Updated: Dec 11, 2021
Virtual real estate has gained immense popularity over the course of 2021. Offering investors a wide range of utility these plots of land occasionally sell for hundreds of thousands of dollars. With a growing number of businesses entering the metaverse there lies an opportunity. In this article I discuss the use cases of purchasing virtual real estate and the best approach to enter the market.
Why is Virtual Real Estate Valuable?
Buying land is a one time payment. There are no annual fees or taxes to be paid on your purchase. This is a massive benefit for investors especially when you consider the versatility of land ownership. Renting out your land for advertisements and e-commerce has inherent value. Businesses will be able to market their goods and services as more people explore these virtual worlds. In addition to having a versatile asset, you get the capital appreciation that comes with it. Each world has a limited supply, so as the platform grows the land becomes more scarce and valuable.
Use cases include:
NFT galleries and shops
In world games and events
Things to consider:
Location - Similar to actual real estate, high traffic areas are going to be more valuable. Businesses are willing to pay more to get seen. Some of these prime areas are located near plazas, beaches, portals, roads, and stadiums. It all depends on the platform but these in-game locations are going to be significantly higher than what you see at floor price.
Choose the correct virtual world - Some platforms may be easier to access than others. It's always best to research the game before looking at property. Make sure your computer is capable of running the game, and make sure your wallet is compatible as well. I recommend a MetaMask wallet as this is the most popular browser extension for decentralized applications.
Buying the token - For established virtual worlds the barriers to entry may be expensive. One way to enter the real estate market is by purchasing the games native token. These virtual worlds offer their own currency, which can be used to purchase plots of land or other in-game goods and services. If investors are bullish buying these tokens at a discount makes a great strategy for entry. When demand picks up so will the token price. As a result this increases potential buying power and may even cause pressure on land prices. Owners are likely to lower their price as many try to cash out an overpriced token.
*It's important to note the opposite occurs when situations are flipped. Buying NFT's can make for an excellent hedge when overall crypto markets appear bearish*
What is the best Metaverse?
Aside from Decentraland, Sandbox is another popular virtual world built on the ethereum network. The Sandbox is not new. The original game was released back in 2012 by game studio Pixowl. This studio would later be purchased by Animoca Brands in 2018 with intention of building a blockchain version of the Sandbox.
Amongst the top games in crypto, The Sandbox deserves a spot at the very top and offers the best ROI in terms of land value. At the time of writing this article Decentraland is garnishing a great deal of attention for being the first metaverse, however the barriers to entry are stifling user growth. In order to access the world you must have a MetaMask Wallet. This means Decentraland is currently capped around 10 million monthly active users. In comparison, when creating a Sandbox account you can log in using email, social media, or even metamask. Having a variety of methods makes it easier for people to enter the game especially for those unfamiliar with web 3.0. The creators of Sandbox want to open the world on all platforms. Eventually allowing users to access the blockchain game on mobile devices as well as consoles.
Other than easy entry into the game, Sandbox offers a great team with years of experience. Despite the competition with Minecraft and Roblox, developers managed to generate 40+ million downloads and consistently held over a million monthly active users during its initial release. Along with the experience required to build a great game, Sandbox has secured numerous partnerships for their platform. Some of which include Atari, Deadmau5, South China Morning Post, Coin Market Cap, Hell's Kitchen, Snoop Dogg, and many more.
The Next Opportunity
The Ethereum network is saturated with many projects claiming to be the next big world. Many have of which have developers with little to no experience building games. Investors are trying to find the next Decentraland and are not likely to find them on Ethereum's blockchain. It's best to be cautious buying land at least until the market cools off. In the meantime other networks such as Cardano, Polkadot, and Solana offer the best opportunities. One platform with huge potential is Pavia, Cardano's first ever metaverse.
One immediate benefit of buying a plot of land in Pavia are the lower gas fees. You no longer have to deal with the insane fees that comes on the Ethereum blockchain. More importantly, the virtual world will offer incredible 3D builders and a diverse collection of scenery for its users to experiment with. This is an exciting opportunity as the game is in its infancy and have yet to sell all the parcels in their metaverse.
Notes on Pavia Land Sales:
Total supply of 100,000 NFT land parcels
Current Floor Price: 347 ADA
First land sale consisted of 29,000 land parcels, mint price = 39 ADA
Second land sale consisted of 31,000 land parcels, mint price = 45 ADA
Third land sale will mint the remaining 40,000 land parcels, mint price = tbd
Each wallet can mint up to 30 parcels
When minting 9 or more you are given 33% chance of claiming an estate
An Estate is 9 parcels in 3x3 formation
The US and UK are banned from taking part in the sale (use a VPN)
Pavia will airdrop fungible tokens to land holders through Cardano DEXs when they come online, this should be in Q1 2022 at the latest
Expect the third sale to take place in January (follow Pavia.io on twitter for confirmation)
What You Will Need to Get Started:
Download Daedalus Wallet (Full Node, Desktop Only) or Yoroi Wallet (Mobile)
Add ADA to the Wallet
On day of land sale, go to pavia.io website
Send ADA to the listed address
Make sure to send exact number of ADA - example: In the second sale, if attempting to mint 3 parcels you would send exactly 135 ADA to the listed address.
Make a cnft.io account in order to purchase in secondary markets
With heavy demand, these plots of land will sell out in seconds. Don't be discouraged as the best opportunities to purchase land will be in the secondary market that same day. Many buyers will utilize bots and get a disproportionate amount of land, they will then list their parcels at fairly low prices in order to make a quick flip. I was able to purchase quite a few properties for under 150 ADA in the second land sale. Within 24 hours the floor price shot up over 250 ADA. This scenario will likely play out the same in the third sale.
Helpful Tool: https://tombozik.github.io/pavia/
The above link is a map of Pavia CNFT listings, as well as a heat map for popular areas
You can filter the parcels shown on the map by setting a maximum price