Late last month, Facebook rebranded to Meta as part of its Metaverse push. Metaverse related cryptocurrencies went ballistic as a result, and one of these was Decentraland’s MANA token.
Decentraland Explained
If you’re unfamiliar with Decentraland, here are the bullet points. Decentraland was founded in 2015 by Ari Meilich and Esteban Ordano.
Decentraland was developed by a for-profit company called Metaverse Holdings Limited, which is based in China but registered in the Cayman Islands.
Decentraland’s development is coordinated by the Decentraland Foundation, a non-profit based in California. Decentraland raised over 25 million dollars in a 2017 ICO and went live in January 2020.
Decentraland describes itself as the first-ever virtual world owned by its users. Decentraland’s virtual world consists of 90,000 parcels of land each, which is a unique NFT on the Ethereum blockchain.
There are different types of land in Decentraland, including individual parcels, estates consisting of multiple parcels, districts, which consist of parcels with similar themes, and plazas, which are untradable parcels that act as hubs within Decentraland and are owned by the community.
Parcels of land can be bought and sold on the Decentraland marketplace, which is where you can also purchase wearables and names for in-game avatars. Naturally, these are NFTs as well.
Parcels of land can be modified using the Decentraland builder, which requires no technical ability to use. The Decentraland builder also allows you to create avatar names. Parcels, wearables, and names are purchased using MANA.
MANA is an ERC20 token, and it is Decentraland’s de facto in-game currency. Within Decentraland, MANA can be used to purchase NFTs from various virtual art galleries, it can be used to purchase tickets for virtual events, and it can even be used for gambling.
MANA holders can also vote on any changes to Decentraland’s virtual world, including modifications to land parameters, adjustments to marketplace fees, and the approval of wearable NFT collections.
MANA holders can also vote on the approval of catalyst nodes, which run the servers that host Decentraland’s virtual world. If you want to learn more about how Decentraland works, are sure to check out my last post about the project.
Decentraland Updates
A lot has changed since I last covered Decentraland, and one of the biggest changes happened two days after my last post went live. This was the opening stages of Decentraland’s integration with Polygon, Ethereum’s leading layer 2 scaling solution.
Decentraland recently completed this native integration with the help of wallet connect making it possible to use MANA in Decentraland with near-zero gas fees. Fun fact Polygon’s developers worked with decentralized developers in 2018 to develop more viable plasma the ethereum scaling solution Polygon currently uses.
Decentraland co-founder Esteban Ordano was also an early advisor to Polygon, and Decentraland has been planning a native polygon integration since it launched.
In May, the Decentraland Foundation announced the release of Decentraland’s new and improved Decentralized Autonomous Organization or DAO.
More on this later, Decentraland co-founder Ari Meilich also revealed his new crypto project called Big Time, which is quoted as “A multiplayer action RPG, where you team up with friends to adventure across time and space.”
In June, Sotheby’s opened a virtual NFT gallery and auction house in Decentraland, and this is a big deal because Sotheby’s is one of the biggest auctioneers in the world.
Sotheby’s might be why Boson Protocol subsequently decided to blow 700K on land parcels to build a virtual mall and why a virtual property developer called republic realm bought its own plot of parcels for 900K shortly afterwards.
At the end of June, the Decentraland foundation announced the introduction of community grants in a bid to build up and expand Decentraland.
In August, the Decentraland foundation announced archipelago, a protocol that splits Decentraland into multiple areas rather than multiple servers. Understanding the significance of this requires a bit of context. Prior to the archipelago, each Decentraland server held a maximum of 100 users. Now, this would make its virtual world feel empty as those 100 users would often be spread out. With archipelago, select areas in Decentraland will basically be hosted on their own servers, and users will automatically switch servers when moving between these areas.
Put simply. Archipelago makes it possible for all of Decentraland’s active players to interact with each other instead of being isolated in siloed servers.
At the end of August, Decentraland introduced its first five in-game quests.
In September, the Decentraland foundation introduced its play to earn incubator in a bid to create a game that can compete against the likes of Axie Infinity, and you can learn more about Axie Infinity by using that link below.
In October, Decentraland held its Metaverse festival, which featured Deadmau5, Paris Hilton, and other famous folks that I’m too old to know about.
A few days later, Facebook announced its Meta rebrand, and MANA went to the moon.
MANA Price Analysis
As you can see, MANA has been on an unsustainable rally, but the correction isn’t coming nearly as quickly as I thought. My initial technical analysis suggested that MANA should have crashed down to around a dollar 50 in the days after it hit 5 dollars, but we’ve yet to come to that price point at the time of the shooting. I can think of a few reasons why and none of them has to do with Facebook.
First, the rest of the crypto market continues to rally, and as the saying goes, the trend is your friend. Most importantly, Bitcoin dominance has been on the decline meaning money is moving into altcoins such as MANA.
Second, the amount of MANA being held in Greyscale’s Decentraland Trust has more than doubled from less than10 million MANA to nearly 20 million MANA since March this year. This suggests there is significant institutional demand for Decentraland.
Third, NFTs. The value of land parcels has exploded over the last year, with the cheapest parcel currently priced at over ten thousand dollars. According to nonfungible.com NFT, trading volume on Decentraland’s marketplace during that time came close to 50 million dollars.
Fourth virtual events, Decentraland has seen dozens of events over the last few months, and these have attracted thousands of new users. I’m sure many of them picked up some MANA along the way.
Fifth, gambling, Decentraland is famous for its decentralized casinos, and these attract thousands of MANA holders every month, and this number only continues to grow.
If these trends continue, they could take MANA past 5 dollars in the longer term. However, I don’t know how much higher MANA could go in the short term. This is because Decentraland currently finds itself in the company of some seriously powerful cryptocurrencies on the leaderboards. Relative to those, MANA is overvalued for the time being.
Moreover, MANA seems to be seeing some cell pressure coming from its community treasury, and this conveniently brings me to the Decentraland DAO
Decentraland DAO
As I mentioned earlier, MANA holders can vote on changes to certain parameters in Decentraland. This has been the case since February 2020, when the Decentraland DAO was introduced. When the Decentralan DAO was created, its treasury came pre-loaded with 222 million MANA, which was around 10% of MANA’s initial supply.
To ensure the Decentraland community doesn’t overspend, the MANA in the DAO treasury came with a 10-year vesting schedule. Over 100 million dollars worth of MANA has been unlocked so far, and this means 100 million dollars is ready to be spent by the Decentraland community with 400 million left in the chamber. Why hasn’t all this money been spent yet?
Initially, Decentraland’s governance was entirely on the chain. This meant that every time someone wanted to cast a vote, they had to pay an arm and a leg in ethereum gas fees. Obviously, this priced out many people and resulted in historically low voter turnouts, which is not what you want when you’re deciding on how to spend millions of dollars for a community-driven project.
Decentraland’s new DAO is different in that it takes most of this voting activity off the chain. This is done using a snapshot, a governance platform that some of you have probably heard of before.
Almost every DAO in cryptocurrency uses snapshot, and this is because it simply takes a snapshot of the tokens being held by the Metamask wallets that are voting on a particular proposal. In other words, snapshot allows on-chain voting with no transaction fees.
With snapshot in place, the Decentraland community has been dipping into those millions in the DAO treasury, and there are four types of Decentraland grants that you can apply for.
A community such as educational YouTube content about Decentraland. Content creator specifically within Decentraland’s virtual world. Pcontributor aka participating as a developer on decentralized GitHub and gaming, which is self-explanatory. Successful applicants can receive up to 240 thousand dollars in MANA.
Decentraland Roadmap
Given that Decentraland direction is decided by the community, the project doesn’t have a concrete roadmap. Decentraland’s upcoming milestones can be found on its governance portal, and there are a few proposals worth pointing out.
Lo and behold, a recently passed proposal gives the Decentraland Foundation the authority to create a concrete roadmap for Decentraland. This proposal was passed about a month ago and has yet to be enacted, meaning this roadmap has yet to be released.
Another proposal that caught my eye has been enacted, and that’s to bring creators, brands, and celebrities to Decentraland to do things like NFT drops and advertising. The proposal projects that the first wave of famous folks are bringing is expected by early 2022, and I reckon we’ve seen a few of them fly in already.
By that time, we could see in-game XP thanks to a proposal called Project G, which will allow Decentraland users to earn experience points from completing certain tasks and interacting with certain objects in the Metaverse.
Other interesting proposals that have already been passed include adding advanced avatar actions such as sitting, lying down, shaking hands, and improving the quality of live streams within Decentraland by switching streaming protocols.
A few active proposals carry similar themes, with one proposing a safety system for in-game chats, a second proposing to make it possible to block users that bother you, and a third proposing to create group chats.
All three of these active proposals are currently passing, and it looks like they will all be approved. There are three additional active proposals that also look extremely promising, and the first is the creation of a digital mall called the GamiMall.
As far as I understand, the GamiMall will feature NFTs, which, when purchased, will generate a random reward that adds an element of gambling and play to earn to otherwise regular NFT purchases. The team is hoping to have the GamiMall open for business within the next year, assuming the proposal passes and it looks like it will.
If you think this proposal sounds crazy, it pales in comparison with the proposal, which seeks to make Decentraland’s Metaverse interoperable with at least four other crypto Metaverse worlds. This will be done using an advanced protocol called IPSME, which was apparently developed by the proposer, who holds a PhD in distributed computing and has worked in interoperability since the 1990s.
No dates have been detailed for this particular proposal, but it will be a game-changer for Metaverse cryptocurrencies if it delivers on its promises.
The last active proposal worth pointing out is one that seeks to bring Decentraland to Polkadot via Astar Network, one of Polkadot’s more popular projects. This proposal doesn’t appear to be all that popular, but it looks like it might still pass.
If it does, we could see Decentraland on Polkadot in five months time, assuming Astar Network secures a parachain slot, of course. You can learn more about Polkadots parachain slot auctions and which projects I believe will succeed by following that link below.
Decentraland Concerns
With all Decentraland’s upcoming milestones, you might be thinking MANA has a clear path to the moon. Unfortunately, there are some very serious risks that could pull the project back down to earth.
The first is competition, specifically from Big Time, the upcoming crypto game created by Decentraland’s co-founder Ari Meilich. You could argue that Decentraland doesn’t really fall into this niche, but it’s the niche the project is hoping to enter in the long term, as revealed by its focus on play to earn.
While I don’t know all that much about Big Time, I do know that Ari managed to bring over a few Decentraland devs to his side. This isn’t all that surprising, given that Decentraland’s founders have been relatively absent when it comes to Decentraland’s operations, and this might be because the project was more of a practice run.
In a recent presentation, Esteban noted that the reason why Decentraland was built on Ethereum was that there wasn’t any other smart contract cryptocurrency at the time. The way he said this seemed to imply that he wished they’d launched Decentraland on a different blockchain instead, and it’s probably too late for that.
Oddly enough, the apparent apathy Decentraland’s founders have had towards the project has so far managed to protect it from a second risk, and that is regulation.
The crypto rating council gives the manor token a score of 3.75 out of 5 on the security scale. In plain English, MANA is close to being like company stock in the eyes of U.S. regulators.
MANA is currently listed on multiple U.S. exchanges, and this implies that this regulatory risk is not present. Otherwise, those U.S. exchanges wouldn’t take the risk of listing MANA. However, the Decentraland community’s recent move to give the Decentraland foundation the authority to create a roadmap could increase this risk. Even though this decision was decided in a decentralized MANA, I don’t think regulators are going to care since the end result is the same. The people who built the project are in control of it.
The risk of this happening is likely low, but the same can’t be said about the regulatory backlash Decentraland could face over its in-game gambling. To my understanding, the kind of online casinos operating in the Decentraland is illegal in the United States, and many decentralized users are Americans.
More importantly, online gambling involving cryptocurrency is something singled out by the financial action task force in its finalized crypto recommendations. This requires the companies providing these crypto gambling services to collect KYC. In this case, that would be decentral games and Atari.
Besides the fact that these companies probably don’t have the means to implement KYC, this kind of crackdown could see users flee from Decentraland, effectively destroying most of its user base.
Conclusion
When I first heard of Decentraland, I remember being sceptical of whether it would get any traction. After all, who needs a virtual world when you have the real world. As time goes on, though, it’s becoming clear that there is value in both. This was evident long before Facebook rebranded to Meta, and it’s something that nobody really noticed until Facebook put the Metaverse on stage.
The crazy thing is that Decentraland is still in its infancy, even though it’s one of the oldest Metaverse projects out there. It’s amazing to see that development continues despite all the problems the project has experienced publicly and behind the scenes. It’s certainly headed in the right direction, and even though MANA might be overvalued relative to Decentraland’s fundamentals today, this probably won’t be the case tomorrow.
This all depends on whether the Decentraland devs can deliver on the demands of the community and the commands of the Decentraland Foundation. Consider the fact that the Decentraland DAO still has more than half a billion dollars of MANA at its disposal. This means Decentraland has one of the largest treasuries in cryptocurrency. If this money is used wisely, Decentraland will become the incredible Metaverse that it was meant to be.