What might the future hold for virtual land and property ownership?
While land ownership is largely out of reach for most people and property ownership is an unlikely prospect for many younger generations, a whole new world of land and property ownership is occurring in a different reality – virtual reality (VR).
It was Second Life, many argue, that popularised the monetisation of virtual land and other assets. The Second Life economy allowed users to get a job, run businesses and sell and lease property and other assets via the platform’s marketplace and in-game currency – Linden Dollars.
Eventually, Second Life’s popularity waned as it became outdated. Huge swathes of users looked for new immersive experiences and the brands sought other opportunities – in Virtual Reality.
VR worlds are very different from the ‘game worlds’ that have gone before, like Sim City, Minecraft, World of Warcraft etc. In VR worlds the user is able to immerse their mind and body into the environment and explore it as if you were actually there. The earlier worlds were built for 2D screens, with little to no opportunity for immersion.
With the rate of technology advancement we are seeing today, within the next two to four years the level of immersion will reach the fidelity of the human retina. And already we’re seeing fully working hand tracking technology where you operate VR with your fingertips. This level of immersion provides a deeper emotional impact; your brain remembers it as if you were there. Just like you do when remembering a real world experience.
Comparing worlds like Sim City to those like Somnium Space, is like comparing Super Mario to Battlefield 5.
VR land ownership is growing steadily in popularity, and many investors are buying virtual land as a commodity, sitting on it now, hoping to sell it at an increased price in the future.
This has been the case with VR platforms such Decentraland and Somnium Space, both of which allow their users to buy plots of virtual land, which they can build upon and potentially monetise.
In Decentraland’s case, digital 1,100-square-foot plots in the platform’s Washington DC-sized Genesis City were selling for as much as $200,000, Bloomberg reported in June.
Back in December 2017, there was a public auction of 45,000 individual parcels of land. Each was priced at 1000 MANA – then around $100 – which raised a massive $28 million for Decentraland’s founders.
This was on top of the $26 million the platform made in 30 seconds during an initial coin offering (ICO) raise earlier in 2017.
Many early investors will be those from the VR community who long dreamt of building property – from dream homes to outlandish architecture – in an immersive VR environment and sharing their creations with others. Some will buy, sell and lease land to develop exciting and unique properties and activities to serve a whole range of purposes.
While VR land and property ownership is an emerging market, the initial reaction from investors and the VR community has been highly positive and has generated tens of millions of dollars in its early days.
In the near future, I expect that the world’s most successful property developers will have made their millions in VR.
Brands are beginning to utilise the opportunity of a whole new world in which to promote their products, but on a far grander and more immersive scale.
Many users are developing property and opening digital stores – from boutiques to malls. Others are hosting popular activities that generate footfall, and may begin to lease their building space for real life brand adverts.
For example, Somnium Space recently held a live VR concert with pop singer Kirsa Moonlight. I expect this type of event to become hugely popular as other platforms, brands, artists and VR property owners discover this new way to interact with the world.
Already VR worlds like Somnium Space, High Fidelity, AltSpace are hiring real people to do work in VR. More and more people will find their daily jobs in VR and will never work in the real world again.
Early investors in digital worlds where the amount of available land is finite will therefore need to think very carefully about the locations of the plots they reserve – and may make many of the same considerations that a land owner of property developer would in real life. For example; Is the plot central in the virtual world/city? Is it likely to see a lot of footfall? Will it be big enough to host the property they intend to build?
For VR property investing to make any sense, VR worlds must be like real worlds: finite. I do not expect the creators of virtual worlds to make them boundless in the future.
But, as with almost every investment or new venture, there are risks. In the digital world this can feel even more risky as we’re not purchasing something we can physically touch. There is concern that digital assets can be more easily stolen or that it will be much harder (or perhaps even impossible) to prove ownership.
Of course, property fraud is always a risk in the real world too, but we’re always more confident of ownership when our asset is something physical – that we can see, touch and feel.
To tackle such scams in the digital world, we’ll begin to see new legislation drawn-up in order to cement ownership of digital assets and to protect consumers from theft, fake assets and duplicate selling of a single asset.
Emerging as the most powerful and reliable guardian of digital assets is the blockchain. The digital ledger records each and every transaction, makes it fully transparent and unable to modify, therefore mitigating many forms of fraud.
Beyond the use of cryptocurrencies, the blockchain can also be used to verify and protect the sales of digital assets and prevent duplicate transactions. The blockchain-based network can also be used to facilitate the execution of smart contracts, which, like a real life contract, make clear the terms of any deal to ensure fairness for all parties.
Somnium Space joined the VRBA (https://www.vrblockchainalliance.org/) to take on exactly those issues. Among some of the most important goals of the alliance is to secure digital assets transfer, but also digital IDs, which don’t have to be stored by private corporations, but are on the blockchain.
Smart contracts could be used to cement ownership of digital land and property, as well as any other digital asset in a virtual world, such as avatars, possessions, and identities.
VR has already facilitated wonderful virtual, immersive activities and meaningful interaction between people from across the world. And as the concept progresses, I’m confident that VR land ownership and property development will blossom.
In the near future, I expect that the world’s most successful property developers will have made their millions in VR. So, looking to new opportunities in this world and the many other emerging virtual realities, it’s certainly an exciting time to be alive!
Artur Sychov is the founder of Somnium Space, an open, social, virtual reality world that has its own economy, currency, marketplace, games, social experiences and virtual land ownership. Somnium Space is interconnected, seamless and fully accessible from any device, from 2D mode on a desktop, to fully immersive VR mode on desktop or mobile. Investors are currently able to buy shares and receive free land parcels via Seeding VR for a limited time. Investors should note that investing puts their capital at risk and investment returns are not guaranteed. Somnium on Facebook, Twitter, LinkedIn, Instagram, Telegram, and Medium.
Investments are not covered by the Financial Services Compensation Scheme (FSCS). Investors should read the full risk warning available on https://seedingvr.sharein.com/risk before deciding to invest.