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Here’s how Metaverse will change the face of real estate industry

With demand for virtual real estate shooting through the roof, we explain key things that you should focus upon to realize maximum benefits from your investment in metaverse platforms.

Real estate is counted among the most significant investment categories and now with the emergence of metaverse platforms, the segment of virtual real estate has assumed prominence. In fact, buying and selling land in the digital space is increasingly becoming popular among investors with many emphasizing that virtual realty can possibly change the entire face of the industry in near future.

From big corporate houses to multinational organisations to venture capitalists, each and every prominent stakeholder in the investment ecosystem is betting money on virtual real estate. A look at the growth numbers registered by the segment and you’ll instantly recognise the potential of metaverse platforms. MetaMetrics Solutions, a leading research and consultancy firm, pegged the market capitalisation of metaverse real estate at $500 million in 2021. Further, the category is expected to grow by 61.74% of CAGR between 2021-26. In terms of the sales of virtual lands on metaverse platforms, the top 10 players have already sold $1.9 billion worth of lands on digitally connected universes. The worth is expected to reach $5.4 billion by the end of 2026 with all prominent stakeholders showing more interest in the category. Clearly, the category of virtual realty is booming and the growth potential seems to be enormous.

In terms of comparison, there’s not much difference between the physical and virtual real estate systems. Both ecosystems consist of buyers and sellers, property developers, and service providers although the striking difference is the absence of regulators in the case of virtual real estate. Unlike physical real estate which is governed by regulations with statutory organisations keeping a strict vigil on its functioning, virtual lands in the metaverse don’t work under any such legal provisions. This completely unregulated nature of virtual real estate has both positive and negative sides to it. While the absence of such external control has helped the category to grow exponentially within a shorter span of time, it is also keeping conservative investors from taking the plunge into the segment.

In the backdrop of the emerging nature of metaverse platforms and virtual real estate, we discuss relevant strategies that investors should consider before betting their money in virtual realty:

a) Diversify Investment Options: One of the golden rules of investing is to have a diversified portfolio consisting of a range of investments in different categories and segments. An astute investor must not put all their eggs in one basket and by this logic, one should consider virtual real estate as one of the investment options in the constellation. Some other significant avenues of investment that you can choose from include stocks and shares, physical real estate, gold, derivatives and securities, and Government Bonds among others.

b) Volatility and Risk Factor: Metaverse, virtual real estate, cryptocurrency, and non-fungible tokens (NFTs) are investment options that come with higher levels of risk factors compared to the other asset classes. Take, for instance, the upheaval in the prices of virtual real estate. The average price of land parcels on metaverse platforms was around $17,000 in the month of January 2022 which has now come crashing down to $2500 in the month of August 2022.

Clearly, virtual realty is not for conservative investors who want their investments to offer returns in a predictable manner. Therefore, you must be willing to embrace enhanced risk if you decide to invest in virtual lands on one or the other metaverse platforms.

c) Cyber Security Risks: The downside of the growing popularity of virtual real estate is its enhanced visibility which has got the segment on the radar of cybercriminals. A study conducted by Check Point Research revealed that metaverse platforms will be the leading target for ransomware attacks in the second half of the year 2022. While this has prompted digital universes to strengthen their overall security mechanisms, the challenge of effectively combating cybersecurity attacks will continue to persist in the future. What makes the situation further complicated is a complete absence of regulatory bodies, thereby leaving no choice for investors to fall back upon in case of cybersecurity attacks or data breaches on metaverse platforms.

d) Technical Competence: Buying virtual lands on metaverse platforms consists of a number of technical steps that have to be completed before the buying and selling of virtual lands can be initiated. These steps include signing up with the platform, setting up of digital wallet, and then topping the wallet with the required amount of cryptocurrency. All these processes are completely digital and mandate a decent level of technical know-how on the part of investors. In case you’re not well-versed with the technicalities of metaverse platforms then investment in virtual realty could prove tricky for you.



Views expressed above are the author’s own.


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