Kasfia Rashid - “Money Matters with Kash the Bookkeeper”
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Hello! Welcome to Money Matters, the accounting show with no numbers. This season we are going back to the basics of business…. Plot twist…. The basics have changed! A plot of land that you can call your own. A couple of thousand square feet of untouched soil, trees and all, where you can let your imagination run wild. A dream come true, right? Well, sort of.
There was an interesting article on Bloomberg and it went like this --
“Investors may not be clamouring to buy offices and hotels right now, but in virtual reality, property deals are surging and attracting millions of real-life dollars."
That’s right folks, it's time to talk about real estate, virtual real-ity estate. Think of these as virtual worlds created by aspiring developers. If you want to create your own version of reality, you can do so by building it on a computer. It could have virtual trees, virtual apartments, virtual people and even virtual land. You could even invite other people to live and explore your world — perhaps even help you build it. And as more people flock into these digital realms, the value of virtual assets inside them will start appreciating in tandem.
“Real-world real estate is very uncertain now,” Janine Yorio, head of Republic Real Estate, told Bloomberg. “Housing prices are at an all-time high. Meanwhile, offices are empty, hotels are empty. This feels insulated from a lot of those real-world risks.”
“Buying land today in virtual worlds may end up feeling a lot like buying land in Manhattan in the 1750s,” Yorio said in the Bloomberg interview. “There is massive growth ahead, and now is the time to get in on the ground floor.”
Show Objectives - The Why
Want to own a piece of virtual reality real estate? You may need to get in line. As Bloomberg reported on Friday (March 19), property deals in virtual reality “are surging and attracting millions of real-life dollars. It was inevitable, then, that someone would start a fund.”
This bizarre bubble market was born from the promise of a VR future. Ray Kurzweil has predicted that, in a matter of years, physical workplaces will be a thing of the past, replaced by virtual ones. By 2020, virtual reality and augmented reality are predicted to rake in an estimated $162 billion in revenue. So, naturally, if there’s real estate to be had (even if it’s virtual), people will pop up to buy and sell it.
The price of virtual property is booming, according to NonFungibl. Last month saw the most expensive virtual land sale to date, when eight lots in the gaming platform Axie Infinity sold for a total of $1.5 million.
What You Need to Know - The What
The most obvious question here is rather straightforward — What’s the utility of owning land in a virtual world? It seems superficial. Perhaps even dubious if you're being critical. So why do it?
Well, it might seem like a fruitless endeavour to some, but people spend millions of hours in simulated environments each day. One 19-year-old kid spent two years building a virtual world in the video game Minecraft. Does that mean everybody would devote themselves to such a cause? Unlikely, but some people enjoy the experience.Outside of this, people are also willing to spend cold hard cash on in-game assets. The popular video-game Fortnite made roughly $300 million in 2020 by selling cosmetic skins, dances, and pre-released game modes to its users.
So asking why people spend time in virtual environments is a moot question. They just enjoy it, plain and simple. But there is one other problem. When you buy an in-game costume, for instance, it doesn’t accord you full ownership of the asset. You merely have the right to use this costume inside the game. The intellectual property meanwhile still belongs to the developers. But what if you don’t have a central authority deciding ownership. What if you have a decentralized digital universe somewhere else?
Let’s take the case of Decentraland, a virtual world that has been taking the real world by storm. Inside this shared space, users can own land, develop it and sell it if they fancy doing so. All of the content in-game is hosted in a network of content servers (computers). And if you want to host a part of this world, you can do so by submitting a request. The request is then forwarded to the DAO — where the community of players will propose and vote on policy updates. It’s a democracy, of sorts and you can decide who gets to run the content servers, what kind of costumes are allowed, how land parcels are auctioned, and other community-related matters. The game also features its own in-game cryptocurrency token — MANA and all of the transactions are recorded on a blockchain.
What You Need to Do - The How
There are many Virtual Worlds surrounding us without us being aware of them, when you’re walking down the street or even looking out of the window they exist and are evolving all the time. Since the arrival of Virtual Reality and Augmented Reality, many companies came forward to building virtual worlds that are or can be visible through compatible devices such as computers, mobile phones, or even suitable headsets. Below are major players in space and how much people had to spend to date trying to buy a piece of it (Data source: Nonfungible.com).
Decentraland — A virtual reality platform powered by the Ethereum blockchain) had a total of 116943 sales of lands done, with transactions totaling $40,814,664.61. The average price of land in Decentraland currently stands at around $1,061.73
Axie Infinity — (A digital pet community centered around collecting, training, raising, and battling fantasy creatures called Axie) had a total of sales of 291838 done, with transactions totaling $10,074,756.22. The average price of land in Decentraland currently stands at around $376.04.
Sandbox (A community-driven UGC-voxel platform where users own their land and host their creative magic) had a total of sales of 78166 done, with transactions totaling $6,955,569.16. The average price of land in Sandbox currently stands at around $704.5
Earth2 (A virtual, digital world on a 1:1 scale with the earth where people can buy lands where real-world monuments like the Tajmahal and Statue of Liberty reside), is just 4 months old and doesn't have sale data available yet. But Earth2 environment also has seen larger purchases of up to $41,250 done for small land parcels. Some early buyers of land in the Earth2 platform have made up to 100K dollars in profits in just a few weeks. (Code ‘A9Y07PN9GR’ gives 5% discount on Earth2.io).
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Written by Kash the bookkeeper
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