Decentraland is one of the most ambitious projects in the crypto space. In a world where virtual reality is estimated to grow a compound annual growth rate of 40%, the Decentraland team hopes to become a dominant player in a potentially lucrative market.
Decentraland can be described as VR-enabled Second Life built on a blockchain. For those unfamiliar, Second Life is a game where players can create virtual avatars to explore a digital world. On Second Life, players purchase land, build homes, and interact with their fellow players. One interesting thing that Second Life helped pioneer is the adoption of virtual economies.
Digital currencies have always been part of games and virtual worlds. These digital currencies work the same way currencies work in real life: You use them as a medium of exchange, a unit of account, and a store of value. But it was only in the 2000s where the virtual economies really took off. Robust economies began forming on popular games like World of Warcraft and Second Life where players tradee virtual property for real-life cash. Gaming currencies no longer only had value in a game, they now have value in real life.
So why Decentraland?
Decentraland tackles the core issue of ownership in a digital realm. In the digital world, ownership is an illusion. While a Second Life player may “own” their real estate and the items they have purchased, true ownership belongs to the game creators. As an example, according to Linden Lab, the company behind Second Life, “Linden Lab owns the bits and bytes of electronic data stored on its servers and….will solely determine any disposition of the electronic data stored on its servers and will have no obligation to reproduce, process, transfer, extract or recreate any data from its servers.” While a user may think they own their Second Life property, legally they don’t.
On Decentraland there can be true ownership. Real estate on Decentraland is represented by a non-fungible cryptographic token called LAND. Users can purchase LAND using a native token called MANA. Similar to the real world, where a record of ownership is kept for a property, on Decentraland ownership of LAND is recorded on the Ethereum blockchain. And unlike Second Life, the owner of the LAND has full control over how it is used. As stated in Decentraland’s Terms of Service, “All acquired Land parcels in the virtual world are owned by their acquirer, giving him/her control over his/her parcel of Land.”
Decentraland’s economic activity
Decentraland’s data is pulled from NonFungible.com, which has done a fantastic job at recording data points for major non-fungible tokens.
From Jan. 21, 2018 to Oct. 22, 2018, Decentraland has recorded close to 39,000 transactions representing $23.5M in MANA spent. Note that this data represents the transfer of Land contracts on Decentraland and not the trading volume of MANA on third-party exchanges.
The dates with the most transaction volumes are January 21, 2018, with 10,988 transactions and January 22, 2018, with 23,370 transactions. These dates are likely when Decentraland deployed their Land contracts from the LAND auction they held in December 2017. Because these two dates include data prior to the launch of the Decentraland Marketplace, we will exclude them from our following charts as we don’t believe they accurately represent regular economic activity (amount spent and number of transactions) on Decentraland.
As such, below we chart Decentraland’s economic activity up until Oct. 22, 2018.
Unsurprisingly, there was an increased amount of economic activity in the month following the release of the Decentraland Marketplace, as LAND owners and potential buyers finally had a venue to trade their assets. This economic activity began to taper off, reaching its lowest point in August, before trending back up in September. This trend is more clear if we chart economic activity on a monthly basis.
Here we see that September saw the highest amount of economic activity compared to the other months with 1,110 transactions representing approximately $1.5M in MANA spent. It is not initially clear what caused this uptrend. There was no noticeable increase in the number of active MANA active addresses in October, nor was there an increase in the price of MANA as we chart below.
However, if we chart the amount spent on LAND vs. the number of active addresses of MANA, we do notice something interesting.
The above chart shows us that a small number of addresses — approximately 200 — contributed to the uptrend in September. In fact, the data shows us that one address (0xf16a25a1b4e6434bacf9d037d69d675dcf852699) contributed to over 36% of the economic activity in September — spending $555k in MANA over 312 transactions to purchase LAND. This hints at the entry of a large buyer on Decentraland as the address was inactive prior to Septemeber.¹
Decentraland’s LAND market
Next, we take a look at the market forming around LAND. Each parcel of LAND is 10M x 10M or 33 ft x 33 ft in size. As mentioned earlier, owners of LAND can do whatever they want with it — building property, renting, or selling.
The highest price paid for a parcel of LAND is ~$175,000. The average price paid for a parcel of LAND is ~$602, while the median price is ~$164.
The most-exchanged parcel of LAND is 53, -87, which has traded nine times.
The ten most active LAND buyers spent over $4M on LAND.
The ten most active LAND sellers, not including Decentraland’s LAND distribution proxy, spent over $1.9M on LAND.
¹ Because addresses are pseudonyms, we can’t tell whether the owner of this address is actually a new buyer or just a new address created by a buyer already on Decentraland.
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A look at Decentraland data and why people are paying up to $175k for virtual properties written by Steven Zheng @ https://www.theblockcrypto.com/2018/10/30/a-look-at-decentraland-and-why-people-are-paying-175k-for-virtual-properties/ October 30, 2018 Steven Zheng