Taipei resident James Zhou says real estate in the real world is too expensive.
Key points:
- The value of digital land in virtual worlds is rising
- Chinese tech giants are keen to get into the metaverse market, but face government barriers
- There are warnings that virtual property investment is a gamble
And so, because the 27-year-old believes virtual worlds might soon take off, he has decided to get into a different market.
In March, the financial product trader spent $15,390 worth of cryptocurrency on 11 pieces of virtual land in a world owned by a US company.
A few months later, from his home in Taipei, he bought more US virtual real estate for $14,344.
Mr Zhou said his purchases on the platforms Sandbox and Decentraland represented an investment and he wanted to help grow the virtual real estate business.
“Then I can make a profit … just like the real world.”
And he is not alone.
More people, including celebrities, are diving into the virtual real estate market, which has attracted traders and buyers worldwide.
Prices are on the rise – one parcel of land reportedly sold for $3.3 million.
To Mr Zhou’s delight, he discovered that JJ Lin, a pop singer famous in China and South-East Asia with more than 1 million followers on Twitter, invested $171,000 in virtual real estate near Mr Zhou’s site on the same platform.
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“[It’s] pretty cool,” he said.
Digital real estate markets are one aspect of metaverses — virtual worlds where users can work, socialise, shop and game, using augmented and virtual reality.
Some metaverse platforms allow users to make purchases with cryptocurrency.
But buyers in Asia, like Mr Zhou in Taiwan and JJ Lin who lives in Singapore, are investing their money in virtual worlds largely run by American-owned companies.
The US is at the forefront of this virtual frontier.
Interest in the metaverse surged in October when Facebook changed its name to Meta, a signal to its increasing focus on virtual reality products.
Meanwhile, Chinese tech giants, keen to get into the market, are facing barriers from the Chinese government.
Meta (formerly Facebook) has launched a virtual reality app where people hold in-person meetings as avatar versions of themselves.(Supplied: Facebook)
‘The next battleground for internet technology’
Although people in China can buy virtual property in Chinese metaverses using the local yuan currency rather than crypto, the Chinese Government has repeatedly issued warnings about such purchases.
Earlier this month, state media issued a warning specifically about property sales in the metaverse, arguing any purchase carried risks of volatility, fraud, illegal fundraising and money laundering.
But despite these warnings, both the Chinese government and Chinese tech giants want to grow their involvement in this new virtual frontier.
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Tencent, China’s biggest internet game company, has welcomed potential business opportunities in the metaverse.
Meanwhile, Chinese companies are rushing to register trademarks related to the metaverse.
In November, China formed the Metaverse Industry Committee, affiliated with the state-supervised China Mobile Communication Association, to explore metaverse platform development.
The committee told local media the metaverse was the third generation of the internet and brought opportunities for new heights in global innovation.
“China sees the metaverse as a cutting-edge technology market and probably the next battleground for internet technology,” said Li Wei, a China economy expert at the University of Sydney.
Li Wei is monitoring the metaverse debate in China.(Supplied)
Dr Li said as China develops metaverses, there was a possibility of another technological divide.
“Under the current geopolitical situation, it is possible to see two metaverses: the Chinese metaverse within the Great Firewall and the Western one outside,” Dr Li said.
Dr Li said investments in these worlds, like property, were attractive to young people who could not afford traditional investments.
“I think it is a response from the younger generation of the dissatisfaction about how our society and the economy are organised,” she said.
Space to play or pause, M to mute, left and right arrows to seek, up and down arrows for volume.As Facebook goes ‘Meta’, we ask what is a metaverse?
Digital property investment a ‘gamble’
Dave Karpf, a US internet expert from George Washington University, cautioned that digital real estate did not have “fundamental value”.
Dr Karpf said buyers believed they were in the early stages of the digital future and that the investments would exponentially increase in value, but this was “pure, unregulated speculation”.
“It is gambling. Some people will get lucky and strike it rich. Many will lose their investment. And many more will surely be defrauded,” he told the ABC.
Companies around the world are investing millions in virtual reality.(Reuters: Tyrone Siu)
Zhou Jian, the vice-president of cloud technology at Chinese e-commerce giant JD.com, said the metaverse was based on blockchain and non-fungible tokens, which meant each digital property was unique.
He told the ABC that metaverse platforms, like Sandbox and Decentraland in the US, did not set property values; rather, the users would decide them.
“If a platform created 1 million square kilometres of ‘land’, but no-one uses it, then it is valueless. However, if they have a billion users, it will be priceless,” he said.
“Ultimately, the buyers will use the property to erect commercial buildings or other facilities to run businesses, like shopping malls.”
Back in Taiwan, James Zhou is hoping his land ends up in the “priceless” category.
Zhou Jian says the metaverse can provide similar living and playing experiences as the physical world.(ABC Southern Queensland: Lucy Robinson)