Few blockchain projects capture the imagination more than Decentraland. Investors, developers, gamers, and even mainstream media have shown interest in the project. But why does it generate such a buzz in the blockchain community and beyond? What makes it unique, and what are the risks and possibilities of Decentraland? This article will answer your most pressing questions.
What is Decentraland?
Decentraland is a virtual world owned by its users. The world is built on the Ethereum blockchain and is divided into 90,000 parcels of LAND. Each parcel of land is ten square meters and can be bought and sold using Decentraland’s cryptocurrency MANA. Because each parcel of land is connected to another parcel, developers encourage people to explore the world that will be built around them.
Contrary to games such as Minecraft or Second Life, Decentraland runs on decentralized servers. This means the game runs across a number of machines owned by its users, instead of servers owned by the Decentraland team. In fact, the Decentraland team plans to eventually leave the platform, to make sure no authority or central control remains. Developers, who already have access to Decentraland’s SDK, can build whatever they want and no one can bring it down.
Work began on Decentraland in 2015. The team has gone through self-labelled historic periods of time to indicate the progress they’ve made. During its Stone Age, Decentraland was a proof of concept for allocating ownership of digital real estate to users on a blockchain through a Proof Of Work algorithm. It was an infinite 2D grid with some metadata per parcel that could identify the parcel’s owner.
The Bronze Age started in late 2016. It saw the team start work on a 3D virtual world divided into land parcels. They developed a first world viewer too. The viewer is no longer available, but if you’re tech-savvy and can run a node, you can still explore the world.
Currently the team is in the beta launch of the Iron Age. This will eventually offer the ability to explore Decentraland with other people, communicate with them through a peer-to-peer communication system, adds scripts for interactive content, allow crypto payments for in-world transactions, and more.
A Unique Combination of Trends
Here’s why Decentraland is a unique combination of different trends:
Firstly, it’s a virtual experience accessed through VR headsets. When done right, Virtual Reality (VR) can draw you into a digital world like no other technology can. Walking through Genesis City, Decentraland’s giant capital, will be a much more immersive experience in VR than it would be if it were only a desktop game.
Secondly, the Decentraland team has so far stayed true to the blockchain concept as originally proposed by blockchain and Bitcoin founder Satoshi Nakamoto. This means decentralized servers, peer-to-peer communications, crypto payments, and no central authority. Long live the decentralized revolution.
Thirdly, much of the focus of the Decentraland team seems to be going into developing games and making it easier for other developers to create games on the platform. In fact, the team has plans to invest $5 million in blockchain gaming startups and sees its gaming product as one of the fundamental parts of the Decentraland platform.
This focus on gaming comes is a wise move. The gaming industry is set to grow to $138 billion by 2021. Although currently still a very niche part of the global gaming market, decentralized gaming (DGaming) seems to be set for explosive growth.
Fourthly, Decentraland will allow its users to trade digital collectibles. As humans, we’ve always liked collecting things. This urge is no different when it comes to the digital world. Because of the chained, secure, and distributed nature of the blockchain, users can now be sure that whatever they’re buying digitally is unique and has value.
The combination of these four big trends is a big reason why Decentraland attracted so much attention for the two big events it organized in 2017:
I Want MANA
On the 19th of August 2017, the Decentraland team had its hotly-anticipated Initial Coin Offering (ICO). The team issued 2 billion MANA tokens at a price of around $0.024 per token, and 2,500 investors bought all the MANA in a matter of seconds. Decentraland raised $25 million in less than a minute, making it one of the fastest-selling ICOs ever.
After the ICO, the cryptocurrency entered the open market and price hovered around $0.01 before skyrocketing up to $0.29 in December. As the time of writing, $MANA is hovering around $0.08. The ICO was the first indication of the massive interest in Decentraland. The second indication that the team was onto something was Decentraland’s first LAND auction.
I Want LAND
The Terraform LAND auction took place on December 15 of 2017. It allowed investors to put their MANA to good use by buying a large portion of the 90,000 parcels of land that Decentraland consists of. In a few days, investors bought 70,399 parcels of land for prices ranging from 1,000 MANA ($80 in today’s MANA price) up to 600,000 MANA ($48,000), spending a total of 161,000,000 MANA ($12,880,000).
Considering all that LAND was from then on owned by the people, a secondary marketplace developed, where people could buy, sell, and rent their land. Have a browse on Decentraland’s marketplace and see what parcels of LAND are up for sale. The value of each parcel will depend on its proximity to the Genesis city centre (where players will spawn when they enter Decentraland), its adjacency to a main roadway, and whether it’s located in one of the city’s themed districts (more on that later).
The cheapest parcel of LAND available today is close to the edge of the map, not connected to a roadway, and not located in a particular district. It’s priced at 9,500 MANA ($760). However, this piece of land was bought for 1,000 MANA ($80) during the action. If the parcel of land sells, the investor will have achieved an excellent return on his money.
The most expensive parcels of land cost millions (and a few even billions) of MANA. These are more likely to be investors who believe in the long-term value of the Decentraland project and who aren’t looking to sell their parcel any time soon (although you never know).
While single parcels of LAND have their value, there’s significantly more value in so-called “estates”, or multiple parcels of LAND joined together. More parcels means more space to build whatever you want to build.
Additionally, the bigger your estate, the higher you’re allowed to build too. The formula for calculating your building height is 20m * log2(n+1). This means a single parcel of LAND limits your building height to 20 meters, while you can build up to around 56 meters with six parcels of LAND.
On the marketplace today, the cheapest estate costs 23,500 MANA and consists of two parcels of LAND. It’s not connected to any roadway, but it is relatively close to the eastern city center and it’s very close to the largest estate in Decentraland (which is also for sale, but you need million-dollar pockets for that one).
Surely It’s Not All Upside?
One of the biggest and highest-profile proponents of the Decentraland project is Barry Silbert, who often tweets about the project. Barry is the CEO of Digital Currency Group, which owns CoinDesk, one of the biggest bitcoin and crypto news sites. The Digital Currency Group has allocated 5% of its portfolio to Decentraland.
The BBC also did a story on Decentraland, mainly focusing on investors buying and spending significant amounts of money on virtual land. It introduced Decentraland to a broader audience.
As Decentraland attracts more attention from this broader audience, the project will likely come under close scrutiny and face some form of skepticism. This is no different from other disruptive ideas and technologies. This being said, there is still merit in looking at the legitimate concerns that people might have with the project.
- Content Curation
The decentralised nature of Decentraland means that anyone can build whatever they want and no one can bring it down. Trolls and grievers have an opportunity to create a world full of pornographic or violent content.
Considering the developer team’s decision to have no central authority, this is likely to happen to a degree. But the team will have to find a way to deal with this type of content. They’ve already said to be working on filters where users can whitelist or blacklist certain parcels of LAND to combat R-rated content.
- Fun to Play
Decentraland will ultimately have to be fun to play to really take off. If it’s boring, poorly designed and not user-friendly, the initial enthusiasm will wane. The Decentraland team realizes this and is placing significant focus on the gaming part of the platform.
Much of how fun it is to play will depend on the content that LANDowners build on their parcels of LAND. There’s a risk that the majority of LANDowners see the platform as a quick way to earn a significant return on their invested money, leaving the ground undeveloped until scooped up by the next investor.
However, considering the value of their LAND will go up depending on the quality of the content built on it, LANDowners have an economic incentive to do something unique with their parcels of LAND.
- Technical Challenges
Because Decentraland is a combination of four big trends all still in their early stages, the team is likely to face significant technical challenges. For one, VR requires low latency to be a pleasant experience, but blockchain transactions are notoriously slow.
Additionally, retrieving files from a peer-to-peer network will depend on download speed, and a distributed peer-to-peer storage system is traditionally slow. And the platform’s scripting APIs will have to be secure enough for its users to hold private keys and authorize micro-payments.
These challenges are laid out in Decentraland’s white paper, so the team has been aware of the technical challenges from the very beginning. Nonetheless, they remain difficult challenges that will need significant innovation on the side of VR and blockchain.
Okay, But What Are the Possibilities?
Decentraland is an open virtual world where people can experience the world’s most innovative technologies. Investors can make real money selling, buying and renting LAND. Developers can experiment with new technologies and build whatever they want without restrictions. Nowhere else do they have the decentralized freedom they have in Decentraland.
But the possibilities extend far beyond investors and developers. Already, entire districts are being built dedicated to a particular theme. Gamble with your MANA in Vegas City in the knowledge that the blockchain allows for a much more transparent process than in Vegas, Nevada.
Or pay a visit to Crypto Valley, Decentraland’s business district. That’s right, Decentraland is open for startups too, who can rent parcels of LAND and build offices to work with their colleagues in VR. Given today’s increasingly remote workforce, Decentraland could be an opportunity to meet with the team and build a stronger community.
You could advertise your brand too! Imagine thousands of virtual avatars stepping in the vehicles they bought, built, or win in a drag race a few parcels down, driving and flying past a big billboard with your brand on it. Who wouldn’t consider that innovative?
Imagine a vibrant world with thousands, if not millions, of digital avatars walking around. A jet shoots through the air. You dodge out of the way of two custom cars drifting through the streets and bump into a friend who just won 1,000 MANA playing blackjack in Vegas City. He invites you over to his parcel of LAND, but you decline. You want buy your own parcel of LAND and are on your way to meet the owner.
Although still virtual, Decentraland is somehow more tangible than any other online or virtual world. Everything feels like it has a bigger impact in Decentraland. It’s not just a game. What you build, stays. What you buy, you own. What you gamble away, you lose. Buying and flipping LAND can make you wealthy in real life.
Decentraland allows you to be yourself in a virtual world. The platform is a unique combination of trends that makes this digital extension of yourself more real than it has ever been.