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Non-Fungible Tokens and Real Estate: Changing The Way We Buy and Sell Properties

Posted On Thursday, 04 May 2023 21:08
Non-Fungible Tokens and Real Estate: Changing The Way We Buy and Sell Properties

Most non-fungible tokens (NFTs) so far seem like fun artworks and trendy alternatives for cryptocurrency investments. They rose to fame in 2017 when Cryptokitties, a blockchain-based game using the Ethereum network, was launched. Their popularity experienced a period of stabilisation until the beginning of 2021, when the market suddenly exploded. So far, several memorable events have brought impressive media coverage, such as when giants like Nike, Adidas, Tiffany, and Gucci jumped on the metaverse trend, and celebrities like Paris Hilton partnered with Roblox to create worlds of digital experiences for users. 

Unsurprisingly, these blockchain-based unique cryptographic tokens became a hot topic, with sales increasing by 21,035 percent from 2020 to 2021. There are several types to choose from, including video game items, sports moments, collectables, music, and digital art, and all it takes to invest in them is owning Ethereum. Make sure to check Ethereum price before purchasing cryptocurrencies. As there's more light thrown on them, they start to infiltrate in other aspects of life, too. Here is where real estate steps in to take advantage of digital works of art.

The fact that NFTs are unique and can't be replicated makes them perfect for real estate digital ownership and trading. This is undoubtedly a broad topic, but understanding what differentiates them from physical real estate, what they are, and the most popular projects in NFT real estate will help you make informed decisions, should you want to venture into this unique world. 

Virtual Real Estate vs Physical Real Estate 

Real-world real estate is always around you, so it's easy to understand. With metaverse real estate, things are different, so it's important to eliminate any confusion that might be created when referring to these two terminologies. 

While physical real estate includes everything around you, from places to sleep to restaurants to eat, metaverse real estate is about social activities, recreation, and retail. No central authority keeps track of your ownership in the latter, as it is anonymous to everyone but you. 

Unlike the real world, on the metaverse platforms, lots are limited. However, instead of being a piece of land that is passed down through generations, digital property can be seen as a system of different destinations that people can move between. 

Before jumping in head-first to invest in metaverse real estate, unpredictability is a crucial aspect to consider. There's always a risk that what's profitable now can be replaced by something else in the future. 

Virtual Real Estate Explained 

Virtual real estate is property or land you can buy in a game or digital environment, taking the form of NFT houses or apartments. Each NFT represents a specific and unique property, enabling buyers and sellers to conduct direct transactions without using an intermediary like governmental institutions or brokers. This permits a more cost-effective and efficient way of investing in properties. Plus, since the asset is linked to the property, there's no need for due diligence, leading to a more transparent process. 

NFTs are a revolutionary technology, bringing about several advantages, including the following:

  • They're exposed to market dynamics, meaning their price can fluctuate, offering the potential for capital gains; 
  • They're not subject to traditional property taxes, meaning you can make savings; 
  • They're immune to physical damage.

 

The use case of your owned digital property is determined by the project you buy your NFT real estate from. For instance, metaverse real estate can be used to improve the work and training experience, providing a virtual office or location for companies to offer their services. Metaverse property has use cases in NFT games, too, with projects like Axie Infinity where you can earn tokens in several ways.

As with any financial investment, risks are inherent. The fact that this market is young and highly volatile can represent a considerable setback when pondering whether digital property would make an excellent asset to include in an investor's portfolio. However, just like with cryptocurrency, price fluctuations allow for profits, but it's crucial to make informed decisions and keep up to date with changes in the market. 

Additionally, NFTs real estate's implications are mostly undefined, and while cryptographic tokens generally fall under the current laws, there's a need to address the unique legal issues regarding money and property, including implications on taxes, insurance, and transferring ownership. 

NFT Real Estate Projects

After shedding light on NFT real estate, it's time to understand some of the most popular projects available. Decentraland, for instance, is a virtual land project on the Ethereum blockchain where you can purchase, sell, and rent your property represented as NFT. Sorare, on the other hand, is a European soccer game developed on the same blockchain that allows you to trade collectable virtual cards representing real-world players. CryptoVoxels, another Ethereum-based project, offers a platform with a unique pixel art design where you can purchase and build your own custom home. 

It's a common practice for metaverse property owners to host conferences and events. If the area where they own virtual property gets enough traffic and many people gather there, the asset's value increases, making it a good advertising tool. The value of the parcels in Decentraland, for instance, keeps rising as impressive projects develop there. Last year, the platform hosted the first metaverse Fashion Week. Unlike exclusive and inaccessible traditional fashion shows, this digital event allowed anyone who could log in to the metaverse to participate.

The Future of NFT Real Estate

As the NFT market matures, it's clear that their implication in the real estate industry continues and is changing how the world perceives real estate ownership and investment. Their potential in this industry is undeniable, from the tokenisation of physical assets to virtual property ownership. 

NFTs are set to transform the real estate market and create new opportunities for investors and property owners who support technological advances and look to experiment with them.   

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