Decentraland (MANA)

other Sep 02, 2024

Decentraland, in simple terms

Decentraland is a virtual world built on Ethereum where you can explore, create, and own things, with everything running on blockchain technology.

It's basically a huge open-world game, like Minecraft.

This means that the virtual land, items, and assets in Decentraland are owned by the players as NFTs, not by a company. You can buy, sell, or trade these digital items, with the native token MANA.

What problem are they solving?

In traditional online games or virtual worlds, the company that owns the platform controls all the digital assets. If the platform shuts down or changes its rules, users can lose everything they've created or purchased.

Everything from Football cards in FIFA to skins in Counter-Strike could in theory be NFTs and therefore player-owned. But these platforms are run by a single company that can make the cards and skins worthless or take them from you at any time.

This might sound trivial to non-gamers, but people are literally using their life savings on CS skins and FIFA cards.

And whenever a new FIFA game comes out (annually), the old cards become worthless...

The Solution

In Decentraland, all items are player-owned, and can be traded with other people.

This makes the in-game items value outside of Decentraland as well.

Decentraland enables this by making in-game land, items, and creations in as NFTs (non-fungible tokens), meaning players truly own these assets and can sell or trade them independently of the platform.

Artists and devs can make money in Decentraland:

  • Product sales. Designers can curate selections of their work for sale as NFTs in the marketplace.
  • Service provision. Developers can create and sell commissioned NFT templates and designs to other users.
  • LAND leasing. LAND owners can lease the use of their assets for a fee.
  • Flipping. LAND can be aggregated to create ‘parcels’ or ‘estates’ which can be flipped for profit. Like selling offline real estate, this can be highly profitable if you time the market correctly.
  • Entry fees. If you build a particularly interesting asset (such as a casino or a museum), you can charge other users entry fees to explore it.
  • Owning LAND. There are 90,000 units of LAND (digital real estate), which in the bull market of 2021 rapidly grew in value.

My experience in Decentraland

By going to ​https://decentraland.org/play/​, I entered the metaverse.

First, I had to pick "an event" to join. There are hundreds to choose from, all in different locations in the metaverse:

 
 

I decided to try the "VegasCityDLC" event.

I made a character called "NotFinAdvice" and jumped in.

A DJ was playing some music and a few NPCs stood around offering mini-games.

It was kind of awkward to play, and it lagged a lot. That's probably a hardware issue on my end.

Moreover, I played directly in the browser. They recommend downloading the app to make the experience smoother.

After playing the mini-game, I got rewarded with an NFT asset:

 
 

I could sell this NFT on OpenSea for MANA, ETH or MATIC, in theory.

Not my first time playing

I spent a couple of hours in a Casino in Decentraland back in 2021.

And three years later, it felt exactly the same.

I'm not impressed by the UX development...

I would love to see smoother gameplay and more activity.

Maybe I picked a bad event, or maybe the activity is low as I'm in Norway and most players are in other time zones.

Adoption & Partners

The most important metric for Decentraland is the number of players.

More players = More adoption.

If Decentraland manages to reach "critical mass", the number of players will start growing exponentially due to the network effect (kinda like Facebook).

Unfortunately, the only ones roaming Decentraland are nerds like me and early adopters...

Below you see how many players there are in Decentrland:

  • Daily Active Users: This number refers to the unique wallet addresses interacting with Decentraland's smart contracts on a daily basis as tracked by DappRadar​.

Back in 2021, at its peak, Decentraland peaked at 5,000 active daily users, so the decline has been stark.

 
 

This extreme drop-off in interest is likely due to the bear market combined with a declining hype around the metaverse in general.

Back in 2021, "everyone" was talking about NFTs and the metaverse. Facebook even changed its name to Meta.

No wonder why the valuations of Decentraland and its competitors skyrocketed.

They also got some big names to dip their toes into Decentaland:

  • Samsung: Opened the Samsung 837X virtual store in Decentraland, offering immersive digital experiences, including quests and NFT rewards.
  • Coca-Cola: Launched its first NFT collection in Decentraland with a virtual rooftop party featuring special giveaways.
  • Sotheby’s: Established a virtual gallery in Decentraland to host NFT art auctions, mirroring their physical London gallery.

So what's going to happen this time?

Will the metaverse hype return?

Will Decentraland reach the highs of 2021?

Probably not...

Here's why:

The Future of Decentraland

Let's do some quick math and define a new metric I'll call "User value" (UV).

We'll divide the "Market cap" of Decentraland by the number of "daily active users":

MC / DAU = UV

$563M / 250 = $2.25M

So, currently, each DAU is valued at almost a million dollars.

That is insane.

But let's ignore the insanity for a moment... This is the crypto market, after all.

Let's figure out what the user value was at the peak in 2021:

Market cap in 2021: $9.5B

Peak daily active users in 2021: 5,000

So, the user value in 2021 was: $9.5B / 12,500 = $1,9M

So the UV is currently higher than at peak metaverse-hype.

That doesn't make sense to me, knowing what I know about the crypto market.

Nevertheless, there's only one way for Decentraland to reach the market cap highs of 2021 of almost $10 Billion:

It needs more users, and to keep those users coming back.

And what needs to happen for more users to join (and stay)?

In my opinion: Virtual Reality.

Imagine Decentraland but in VR.

How cool is that?

I'd jump in the second I saw the announcement.

No more typing on the keyboard, you get to talk directly with other players.

I've tried social rooms in VR before, and it feels more real than I ever imagined.

In fact, I watched the FIFA World Cup finale in 2022 between Argentina and France in a virtual teather with 12 other people from around the world using a Meta Quest 2.

Furthermore, events like concerts, games, and museums would be 10X more fun.

The DJ playing music at the event I tried out, for instance, wouldn't just look like a random YouTube livestream, it would feel real.

And Decentraland knows this. Here's their 2024 manifesto:

The main goal for 2024 will be the development of a new, powerful Desktop Client that will take Decentraland to the next level while laying the groundwork for future VR and mobile versions—an exciting year is ahead! - Decentraland Foundation

Conclusion

Although Decentraland is at the cutting edge of decentralized metaverses, it's too early to seriously invest in it given the other opportunities for more mature projects in other sectors.

I believe Metaverse projects will be better in the next cycle when VR tech has matured and Decentraland has built a compatible desktop client that makes it more immersive.

Then, and only then, will we see Decentrlaand soar to the tens of billions in market cap.

If you're up for the risk, investing at low valuations like the current market cap of $500 million might net you a 100X ROI if they pull it off.

Personally, I'll wait and see.