Investors Are Sinking Real Money Into Virtual Real Estate, With No Guarantees

A version of this article was published in TIME’s newsletter Into the Metaverse. Get a Weekly Guide to the Future of the Internet. Here are past issues.

Chris Adamo believes he is too late for the NFTs or nun-fungible tokens investing. His first token was collected in the summer of 2021. Adamo, however is very early when it comes time to buy property in the metaverse. A Miami-based venture capitalist used a virtual broker to purchase 23 parcels of land in The Sandbox. This virtual world is user-generated and blockchain-based. Prices start at 1ETH, or about $3,000, eight months ago. Another nearby property sold at around 42ETH (or $130,000).
[time-brightcove not-tgx=”true”]

The land—pixels, really—bordersIt is the home of the Bored Ape Yacht Club, an NFT-friendly community. Adidas owns the plot. They’re calling it Sandbox Hill Road, as a nod to Silicon Valley’s famous Sand Hill Road and The Sandbox, the platform where this “land” exists. Already, the parcels’ value has gone up about ten times in price, making their holdings potentially worth many millions of dollars.

“It’s like the New York City of The Sandbox,” Adamo says. “Like the Lower East Side or Soho right now.” Translation: it’s hip—or at least, they are invested in believing it can be.

The metaverse can encompass all that is virtual, including digital art and virtual worlds. If so, the parcels of real estate being bought up could be considered one type metaversal investment often called NFTs. These virtual worlds—The Sandbox, Decentraland, Cryptovoxels, Earth2, Nifty Island, Superworld, Wilder World—each offer different things to users: hyper-realistic graphics, gaming options, communities of specific types of early adopters. Snoop Dogg has a house in The Sandbox, while Paris Hilton is on Roblox.

Learn More NFT Art Collectors Are Playing a Risky Game—And Winning

Right now, if you open The Sandbox on a web browser, all you’ll see is a flat map of brand logos scattered throughout land-shaped masses made up of colorful pixels. (Each of those pixels, or plots, is a property worth real money; in general, the concept of scarcity is a farce online, but in these worlds—as in our physical one—it is often real.) Cryptovoxels feels more like an early stage video game with a bunch of blank, walking mannequins. Sometimes they even fly. Click on a billboard, and you’ll see details of the NFT work and artist you’re viewing, with a link to OpenSea, the NFT marketplace.

MetaCollective plans big for the blank spaces. For Drew Austin, managing partner at venture capital syndicate RedBeard Ventures and leader for MetaCollective, it’s all about developing this corner of the future internet into a learning center or “university” for personal financial education on all things web3. The future of the internet will include virtual classes, for-rent dormitories, as well as a social network. “We can recreate what an educational digital experience is, in this new digital world,” he says. All of this is yet to be built. However, the money is available.

Sandbox view.
SandView from the Sandbox

You can think of it as buying a domain name or purchasing a social media account. If email was our home in Web 1, and social profiles—like a Facebook or Instagram page—were the Web 2 home bases for each of us, then personal property in the form of virtual real estate may be the Web 3 version. Web 3 property, on the other hand, is not dependent upon providers and platforms for design, regulation, or control of the experience. Instead, it is something that you can create yourself. It could be a brand’s digital presence that is more active and interactive than the current one. Individuals could make a living selling or playing games.

Andrew Steinwold, managing partner at metaverse-native fund Sfermion, calls it “unlimited optionality,” breaking free of the bounds of our profiles and pages. A whole industry has emerged of developers for virtual worlds. “One of the things that’s so exciting and fascinating about the metaverse is it’s all about cocreation, right?” says Jessica Peltz Zatulove, another MetaCollective member. “So we’re also just seeing this blending between creators and celebrities and communities.” Then again, right now this is all speculation.

The big winners—at the moment, at least—are the platforms and developers, who are raking in investment dollars from early buyers. Animoca Brands recently announced that it now owns The Sandbox. Worth $5 BillionThis is an increase from the $22 billion valuation in 2021. Roblox is a well-known gaming company that was listed at the New York Stock Exchange on March 20, 2021 for a value of $2 billion $42 Billion. One Research ReportThe virtual gaming industry could reach $400 billion, according to estimates. A larger metaverse industry is estimated at over $1 trillion.

Learn More NFTs Are Shaking Up the Art World—But They Could Change So Much More

Many of the early buyers of virtual real estate are doubly invested—in the platforms themselves and through personal plays like DAOs buying and developing new land—so their bullishness is ultimately self-serving. (Steinwold’s fund, for instance, has its hand in both platform investments and individual properties; Austin runs a fund that invests in five different worlds.) The technology, too, is early—Adamo is the first to admit we’re about a decade out from easy mass adoption, and Austin notes plenty of “room for improvement,” from the interface to the technically complicated process of buying property.

Web3 investors still have a lot to choose from. As virtual property prices rose, so did their demand. As high as 500% since Facebook’s much-hyped transition to Meta, according to CNBC. Some virtual-world plots cost as much as an actual house.

The entrance to Decentraland. Decentraland is a 3D virtual world platform. Users may buy virtual plots of land in the platform as NFTs via the MANA cryptocurrency, which is a sidechain of Ethereum. It was opened to the public in February 2020, and is overseen by the nonprofit Decentraland Foundation.
DecentralandDecentraland is the entrance. Decentraland, a 3D virtual reality platform. The MANA cryptocurrency is an Ethereum sidechain that allows users to buy virtual land plots. The nonprofit Decentraland Foundation oversees the platform and opened it to the public in February 2020.

Although the site’s user experience is not perfect, it offers many options for property development and claims. ONE Sotheby’s just AnnoucedThey will create a virtual replica in The Sandbox of the real property, and ownership will cross over. In the meantime, an unknown buyer purchased the adjoining property that Snoop Dogg was looking for. reported $450,000MetaCollective also bets on proximity to famous neighbors as an added value. One developer at Cryptovoxels plans to create a New York Stock Exchange-style trading centre and home for crypto native companies such as defi protocols. They purchased the property because it allowed for bigger virtual buildings. This is the ultimate goal: to make it a hub of virtual reality, with real utility for those who migrate into other realms.

All this sounds a little too sanitized. Investors are keeping a healthy suspicion about current versions of virtual worlds. Steinwold raised more than $100 million in investors to fund his funds. However, he believes that much of virtual world speculation is overvalued. In fact, he says, overvaluation in web3 is “true broadly,” from NFT art to crypto tokens. But that still hasn’t stopped him from investing “at the company-building level.” And it hasn’t stopped him from backing the Frankfurt NYSE plan in Cryptovoxels. “We’re kind of in the pre-Napster era. We don’t have Napster yet. We don’t have iTunes, and we don’t have Spotify,” he says, comparing today’s virtual worlds to the early-2000s music-sharing platform and its successors. “That’ll come, but it’s gonna take a pretty long time.”

Learn More Young artists are earning millions on NFTs Is This How They Are Doing It?

Another MetaCollective investor Zatulove sees the value in business opportunities. Zatulove was a founding partner in Hannah Grey’s early stage venture firm, which specializes on emerging platforms for brands. She is now focused on how to bring commerce into the new environment. “It’s about having an office space in a prime location, but it’s really about: Can you rent this land?” she says, “Can you have a store? Are you able to host events? We’re in a gold rush moment with virtual real estate where people don’t know what they’re gonna build or how they’re going to build it, but they’re acquiring land in the best possible locations to create an interesting financial future.” She imagines setting up office space on the MetaCollective campus.

“Maybe we have a coffee shop, maybe we have a cool hangout. Maybe we have town hall meetings, maybe we host office hours for founders, maybe we just have a museum that inspires creativity, in collaboration across different builders in this space,” she says, brainstorming. The market is huge. Zatulove points out the 3 billion gamers worldwide, who spend a lot of time in virtual worlds. Even if Sandbox hasn’t captured their attention yet, the potential is there. “The delight right now of virtual real estate is that it’s recognizing that there’s opportunity ahead that you’re setting up for yourself,” she says.

Adamo has kids and, like any dad, he’s thinking about their future—and about what he can pass down to them. This real estate might not be a brick-and-mortar property, but it’s still something bought with their best interests in mind. “With the rates of this year’s growth, this looks like a really multi-generational plan purchase,” he says. Perhaps Sandbox Hill Road, which is similar to Kazaa and Limewire in the future, will vanish into the web. Maybe he’s bought into a future Spotify. Meanwhile, the bubble keeps growing.

For a weekly look at the Internet’s future, subscribe to Into the Metaverse

Sign up for TIMEPieces TwitterDiscord and Harmony


Related Articles

Back to top button