How to Invest in Digital Real Estate Using Cryptocurrency
Have you ever heard that real estate is the best investment because we all need somewhere to live? Would you still believe that real estate is the best investment if it was only digital?
Even if you’ve been into cryptocurrency investing for quite some time, the idea of owning digital real estate and profiting from it handsomely might seem like a bit of a stretch to you.
Not to worry, because in this Netcoins Progressive Investor post, you’re going to learn about why digital real estate on the blockchain has value, how you can capitalize on it, and why investors are starting to take an interest in the space.
Before you take a deep dive down the digital real estate rabbit hole, you should know that as with any other category of cryptocurrencies, several digital real estate projects are coming out of the woodwork that might make you wealthier.
To teach you the basics of how this sector of crypto investing works and why it’s valuable, we’re going to use one project as a case study for all metaverse projects. That’s Decentraland.
But before getting into all of that, let’s explore the exciting world of online gaming and metaverses. It will help put investing in digital real estate on the blockchain into context.
Investing in Digital Real Estate and Commodities Existed Long before the Blockchain
You’ve heard it before. Owning a valuable piece of real estate and earning a profit off of it is all about location, location, location.
Food, water, and shelter are the three necessities all human beings need to survive. That’s why when your parents hear that you’re putting money into cryptocurrency and you encourage them to do the same, they’ll probably still be more inclined to buy a property. It’s what they understand. They view it as safer, and they have no idea what metaverse is.
The word metaverse is a broad term that just refers to a digital world. The first exposure you might’ve had to a metaverse likely came well before cryptocurrency even existed. That’s because the concept of virtual worlds comes from video games. One particular type of video game to be specific.
That’s Massive Multiplayer Online Role-Playing Games (MMORPGs). Popular online games in this category that weren’t born on the blockchain include World of Warcraft, Final Fantasy, and RuneScape to name a few.
Each of the above games allows you to become a character in the game. You play a character in a fictional world that almost literally never ends and you do it online with a lot of other people. This category of games is called MMORPGs
The First Digital Metaverse Marketplaces
There are many exciting games in the MMORPG genre, but World of Warcraft is a classic.
In today’s world of competitive gaming, gamers organize themselves in teams and play in all kinds of different genres to win multimillion-dollar tournaments. But before those tournaments got as big as they are now, players could make money by buying and selling their gaming accounts.
We’re not just talking about a few dollars here. We’re talking about teenagers mowing lawns to buy their first World of Warcraft account and turning into a six-figure per year business. Don’t believe it? Check out this old Reddit thread by a teenager who volunteered for an Ask Me Anything session on Reddit.
Buying and selling online accounts is nothing new. It doesn’t just happen in video games. It also happens with Internet marketing tools that are valuable. There are marketplaces for buying and selling Gmail, Facebook and eBay accounts as well. Frankly, there is a market for buying any kind of account online these days. As long as someone thinks accounts on a given platform are worth money, there is someone willing to sell theirs.
So why is investing in digital real estate within these metaverses so profitable? There are several reasons for that.
Online Gaming and eSports Are Exploding in Popularity
To progressive investors of a certain vintage, the idea of making a full-time career out of playing video games is still probably mind-blowing, but it’s the reality of the world we live in today.
The online gaming industry is maturing quickly. Video game companies are sponsoring multimillion-dollar events. Brands are also sponsoring individual players, and those players are becoming brands themselves growing huge fan bases.
Perhaps more importantly, kids are realizing that they don’t have to sell their wares or their digital real estate on marketplaces that are going to take a big cut. They don’t have to worry about following the terms and conditions of large game publishers that want to control branding, messaging, and commerce.
Now they can do it all on the blockchain. And now, they are not just building up characters with fancy armour and weapons. They can build virtual worlds where they can own land, rent it out, build businesses on top of it or sell advertising on it. And of course, they can do it all on the blockchain.
Virtual Real Estate Versus Physical Real Estate: Why Retail and Institutional Investors Are Pouring Capital into Both
Before getting into specific blockchain projects that allow you to profit off of digital real estate, perhaps you should know why retail and institutional investors alike are investing in it.
Investing in physical real estate makes a lot of practical sense. Most people who feel they don’t know that much about investing but want to put their money to work know that investing in physical real estate is almost always a good idea.
Why is it then that many retail investors are taking such a big interest in digital real estate?
One reason is that the crypto elite who’ve already made money off of Bitcoin bull runs, ICOs, and NFT mania are looking for what’s next. Another reason is that just like the rest of the trends we’ve seen blaze through the cryptocurrency world, digital real estate is earning investors huge returns.
Enter Decentraland: The Most Popular Metaverse on the Blockchain
Decentraland is the most popular metaverse on the blockchain right now. The total market capitalization of Decentrland’s MANA token stands at more than $2.1 billion Canadian at the time of this writing.
The game offers users the opportunity to build, live in, and profit from a virtual world using an avatar just like most MMORPG games. Users can purchase parcels of land which measure 33 x 33 feet (virtual feet of course). In total, there are a maximum of 90,000 parcels of land available for sale on the platform.
Players can use their parcels for whatever they want. Put a house on it, build a casino, theme park, or any other kind of business, let other users advertise on it, or just hold it and let it appreciate in value.
The MANA token itself is what players use to participate in transactions and get their hands on some land. Owning a big plot of land means you own a district. Several districts linked together make communities. MANA is ERC-20 compliant, meaning it lives on the Ethereum blockchain. From a technical standpoint, its blockchain layers fulfill three different use cases:
- The consensus layer allows token holders to participate in governance and determine what happens to the project next using smart contracts.
- The land layer renders the content and keeps the game itself going.
- The real-time layer allows peer-to-peer connections to take place so that players can communicate.
This structure gives users an entire world to engage with while maintaining the security offered by smart contracts and the blockchain. All in one amazing experience.
Why Institutional Investors Are Starting to Buy Digital Real Estate
Janine Yorio is the managing director of Republic, an alternative investing platform founded in 2016 that is open to all investors. The platform currently has over 700,000 users.
Yorio recently appeared on an episode of CNBC’s Fast Money. During the segment, Yorio points out that in 2019, one parcel of land within the Decentraland metaverse was worth about $500 USD. 12 months later, those same parcels of land sell for $7,800 USD.
Of course, much of that price appreciation has to do with the broader bull run the crypto market is experiencing since the coronavirus pandemic spread across the globe in March of last year, but there is a fundamental driver behind all of this virtual real estate price action as well.
The concept of selling advertising within video games is nothing new. All you have to do to understand that is look at one video game maker that happens to have a Canadian head office in Vancouver. Electronic Arts.
Play a sports video game on PlayStation 5 or Xbox One and you’ll see real-world sponsorship logos virtually embedded on the field of play. That’s because both videogame makers and institutional investors know that a younger generation is spending more and more time playing games online than ever before (and they’re likely interested in all things crypto and blockchain too).
Gaming companies understand that advertisers need to be where the players are if they want to build brand loyalty.
NFTs are taking off. Smart contract platforms are getting closer and closer to becoming everyday tools that a non-developer can use. More and more of society’s monetary value is flooding into the blockchain.
That’s why it makes sense that institutional investors who are already earning handsome returns on their cryptocurrency holdings would look to diversify by purchasing digital real estate.
Other Digital Real Estate/Metaverse Projects That Might Make You Wealthier
Here are a few other projects outside of Decentraland that are trying to steal their share of the metaverse market.
In the same interview with CNBC mentioned above, Yorio points out that a project called The Sandbox (another virtual world on the blockchain) was selling parcels of land for $30 USD just five months ago. Now that same land is selling for $880 USD. That difference in price represents a nearly 30x ROI!
The project recently ran its first NFT auction in support of the charity UNICEF. Billionair crypto investors Tyler and Cameron Winklevoss are involved with SAND.
OVr is an augmented reality project that caters to different groups of stakeholders:
- Digital asset investors who want to collect land.
- Advertisers who want to promote a brand.
- Artists who want to make money building the OVr virtual world.
- Off-line stores and services that want to promote their business.
With OVr, you can buy and sell land, advertising, and one-of-a-kind experiences. It’s the fourth most popular metaverse project on the blockchain by market cap, and as noted, its focus is more on real-world augmentation rather than gaming.
Decentral Games gives users the ability to build, own and profit from virtual casinos. As a casino owner, you get to be the house. You also get to keep the profits. But instead of just running a gambling website offshore somewhere and hiding behind a computer, you get to build a digital version of the casino environment itself.
Decentral Games currently has a $95 million market capitalization at the time of this writing and is making an obvious play to combine the benefits of owning digital real estate with one of cryptocurrency’s most popular use cases, gambling.
Let Netcoins Be Your Gateway to Investing in Digital Real Estate on the Blockchain
Just like the exciting world of decentralized finance and NFTs, the most popular metaverse projects available for investment on the open market today live on the Ethereum blockchain.
If you want to get yourself Ethereum tokens at the best possible rate with some of the lowest fees in the industry, trust Netcoins to be the first cryptocurrency exchange in Canada you use to get skin in the virtual real estate game. It’s free to register for an account.
Easily move your cryptocurrency into digital real estate as a way to diversify your holdings just like the big boys are doing now.
Cryptocurrency allows you to be your own bank. The metaverse allows you to be a digital land developer. Why not do both?
That’s what being a progressive investor is all about!
Writer, content marketing at Netcoins.