A Real Estate Boom in the Metaverse is Coming

If Irina Karagyaur is correct, 2022 will see the beginning of a gold rush in virtual land, especially as a “more efficient and scalable future for the intersection of blockchain and real estate is being built as we speak – and it’s not solely confined to the Ethereum blockchain.”

As I’ve mentioned in previous articles, the future of NFTs is a multi-chain one. This solves the limitations of the Ethereum blockchain and enhances its usage, and we will see “unimaginable opportunities” in every corner of commerce. Alternative chains, such as Solana, Tezos, Polkadot, Kusama, Cardano and many others make more diverse use cases possible and they answer issues such as scalability, network congestion and the ability to truly fractionalize ownership, so that NFTs become usable and transferable in the Metaverse. It may also mean that NFTs are able to “break out of the confines of traditional digital collectibles,” and be part of the ‘real world’. But while NFTs have been until now primarily focused on collectible memes, art, sports and luxury goods, Karagyaur argues that the potential for real estate to be modernized and made more efficient on the blockchain is powerful, inevitable even.

Buying and selling real estate is a time-consuming business, as well as an expensive one. But with virtual real estate in open metaverses, it will be possible to use peer-to-peer transactions alongside smart contracts that automate and speed up every part of the process. For example, property asset transactions, can be executed in minutes instead of weeks or months.

Furthermore, Karagyaur points out, “virtual real estate can unlock liquidity via decentralized global markets that enable tradable assets and allow for metaverse assets to be used as extractable collateral to fuel innovative methods of lending in decentralized finance (DeFi). Potentially, owners of digital homes may be able to use them as collateral for loans, and it may be possible for owners of a valuable piece of virtual land to exchange it for a property or land in the real world.

Most importantly, Karagyaur claims that Ethereum’s network, whicle it is the dominant smart contract blockchain, will not be enough to host all this activity. This is why the talk about multi-chain development is so important. As she says, “Although Ethereum layer 2 solutions (add-ons that help the network process more transactions) work well, new blockchains have seen exponential growth and promise fertile new ground,” and there is plenty of room for the creative builders that are looking beyond Ethereum.

Some well-known names, such as Snoop Dogg, are already investing millions of dollars in virtual real estate, and Fortune magazine calls it “a multi-trillion dollar opportunity”. For the younger generation it is possible that their first property purchase will be in the Metaverse, an idea that the Boomer generation may struggle to comprehend. Of course, there is a lot of work to be done before we get to that point, and there are some who believe it is a ‘pie in the sky’ notion, some criticising it as ‘novelty’ driven by hype and speculation, whilst others argue that buying and selling real estate requires legal due diligence, and they can’t see how that might be possible in a virtual world. And of course there is the real estate sector itself, which may not be too keen on seeing their old-fashioned but profitable business model turned on its head. Still, as Karagyaur says, “real estate NFTs promise the ability to democratize property ownership, a space that has historically excluded a majority of the world.” It’s just a potential market at the moment, and building it will take time, but it’s not too difficult to imagine the day when it’s a reality.

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