What is Digital Real Estate?
By: Real Estate Hotline
Winter 2022 (Vol. 39, No. 4)
Note: This article is in response to general questions about these assets from members. It is for education purposes only and not intended as an endorsement of any investment. The cryptocurrency, NFT and digital real estate markets are still considered highly speculative.
With the actual real estate market too hot for many investors, some have turned to investing in virtual real estate. But if you google the term, you may find confusing and conflicting answers.
In the past, the term, “digital real estate” was used to describe assets such as domain names, websites, blogs, digital products, social media accounts or email lists. Some people used the term when referring to cryptocurrencies like Bitcoin or Ethereum.
But most recently the term “digital real estate” is referring to a new trend of buying virtual real estate in an online format called the metaverse. The metaverse refers to different platforms or realms on the internet. Examples of these ‘worlds’ include Sandbox, Decentraland and Axie Infinity.
To access the metaverse, you will need to set up a crypto wallet to hold your digital assets. A crypto wallet may sound like a new term but it’s just an online account that you put fiat money into. Fiat money is any recognized currency like the US dollar or Euro. You then use that account to buy the specific token required to purchase the plot of land you want.
Each virtual world has its own unique token allowing users to make digital land purchases. You choose the plot of “land” you want and you receive a non-fungible token (NFT). The assets are backed by forgery-proof certificates stored on the blockchain.
It all sounds a bit daunting but once you settle on where you want to invest it’s a fairly straight forward process. Most of the tokens you would need are sold on popular online sites like Coinbase, Binance or Gemini that guide you through the steps with easy to follow instructions.
What is an NFT? NFTs (or “non-fungible tokens”) are a special kind of cryptoasset in which each token is unique. On the other hand, the bitcoins, altcoins, and the US dollar are all “fungible”. My dollar is worth the same as yours. But just like actual real estate or other assets such as artwork, recordings or even pets - each NFT is uniquely valued.
NFT could be considered the certificate of authenticity or ownership of an online artifact or asset. For digital real estate, it’s the online version of a deed.
You can buy NFTs directly from the creator or through third party providers. A popular NFT marketplace is OpenSea. They currently have over four million assets available and there are millions more on other sites like Rarible, Foundation, SuperRare and NBATopShop.
NFTs are commonly associated with original works or digital art, music or videos. Of course with this type of asset, anything digital can be copied. But the idea behind value in owning the rights to the original is similar to owning an original Van Gogh. Even though there are copies in every form, the original still holds great value. Yes, anyone can just copy the actual photo or recording but no one but you will have the actual certificate of authenticity you have in your wallet and stored on the block chain.
Before you go shopping - BEWARE of fake NFT projects. Anyone in the world can create and sell an NFT without approval from any central authority. Many new NFT projects appear every day and not all of them are legitimate. They may even be representative of a legitimate asset such as a tv series or popular celebrity but have no authorization or affiliation with that asset.
BEWARE of fake NFT marketplaces. There are fake NFT marketplaces that take your money in exchange for worthless assets. Take extra care to be sure you are dealing with only legitimate NFT marketplaces. Some sites recognized as legitimate include:
- Rarible (for art), NBA Top Shot (for sports), Axie Infinity (for gaming), Decentraland (for real estate) and Valuables (for tweets). Note: This is just a short list and does not include all legitimate sites.