Five Things A Metaverse Sceptic Learned By Buying Real Estate In A Virtual Universe
With traditional real estate out-pricing buyers, buying digi-assets to diversify our investment portfolio is a good idea. It's time to go "phygital"– this digital-real world hybrid is here to stay!
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As the head of Dubai-based interior design and architecture studio Roar, I recently spent US$60,000 on buying real estate in Decentraland, which has billed itself as "the first fully decentralized world." Here's my explanation of how and why I did this- and what I learned in the process:
1/ I was so wrong to turn my nose up at the metaverse
Full disclosure: my name is Pallavi, and I am a recovering metaverse sceptic. For a long while, I have been reading about bitcoin going through the roof, non-fungible tokens (NFTs) selling for millions, and people trading plots in Decentraland- and I'd think, "These guys are nuts, frittering their hard-earned cash on useless digital nonsense." It's a well-trodden argument- but then, I had a realization, and I finally got it. The turning point was my credit card bill. To be precise, the credit card bill for my kids' video games such as Minecraft, Fortnite, and Roblox. As it turns out, I've been spending a fortune in the metaverse for years now, buying characters, weapons, skins, even a few virtual countries– and I have the receipts to prove it. As it turns out, I'm not alone. Bloomberg crunched the numbers on the metaverse economy, calling it "a nearly $800 billion market opportunity." Earlier this year, Microsoft paid $67 billion for video game company Activision in what has been described as the biggest tech takeover in history. ("The deal will provide building blocks for the metaverse," said Microsoft CEO Satya Nadella.) And then there was Facebook changing its name to Meta. I could go on- the examples are plentiful.
2/ Buying is hard: We needed thousands in cash and a guy in a Land Cruiser
It's one thing deciding to buy property in the metaverse; it's another thing to actually do it. I'm doing my MBA, and my professors at INSEAD constantly remind me: "Execution is everything!" And in this instance, the execution was excruciating! Here is the problem: I wanted to invest about $60,000 in Decentraland (more on this later) with my colleagues at Roar, Kathryn and Leigh. But I live in the UAE, and lots of the top cryptowallets are designed for residents of the US. Even when we set up a local wallet, frustratingly, it had a 60-day cooling off period before we could spend our ethereum to buy mana, the crypto for Decentraland. Eventually, it was old school cash that won the day: we withdrew thousands and thousands of dirhams in notes from an ATM and contacted Intex Pearl, an ethereum trading company, who collected the money and completed the trade on our behalf. I'm sure there's a better way to do this, but this is how we got it across the line. It's certainly a good thing that crypto brokers take compliance, anti-money-laundering, and know your customer (KYC) protocols seriously. But it can make the process of buying metaverse real estate akin to walking through treacle.
Image courtesy: Roar
3/ We bought from Decentraland- the number of plots is capped
Once you have made the initial general decision to invest in the metaverse, you have a specific decision to make: which "verse are you going to pick? We chose Decentraland, which was created in 2017 by a couple of Argentinians, and formally launched in 2020. Here's why: first, Decentraland capped the number of plots at 90,601. Scarcity is key in the crypto world, which is why bitcoin does so well- thankfully Decentraland plots have a lower carbon footprint. Back in 2017, a plot cost around $20; today, they sell for tens of thousands. The Canadian cryptocurrency company Tokens.com bought a patch of land last year for $2.4 million, Sotheby's has re-recreated its London auction house in Decentraland, and so, yes, it seems to be gathering steam. One final stat: back in 2017, you could buy one mana for $0.02– today it's above $3. Now, of course, other metaverses are available and we have no particular affiliation to Decentraland, but we had to take a punt, and this is the one we picked.
4/ The metaverse business model for an architecture firm
Here's how we did it: we bought four plots of land on the main access road in Decentraland, close to Genesis Plaza, for about $60,000. If you have four plots, it's classed as an estate, rather than an individual parcel, and that gives you extra height restrictions. We're calling it @RoarMetaSpace. (The exact coordinates are RoarMETAspace -135, -75 next to Genesis Plaza.) Our space will have an art gallery and bar on the ground floor, a co-working space on the first floor, and an experimental hotel room on the second floor. As a business, we hope to make money in three ways:
- Sell UAE-centric art as NFTs In February, we launched our first collection on the New York City-headquartered NFT marketplace OpenSea, and they're already for sale at $1,000 each. We're also working on furniture designs. Too many contractors just copy designer furniture, giving the photo to a manufacturer to rip off. That's a flagrant infringement of intellectual property. Instead, we want to give them the chance to buy original designs that they can own legitimately.
- Be contracted for design projects in the metaverse Charge a fee to design real estate in the metaverse, in much the same way as we have done for nearly 10 years with physical buildings.
- Make use of the developer model Much like how Dubai-based real estate players Emaar and Damac do in the physical world, we are also thinking of buying plots, building them, and then sell them as individual apartments, offices, shops, etc. We are all new to this, and so, there's a lot to learn, and it will be a lot of trial and error, not just in buying the space, but in designing it. But that's how design thinking works– it's an iterative process. There's clearly potential: an anonymous buyer this year paid $450,000 to be Snoop Dogg's neighbour in Decentraland, so let's see where it all goes.
Image courtesy: Roar
5/ It might all end in tears, but doing nothing is also a risk
The bottom line is that we don't want to be Dick Rowe– that's the 1960s music producer who didn't sign The Beatles! Also, luckily, we haven't bet the farm. While $60,000 isn't nothing, it's not going to break the bank- Roar has had a good run through its core business of selling design services for physical buildings like offices, hotels, homes, etc., so we can afford to dip our toe in the water. With traditional real estate out-pricing buyers, buying digi-assets to diversify our investment portfolio is a good idea. It's time to go "phygital"– this digital-real world hybrid is here to stay!