Owning land in the Metaverse is an expensive business. Lately, we’ve seen individuals as well as companies offering millions of dollars for virtual land, $2.4 million to be precise.
In an interview with indianexpress.com, Anshul Dhir, CEO of EasyFi, explains how digital land in the metaverse can be purchased through loans, but without the involvement of any banks. He says the idea of owning land in the metaverse might seem weird and surprise a lot of people, but for those familiar with popular games like The Sims, Farmville, and Clash of Clans, it might not seem like a big deal.
Dhir also wants people to understand what the metaverse is before they own or even think about investing in digital lands. The easiest way to understand the metaverse, he says, is to understand what it is not. He said: “Metaverse is not new technology or software, rather think of it as a combination of existing technologies, all complementary to create something called ‘digital space’.”
For the uninitiated, the concept of digital space dates back to 1992, Neal Stephenson in his science fiction novel Snow Crash describes the metaverse as a computer-generated virtual world made possible through software and global networking technology fiber optic.
Storylines in the Metaverse can reach over $4 million. Inasmuch as some say buying real estate in the Metaverse is similar to buying real estate in Manhattan in the 1940s.
This raises an important question: if virtual plots cost exactly like real-world plots and are so expensive, then why would people buy land in the metaverse? “The return on investment (ROI) is at all times higher than that of real plots. In the metaverse, the return on investment can reach 1000% and in a very short time,” Dhir told indianexpress.com.
He also believes that virtual real estate has the upper hand over physical plots due to its underlying blockchain technology, which makes it impossible to land scams, which is quite important in the physical space.
Blockchain technology is basically a distributed database, where every transaction is recorded, which makes every transaction transparent. “Blockchain minimizes any risk of real estate fraud such as forced cancellation, unauthorized sale, false promises and even late possession.”
It should be noted that, like in the real world, real estate prices in the metaverse are entirely dependent on location, population, and the ratio of supply and demand – when there is growing demand. for land in the metaverse in a certain area, then prices go up automatically.
Meanwhile, Dhir points out that not all virtual plots are expensive and some can even start from a few hundred dollars. But, just like the real world, everyone wants to be among the best and most popular places in famous metaverses like The Sandbox and Decentraland.
Some of the major metaverse projects that have attracted real estate are the Sandbox (SAND), Axie Infinity (AXS), Decentraland (MANA), Enjin (ENJ), etc.
Ready in the Metaverse
Buying virtual plots in the metaverse is possible only through crypto-assets. Indeed, “fiat currencies incur huge transaction fees and would require the involvement of a third party to facilitate global transactions, however, cryptocurrencies are tradable globally”.
Any sliver of the metaverse could be purchased through cryptocurrency lending, and this is facilitated by decentralized finance (DeFi). But what is DeFi?
Like the famous saying, “Necessity is the mother of invention”, this also applies to the case of DeFi.
Dhir gives an interesting analogy: if you go to a bank and ask for a loan, it is not to buy a car or a property, but to buy virtual real estate. Your application is very likely to be rejected. “DeFi is being touted as the solution to lowering the barrier of entry for those struggling to access bank accounts.”
It won’t be fair to call DeFi like banks, because unlike banks, “anyone who doesn’t need any KYC documents and (without any credit checks) can borrow crypto assets, all transactions are automated at using smart contracts”. he says.
DeFi is not centralized, so no one owns it. It runs on blockchain technology. These products do not use any third parties to facilitate crypto lending and borrowing. On DeFi, transactions are made without the need for a broker.
“Funds can be transferred instantly via blockchain, so there is no waiting and absolutely no downtime. Transaction rates (for now, at least) are much better than in traditional banks, although transaction costs vary depending on the blockchain network,” adds Dhir.
NFT as collateral
Granting loans is not as simple as it seems. There are various factors involved to lend loans with ease and safety.
To process any loan, DeFi requires collateral. “In the case of the metaverse, the collateral can be your cryptocurrency deposited in your crypto wallet or even an NFT that you have purchased. Having a mortgage held against an NFT for $20,000 owned by an individual investor is always easier than putting $20,000 on real estate.
MetaFi, the Company’s crypto lending product in the Metaverse, will facilitate lending for Metaverse assets such as NFTs, virtual real estate, land, parcels, and on-chain gaming on EasyFi.
“Companies are capitalizing on the endless possibilities the metaverse offers, this could represent a potential trillion dollar opportunity. It may seem that the price tags of many digital real estate are already staggering. Remember that there is still plenty of land to buy while some is still under development. Undoubtedly, the potential of digital lands is unimaginable, only if properly channeled,” concludes Dhir.