Virtual reality (VR) is projected to become a $40 billion industry by 2020. Innovations in both VR hardware and software have made for interesting applications, especially in gaming and entertainment. In addition, new products by companies like Oculus and Sony are making VR headsets more accessible to both consumers and developers.
New platforms seek to integrate these new VR technologies with the social element of multiplayer gaming. These allow for more immersive experiences unlike previous virtual worlds like Second Life. To its credit, Second Life popularized not only activities such as social interaction through digital avatars but also the monetization of virtual items and real estate. Rare and unique items in these virtual worlds and online games can reach six-figure prices in real dollars. Demand for such items has even spawned a lucrative black market.
Today’s modern VR platforms leverage emerging technologies such as blockchain to make virtual property ownership and trade more secure. Virtual reality platform Decentraland, for example, uses blockchain to identify and designate ownership of land in its virtual world.
Because of the various possible applications of VR, virtual real estate can now function similarly to real-world properties that they can be sold, leased, and used for virtual activities. Blockchain could help formalize the market for these virtual properties.
Second Life’s developer Linden Labs deserves credit for its attempt to create a virtual real estate market. Virtual real estate in Second Life was initially meant to function as in-world spaces where users can place game objects such as items and architecture. Users could get larger spaces by paying for premium subscriptions. Eventually, the in-platform economy evolved to allow those who own large stretches of virtual land to sell or rent these spaces out through Second Life’s own marketplace. It was not long until marketers saw potential to increase their visibility by using these spaces to promote their brands on the platform.
Other companies went as far as creating virtual storefronts on Second Life. However, Second Life’s novelty and buzz eventually wore off and usage of the platform dropped. Some believe that it was because Second Life failed to fill a commercial need. Users also complained about lag issues and poor performance. Second Life supposedly still has 600,000 active usersaccording to Linden Labs, but it isn’t the definitive online gathering place that it once was. Brands eventually had to drop their participation on the platform and focus on building their online presence on other social platforms with wider reach such as Twitter and Facebook.
VR, Virtual Worlds, and Blockchain
Still, virtual reality is just virtual. You are not buying a property in the Bahamas so don’t go booking flight tickets. However, new VR technologies are bringing a resurgence of interest in virtual worlds. Improved headsets now showcase high resolution display panels that allow for better visuals. Hardware such as tactile gloves can now also offer finer controls and haptic feedback creating more immersive experiences for users.
Virtual worlds seek to capitalize on these developments. Virtual reality platform Decentraland, which recently raised $24M ICO in less than 35 seconds, allows decentralized apps to be built on top of its technology. In addition, instead of essentially subscribing to a virtual world service like Second Life, Decentraland is not controlled by a central authority. Developers and users can enjoy a more open platform to experience VR. The decentralized platform enables users to monetize virtual property beyond what is typically allowed by the terms of services of most virtual worlds. Many online games, for instance, disallow trading of virtual properties for fiat currencies or any trading activity done outside their own platforms.
As an investment opportunity, virtual real estate offers rewards comparable to real world properties. High traffic areas in virtual worlds are prime locations for commercial use and brand visibility. For example, virtual arenas in sports games have banners and displays showcasing sports brands. Marketers pay game developers top dollar for their brands to be showcased on these spaces.
Virtual real estate owners would be able to use their properties for similar purposes. Modern VR platforms can even allow for a variety of campaigns that maximize the sensory capabilities of new hardware. Businesses could create showrooms where customers can see products in 3D and even “feel” them.
As such, the perfect storm seems to be brewing for VR. The improvements in the VR hardware are allowing for richer experiences. “Environments in VR are completely malleable, down to the setting, physics, and social parameters. This allows blockchain developers to experiment in ways that would be impossible in the physical world,” writes Franco Zeoli from Zeppelin. New decentralized VR platforms also liberate users from the usual constraints imposed by virtual world developers. Blockchain ensures that the trade of virtual properties becomes fair and secure.
Beyond gaming and virtual exploration, developers on decentralized platforms could even look into creating virtual venues for events such as concerts, shows, and sports. Similar to real-world events, marketers can use these to push brands and even virtual merchandise. As with most tech developments, the market ultimately determines if these developments will live up to their potential. But given the current speed of progress in VR, exciting possibilities await as the technology and market continue to evolve.
I am an entrepreneur, a writer and advisor. Currently involved in a number of ventures in the proptech, fintech and blockchain arenas.