How does NFT Real Estate work in the virtual world? Why NFT Real Estate can be a better option than traditional real estate?
NFT real estate is virtual property that you can buy on the Metaverse platform.
There are many use cases for NFT real estate, but the most common is as a social, work and play space.
The value of NFT real estate is affected by utility, project and demand.
Thanks to blockchain technology, real estate industry processes are made more efficient, transparent, and secure because of the tokenized representation of real-world assets such as real estate.
After Facebook announced its name change to Meta, the concept of the Metaverse took off from a niche sci-fi concept to a hot topic in pop culture.
Celebrities like Hilton hotel heiress and reality TV star Paris Hilton have created virtual islands in Roblox; big brands like Adidas and Gucci are scrambling to embrace the metaverse. These have all sparked further attention to NFTs. So it’s no surprise that virtual real estate is a hot topic. Some Metaverse real estate sells for prices even higher than real-world prices, changing the way we think about digital real estate.
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What is the Metaverse?
In 1992, author Neil Stephenson coined the term metaverse in his science fiction novel Avalanche, which is described as a world parallel to the real world. The metaverse, as we know it today, is a concept involving a 3D virtual world that brings together aspects of online and real life. In the Metaverse, users can participate in activities, interact, work, and play games. You can think of it as the next iteration of the internet. Furthermore, since the digital economy, identity and ownership are core elements of the metaverse, blockchain technology is an important part of this field.
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What is NFT real estate?
NFT is short for non-fungible tokens of encrypted tokens, which represent unique digital assets. We typically use NFTs to tokenize digital and physical assets such as art, collectibles or tickets. The metadata of each NFT is securely stored on the blockchain and is a verifiable proof of authenticity and ownership. In addition, an NFT can only have one official owner at a time, and it cannot be forged or modified.
NFT real estate is a programmable plot in a virtual world that users can explore using their 3D avatar. In the metaverse, users can purchase NFTs associated with specific parcels of land to represent sole ownership of their property. The use of NFT land varies from project to project. In the case of Decentraland, users can develop plots, participate in events, participate in social functions, and more.
NFT real estate use cases
Which project you buy NFT real estate from will determine what properties your real estate has. Below, we’ll highlight four things you can do with the Metaverse NFT real estate program.
Advertise
Creators can monetize Metaverse properties by charging access fees or trading NFTs. Brands can use virtual properties to advertise, organize virtual product launches, and provide unique customer experiences. For example, Nike has taken the lead in entering the metaverse, establishing NIKELAND to expand its user base. The Metaverse is an interactive world where users can play mini-games and enjoy a virtual lifestyle themed around sports and gaming.
Social contact
While some may view NFT real estate as an investment, others may wish to use the real estate for its intended purpose. Metaverse Real Estate gives users the space to connect online with friends and like-minded people. It’s a virtual space where they can play games and socialize using digital possessions.
Work
Remote work and communication with colleagues online has gradually become the new normal since 2020. NFT real estate can be used as virtual office space, or it can also be used as a location for companies to provide virtual services.
Game
Apart from the examples mentioned above, the properties of the metaverse are also useful in NFT games. For example, lands in Axie Infinity can provide players with additional resources, such as tokens and crafting items.
What factors drive the real estate value of the Metaverse?
Similar to other NFTs, the main factors driving real estate prices in the Metaverse include utility, project details and location. As we briefly discussed above, virtual real estate has a wide variety of use cases.
If the real estate is in an area with ample traffic, it’s not uncommon for people to use their real estate in the Metaverse for events and conferences, or even use it as an advertising space. If your NFT real estate is in a crowded area, it may be worth more than a virtual property in a featureless area.
For example, some big brands such as Skechers have opened virtual storefronts in the metaverse, causing the land plots in The Sandbox and Decentraland to continue to appreciate in value.
High demand has led to a surge in NFT real estate projects on popular platforms such as Decentraland and The Sandbox. Compared to smaller projects, these platforms are more popular and therefore have a larger user base.
Buy real estate in the Metaverse
The process of buying real estate in the Metaverse is largely similar to buying NFTs. There are two main ways to buy NFT real estate in Metaverse: You can buy Metaverse real estate directly from the project platform, or buy second-hand through NFT marketplaces such as Binance NFT.
To buy, all you need to do is set up a cryptocurrency wallet and buy cryptocurrencies.
Most of the more popular metaverse platforms such as Decentraland and The Sandbox run on the Ethereum blockchain. That is, because the title deed for each piece of real estate is a unique piece of code on the blockchain and sold as an NFT, transactions are made in ether.
But not all platforms require ether. Therefore, before you are anxious to apply for a title deed for NFT real estate, you should carefully check whether your wallet supports the blockchain where the real estate is located. As with any other investment, be sure to do your own research (DYOR) before deciding to take any risks.
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How will NFTs affect the traditional real estate industry?
Blockchain technology has revolutionized many industries, and the real estate industry is no exception. Below, we’ll highlight four ways NFTs can benefit the real estate industry.
Improve security and transparency in the industry
The disadvantage of issuing paper real estate title deeds is that it is easy to be lost, tampered with or forged. Using tokens to represent physical property makes buying and selling real estate more efficient and secure. Since NFTs are stored on the blockchain ledger, anyone can track ownership history and previous transactions to verify their authenticity. Additionally, the blockchain ledger is immutable, so minting your title deed or any other document as an NFT greatly reduces the risk of criminals forging property documents.
Fractional ownership
In the field of NFTs, the term fragmentation usually refers to sharing the cost of collectibles or digital artworks, each taking a piece of ownership. In the real world, fragmented NFTs let you share the cost and ownership of physical assets such as real estate with multiple people. Minting real estate ownership as a fragmented NFT could help lower the barriers to entry for people in the real estate market.
Liquidity of real estate
Liquidity is an obstacle that can affect property values as it can be difficult to find the right buyer for the right property. But because blockchain technology is not limited by national borders, it can help expand the openness of the real estate market to a global group of buyers by increasing the number of market participants.
The trading platform is convenient and easy to use
The real estate industry is notorious for slow processes, but NFTs can help simplify and speed up these processes. Because NFTs are kept on a decentralized ledger, everyone can access the history of transactions and ownership. Additionally, smart contracts assist in automating and maintaining the red tape and processes associated with assets changing hands. Smart contracts are blockchain programs that automatically execute commands when conditions are met.
Conclusion
Paying money to buy virtual land may seem incomprehensible to many. However, you only have to look at the explosion of digital collectibles, the metaverse, and other NFT use cases to understand the potential of NFT real estate. So far, NFT has made the process of the real estate industry more efficient, transparent and secure. Blockchain technology is constantly evolving, so developing more Metaverse real estate projects should be nothing new.
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Comment by Hans
April 24, 2024
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