What do you do with a $ 69 million piece of art that doesn’t physically exist?
That’s the question facing the Singapore-based investor calling himself Metakovan, who made headlines last month when he bought the digital artwork “Every Day: The First 5000 Days” by American artist Beeple at Christie’s.
The job is a non-fungible token (NFT), a new type of virtual asset that has its ownership status and authenticity verified by blockchain. NFTs have exploded in popularity in 2021, and prices have skyrocketed.
Metakovan, whose real name is Vignesh Sundaresan, plans to display the artwork in four virtual world settings. He is working with architects to design gallery complexes that the public can enter via web browsers or virtual reality technology.
But art is just one part of a new economy of blockchain-based virtual worlds where land, buildings, avatars, and even names can be bought and sold like NFTs, often for hundreds of thousands of dollars. In these environments, known as a metaverse, people can walk with friends, visit virtual buildings, and attend virtual events.
Metakovan’s plans are an ambitious undertaking, but it says it is the world’s largest NFT investor. Its collection of NFT and other crypto assets, the Metapurse fund, is valued at $ 189 million, according to NonFungible.com, a site that aggregates sales history data from NFT markets.
“The current NFT Cambrian explosion you see is about acquisition – people want to buy NFT, gobble up as many as they can,” said Anand Venkateswaran, also known as Twobadour, who runs the Metapurse fund with Metakovan.
“But it’s just the tip of the iceberg. The real explosion will happen when they are able to … experience these NFTs as intended. If it’s a virtual parcel of land, you should move into it, have an immersive experience in it.”
In what will be one of the biggest names to join the party, video game maker Atari (ATAR.PA) told Reuters it planned to launch its own blockchain-based virtual world and would announce details soon.
Online environments are going to be “very, very big,” regardless of fluctuations in the price of bitcoin, said Frederic Chesnais, head of Atari’s blockchain division and a former CEO of the company. NFT’s real estate could one day reach millions of dollars, he added.
Investors warn, however, that while large amounts of money are flowing into NFTs, the market could represent a price bubble, with the risk of major losses if advertising is turned off. There could also be great opportunities for fraudsters in a market where many participants operate under pseudonyms.
A PLOT OF VIRTUAL LAND: $ 500K +
The NFT frenzy has increased interest in blockchain-based online environments. The best known are Decentraland, Cryptovoxels, Somnium Space, and The Sandbox, where virtual real estate prices are reaching new highs.
Decentraland has made more than $ 50 million in total sales, including land, avatars, usernames, and wearable devices such as virtual sets. A piece of land measuring 41,216 virtual square meters sold for $ 572,000 on April 11, which the platform said was a record.
Another Decentraland parcel sold for $ 283,567 on March 21, according to NonFungible.com, while Somnium Space said a property on its platform sold for more than $ 500,000 on March 16.
Metaverse enthusiasts liken the rush to buy virtual land to the scramble for domain names in the early days of the internet. There are currently a few thousand sole proprietorships on each of the major blockchain-based platforms.
His theory is that as more people congregate in these settings, parcels of land in central locations will be highly sought after due to the amount of visitor traffic.
“All the virtual land and these virtual spaces are basically real estate that experiences will start to focus on, that attention will start to focus on,” said Twobadour.
“That’s where all the attention is and that can be monetized in a million different ways.”
So far, it is a relatively small number of people that are driving up land prices on these worlds.
In Decentraland there were 334 buyers in March, sending monthly land sales volumes over $ 4 million, up from $ 767,400 in February with 184 buyers and $ 246,134 in January with 111 buyers, according to NonFungible.com.
An NFT investor named Whale Shark, whose collection was valued at over $ 20 million by NonFungible.com in February, said he spent 200 of the cryptocurrency Ether on land on Cryptovoxels and another 200 on The Sandbox in 2018 and 2019.
Those properties cost about $ 60,000 each back then, but are now worth more than $ 400,000 each, he added, speaking on condition of anonymity.
Some virtual worlds have their own cryptocurrencies: Decentraland’s MANA has soared more than 3,500% over the past year, according to Coinbase.
VIRTUAL FESTIVAL, ANYONE?
Some of the early virtual land investors who bought early are now selling to companies, said Samuel Hamilton, community and event leader for the Decentraland Foundation.
Atari, prior to its plans to open its own blockchain-based world, licensed a retro arcade within Decentraland and is slated to open a casino, while an area called “Crypto Valley” is home to several businesses. encryption.
Decentraland has hosted a virtual fashion show in collaboration with Adidas, where the designs were auctioned as NFT. It is also attracting the interest of musicians who can perform in the space, selling tickets and merchandise as NFT.
“We will have several well-known world festivals, all on stage, and when we get to that point we expect hundreds of thousands or even millions of people,” said Hamilton.
Last year, American rapper Travis Scott drew an audience of 27.7 million visitors to five concerts within Fortnite, the popular online game owned by Epic Games.
IS ‘CRYPTO WINTER’ COMING?
Sebastien Borget, co-founder of The Sandbox, described business activity within virtual worlds as a new nation in the making and said that the NFT-based economy would surpass the real world within a decade.
However, there are many in the fledgling industry warning of the dangers that lie ahead for investors.
“I hope there will be a crypto winter in the coming months, the whole NFT boom will explode and then all the value will completely collapse,” said Ben Nolan, founder of the virtual world Cryptovoxels.
“Doing NFT as an investment or as a way to make money is really inadvisable.”
However, he sees a future for virtual worlds and NFTs.
“Do I think most people will use virtual worlds? Probably not, but I think a lot of people will and I think NFTs are a big part of that growth,” he said.
“In fact, walking with another person in a virtual space and looking at art together is a really nice way to spend time,” he added.
Whale Shark said the vast majority of NFTs were not commercially viable and he hopes that only a small number will emerge as winners.
But some investors, like Australia-based Mateen Soudagar, aka DCL Blogger, have little interest in reinvesting in the real world.
Soudagar says that he has made millions of dollars through cryptocurrencies and NFTs, but instead of withdrawing money, he keeps around 75% of his money in crypto assets and acknowledges that many of his peers do the same. Other than upgrading your laptop, your lifestyle hasn’t changed.
“If you are a believer in movement, then you think the world will move into this space,” he said. “So when you put it in fiat, you go backwards.”
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