The ‘metaverse’ bet: crypto-rich investors snap up virtual real estate
What do you do with a $ 69 million piece of art that doesn’t physically exist?
That is the question from the Singapore-based investor, who calls himself Metakovan, who made headlines last month when he bought the digital artwork “Everydays: The First 5000 Days” by American artist Beeple at Christie’s.
The work is a non-fungible token (NFT) – a new type of virtual asset whose ownership status and authenticity are verified by blockchain. NFTs have become increasingly popular in 2021, and prices have skyrocketed.
Metakovan, whose real name is Vignesh Sundaresan, plans to exhibit the work of art in four environments in the virtual world. He works with architects to design gallery complexes that the public can access via web browsers or virtual reality technology.
However, art is only part of a new economy of blockchain-based virtual worlds, where lands, buildings, avatars, and even names can be bought and sold as NFTs, often grossing hundreds of thousands of dollars. In these environments, known as metaverse, people can wander around with friends, visit virtual buildings, and attend virtual events.
Metakovan’s plans are ambitious, but he says he is the world’s largest NFT investor. Its collection of NFTs and other crypto assets, the Metapurse Fund, is valued at $ 189 million, according to NonFungible.com, a website that aggregates sales data from NFT marketplaces.
“The current Cambrian explosion of NFTs is all about acquisition – people want to buy up NFTs and gobble up as many as possible,” said Anand Venkateswaran, also known as Twobadour, who runs the Metapurse fund with Metakovan.
“But it’s only the tip of the iceberg. The real blast will happen when you … get to experience these NFTs the way they were intended. If it’s a piece of virtual land, you should move around in it and have one.” immersive experience in it. “
The video game manufacturer Atari (ATAR.PA) told Reuters that it is planning to introduce its own blockchain-based virtual world and will announce details shortly.
Online environments will be “very, very big,” regardless of bitcoin price volatility, said Frederic Chesnais, head of Atari’s blockchain division and former CEO of the company. NFT real estate could one day make millions of dollars, he added.
However, investors caution that while there is a lot of money flowing into NFTs, the market could represent a price bubble that carries the risk of major losses if the hype subsides. Fraudsters could also stand the best chance in a market in which many participants operate under pseudonyms.
Click on https://graphics.reuters.com/NFTS-WORLDS/dgkplywqmvb/chart.png for a graph showing sales growth in crypto assets
A PLOT OF VIRTUAL LAND: $ 500,000 +
The NFT frenzy has increased interest in blockchain-based online environments. The best known are Decentraland, Cryptovoxels, Somnium Space, and The Sandbox, where virtual property prices hit new highs.
Decentraland had total sales of more than $ 50 million, including land, avatars, usernames, and wearables such as virtual outfits. A piece of land measuring 41,216 virtual square feet sold for $ 572,000 on April 11, which was a record, according to the platform.
Another property in Decentraland was sold for $ 283,567 on March 21, according to NonFungible.com, while Somnium Space said a property on its platform raised more than $ 500,000 on March 16.
Metaverse enthusiasts compare the rush to buy virtual land to searching for domain names in the early days of the internet. There are currently a few thousand unique landowners on each of the major blockchain-based platforms.
Their theory is that plots in central locations are in high demand due to the high traffic when more people congregate in these areas.
“All of the virtual land and spaces are basically real estate that the experience will be focused on and attention will be focused on,” said Twobadour.
“That’s where all the attention lies and that can be monetized in a million ways.”
So far, it has been a relatively small number of people who are driving up land prices on these worlds.
There were 334 buyers in Decentraland in March who sent $ 4 million monthly land sales from $ 767,400 in February with 184 buyers and $ 246,134 in January with 111 buyers, according to NonFungible.com.
An NFT investor named Whale Shark, whose collection was valued at more than $ 20 million by NonFungible.com in February, said he had 200 of the cryptocurrency Ether on land in Cryptovoxels and another 200 in The Sandbox in 2018 and spent in 2019.
These goods cost around $ 60,000 each then, but are now worth more than $ 400,000 apiece, he added on condition of anonymity.
Some virtual worlds have their own cryptocurrencies: According to Coinbase, Decentraland’s MANA has increased by more than 3500% in the past year.
A graphic on the boom in virtual real estate can be found at https://graphics.reuters.com/NFTS-WORLDS/bdwpkbzzwvm/chart.png
VIRTUAL FESTIVAL, ANYONE?
Some early virtual land investors who bought early are now selling to businesses, said Samuel Hamilton, community and events leader at the Decentraland Foundation.
Prior to its plans to open its own blockchain-based world, Atari has licensed a retro gambling hall in Decentraland and is to open a casino, while various crypto companies are based in an area called “Crypto Valley”.
Decentraland, in collaboration with Adidas, hosted a virtual fashion exhibition where designs were auctioned off as NFTs. It also attracts interest from musicians who can perform in the room and sell tickets and merchandise as NFTs.
“We are going to have several well-known global festivals that are all hosting the stages, and when we get to that point we expect hundreds of thousands or even millions of people,” said Hamilton.
Last year, American rapper Travis Scott drew 27.7 million visitors to five concerts at Fortnite, the popular online game from Epic Games.
IS CRYPTO WINTER COMING?
Describing doing business in virtual worlds as a new nation forming, Sebastien Borget, co-founder of The Sandbox, said the NFT-based economy would outgrow the real world within a decade.
However, there are many in the young industry who warn of dangers for investors.
“I assume that there will be a crypto winter in the next few months, the entire NFT boom will explode and then the entire value will absolutely collapse,” said Ben Nolan, founder of the virtual world Cryptovoxels.
“NFTs as an investment or a way to make money are really bad advice.”
However, he sees a future for virtual worlds and NFTs.
“Do I think most people will be using virtual worlds? Probably not, but I think a lot of people will and I think NFTs are a big part of that growth,” he said.
“Walking around in a virtual space with another person and looking at art together is a really nice way to spend time,” he added.
Whale Shark said the vast majority of NFTs have no economic viability and expect only a small number to emerge as winners.
However, some investors like Mateen Soudagar from Australia, also known as DCL Blogger, have little interest in investing in real assets again.
Soudagar says he made millions of dollars from cryptocurrency and NFTs, but instead of cashing out, he keeps around 75% of his money in crypto assets and expects many of his colleagues to do the same. Aside from upgrading his laptop, he hasn’t changed his lifestyle.
“If you believe in movement, then you think the world will move into this space,” he said. “So when you put it in Fiat, you go backwards.”
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