Anyone who has ever been involved in a real estate purchase knows how complicated the process can be. Determining where and what one wishes to purchase, deciding how best to finance the transaction, even knowing exactly why buying something makes sense in the first place—there can be a lot to juggle before one even encounters the complexity of forms, contracts and payment mediums. While going through the process of purchasing real estate in real life, I became curious about purchasing real estate in the metaverse. What exactly would I be purchasing? What can I do on my new virtual real estate? How can I prevent trespassers? Eager to find out (and assuming it would only cost a few hundred bucks), I set out to buy some real estate in the metaverse.
Despite my technological savvy, it was unclear to me how to get into the metaverse, let alone where to start looking to buy real estate. It’s not like real world real estate (yet), where I can just download Zillow or Redfin and get started—or even contact a broker. Of course “how to enter the metaverse” is just a Google search away, and I clicked on an article marketed as a step-by-step guide. It wasn’t long before I reached Decentraland, which is a software that allows users to interact in a virtual world.
Going to Decentraland? Bring a Wallet.
Eager to login and start exploring, my first decision was whether to sign up using a digital wallet or as a guest. (To sign up as a guest, your data is stored locally and your experience is limited.) what is a “digital wallet” and how do I use one? Luckily, the site has a helpful section to facilitate this. I decided to go with a Coinbase wallet since I already have a Coinbase account.
To create a wallet, I had to create a username and enroll in either FaceID or a passcode. Then I was prompted to back up my wallet because if I lose my recovery phrase, I would not be able to access my account. Backing up a crypto wallet is always a good idea because if you happen to lose your wallet, lose the device it’s stored on, or inadvertently delete the wallet application, your precious coins may be forever lost. So of course, I manually backed up my wallet. Next, I had to connect to my wallet through Fortmatic, which allowed me to use my phone number or email address to connect to an Ethereum-based app without a browser extension. Finally, I had to connect my Coinbase Wallet to my Coinbase account. I was now one step closer to being able to check out Decentraland.
Down the Road of Exchange Rates
I only had $6.48 in Bitcoin in my Coinbase account, so I converted that to Ethereum (because I would later have to convert Ethereum to MANA on Decentraland to purchase things). The exchange rate was 1 BTC for 13.4910 ETH. I was reasonably sure that would not be enough to purchase my new virtual plot of land.
Plus, I needed to add currency to my wallet for my digital signature. Specifically, I needed at least 0.0054 ETH to deposit to my Decentraland wallet. To add $50 of ETH to Decentraland, there is a miner fee ranging from $6.75 to $8.98.
So, I bought $350 worth of ETH (again, thinking virtual real estate would only cost me a few hundred U.S. dollars), which included a Coinbase fee of $13.43. (You’ll note, as with real-world real estate, fees are prevalent, at least in this corner of the metaverse.) This payment was facilitated instantly with PayPal (if I processed through my bank account, it would be on hold for several days).
Now that I had purchased the ETH, I had to transfer it to my wallet so that I could later convert it to MANA. To transfer $100 USD in ETH to my wallet, there was a “Network Fee” of $5.34 or 0.001806 ETH. So I had to spend about $19 to get 0.14 ETH (approximately $350) in my wallet. Naturally frugal, by now I was feeling a bit skeptical that a plot of virtual land lay at the end of this effort.
Avatars and TOS
It’s true that in real-world real estate transactions, the mortgage company, bank, etc. need direct access to an account and some information, but this felt like a different level of institutional trust. Plus the fact that losing a simple recovery phrase could cause me to lose access to my virtual wallet … that was a hard pill to swallow.
A Fee Too Far and the High Price of Real Estate
Once I was finally in, I roamed around Decentraland for about 30 minutes. It was nostalgic—it reminded me of playing The Sims in the good ole days. Eventually, I found the Metaverse Trade Center in Genesis Plaza. There was a “master trader” inside named Charlie. After clicking “E” to talk to Charlie, I selected “Yes” when asked if I’d like to learn more about the Decentraland Marketplace.
Here, I learned that all transactions on the blockchain require a small gas fee that is paid to the network of miners. The Marketplace also charges a small fee on all transactions. But this fee “doesn’t go into anyone’s pocket. Instead, it gets burned,” which means that it can no longer be used on the network (essentially a disinflationary mechanism). Then I was directed to visit market.decentraland.org, where I could buy or sell LAND (a non-fungible digital asset divided into parcels—what virtual property is called in Decentraland), wearables or unique memes.
But once I finally took a look at the prices of the LAND on sale, the game was over. The “land” available for purchase in this particular metaverse would cost me upwards of $15,000. There was the option to purchase with a mortgage, but I had already given up too many fees and granted full browser permissions. I just couldn’t fathom giving up more of my money and privacy.
There are undoubtedly a ton of kinks—legal and otherwise—that still need to be worked out when it comes to purchasing metaverse real estate. At this early stage, we can already see some stark differences from real life real estate transactions—namely the privacy, data security, and governance issues. As someone who missed out on the opportunity to become a millionaire from the Bitcoin boom, I can understand the desire to want to get in the game early. But we could all benefit from exercising caution when engaging in these innovative transactions.[View source.]