Snoop Dogg has a crib in The Sandbox; Paris Hilton has an island in Roblox. While Sydney-siders continue to daydream of breaking out of their rentals and hammering nails into the walls of their own owned homes, others are forking out millions on digital property. So, if home ownership is out the window, could a meta-house be the next best thing?
But wait, metaverse? I still haven’t worked out crypto, let alone why I would want to own Nyan Cat…
Okay, let’s break this down.
Cryptocurrency is a digital and decentralised medium of exchange based on something called blockchain technology. A blockchain, or shared ledger, records transactions and tracks financial assets across a peer-to-peer network. So, unlike central banks, crypto is designed to exist through automated algorithms outside of the control of governments and central authorities – it cuts out the middle man. The blockchain is accessible to everyone who uses the cryptocurrency. Every copy is updated simultaneously, creating an accurate and identical transaction record. The most popular cryptocurrencies are Bitcoin and Ethereum, but there are thousands.
So, what do I do with it?
Well, depending on what you’re trying to buy, you can use crypto to securely make purchases. You can also invest in crypto, sort of like you do with stocks – at your own risk. Crypto is a speculative market, and you should never invest what you can’t afford to lose.
Okay, I kind of get it… So, what on earth is an NFT?
If you’re as late to the party as I am, you’ll have spent the last 6 months desperately trying to avoid discussing NFTs at dinner parties. Literally speaking, NFT stands for nonfungible token. But what does that actually mean? Well, ‘fungible’ is an economic term that refers to things that can be exchanged for other identical things. So, a crinkled $5 note that doesn’t work in the vending machine can be traded with your mate for their crisp $5 note, and you’d both still have the same amount (less a packet of Twisties). Cryptocurrencies are also fungible. Other things, like cars or baseball cards or land, are nonfungible – meaning they have unique qualities that add or subtract value. That’s where NFTs sit.
In this context, a token is a digital asset stored on a blockchain (cryptocurrencies are also tokens, but not all tokens can be used like money). Unlike digital coins, digital tokens represent an asset that can be assigned a price.
Hold up – I thought this was NFTs for dummies…
Look, I get you.
Basically, NFTs can be anything digital – art, music, you’re very best tweets. To put it simply, it is the digital version of collecting fine art.
That makes more sense I guess… But why would I buy a digital file that anyone could just copy and paste?
NFTs are a unique digital signature that, like crypto, use cryptographic technology to store information (such as who created it, previous sales, or conditions of future sales) on a blockchain. Remember those?
Yes, it is true that you can still make a copy of digital files (including NFTs), like how you could photocopy a painting. But what you’re buying isn’t just the art, it is the ownership of the work. To stick to the analogy: anyone can buy a print of a Banksy, but there is only one original.
So basically, NFTs are only valuable because they are rare?
Well, it is this scarcity that allows people to ascribe value to them, in theory. Like any speculative asset, you buy the thing (stocks, houses, crypto) hoping that its value will increase so that you can one day sell it for a profit.
Does that actually work?
Sometimes. This Gucci Ghost was originally bought for $200, and later sold for $3600. A video by Beeple was originally bought for $66,666, and later sold for $6.6m. But it is risky – the system only works if people do in fact ascribe value to the NFT you own.
In March 2021, tech entrepreneur Sina Estavi paid $2.9m for an NFT of Twitter founder Jack Dorsey’s first tweet, which he called the “Mona Lisa of the digital world”.
After holding the NFT for just over a year, Estavi put it up for sale with bidding starting at $48m, but as of Monday the highest bid was roughly $29,700. This could be because crypto enthusiasts have redirected their attention to the metaverse.
Okay, I’ve made it this far. What on earth is the metaverse?
Well, that’s tricky. Is it a video game? Is it VR? Is it some wacky extension of social media? In a way, the answer is all of the above.
At this stage, the metaverse is mostly just an intricate idea. Like when the internet was first coming about, no one knew exactly what it was going to look like – they just knew it was coming. The term refers more to a shift in how we interact with technology day by day. In truth, it doesn’t even exist yet.
Many experts believe the metaverse will be made up of technologies like virtual reality and augmented reality, that will accumulate to create a 3D version of everything digital. This digital world would run parallel to the real word, and continues to exist even when you’re not in it.
So, if it doesn’t really exist yet, how are people purchasing houses in the metaverse? And why?
While there is no real portal into the metaverse as of yet, multiple platforms are offering separate experiences in virtual and augmented reality – there just isn’t a single gateway for people to access them yet. Platforms such as Fortnite, Sandbox and Roblox are offering a variety of experiences, from live entertainment to gaming and, of course, real estate.
Some people are buying property in the metaverse for the same reasons you made a webpage on the internet in the early days, as a place to do business or show off assets.
Others are buying meta-land as an investment – because they believe it will be much more valuable in the future. But, just like with crypto and NFTs, this is risky and there is no guarantee that value will increase.
If people are already buying property, will I be living in the metaverse some years from now?
Maybe – some experts believe that by 2030 “a large proportion of people will be in the metaverse in some way”. But the idea is very much in its early days, and we still don’t know exactly what it will look like.
Maybe people won’t want to hang out in the metaverse. But either way, I wouldn’t go giving up your rental anytime soon.