The structure and content of the study
In order to provide a basic understanding of the relatively recent phenomenon, the report begins with a comprehensive introduction to the topics of the metaverse and virtual worlds. This way, readers can get an idea of exactly what is involved and why the topics are so important. This is followed by statistical analyzes and evaluations of the virtual world using an example sand.
Among other things, they revealed that neighborhood effects play a critical role in the pricing of virtual land and that the price of digital real estate does not show significant correlation with other asset classes (such as stocks and gold).
Digital real estate is a multi-billion dollar market
Alone on Ethereum (ETH) Blockchain, more than $1.2 billion worth of digital parcels from LAND (Virtual Earth) have already been traded. The largest share of turnover spans the three largest projects: The Sandbox, the other side and Decentraland.
While the analysis performed showed significant correlations between the prices of various other asset classes (such as cryptocurrencies, stock indices, gold, bonds, and real estate), no correlation was found between them and the LAND price. These results indicate that the digital land may offer investors potential diversification advantages. Additionally, it once again underscores the fact that digital real estate is still a very young asset class by comparison.
Location as an important factor in land price
Analysis of data from seventeen popular brands or notable landowners (such as Adidas Originals, Snoop Dogg, or Binance) at The Sandbox revealed that the price of digital land is highly dependent on distance to the properties of these mostly popular landlords. This score indicates that users are specifically searching for properties in neighborhoods “populated” by well-known brands or celebrities.
Although the price-determinants from traditional real-world real estate markets are essentially familiar (keyword location), the result is somewhat surprising given the differences between the analogue and virtual worlds. After all, the surrounding neighborhood and infrastructure in the virtual world do not initially play any corresponding role from a purely practical point of view. This makes the results more interesting.
Digital land near the property of celebrities like Snoop Dogg or Steve Aoki has historically cost a premium of $25,509 and $17,233, respectively. After the announcement of the partnership between The Sandbox and Snoop Dogg, the value of digital land in the immediate vicinity of Snoop Dogg increased by as much as 4’137%. Similar, albeit smaller, effects can be seen for other notable LAND owners (such as major brands or crypto companies).
Current situation and expectations
Metaverse in Rapid growth. Blockchain-based digital worlds with crypto assets and digital real estate form an essential building block of the metaverse. As a result of speculation and investment opportunities, this has steadily and clearly taken a leading role.
Virtual worlds such as The Sandbox allow their users to play, build, interact and participate economically. The underlying fundamental principle as such is nothing new. Virtually designed 3D worlds, like Second Life, have been around for decades. In those, people can actually interact, play, trade, and communicate through avatars. This suggests that the degree of financial and economic involvement in individual projects and the income generated is one of the main reasons for the success of virtual worlds. ‘Simple’ users become immediate beneficiaries with a long-term economic interest in seeing the virtual world grow and flourish. In line with previous developments in the field of virtual worlds, it can be assumed that users, owners, issuers and investors will have long-term success with the digital earth.