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The internet in general, and Web3 in particular, have opened up a brave new world of opportunities for investors hoping to capitalize on digital assets — assets you can buy, sell and trade just like you would their physical counterparts. In fact, the digital asset market is projected to reach $56.42 billion in 2023 and $102.7 billion by 2027, according to Statista. Digital real estate is an important part of that market, but is it worth your investment?

See: 3 Things You Must Do When Your Savings Reach $50,000

What Is Digital Real Estate?

Strictly speaking, the term “digital real estate” refers to virtual real estate — the digital version of physical real estate. It’s located in the virtual world known as the metaverse. But the term also includes other types of digital “properties,” such as:

  • Website domain names
  • Websites
  • Mobile apps
  • Online stores
  • Blogs
  • Podcasts
  • Social media profiles
  • Digital artwork
  • Online courses

What all these assets have in common is that you can buy, sell and/or leverage them to make money — just like with physical real estate. That makes digital real estate a potentially good investment for investors who understand the technologies and their risks.

How Does Virtual Real Estate Work?

Digital assets like websites and online stores are easy to understand because they’re familiar. Not so with virtual real estate, which exists in the metaverse.

The metaverse is made up of “persistent” virtual worlds, meaning the worlds continue to exist even if no one is using them, as opposed to temporary environments created on the fly. The persistent nature of metaverse worlds lets users buy or build in-world assets, including virtual real estate.

Virtual real estate consists of plots of land, residences, stores, hotels, entertainment and performance venues and potentially any other virtual representation of real estate you can imagine. The properties “live” on blockchains, which are public ledgers that record direct transactions between individuals or entities. Most of the properties exist within one of four major metaverse game platforms: Sandbox, Decentraland, Voxels and Somnium, all of which are built on the Ethereum blockchain.

When you buy physical real estate, you get a deed that proves ownership. Non-fungible tokens serve that purpose in the metaverse. NFTs are collectible digital representations of a digital asset. Because each one is unique and exclusive to that asset, trading an NFT is the same thing as trading the asset. In this case, the asset is digital real estate.

It’s important to note that assets aren’t interoperable — you can only interact with them in the metaverse for which they were created.

Ways To Invest In Digital Real Estate

Just about every digital asset has money-making potential. The trick is to select assets with manageable learning curves and risk profiles that match your risk tolerance.

Buy Virtual Real Estate

Most virtual real estate is bought and sold on the secondary market. You can buy it on the platform’s own marketplace or on a third-party NFT marketplace such as Blockee or OpenSea. Either way, compare prices of similar recently sold virtual real estate to make sure you’re getting a good deal.

Be warned, though — virtual real estate doesn’t come cheap. As of Aug. 23, Blockee has two Voxels plots listed: one for five ethereum (equivalent to $8,452.03) and one for 10 ethereum. Transactions occur in cryptocurrency, so you’ll need a crypto wallet and an account on a cryptocurrency exchange such as Coinbase to buy real estate NFTs.

So, what do you do with your real estate once you purchase the NFT? You can create a passive income stream by building a house and renting it to an individual user, or constructing a commercial building and leasing it to businesses or even erecting billboards and selling advertising space, like Tokens.com is doing with a tower it built in Decentraland. You could turn it into a shop for digital products you or other makers create. Create a concert space, book talent and sell tickets to the show.

The possibilities are endless. But so are the risks. If the platform goes under, your investment goes down with it.

Trade Collectible NFTs

Real estate is just one of a nearly endless list of assets you can trade via NFTs. If you’re a creative type, you can “mint,” or create, your own art or music NFTs and sell them on Blockee, OpenSea or another NFT marketplace. Alternatively, you can invest in NFTs minted by other artists. They might represent a standalone work or part of a collection, such as the wildly popular CryptoPunks. You’ll have to watch the marketplaces to see which artists and which collections are likely to appreciate in value.

Invest In Metaverse Stock

Metaverse stocks are stocks in companies that are directly involved in building the metaverse, as well as companies that support it — hardware and software providers, for example. Some are highly speculative. However, major players like Meta and Nvidia are also integral to the metaverse space.

Trade Domain Names

Domain names are technical necessities, and they’re also important marketing tools. However, there are roughly 1.1 billion websites already, according to Siteefy, so it can be tough to find an available domain name that is both memorable and drives traffic to a website.

Research some popular niches and create domain names for them according to Google guidelines. You can research and buy domain names on any number of web hosting sites. Later, if someone tries to buy a domain name you own, they’ll have an opportunity to buy it from you.

Start a Blog

If you’re not technology minded but you have information to share or interesting stories to tell, a blog might be a good way for you to invest in digital real estate. The easiest way to start is with a template from a platform like Wix. You’ll also need a hosting platform to deliver the content to viewers, and a domain name. Once you’ve published a lot of content and gained a following, you can monetize the blog in any number of ways, from charging readers a subscription fee, to affiliate marketing, to selling advertising space to other businesses.

Is Investing In Digital Real Estate Worth It?

For the right investor, a digital real estate investment could be a good way to diversify your portfolio or even start a new business. However, some investments, like virtual real estate and other NFTs, are highly speculative. Research the assets and the platforms that power them before you invest, and never invest more than you can afford to lose.