While public consciousness of the metaverse exploded in autumn 2021 when Facebook changed its name to ‘Meta’, signalling its intent to expand into this area, we’ve been tracking the rise of the metaverse (or more accurately ‘metaverses’ as no single metaverse exists – it’s a concept used across multiple competing virtual worlds and experiences) for some time.
Although there’s been significant investment into the space, the metaverse remains largely conceptual. Nonetheless, this hasn’t deterred investors from staking a claim on digital plots of land in virtual worlds such as The Sandbox and Decentraland. Investors are able to purchase a coded plot, in the form of a Non-Fungible Token (NFT) which provides a digital certification of ownership. Virtual land owners can then develop the plot for a variety of uses which could include creating a virtual retail store, casino or art gallery, or a space for avatars to socialise with one another.
A number of household names including Samsung, Sotheby’s, Coca-Cola, JP Morgan, and Adidas have ‘entered the metaverse’ by doing just this. Private individual owners have also developed their virtual plots in various ways such as by creating a house for themselves, hosting a game for users to play and earn native tokens from, or a shop rented to a virtual fashion house selling items.
Subsequently, there are several aspects to the metaverse which may be of interest to the real estate industry. First is the trading of land within the metaverse – like real life plots these can be bought and sold. Second is the potential marketing opportunity that having a presence in the metaverse could bring. For example, it provides a digital channel for brands to create exciting spaces where they can engage customers and build loyalty, which may lead to purchases either in real life or virtually in the form of items that a customer’s avatar wears in the metaverse. Third, the metaverse has the potential to offer brands the opportunity to incorporate augmented reality into their real-world offerings, providing customers with an enhanced experience. For example, when entering a store while viewing the metaverse through augmented reality glasses you may see extra virtual products or services displayed that aren’t physically present.
While the possibilities are exciting, it’s important to remember the nascency of the metaverse and its supporting technologies. There remain many issues to be ironed out. Unlike in the real world, scarcity of virtual-land isn’t an issue. Virtual worlds such as Decentraland are governed by blockchain rules which prevent them from adding additional plots of land, but the threat remains that competing worlds will become more popular, therefore devaluing your real estate investment. It’s likely we will see the rise and fall of a number of virtual worlds before we can be sure of the market leaders.
There are also concerns surrounding cyber-security. For example, while blockchain technology is secure by design, the physical hardware used as an interface such as smartphones, laptops and computers, provide access points for hackers if precautions are not taken. There have also been cases of harassment, inappropriate content, fake news, grooming, and identity theft, as well as concerns that popular virtual worlds are governed by a small number of people and entities, concentrating power with a few.
The metaverse will rely heavily on technologies such as AI, cloud services and data centres; all of which generate significant carbon emissions. It’s therefore critical for all participants to consider where the energy they use is coming from and the subsequent environmental impact. The metaverse is most certainly an interesting area that will continue to grow and morph into exciting new offerings. However, it’s clear that it must be developed with a focus on ESG principles in order to avoid potentially significant future ramifications.
Further information
Q&A: The metaverse and why it matters