Decentraland made headlines when users began making more than 500 percent profits from purchasing and selling digital land. This was in 2018, and the decentralized virtual world has only grown in popularity since then.
Decentraland is the first and most well-known Ethereum-based multiplayer role-playing metaverse. While you can never physically relocate into or visit Decentraland, you can purchase and sell land there—and possibly make a lot of money doing so.
Decentraland: What is it exactly?
Decentraland is the most rapidly expanding crypto-based virtual world. It was built in 2016 by a group of developers in Argentina, and its user interface is heavily influenced by Second Life and Minecraft, two of the world’s most popular online games.
Decentraland differs from previous virtual worlds in that all places (referred to as LAND in the game) save for roads and plazas can be purchased, sold, and developed by game players. Ownership of the virtual properties is documented on the Ethereum blockchain to facilitate transfer and prevent fraud.
Landowners have control over the material that appears on their parcels of land, which are characterized by a set of computer coordinates.
Content can range from static 3D scenes to interactive systems like games, casinos, art galleries, and whatever else developers can think up. (Personally, I’d like to see a virtual NFL-style football league where you can own teams, trade players, etc., and vie for the first Meta Superbowl. Note to self: pitch this to the NFL.)
There is a thriving community of 3D animators, artists, and developers working on these virtual places, providing new ways for people (as avatars) to connect and engage.
Each LAND plot measures 16 meters by 16 meters and is represented by an NFT (or non-fungible token). A non-fungible token is a blockchain data unit that represents a unique digital property (in this case, virtual real estate). NFTs cannot be used interchangeably.
MANA, Decentraland’s official cryptocurrency, can be used to purchase LAND. MANA can be purchased and sold on Coinbase and other cryptocurrency exchanges. One MANA was worth $3.03 at the time of this article. The highest price paid for a plot of land was 2,000,000 MANA with a current value of over $6M.
LAND chunks can be purchased through the game’s marketplace as well as third-party marketplaces such as OpenSea. Keep in mind that cryptocurrencies are volatile, and most people buy crypto for speculative purposes.
Decentraland’s total parcel count is limited to 90,000. The common spaces, plazas, and roadways in Decentraland are owned by the developers and cannot be purchased or sold by users. One of the primary drivers of the value of LAND in Decentraland is scarcity. Space is limited in this metaverse, just as it is in the real world, which makes owning real estate in this metaverse potentially valuable. Even in the metaverse it’s location, location, location.
What do you do with digital real estate?
The importance of community in Decentraland (and other virtual worlds) cannot be overstated. Virtual land, like real-world real estate, is valuable not only because of where it is located within each metaverse, but also because of how owners choose to develop the land. MANA (Decentraland’s digital currency) and land acquisitions are fueled by excitement about the potential of what might be built in the metaverse. To entice users to visit virtual land, there must be a reason for them to do so, such as an exciting game, intriguing content, digital art to look at, new people to communicate with, or even money to win at in-world games. The following are some popular developments in Decentraland:
- Art galleries where owners exhibit and sell their digital NFT art, such as Cryptokitties and other NFT collectibles
- Casinos where people can win money MANA
- Ethermon, a monster catching game and other game sites
- Branded content, such as Atari arcade, which will have games playable within Decentraland
- Music venues where DJs and artists perform and host concerts
As more real-world brands use the metaverse to engage, advertise to, and connect with users and consumers, digital real estate within the metaverse is likely to gain in value. For example, land that sold in Decentraland for $500 in early 2019 is now worth more than $7,860.
Decentraland: Real Investments in Make Believe Property
As noted earlier, location sells. Parcels closer to Genesis Plaza (the starting point of the game) and various districts such as Vegas City, Crypto Valley, or Dragon City are often more valuable than others. Likewise, land parcels at intersections are more valuable than those that are not. Opening a store? You’d want it on a corner.
Purchasing contiguous parcels in Decentraland can result in the formation of a “estate.” Owners of estates are able to construct greater developments. In Decentraland, people from all over the world can attend virtual gaming conventions, meet in a virtual area to watch a real-world sporting event, or pitch ideas to possible investors in Crypto Valley, a virtual Silicon Valley. That is why it is critical to own a large number of nearby lots. This land can be rented out, providing owners with cash flow as well as potential revenue from tenants.
Always look at comparable assets, just like you would when completing due diligence on real estate in the actual world (comps). When purchasing a home, one of the first things you should do is research comparable properties in the neighborhood to get a sense of price and value.
The same principle applies in Decentraland—you should base your assumptions on the sales history of similar parcels in surrounding places rather than the sales price itself. Nonfungible.com can tell you how much the parcels are worth, and Opensea.io can show you where the parcels are trading.
The Decentraland Land Rush
Household names are making their mark on the metaverse, and reputable investors are following suit, seeing metaverses as fresh investment prospects.
Atari has announced a collaboration with Decentraland, and they intend to take over a vast estate in Decentraland, where gamers will be able to play some of Atari’s most iconic games, including Pong, Break-out, Asteroids, Missile Command, Centipede, and many others.
Regular folks are turning to the metaverse for amusement and interaction in record numbers at a time when socialization has been forced to the internet. The more information there is for users to interact with, the more interesting (and lucrative) the metaverse becomes, drawing more users and, as a result, more corporate sponsorships.
Follow the money. When companies like Atari, Nike and crypto exchanges like Kraken start opening virtual spaces on Decentraland you know things are getting serious.
The NFT market tripled in size last year, and this trend is expected to continue into 2021. Headlines have touted record-breaking trades, such as Beeple’s digital NFT piece, which recently sold for more than $69 million at Christie’s. Art, music, collectibles, wearables, and other digital assets are being repackaged as NFTs, and as people continue to invest in NFTs, they will need a place to store, show, and wear their digital assets, which will be in metaverses such as Decentraland.
If you are ready to buy land on Decentraland, we created a simple guide for you to read on how to do so: How to buy land on Decentraland? – A simple guide
Virtual land is emerging as a real investment, but putting real money into digital real estate can be daunting. As with any investment, virtual or not, do your homework. Understand what you’re buying and more importantly why you’re buying it.
This article is intended for educational purposes only. The author is an investor in Decentraland.
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Jay Speakman is a technology writer based in San Francisco, California. He writes on the topics of blockchain, cryptocurrency, DeFi and other disruptive technologies. Clients include Avalanche, Be[in]Crypto, Trust Machines and several blogs devoted to blockchain gaming. He will not rest until fiat currency is defeated.