Republic, a leading crowdfunding platform, is launching a fund for virtual real estate deals. People are spending increasingly more time in virtual worlds for both leisure and work, accelerated by the pandemic.
As a result, there has been a vibrant digital real estate market created. It was just a matter of time until somebody built a fund around it. Republic hopped on the opportunity first.
Hold on, virtual land?
What started as an opportunity for gamers to build virtual worlds has turned into something pretty amazing. One of the more popular virtual worlds is called Decentraland.
Curious where the name came from? All of these virtual worlds are built on top of blockchain technology, which is known for its decentralized nature, hence the name Decentraland.
Gamers are able to buy and build whatever they want on their plots in Decentraland. Many of them are hoping to make a profit selling goods and services in the virtual world's own crypto currency, MANA. And it isn’t only gamers getting involved. Investors are spending real money to buy land in new cities that exist only in virtual reality.
More than just 'The Sims'
Virtual worlds like Decentraland are selling plots of land on a daily basis. Each world has its own economy, currency, and events going on. But you don’t need to own land to participate in the economy.
According to Bloomberg, the average price paid per parcel in Decentraland was $2,703 as of March 15, more than triple the price in 2020. Another virtual world, Cryptovoxels, has seen a price per parcel of land jump from $821 to $3,895 since last year. The most expensive deal to date happened in February on the platform Axie Infinity: Eight lots sold for a combined $1.5 million.
People are using these virtual worlds as a place to display and sell their virtual art and other creations, meaning there is real economic activity happening here. Could this be the future of retail one day? Imagine going to a virtual mall within Decentraland to try on a pair of virtual shoes and some jeans, then ordering real ones to be sent to your home.
Janine Yorio, Head of Republic Real Estate, said, "Buying land today in virtual worlds may end up feeling a lot like buying land in Manhattan in the 1750s. There is massive growth ahead, and now is the time to get in on the ground floor."
Republic’s fund, Realm, is set to launch soon. Realm plans to purchase parcels of land across several online worlds and develop them into virtual stores, hotels, and more. In theory, returns cannot only be generated from further adoption and increased "land" value, but also from cash flow associated with the economic activity happening within the virtual worlds.
The fund is invite-only, open to only 99 investors, has a minimum investment of $25,000, and is limited to accredited investors.
Yorio said, "Real-world real estate is very uncertain now. Housing prices are at an all-time high. Meanwhile, offices are empty, hotels are empty. This feels insulated from a lot of those real-world risks."
The Millionacres bottom line
It’s still the Wild West out there. And while this idea is certainly farfetched, it makes sense as a potential real estate play. People are gathering (virtually) in an area to hand out, build, and sell things. Owning a piece of that land could become a cash-flow generating asset in the long term.
The big difference between standard real estate and virtual is that planet Earth has a very finite amount of land. While each virtual world has a limited supply of land, new worlds can always be built. One obvious unknown is how loyal folks will be to their virtual land or lands. Either way, this is going to be a fun space to watch.