Ornella Hernandez

<div id="highlights-block_62c895042670d" class="highlights">
 <ul>
 <li>Yuga Labs’ Otherdeed for Otherside leads all-time cumulative virtual land sales, in total worth $853 million</li>
 <li>As the metaverse grows, so does the virtual real estate market</li>
 </ul>
 
</div>



The key to sustainability of the metaverse may lie in the virtual real estate market, suggests Chainalysis.



The blockchain analyst’s latest State of Web3 report <a href="https://blog.chainalysis.com/reports/metaverse-gaming-web3/" target="_blank" rel="noreferrer noopener">found</a> the growth of blockchain-based virtual real estate (VRE) prices has outpaced physical real estate. VRE prices exploded 879% from September 2019 to March 2022, while real-world real estate prices grew by 39% during the same time period.



Of course, virtual and physical real estate are not the same thing. Humans need land, homes and buildings to live, work, study and sleep. Metaverse real estate, on the other hand, is all about retail, recreation and social activities.&nbsp;



According to Chainalysis economist Ethan McMahon, any correlation between physical and virtual real estate markets could be attributed to their relative maturities: Virtual real estate is only a couple of years old, so it has much more volatility than its more mature counterpart.



One of the main drivers of NFT land demand the report cites is access to private events and token-gated communities. Demand directly translates to sales of virtual real estate.&nbsp;



Bored Ape Yacht Club, for example, which has been a leader in bundling its NFTs with socialization entertainment for its community members, raised $320 million worth of ether from its Otherdeed land sales for its upcoming Otherside metaverse during the first weekend. It was “the largest NFT mint in history by several multiples,” according to Yuga Labs, with sales traffic <a href="https://cms.blockworks.co/solana-and-ethereum-suffer-weekend-disruptions-thanks-to-nft-mints/" target="_blank" rel="noreferrer noopener">triggering</a> skyhigh gas fees on the Ethereum mainnet.&nbsp;



Otherdeed for Otherside has the largest total cumulative value of land sales in metaverse real estate, coming in at roughly $853.6 million at the time of publication, <a href="https://dune.com/metaland/Metaverse-Land-Community" target="_blank" rel="noreferrer noopener">according</a> to Dune Analytics. Decentraland ranks second with about $378.6 million, and The Sandbox ranks third with $227 million in cumulative sales value. &nbsp;



A growing number of major companies are buying up metaverse land and setting up shop, including Adidas, Burberry, Gucci, Nike, Samsung and Louis Vuitton. JPMorgan was the first bank to <a href="https://cms.blockworks.co/jpmorgan-enters-the-metaverse-with-virtual-decentraland-lounge/" target="_blank" rel="noreferrer noopener">jump</a> into Decentraland by signing a year-long property lease in February, and HSBC <a href="https://cms.blockworks.co/hsbc-buys-virtual-real-estate-in-sandbox-metaverse/" target="_blank" rel="noreferrer noopener">followed</a> with a plot purchased one month later.&nbsp;



At the time, JPMorgan <a href="https://www.jpmorgan.com/content/dam/jpm/treasury-services/documents/opportunities-in-the-metaverse.pdf" target="_blank" rel="noreferrer noopener">released</a> a report that envisioned opportunities within the metaverse market worth over $1 trillion in yearly revenues by 2030.&nbsp;



<h3 class="wp-block-heading">Real-world trends map to metaverse markets</h3>



McMahon told Blockworks there is “massive” potential in this space, not only for game developers, but for individuals who own characters and items they play with as well.&nbsp;



Marketers and corporations that want to appeal to gamers could also benefit, with an ever-changing set of advertisement possibilities.



Brands seem unwilling to risk getting left behind. The largest VRE sale to date was made by financial publishing company Curzio Research, <a href="https://medium.com/@TCG_World/tcg-world-announces-5-000-000-purchase-in-commercial-real-estate-with-new-partners-curzio-research-dd49c62c7adf" target="_blank" rel="noreferrer noopener">spending</a> $5 million for a tract of virtual land in May in the TCG World metaverse running on the Binance Smart Chain (BSC). In the second-largest deal, Republic Realm <a href="https://markets.businessinsider.com/news/currencies/metaverse-property-sandbox-virtual-real-estate-deal-record-4-million-2021-11" target="_blank" rel="noreferrer noopener">paid</a> $4.3 million for a slice of The Sandbox.&nbsp;



Large sales in a particular area consequently affects prices of surrounding land, both in the physical and digital world. As a result, speculators may take advantage of short-term profit making. But speculation can only drive the value of digital property while scarcity and liquidity reign.&nbsp;&nbsp;&nbsp;&nbsp;



The main driver of value in the metaverse will be utility, which is currently the “missing layer for most metaverse platforms,” Sam Huber, CEO of metaverse development studio LandVault, told Blockworks.



Utility is directly related to business models that landowners can create on top of their land, he explained. From selling NFTs as tickets to events to e-commerce and advertising — any potential revenue generated gives metaverse land value.



While blockchain-based virtual real estate is relatively new, the concept of digital property is not. Be it video games Second Life, Fortnite, Roblox or Minecraft, virtual worlds have already successfully popularized metaverse assets and resources.&nbsp;



“Speculation will always exist, but eventually utility will take over as more and more people enter the metaverse, and it makes more sense to own land and build a business on it,” Huber said.



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Metaverse Land Prices Holding Up in Current Market Climate

Morgan Chittum

<div id="highlights-block_62320be691e2d" class="highlights">
 <ul>
 <li>”The metaverse is how people will experience Web3 [and] the next generation of the Internet,” HSBC’s Suresh Balaji said</li>
 <li>Rival megabank JPMorgan unveiled a virtual lounge last month in blockchain-based world Decentraland</li>
 </ul>
 
</div>



Financial services provider HSBC said Wednesday it will acquire a piece of virtual real estate in The Sandbox metaverse.



The purchase is a part of a larger partnership with The Sandbox to engage with sports, esports and gaming fans, according to the bank’s <a href="https://sandboxgame.medium.com/hsbc-to-become-the-first-global-financial-services-provider-to-enter-the-sandbox-c066e4f48163" target="_blank" rel="noreferrer noopener">announcement</a>.



“The metaverse is how people will experience Web3, the next generation of the Internet — using immersive technologies like augmented reality, virtual reality and extended reality,” Suresh Balaji, chief marketing officer at HSBC Asia-Pacific, said in a statement. Further details on the plot were not disclosed.



HSBC joins a laundry list of big-name brands and companies that have partnered with the blockchain gaming firm, including Warner Music Group, Gucci and Adidas.&nbsp;



“We&#8217;re pleased to see large, trusted institutions such as HSBC join The Sandbox open metaverse and embrace the culture of Web3, connecting with users through entertainment, gaming and user-generated content,” Sebastien Borget, chief operating officer and co-founder of The Sandbox, said in a statement. 



The partnership, The Sandbox US CEO Mathieu Nouzareth said, signals the “rapid maturation” of the metaverse, and other financial institutions will likely follow suit.



“As metaverse adoption expands further into the mainstream, we’re only going to see a broader spectrum of brands investing in the metaverse to create digital-first experiences that engage both new and existing customers,” Nouzareth told Blockworks.



Last month, megabank JPMorgan <a href="https://cms.blockworks.co/jpmorgan-enters-the-metaverse-with-virtual-decentraland-lounge/" target="_blank" rel="noreferrer noopener">unveiled</a> a virtual lounge in blockchain-based world Decentraland.&nbsp;



“When you think about the economics of the metaverse — or metanomics — there are opportunities in almost every market area.” the bank wrote in a note. “We are not here to suggest the metaverse, as we know it today, will take over all human interactions, but rather, to explore the many exciting opportunities it presents for consumers and brands alike.”



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HSBC Buys Virtual Real Estate in Sandbox Metaverse

<div id="highlights-block_61a7dc807b7cf" class="highlights">
 <ul>
 <li>The metaverse could generate a $1 trillion annual revenue opportunity, according to a recent report from Grayscale</li>
 <li>Virtual property is a kind of NFT that represents ownership of a piece of land in the metaverse</li>
 </ul>
 
</div>



A plot of land in the popular play-to-earn video game, Axie Infinity, recently <a href="https://markets.businessinsider.com/news/currencies/metaverse-crypto-digital-land-sold-axie-infinity-nft-decentraland-2021-11" target="_blank" rel="noreferrer noopener">sold</a> for $2.3 million. The following week, virtual real estate developer, Republic Realm, <a href="https://www.wsj.com/articles/metaverse-real-estate-piles-up-record-sales-in-sandbox-and-other-virtual-realms-11638268380" target="_blank" rel="noreferrer noopener">said</a> it had purchased a piece of property in The Sandbox for $4.3 million.



Digital property sales are notching never-before-seen highs as investors pile millions of dollars into real estate in the metaverse.



Axie Infinity co-founder Jeffrey Zirlin told Blockworks in an email that the recent sale of the plot of land, which was worth 550 ETH, makes perfect sense as people’s “digital lives are starting to take more importance in relation to [their] physical lives.”



“In the future the majority of people will be found mingling in virtual environments which will still need to mirror the physical world in some aspects,” Zirlin said.



For the uninitiated, <a href="https://axieinfinity.com/" target="_blank" rel="noreferrer noopener">Axie Infinity</a> is a blockchain-based world where users can earn crypto rewards that can later be sold on exchanges. But the Axie homeland, called Lunacia, is divided into tokenized plots of land which act as homes or bases of operation for players, according to Zirlin. Therefore, virtual property can represent a non-fungible token (NFT) that represents ownership of a certain piece of land in the metaverse.&nbsp;



One buyer, who previously <a href="https://twitter.com/Its_Falcon_Time/status/1358919496099110915?s=20" target="_blank" rel="noreferrer noopener">purchased</a> a plot of land for $1.5 million, described their investment as &#8220;the Hamptons of digital real estate.&#8221;



&#8220;The transition and blend from real life to digital events has increasingly accelerated, leading to the formation of digitally native nations. I believe having ownership in such nations has an addressable market that is far greater than the real world,&#8221; the virtual landowner, who goes by &#8220;Flying Falcon&#8221; online, told Blockworks.



<figure class="wp-block-embed is-type-rich is-provider-twitter wp-block-embed-twitter"><div class="wp-block-embed__wrapper">
<blockquote class="twitter-tweet" data-width="550" data-dnt="true">1) Why I spent $1.5 million on digital land in the <a href="https://twitter.com/AxieInfinity?ref_src=twsrc%5Etfw">@AxieInfinity</a> metaverse <a href="https://t.co/GanX0u0yOe">pic.twitter.com/GanX0u0yOe</a>&mdash; Flying Falcon (@Its_Falcon_Time) <a href="https://twitter.com/Its_Falcon_Time/status/1358919496099110915?ref_src=twsrc%5Etfw">February 8, 2021</a></blockquote><script async src="https://platform.twitter.com/widgets.js" charset="utf-8"></script>
</div></figure>



<h3 class="wp-block-heading">High-risk investment&nbsp;</h3>



In a rapidly evolving, growing — and at times volatile — space, virtual land could also be considered a high-risk investment choice, Zach Aarons, a general partner at real-estate tech VC firm MetaProp, told the <a href="https://www.wsj.com/articles/metaverse-real-estate-piles-up-record-sales-in-sandbox-and-other-virtual-realms-11638268380" target="_blank" rel="noreferrer noopener">Wall Street Journal</a>. 



“If I buy a building for 40 ETH, and then ethereum goes from $4,000 to $100, that’s a fundamental risk that I’m not really taking when I’m buying a piece of physical real estate,” he said to the Journal, who first reported Republic Realm’s $4.3 million investment. 



But the metaverse could still generate a $1 trillion annual revenue opportunity, according to a <a href="https://grayscale.com/wp-content/uploads/2021/11/Grayscale_Metaverse_Report_Nov2021.pdf" target="_blank" rel="noreferrer noopener">report</a> from crypto asset management firm Grayscale in November.&nbsp;



<div class="wp-block-image"><figure class="aligncenter size-full"><img loading="lazy" decoding="async" width="556" height="328" src="https://blockworks-co.imgix.net/wp-content/uploads/2021/12/81AA0276-DFBB-4027-A1D6-9800FAF5A4B1_4_5005_c.jpeg" alt="" class="wp-image-12019" srcset="https://blockworks-co.imgix.net/wp-content/uploads/2021/12/81AA0276-DFBB-4027-A1D6-9800FAF5A4B1_4_5005_c.jpeg?w=556 556w, https://blockworks-co.imgix.net/wp-content/uploads/2021/12/81AA0276-DFBB-4027-A1D6-9800FAF5A4B1_4_5005_c.jpeg?w=300 300w, https://blockworks-co.imgix.net/wp-content/uploads/2021/12/81AA0276-DFBB-4027-A1D6-9800FAF5A4B1_4_5005_c.jpeg?w=428 428w, https://blockworks-co.imgix.net/wp-content/uploads/2021/12/81AA0276-DFBB-4027-A1D6-9800FAF5A4B1_4_5005_c.jpeg?w=442 442w, https://blockworks-co.imgix.net/wp-content/uploads/2021/12/81AA0276-DFBB-4027-A1D6-9800FAF5A4B1_4_5005_c.jpeg?w=371 371w, https://blockworks-co.imgix.net/wp-content/uploads/2021/12/81AA0276-DFBB-4027-A1D6-9800FAF5A4B1_4_5005_c.jpeg?w=80 80w" sizes="auto, (max-width: 556px) 100vw, 556px" /><figcaption>Source: Grayscale</figcaption></figure></div>



There’s even a “Zillow for the metaverse” now, a New York-based startup called <a href="https://meetparcel.com/" target="_blank" rel="noreferrer noopener">Parcel</a>. The niche marketplace allows users to connect their digital wallet such as MetaMask and bid on properties in virtual worlds like Decentraland, Cryptovoxels and others. 



“Blockchain is the first time where it&#8217;s a fully global market,” co-founder Noah Gaynor told Blockworks in an interview. “I actually think things in the metaverse and crypto in general have this premium because you have liquidity from all over the world.&#8221;



“Not every single person in the world can buy Apple stock, but practically everyone with an internet connection can buy a piece of virtual land. There’s a lot more players chasing the same assets,” he said.



Gaynor added that the future of real estate investment has a huge growth opportunity in the metaverse, citing the potential for digital landowners to put up billboards on their property to make passive income.



“We believe these virtual worlds will have thriving economies just like the physical world,” he said.&nbsp;



When asked how to respond to skeptics who question how a virtual piece of property could be worth millions, Gaynor responded:&nbsp;“At the end of the day, it&#8217;s just supply and demand, right? Someone&#8217;s willing to pay that much for it, then that&#8217;s what it&#8217;s worth. [It’s the] same as bitcoin or any other asset.”



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