Owning a piece of land in the metaverse is an expensive affair. In recent times, we have seen individuals as well as corporations bid millions of dollars for a virtual piece of land, $2.4 million to be precise.
In an interview with indianexpress.com, Anshul Dhir, CEO of EasyFi talks about how digital lands in metaverse can be bought through loans but without the involvement of any bank. He says the idea of owning land in the metaverse might sound weird and come as a surprise to a lot of individuals but for the ones familiar with popular games like The Sims, Farmville, and Clash of Clans it may not sound like a big deal.
Dhir also wants people to understand what metaverse is before owning or even thinking about investing in digital lands. The easiest way to understand the metaverse, he says, is to understand what it is not. He said, “Metaverse is not a new technology or a new software, rather think of it as a combination of existing technologies, all complimenting each other into building something called as ‘digital space’.”
For the uninitiated, the concept of digital space dates back to 1992, Neal Stephenson in his science fiction novel Snow Crash describes metaverse as a computer generated virtual world made possible through softwares and a worldwide fibre optic network technology.
Plots in the metaverse can go as high as over $4 Million. To the extent, some say buying real estate in the metaverse is similar to buying real-estate in Manhattan in the 1940’s.
This raises an important question: If virtual plots cost exactly like real world plots and are so expensive, why would one buy lands in the metaverse then? “Return on investment (ROI) is anytime higher as compared to real world plots. In the metaverse, ROI can go as high as 1000 per cent and in a very short time,” Dhir told indianexpress.com.
Anshul Dhir, CEO of EasyFi. (Photo: EasyFi)
He also believes that virtual real estate has an upper hand on the physical plots because of its underlying blockchain technology, which makes it impossible for any land scams to occur which is quite prominent in the physical space.
Blockchain technology is essentially a distributed database, where every transaction is recorded— making every transaction on it transparent. “Blockchain minimises any chance of real estate frauds such as forced cancellation, selling without authorisation, fake promises, and even delays in possession.”
It should be noted that similar to the real world, the real-estate prices in the metaverse are completely dependent on location, population, and the demand and supply ratio—when there is an increasing demand for a plot in the metaverse in a certain area, then the prices go high automatically.
Meanwhile, Dhir emphasises that not all virtual plots are expensive and some can even start from a few hundred dollars. But, just like the real world, everyone wants to be part of the best and popular locations in famous metaverses like The Sandbox and Decentraland.
Some of the top metaverse projects that have attracted real estate are the Sandbox (SAND), Axie Infinity (AXS), Decentraland (MANA), Enjin (ENJ), etc.
Lending in metaverse
Buying virtual plots in the metaverse is possible only through crypto-assets. This is because “fiat currencies incur huge transaction fees, and would require the involvement of a third party to facilitate global transactions, however, cryptocurrencies are tradable globally.”
Any plot in the metaverse could be bought through cryptocurrency lending, and this is facilitated through Decentralised finance (DeFi). But what is DeFi?
Like the famous proverb, “Necessity is the mother of invention”, this is applicable in the case of DeFi as well.
Dhir gives an interesting analogy: if you visit a bank and ask for a loan not to buy a car or a property, but to buy virtual real-estate. Your application is most likely to be rejected. “DeFi is touted as the solution to lowering the barrier of entry for those who struggled to access bank accounts.”
It won’t be right to call DeFi similar to banks, because unlike banks “anyone without the need of any KYC documents and (without any credit check) can borrow crypto assets, all the transactions are automated with the help of Smart contracts,” he says.
DeFi is not centralised, so nobody owns it. It runs on blockchain technology. These products don’t use any third parties for facilitating crypto lending and borrowing. On DeFi, trades are made without the need of any broker.
“Funds can be transferred instantaneously via a blockchain, so there is no waiting and absolutely no down-time. The transaction rates (for now, at least) are much better than at traditional banks, though transaction costs vary depending on the blockchain network,” Dhir adds.
NFTs as collateral
Giving loans is not as easy as it sounds. There are various factors involved for lending loans with ease, and safely.
To process any loan, DeFi requires a collateral. “In the case of metaverse, the collateral can be your cryptocurrency laying down in your crypto wallet or even an NFT that you bought. Having a mortgage held up against an NFT for $20,000 owned by an individual investor is always easier than putting down $20,000 on a piece of real-estate.”
MetaFi, the company’s crypto lending product in metaverse, will facilitate loans for metaverse assets such as NFTs, virtual real estate, lands, plots, and on-chain games on EasyFi.
“Corporations are capitalising on the endless possibilities that metaverse offers, that could be a potential trillion dollar opportunity. It might seem that the price tags on a lot of digital real-estate might already be at a staggering amount. Remember, there are still plenty of plots yet to be purchased while some are still being developed. Undoubtedly, the potential of digital lands is unimaginable, only if channeled rightly,” Dhir concludes.