New Economy in the Metaverse: Buying Digital Land, Getting a Mortgage, and Creating Business
The Metaverse is a whole new world that has yet to be fully built. Anything you can do in the real world, you can do in the metaverse; the only difference is that instead of consuming that content, you’re experiencing it – the possibilities are endless. Perhaps that’s a key part of why so many businesses and tech-oriented figures are entering the innovative virtual space.
According to an estimate by MetaMetrics Solutions, sales of virtual property exceeded a value of $500 million in 2021, and that number is expected to double this year.
In an exclusive interview with DailyCoin, CEO of TerraZero Dan Reitzik explained how to identify opportunities in the metaverse and obtain digital land. Before Reitzik started the metaverse project, he was the CEO of DMG Blockchain Solutions – one of the largest crypto miners in North America.
TerraZero is known for being the first company to provide mortgages for digital real estate. The tech company is also the owner of the largest single estate in Decentraland’s virtual world.
TerraZero’s mission is to bridge the real world with the metaverse and help businesses, brands, and entrepreneurs alike to join the metaverse.
“I realized early on that if we want the metaverse to succeed, we need to provide the same tools that people have in the real world into the metaverse and that's why provide things like financing. The whole point is to help entrepreneurs and artists and others build this new world that's emerging because it truly is built by its own users,”
Reitzik explained, outlining the company’s mission.
The Promising New World
Back in the 90s, when the internet first came about, it was a medium through which young people could form careers and own new businesses. As Reitzik emphasizes, the same thing is happening now with the metaverse; young people are going to take over the virtual world, and they’re going to build it, creating businesses, and earning a living in there. It’s going to be a whole new economy, just like e-commerce.
“The metaverse presents a third way to sell products and services. I think that the metaverse emergence is truly a new economy. Just like the Internet became an entirely new economy back in the 90s and early 2000s.”
In the metaverse, if a user wants to build something, whether it’s a game, a storefront, or a concert venue, they have to have land on which to build it.
Different Metaverses
There are going to be two main kinds of metaverse platforms: centralized and decentralized. Centralized metaverses are what Meta is building, where the metaverse tracks data and sells advertisement slots, while decentralized is where the world is created by its own people.
“Decentralized is where I believe the future is, where people have control over their privacy, where there's no company that runs it. There's no CEO of it. It's run by a DAO, ERC-20 type of token, and it's a true democracy,”
Reitzik enthused.
In the future, there will probably be hundreds of different metaverses catering to a variety of different needs and preferences. One will might be all about gaming (The Sandbox), while another may be centered around shopping, and a third one could be more like Decentraland, which is similar to the real world with heavy emphasis placed on social life. They will all have different features and diverse experiences for users to find.
Currently, worlds like Decentraland are the only ones that are developed far enough and which makes the most economic sense for brands to justify having presence there. What makes Decentraland stand out is that in this metaverse there can only ever be 90,000 parcels of land. It’s similar to Bitcoin, which can mine 21 million coins and is deflationary. As more and more people want to become part of Decentraland, the price of land will increase as available land decreases and no new plots are created.
How to Get a Mortgage for Digital Real Estate?
As Reitzik explained, to get a loan for digital real estate, an individual or entity needs to come up with a promising idea that would add something unique to metaverse’s economical expansion.
“We purchase the land on behalf of the customer, the customer has deployment rights for the land, so they can build whatever they want on the land. But TerraZero holds the NFT – which is the title to the land – until the debt is paid off. Then, it’s very similar to a regular mortgage or a small business loan. We don't do a 30-year mortgage, like for a normal house; we do a two-year term, the customer puts a third of the total price, and then we spread the payments over two years.”
There are exceptions, however.
“Every single deal will be different. If we really, really like the project, we'll give them all of the money. Because at the end of the day, it's all about helping create this new economy,”
Reitzik added.
TerraZero has only given out a few mortgages so far, but the company has received hundreds of requests (20-50 daily), of which the majority are dismissed as users are largely looking to speculate and invest only if they can later sell the land for a profit.
The mortgage is high risk, and thus interest rates are typically much higher compared to physical real estate at around 15%-20%.
“We're only interested in financing people that have viable plans for their land that would add to the experience of that metaverse,”
Reitzik underlined.
Payment Methods and Acquiring Land
Even though in the metaverse users can only make purchases with cryptocurrency, TerraZero offers fiat to crypto conversion on the date the contract is signed. The company buys the piece of land that the customer wants, giving the buyer deployment rights so they can build or do whatever they want on that land. The lender then takes the NFT that represents the ownership of the land and puts it on hardware wallets inside a bank safety deposit box.
“When the customer has paid off the loan, then we transfer the ownership NFT to the customer. But during that time that they're still paying us, they can still earn a living, and they can still build whatever they want on their land,”
the CEO explained.
During the process, buyers receive a standard loan document; the collateral for this is the NFT, which represents the ownership of the chosen parcel of land. TerraZero will then hold it until the customer has paid off their debt.
Renting Digital Land Will Soon be Possible
TerraZero’s team is building a new project called ‘Amadea‘ which will launch in Q2 of 2022. The project will help businesses, brands, and entrepreneurs to buy, sell, and even rent land, buildings, stages, concert halls, and more.
On Amadea, users will be able to select their chosen metaverse to buy or rent property in, yet Reitzik claims that the holy grail of the metaverse is creating interoperability between the worlds, which would allow users to take their avatars from one world and use it to explore in another.
On the Flipside
- There’s high risk involved given that the virtual land purchased in the metaverse may never become a popular place and may even cease to exist at some point in the future due its reliance on a number of technological and business decisions made by the platform.
- Returns from investments in the metaverse are uncertain, as the very concept of the metaverse is still in the development stage.
- The price of digital property is closely linked to the price of cryptocurrencies, which are very volatile by nature.
Text source: DailyCoin.com
