Real Estate in the Metaverse: A Few Risks to Know Before Investing

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In the real world, land as a fixed asset may not be the only option. Metaverse is also rapidly becoming a destination for real-estate investment that resembles real-world investments in land and offers possibilities for monetizing investments through rentals and other means. Celebrities have been buying metaverse real estate for some time, and many crypto enthusiasts are experimenting with token assets.

Risks Associated with Metaverse Real Estate

Metaverse real estate is also predicted to be the next big thing in the crypto world, according to experts. According to Business Today, Yunometa’s founder, Arijit Mukherjee. Investing in metaverse land now could be the next big thing with significant potential for high returns. To keep things simple, think of buying land in the metaverse as buying an NFT, which gives you a deed of ownership for your virtual plot. We see land parcels from companies like The Sandbox and Decentraland, where early buyers have made a lot of money selling nearby properties. When making money from virtual real estate, timing and location are just as important as they are in the real world. With each passing day, the potential and scope will continue to expand.

Investors ought to be aware of the inherent risks presented by virtual real estate’s singular nature. Scams have also thrived because of the metaverse’s novelty. Before investing in the metaverse, we have outlined four potential dangers we believe every investor should be aware of.

Platform Operators Manage Rights to Virtual Real Property 

A few apparent distinctions between virtual and traditional real estate give investors unique buying risks. Our senses can directly perceive physical land and improvements, whereas virtual real estate can only be perceived through a medium. As a result, owners of virtual real property on a platform would have no property rights and very little recourse if the platform’s operator were to restrict an owner’s access to the platform or delete the platform entirely.

Virtual real property owners must accept the terms as they are, so a platform operator can draft terms of use however they see fit. The terms of use of most metaverse platforms protect the operator from liability and give the operator a great deal of discretion when influencing virtual real property rights. 

DAOs are helpful, but they make things more complicated.

The emergence of Decentralized Autonomous Organizations (DAOs) is one of the most prevalent trends. Some platforms, like Decentraland, are community-driven entities with no central authority. The DAO members commonly called “token holders,” vote on decisions based on governance protocols and smart contract rules. DAOs decentralize the power that would otherwise be concentrated in a platform operator by providing token holders with input into a platform’s rules and regulations[8]. In the metaverse, DAOs can be considered on-chain counterparts to homeowners’ associations. Because rulemaking necessitates owner cooperation and permits owners to advocate on their behalf, this lowers the likelihood that an owner’s rights will be restricted. However, lobbying may result in inefficiencies and increase the complexity of virtual real estate ownership.

No Flexibility with Smart Contracts

Smart contracts are self-executing consensus protocols based on a series of agreed-upon if-then statements written into code on a blockchain. These smart contracts are utilized to facilitate the acquisition and sale of virtual real estate. In the metaverse, smart contracts are used for virtual real estate transactions, but security comes at the expense of flexibility. Non-fungible tokens, or NFTs, are the subject of smart contracts that also serve as deeds. Because smart contracts are linked to the blockchain, any modifications to the code or protocols require an affirmative vote of the DAO. Although smart contracts provide security for virtual real estate transactions, they also reduce flexibility. There is no room for error when negotiating the terms of a virtual real estate transaction because, for instance, once a purchase is added to the blockchain, it is final, and there is no way to change or restate the terms without the consent of the DAO. 

Chances of Fraudulent

Malicious actors are creating unnatural links to the most popular metaverse platforms to take advantage of this. The con artist can access the consumer’s virtual wallet and transfer its consent through a smart contract once the link is activated. Because of this, it is nearly impossible to modify the transfers, making it virtually impossible to recover the stolen cryptocurrency. Some blockchain-based businesses are beginning to include features that allow cryptocurrency to be reported stolen. Virtual real estate investors should incorporate two-step authorization to protect their virtual wallets better to prevent these scams.

Conclusion 

Before purchasing virtual real property, investors should be aware of certain structural risks, such as a platform operator’s broad control over virtual real property rights. Indeed, fraudulent meta Virtual property rights will become more complicated as DAOs become marketable. Investors should also be aware of the immutability of cryptocurrencies and smart contracts.

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