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The idea of “virtual land” sounds ridiculous. What’s the point of paying for land you can’t even walk on?
In order to wrap our heads around this idea, we should consider the foundation already in place. Do you remember those Pokemon Go stampedes? Pokemon Go was a great example of how far augmented reality could get people invested. Despite appearances, the game was anything but a fad. In fact, as of this summer, one in five minutes spent on the top 20 games on Android is devoted to Pokemon Go.
But virtual and augmented reality isn’t just for video game nerds. Sweden used a virtual reality simulator to create a virtual embassy. Reuters, the famous international news agency, stationed its reporters to be virtual embeds. Basketball superstar Steph Curry uses a form of VR with Eclipse’s Strobe Goggles to practice the timing on his shots. VR may actually be what saves Nefertari’s tomb; ancient Egypt’s version of the Sistine Chapel.
Here’s another one: world-famous rock band U2 once played a live virtual reality show. Sound bizarre? Maybe you should just watch it for yourself.
Now that you’re shocked and maybe even a little horrified, that brings us back to real estate.
No matter how bizarre the idea of virtual land sounds, there’s nothing bizarre about making money. Virtual and augmented reality markets are projected to make $162 billion in just the next two years. If VR is good enough for music, gaming, sports, and science — why not property?
That’s the story going on behind the simulated world of Decentraland. And there’s legitimate money in real estate VR. One man paid $15,000 for 62 plots of land. A credit network bought nearly $150,000 in square feet. So how does it all work?
Decentraland is powered by the blockchain. If you still can’t wrap your head around what a blockchain is, we’ve got you covered. To recap, the blockchain is a shared network acting as the public ledger that is typically reserved for banks; just as banks ensure that every transaction is legal and verifiable, a blockchain does the same. The difference? Banks do business in one central headquarters. The blockchain is decentralized, allowing a network of strangers to keep everything functioning.
It’s worth highlighting the blockchain precisely because real estate is one area the blockchain could potentially disrupt. Because the blockchain is a database, it has the ability to secure various records, such as verification of ownership, property deeds, and document validation. The prospect of cutting out real estate middle men is what has allowed tech startups to create the International Blockchain Real Estate Association.
So what does this mean for real estate?
The first thing to note about real estate VR is that the money within it is based on cryptocurrency. You don’t have to know much about bitcoin to know that it’s incredibly volatile. Wikipedia’s founder has called bitcoin a bubble. Even people who have invested in Decentraland’s Genesis City say that all of this “sounds crazy.”
So why does real estate VR deserve the oxygen of publicity if it looks to be built on a house of cards that don’t even exist? Well, the main reason is that real housing is built on its own deck of cards. A recent report found that home prices “are the least affordable since the third quarter of 2008, when the financial crisis erupted.”
Minimum-wage workers in the US can’t afford a two-bedroom apartment anywhere. In fact, to get a sense of this, consider the state with the cheapest housing; Arkansas. You would need to make $13.84 an hour to afford a two-bedroom rental home without paying more than 30 percent of your income. Housing trends aren’t apocalyptic, but some areas are bleak. Does VR offer a potential solution? That’s the million dollar question.
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