How to think about non-‘real’ real estate – POLITICO

With the help of Derek Robertson and Sam Sutton

The whole idea of ​​”virtual real estate” sounds like a joke about the future at first. – what part of the “real” do they not get?

But there is a burgeoning real estate market in the metaverse, and it even has some history: Users could buy land from Second Life as far back as 2003.

But the virtual real estate market has really taken off over the past year, especially after Facebook’s decision to focus on the metaverse. Selling real estate on only four platforms – Sandbox, Decentraland, Cryptovoxels and Somnium – surpassed $500 million in 2021according to MetaMetric Solutions.

‘Metaverse Fever’ Sparked Both Curiosity and skepticism. In a sense, this is easy to understand: the terms surrounding virtual real estate – lots, plots, “real estate” itself – mimic the real world very clearly (unlike, say, the NFT market for Bored Apes). But where ownership is supported by an extensive legal framework, virtual real estate, like much of the metaverse, is the wild west.

Washington is still arguing about how to classify stablecoins and which agency will control them; The much smaller real estate investment world of the metaverse, owned by about 25,000 crypto wallets as of December, is hardly on the radar of politicians.

So while the packages are being sold as a legitimate investment, using the terminology of one of the world’s most common and understood assets, it’s unclear how they will be regulated – whether securities laws will apply, what kinds of disclosures consumers will need, or what the tax implications will be. consequences of owning property in the metaverse.

We caught up with Janine Yorio, CEO of Everyrealm, one of the largest real estate investors in the Metaverse.

Let’s start with the basics. What is the meaning of virtual real estate?

There are two components of real estate. There is dirt, earth, and on top of it there are improvements, buildings. It’s the same in the metaverse: there is dirt, which is digital fragments on which you can build things – content, video games, digital twins, or architectural structures. When you buy property in the metaverse, you are buying dirt and the ability to put something on top of it – things that are extremely volatile and limited really only by human ingenuity, because there is no physics in the metaverse, there are no unions in the world. metavers, building materials cost the same.

The legal and social frameworks associated with owning property have been around for centuries, and there are real constraints that help shape value. In a world where only human ingenuity limits you, how do you have any sense of investment stability?

I don’t think it’s a stable investment. It’s very risky and very volatile to buy a piece of a video game, and in most cases that video game hasn’t even launched yet. It is based on the crypto industry, which is notoriously unstable. This is a venture capital style investment where you take on the risks of a company at a very early stage in addition to the fact that this asset class is just in its infancy. But there is precedent that it has worked and real estate has become valuable. And the price is still low enough for the mainstream audience to participate: the average cost of a piece of real estate in the metaverse, depending on the platform, is between $500 and $5,000.

Who buys these plots?

Back in December, we discovered that there were 25,000 crypto wallets around the world holding metaverse real estate. Speculators may have several wallets, so it’s probably less than 25,000 people.

What do people use their purchases for?

There are currently many such platforms that are still being developed. People are speculating. Most platforms will fail, but some will become mainstream and have hundreds of millions of users. And once you get to millions of users, it’s important to be prominent on a platform that achieves scale and popularity.

So, for example, the TV show The Walking Dead, they have a huge amount of metaverse objects, and they are building a Walking Dead space that will be part video game, part brand activation. There is a casino that is not branded at all, but it is designed to make money, just like a real casino. You have Snoop Dogg trying to make money and build his brand and I think his career is going in a new direction.

I saw someone spend $450,000 to buy a lot next to Snoop Dogg. Will we have a situation where virtual Times Squares appear organically?

Probably. If the metaverse platform is successful and there is a place where people tend to congregate after the casino, then the proximity to that casino is theoretically worth more. But this is a hypothesis, it has not been proven. Another caveat is that in the metaverse you can usually teleport, so proximity is a kind of real world concept that only partially applies to the metaverse.

How does the investor know that the encoder is simply not adding more land?

This is what blockchain is really good at – it’s basically like a public spreadsheet, a ledger that shows existence and ownership. Also, in most of these situations, the largest landowner in a particular metaverse is the developer, so yes, they can get more land, but then that would undermine the value of the treasury they own.

Is it that investors want more fencing around? Or is it a market where everyone wants Washington to stay away?

The aspect of the metaverse that typically attracts the most publicity is the sale of metaverse real estate in the form of NFTs. To this end, there are already many discussions in Washington about regulating NFT sales. Clarity and transparency are always beneficial for any industry, and this one is no exception.

If the metaverse really is an ever-active, ever-evolving virtual world connected by millions of audiovisual devices around the world will require some serious networked firepower.

At an event yesterday hosted by the Economics Club in Washington, T-Mobile CEO Mike Sievert said that just like 4G-enabled devices like the iPhone, 5G spectrum could one day be seen as part of the foundational toolkit that enabled the metaverse to begin.

“There are tens of billions of dollars invested in the metaverse, and whether it will be 3D TVs or the future of how we live is still unclear, but I think it will be somewhere in between,” Sievert said.

“Augmented reality is all about transferring huge amounts of data over a mobile network and then giving you back an experience that improves your life in some way… it requires low latency and high connectivity combined with the hardware and software innovations you saw with 4G “.

Companies such as Epic Games, which have built the most successful metaverse-like spaces currently in existence (“Fortnite”), have developed workarounds, including graphical and computational fixes, from companies like Nvidia. To provide such an experience on the scale envisaged for the metaverse would require both. as well as a fundamental leap in networking potential envisaged by Sievert. Derek Robertson

Cryptocurrency mining boom that spawned a new class of millionaires – and sucked out enough energy to ignite great environmental reaction – could come to an end, as Sam Sutton of POLITICO said reports for Pro subscribers Today.

Culprit: A well-documented downturn in the cryptocurrency market, coupled with rising interest rates and electricity tariffs that have undermined the power of the rest of the economy. Suddenly, the crypto miners who had overused their funds to invest in massive computing rigs were heavily indebted, with little return.

“It looks like Murphy’s Law has kicked in for a lot of bitcoin miners over the past few months,” Charlie Schumacher, vice president of communications at mining firm Marathon Digital, told Sam this week. Newsletter “The Long Game”.

The recession threatens the general argument in favor of mining: they can spur renewable energy innovation to meet their electricity needs. “We’re all interested in moving in that direction,” Schumacher told Sam. “But first you have to make sure you survive. Derek Robertson

Stay in touch with the entire team: Ben Schrekinger ([email protected]); Derek Robertson[email protected]); Konstantin Kakaes (ur.[email protected]); and Heidi Vogt ([email protected]).

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