Do you really own real estate on Metaverse

March 3, 2022

The recent wave of interest expressed shown by investors who are looking at owning digital assets in the so-called “virtual world” or Metaverse has also been looked at seriously and sometimes with concern among market watchers, and analysts. While Mr. Marc Zuckerberg first touted the term, “Metaverse” and have since renamed his public-listed social media website as Meta Platforms Inc. (FB), it was the virtual game called Second Life, an online game that has been in existence since 2013 that has now spawned into terms such as non-fungible tokens (NFTs), and virtual reality (VR).

Coming back to the topic of owning digital real estate, or digital-enabled land plots, there could be some debates over whether do you really own a piece of real estate digitally?

What is Metaverse?

So, before we even go further, let us be clear about definitions of Metaverse and what exactly is Metaverse.

According to Wikipedia, a metaverse is defined as a network of 3-dimensional (3D) virtual worlds on social connection. It is also often described as a hypothetical iteration of the internet as a single, universal virtual world that is facilitated by the use of virtual and augmented reality (AR) headsets.

The term Metaverse traced its origins as far back as in 1992 where the popular science fiction novel, Snow Crash, quoted the two words “meta” and “universe”. Back then, it was just any other science fiction novels that one normally read, and that is if you are into science fiction stories. However, fast forward to 2020, in a post-Covid endemic world, the terms Metaverse has now spun off into other software programs that run virtually such as Decentraland, which is the main focus of this article.

What is the term “Land” anyway?

As per the Singapore’s Council of Estate Agencies (CEA) Real Estate Salesperson (RES) Examinations latest syllabus (January 01, 2019), the definition of land means “the surface of any defined parcel of the earth, so much of the subterranean space below or much of the column of airspace above the surface whether or not held apart from the surface as is reasonably necessary for the proprietor’s use and enjoyment, and includes any estate or interest therein, and all vegetation growing thereon and structures affixed thereto.”

So, with that, the question comes into mind of investors out there, especially those who are into owning digital land plots on platforms such as Decentraland, which is touted as the latest and most recognisable platform when it comes to buying and selling of digital land plots. As a real estate professional, one of my concerns is whether do you own a piece “Land” in the first place? Does Land in Metaverse world qualifies as real estate or are you merely owning pieces of assets digitally?

What is Decentraland?

According to a blog post published on the website Delta Exchange, Decentraland is a platform enabling users to be part of a shared virtual world. It is also platform where users can buy or sell digital property, play games, exchange collectibles, socialise, interact and explore.

Decentraland was founded in 2015 by two Argentenian individuals by the names of Ari Meilich and Esteban Ordano and launched in 2017. The platform was initially run on a proof of concept (POC) basis where it could allocate ownership of a digital real estate plot to its users on the blockchain and has now been branched into a three-dimensional project.

Source: Binance Academy (A 3-D photo illustration of a piece of digital real estate)

What does Decentraland run on and the medium of exchange?

Decentraland runs on NFTs via the MANA cryptocurrency which is the official medium of exchange, or what you called it the official currency users need to trade digital land plots. It runs on the Ethereum blockchain, and is overseen by a non-profit entity called Decentraland Foundation.

How does Decentraland impacts Singaporean real estate investors like us?

Nothing really. But it is an upcoming alternative investment (AI) to keep tabs on as the craze of owning digital real estate starts to take a foothold among the investment portfolios of many investors, including real estate investors, and real estate professionals like ourselves who need to be equipped with the necessary knowledge in order to provide a fair and equitable advice to our real estate clients, and/or the public in general.

Would the concerns regarding financial scams and fraud impact us?

As a real estate professional, and a keen market watcher on both the Singapore and global real estate market, we think that real estate investors need to pay close attention on the issues regarding legitimacy, title, ownership, fraud, basic land and tort law concepts when it comes to the trading and ownership of digital real estate.

Due to the lack of sufficient background, and knowledge regarding digital real estate, we, as real estate professionals, would rather advise clients to exercise caution against going into such alternative forms of investments if their investor appetites are not in line with their investment objectives, and time horizons, etc.

These are real concerns as the definition of Land is not properly stated in the first place when it comes to ownership of digital real estate. Although the ownership title is being verified and confirmed through the Ethereum blockchain where titles once formed digitally on the blockchain cannot be altered or changed in any way, there are still some cloud of doubts as to how digital land ownership can represent the heterogeneous, immobility, indestructible and indivisibility nature of the actual piece of real estate. Moreover, although some, if not all the characteristics of digital real estate seems to have some resemblance of the characteristics of plain vanilla land ownership laws especially when it comes to these digital real estate assets that are held on the blockchain, we think that investors need to also be exposed to what goes behind the scene through a more investor-focused financial education foundational knowledge Investors are encouraged to participate in regular talks, exercises, or  employees through establishing  learning partnerships with home-owners, developers, and real estate agencies, like Propnex and its over 11,000 professional Real Estate Salespersons (RES) and counting when it comes to being clear of what is at stake, and other issues like who owns what in the Metaverse world.

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