Blockchain technology is quietly disrupting how we create and trade digital assets online. From Crypto Kitties to Gifto tokens, people are starting to realize the potential for unlimited creativity and commerce using virtual items over decentralized networks.

None understand this more than the team at Decentraland, who are launching an entire virtual reality world for users to acquire digital plots of land to build upon, redesign, and even monetize. This will all be done through their utility token, MANA.

The only constraints are the limits of your imagination.

How it Works

Powered by the Ethereum Blockchain, Decentraland combines an immersive virtual universe similar to video games like Skyrim, with the addition of a 3D layout: All built on a decentralized peer-to-peer network.

To begin, users first acquire LAND, which is a non-fungible digital asset that is purchased in the game. Once you purchase LAND, you can craft 3D scenes, create games, or even launch unique educational or tourism services on it.

The most amount of LAND a user can acquire is 33 x 33 feet. LAND (like cryptocurrencies) are also intentionally made scarce in order to increase demand and make sure the value of the network grows as more users adopt it. All available pieces of virtual land are sold on their marketplace.

Multiple pieces of LAND can form together to create a district. Districts are communities that form their own themes like Vegas, Halloween or a Battleground.

MANA Token

Decentraland uses its own ERC20 token called MANA to pay for LAND and other goods and services within the virtual world.

When MANA tokens are spent on LAND, they are later burned in order to lower the number of coins circulating, which mathematically increases demand as the network grows. It also helps reinforce the idea that LAND is finite even in a virtual space.

Decentraland Architecture

The Decentraland protocol is comprised of three layers:

  • Consensus layer: This is where land ownership and its contents are tracked using Ethereum’s Smart contract technology
  • Land content layer: Virtual assets are downloaded and rendered using a decentralized distribution system.
  • Real-time layer: Enable users to connect with each other peer to peer.
Overview of Decentraland
Overview of the Decentraland Protocol. Source: decentraland.org

Decentraland is built using A-Frame, an open-source web framework for building virtual reality experiences. Users can also build unto the virtual world by creating models in SketchUp or Blender then importing those models into the platform.

History

In 2015 Decentraland began its first proof of concept experiment called ‘Decentraland’s Stone Age’. They developed a platform for assigning ownership of digital real estate to users on a blockchain.

The digital real estate assets were initially implemented as pixels on a 2D grid. Each pixel contained metadata identifying the owner and describing the pixel’s color. In early 2017, the team started developing the Bronze Age, a 3D virtual world divided into land parcels.

The owner of each parcel could link it to a hash reference file, using a modified Bitcoin blockchain. In late 2017, the MANA token was created to allow users to claim parcels of LAND and interact with each other within Decentraland.

At the end of last year, Decentraland held a Terraform event where the beta version of their ‘Iron Age’ was launched.

Today the team is working on their ‘Silicon Age’, which is described as a full-fledged 3D world, with full VR support and customization of the laws of physics. Live in the blockchain. They have also secured partnerships with imToken, districx and Aragon to provide their services.

Decentraland Team

Decentraland Management Team
Founding Team – Image via Decentraland.org

The management team consists of a project lead (Ari Meilich) and a Tech lead – (Esteban Ordano). The founders are credited with developing Streamium and Bitcore.  Streamium is a decentralized trustless video streaming using Bitcoin payment channels. Bitcore is a full stack for Bitcoin and blockchain-based applications

Ari’s previous experiences include being the co-founder of Benchrise, a customer relationship management tool to find and engage with top talent based on their latest projects, interests and mutual connections.

He has also worked as a market research analyst for CRV, a VC and private equity firm. Ari graduated with a degree in Neuro-science and Neuro-Economics from NYU.

Esteban was previously the founder of Zeppelin Solutions, which builds software to grow and protect the core infrastructure of an open, global economy, powered by blockchain technologies. Prior to that, he was a software engineer at Bitpay and Google.

Decentraland’s advisory board consists of highly experienced people in the Blockchain space.

Decentraland Advisory Board
Decentraland Advisory Board. Source: decentraland.org

For example, Xiaolai Li is the founder of the InBlockchain which is one of the most influential investor groups in the Chinese blockchain industry. They also have Jake Brukhman which is the founder of CoinFund. The Coinfund was the advisory firm that assisted with the Kik Kin token crowdsale.

Competition

Decentraland is currently the market leader in VR platforms built on the blockchain.

Mark.Space does something similar by providing VR and AR compatible web spaces powered by Blockchain. However, they are not as far along as Decentraland in terms of development.

High Fidelity and Sansar are non-blockchain platforms that sell virtual reality experiences.

Token Sale and Performance

On August 8th, 2017, Decentraland launched its ICO, raising $24 million in about 35 seconds, making it one of the most successful ICO’s of last year.

Roughly 10,000 investors contributed to the sale, and as many as 7,000 were disappointed to discover their transactions did not go through in time.

Since launching its token sale, MANA has performed well in comparison to the broader crypto market. Its price was $0.02 when it first hit exchanges, then rose up to a peak of $0.26 during the market boom period in early January. From February to April the price ranged between $0.11 and $0.07, which is relatively stable for an Altcoin, and still more than twice its launch price.

MANA Price Performance
Overview of the Decentraland Protocol. Source: coinmarketcap.com

MANA almost reached its previous peak on May 3rd at $0.19, before dropping to its current price of $0.10 per token. ICO drops reports that Decentraland ICO investors have made an average of 4x their money since the token sale.

MANA tokens are available on Binance’s exchange and on the Huobi Crypto Exchange.

Strengths

Given the unique positioning of Decentraland in a large market, there are at least two strengths that we see for Decentraland and the MANA token.

  • Decentraland is a highly creative project that provides users with multiple use cases: developing applications, curate content, launching brand advertisements, gathering digital collectibles, connect with others through online forums, chat groups and districts, etc.
  • The company is leading a new path by going after the virtual reality market (projected to be worth $215 billion by 2021) and combining that with Blockchain technology, which is conservatively estimated to have a market size of $60 billion by 2024.

Challenges

While Decentraland is no doubt in a favourable position in the virtual reality market, there are a number of challenges that we foresee for them going forward.

  • The current state of Blockchains may make it hard for Decentraland to scale. The team has admitted in its white paper that content distribution across a peer-to-peer network is going to be challenging because of slow download speeds and ensuring that content is sufficiently distributed around the network without loss. Other Blockchains like Filecoin are addressing these issues and the Decentraland team hopes to utilize their technology once it becomes production ready.
  • The team also anticipates problems with filtering content for mature audiences (like pornography, violence, or gambling) are difficult to solve within a decentralized network. An exciting virtual platform like Decentraland is sure to attract people of all ages. Therefore some form of self-regulation amongst the community must be implemented to prevent minors from being exposed to mature content. At the moment the team is suggesting a reputation-based approach, users could select one or more providers of whitelists/blacklists that track the type of content being served on each LAND parcel.
  • The team, although, although talented, seem to be lacking in experience when it comes to managing virtual reality platforms. They may need to get some advisors from the VR space to match the ones they’ve gathered from the Blockchain space.

Conclusion

Decentraland is a great example of Blockchain technologies being utilized outside of the finance sector. Virtual reality is a huge market that can only be enhanced when developed on top of a scalable and fully functioning blockchain infrastructure.

Empowering users to use their imagination in a digital environment with very few limits can provide immense value, but can also be a challenge to scale if Blockchains themselves do not become much faster.

By marrying virtual reality with the blockchain, Decentraland is carving a new path, while simultaneously competing with platforms on both sides. Centralized VR platforms will initially beat Decentraland in content distribution speed, while Decentraland will hope to have an advantage through its virtual marketplace for buying land with tokens that are tradable for real money.

Ultimately, if Decentraland can overcome its challenges and gain mass adoption, the opportunities for creativity and commerce in a Virtual Reality/Blockchain hybrid ecosystem are endless.

Featured Image via decentraland.org

Posted by Toju Ometoruwa

Toju Ometoruwa is a Northeastern University alumni who is the co-founder of Pazima, a start-up that provides secure lending options for low-income workers. His passion is to empower communities across the African diaspora through the blockchain.