Inside the Booming Metaverse: How Decentraland’s Virtual Economy is Changing the Game for Digital Assets and Real Estate
Decentraland has been in development since 2015 and launched its virtual world in 2020. It is a decentralized platform that enables users to create, experience, and monetize content and applications in a virtual reality environment. As a blockchain-based platform, Decentraland provides an open and transparent environment where users can interact with each other, buy and sell virtual real estate, create unique 3D experiences, and even build their own digital economy. With its growing user base and innovative features, Decentraland is quickly gaining attention as a leading player in the emerging metaverse space. Since its launch, Decentraland has grown rapidly, attracting a diverse community of users from around the world. The platform uses the Ethereum blockchain, which enables users to create and trade unique, non-fungible digital assets. One of the most exciting aspects of Decentraland is its potential to create a new kind of digital economy. By allowing users to create and trade digital assets and services within its virtual world, Decentraland offers a decentralized alternative to traditional online marketplaces. This is particularly relevant in the current climate, where concerns about data privacy, content moderation, and centralized control have led many users to seek out decentralized alternatives. In this article, we will delve deeper into the various components of Decentraland’s ecosystem and explore how they fit together to create a dynamic and engaging virtual world. Additionally, we will examine some of the challenges facing Decentraland and the broader metaverse ecosystem and consider how the platform is positioned to address these challenges going forward.
Author: Stephan Raubach
Introduction to Decentraland: A Brief Overview
Decentraland is a blockchain-based virtual world platform that allows users to create, experience, and monetize content and applications in a virtual reality environment. Decentraland has been in development since 2015 and launched its virtual world in 2020. Decentraland’s ecosystem consists of two native tokens: MANA and LAND. The MANA token is the utility token of the Decentraland platform and serves as the primary means of exchange for all goods and services within the virtual world. On the other hand, the LAND token is an ERC-721 token representing a unique virtual plot of land within the Decentraland world, which users can buy, sell, and use to create their own custom experiences. The LAND token enables users to take ownership of their virtual real estate and create a wide range of experiences, from games and art installations to virtual storefronts and social spaces. As Decentraland’s ecosystem continues to grow, the role of MANA and LAND in the metaverse economy is likely to become even more critical, and understanding its tokenomics is crucial for anyone looking to get involved in this exciting new space.
To create a decentralized free market economy, Decentraland employs immutable blockchain technology and offers various critical features for users to familiarize themselves with in its virtual world. First and foremost, Decentraland allows users to enter the virtual world as a fully customizable avatar. There are many free outfit options to choose from, but users can also spend MANA (the platform’s cryptocurrency) to purchase unique clothing items and create personalized avatars. Each avatar has a Decentraland passport (every avatar in Decentraland is issued a Passport to help manage the user’s digital identity), which connects to an Ethereum-compatible wallet where all MANA and items are recorded. Additionally, users who own a parcel of LAND in Decentraland can become builders, allowing them to add scenes or entire environments to their LAND. No coding is required, as the platform provides a large pool of pre-built scenes that can be applied to any LAND.
Decentraland’s Digital Marketplace
Decentraland’s digital marketplace is a key feature of its virtual world economy, allowing users to buy and sell virtual assets, including LAND, wearables, and other in-game items, using the platform’s native cryptocurrency, MANA. The marketplace operates on a decentralized infrastructure, ensuring that transactions are secure, transparent, and tamper-proof. Furthermore, the platform leverages blockchain technology to facilitate the creation of distinctive, non-fungible tokens (NFTs), which provide users with a sense of ownership and exclusivity over their virtual assets. As Decentraland’s user base expands, it is expected that the demand for these virtual assets will rise, enhancing their value and subsequently propelling the growth of Decentraland’s thriving digital economy.
Tokenomics: The Role of MANA & SAND
Decentraland’s tokenomics are an essential component of its decentralized economy. The platform has two native tokens: MANA and LAND. MANA is the utility token of the Decentraland platform and serves as the primary means of exchange for all goods and services within the virtual world. Users can earn MANA by creating and selling content, participating in events, and contributing to the development of the platform. MANA can also be used to purchase virtual assets such as wearables, avatars, and other digital items within the Decentraland marketplace. Additionally, MANA is used to pay transaction fees on the Ethereum blockchain, making it an essential component of the platform’s infrastructure. The value of MANA is subject to market fluctuations, and its price is determined by supply and demand. As Decentraland’s ecosystem continues to grow, the role of MANA in the metaverse economy is likely to become even more important.
Decentraland’s second native token is LAND, which represents virtual real estate within the Decentraland world. Each LAND token represents a unique, non-fungible piece of virtual land that users can buy, sell, rent, and develop. LAND serves as the foundation for creating immersive 3D experiences within Decentraland, allowing users to build virtual structures and applications on their land. The value of LAND is determined by various factors, including its location, size, and the amount of development on the property. LAND owners can earn revenue by leasing their virtual real estate to other users or by creating and selling their own experiences on their LAND. In addition to providing an avenue for monetization, LAND also serves as a governance tool within the Decentraland ecosystem. LAND owners have voting rights and can participate in shaping the platform’s development roadmap and decision-making processes. Overall, LAND plays a crucial role in Decentraland’s tokenomics, offering a unique opportunity for users to take ownership of their virtual space and participate in the growing metaverse economy.
The classification of MANA according to the ITC:
Economic Purpose (EEP): MANA is listed as a Settlement Token (EEP22TU03).
Industry Type (EIN): The issuer of MANA is active in the field of Entertainment, Sports and Gaming (EIN08ES).
Technological Setup (TTS): MANA is an Ethereum ERC-20 Standard Token (TTS42ET01). The Class “Ethereum ERC-20 Standard Token” captures every token that is implemented by means of the ERC-20 Standard on top of the Ethereum blockchain.
Legal Clam (LLC): The MANA token does not entitle its holder to any legal claim or rights against the issuing organization; therefore, it is listed as a No-Claim Token (LLC31).
Issuer Type (LIT): The dimension “Issuer Type” provides information on the nature of the issuer of the token. Decentraland’s development is overseen by the nonprofit Decentraland Foundation. In 2017, the platform raised $26 million in its initial coin offering (ICO). Based on that information, MANA is classified as a Private Sector Legal Entity (LIT61PV).
Regulatory Framework (EU) (REU): The dimension “Regulatory Status EU” provides information on the potential classification of a token according to the European Commission’s proposal for a Regulation on Markets in Crypto Assets (MiCA, Regulation Proposal COM/2020/593 final). The MANA token qualifies as a Utility Token (REU51UT) according to the definition provided in Article 3 (5) of Regulation Proposal COM/2020/593 final.
DAO and Governance
Decentraland sets itself apart from most virtual worlds by being fully decentralized and governed by the holders of MANA tokens through the Decentraland DAO, rather than being controlled by the company that created it. Each token held by an individual, whether it is MANA, LAND, or Estate, provides a certain amount of voting power in the DAO, with each MANA token providing 1 unit of voting power and each LAND and Estate token providing 2,000 units of voting power. Users can wrap their MANA to create wMANA, which locks it for voting purposes, and unwrap it at any time to transfer or spend it. LAND tokens can be purchased with MANA through the Decentraland Marketplace, while Estate tokens are created from merged LAND tokens. Decentraland’s Security Advisory Board (SAB) oversees the security of the platform’s smart contracts and is comprised of five individuals voted into place by the community. The SAB has the power to delay or reject any governance proposals that may negatively impact Decentraland until fraud risk is minimized.
Standing Out in the Competitive Metaverse Landscape
As interest in the metaverse continues to grow, Decentraland is one of many virtual worlds competing for a piece of the pie. However, Decentraland sets itself apart from the competition through its unique approach to governance and decentralization. While other virtual worlds are typically controlled by the company that created them, Decentraland is fully decentralized and controlled by the community through its DAO. This allows for more user input and control over the platform, as well as the potential for value to be transferred back to the real world. Additionally, Decentraland’s focus on blockchain technology and the use of cryptocurrency further sets it apart in the crowded field of virtual worlds.
A Look into the Future: Decentraland’s Roadmap
Decentraland’s roadmap outlines a bold vision for the future of the platform and its potential impact on the metaverse industry. The platform’s focus on decentralization and blockchain technology positions it as a leader in the emerging metaverse industry. Decentraland plans to continue developing its governance structure to be more democratic and efficient, enabling the community to have more control over the platform’s development. Additionally, the platform aims to improve its user experience, making it more intuitive and accessible to a wider audience. Furthermore, Decentraland plans to introduce new features and capabilities, such as decentralized applications and cross-chain functionality, that could expand the platform’s use cases and appeal. Overall, Decentraland’s roadmap suggests that the platform is well-positioned to compete in the rapidly evolving metaverse industry and could have a significant impact on the future of virtual worlds.
The International Token Standardization Association (ITSA) e.V.
The International Token Standardization Association (ITSA) e.V. is a not-for-profit association of German law that aims at promoting the development and implementation of comprehensive market standards for the identification, classification, and analysis of DLT- and blockchain-based cryptographic tokens. As an independent industry membership body, ITSA unites over 100 international associated founding members from various interest groups. In order to increase transparency and safety on global token markets, ITSA currently develops and implements the International Token Identification Number (ITIN) as a market standard for the identification of cryptographic tokens, the International Token Classification (ITC) as a standard framework for the classification of cryptographic tokens according to their inherent characteristics. ITSA then adds the identified and classified token to the world’s largest register for tokens in our Tokenbase.
- The International Token Identification Number (ITIN) is a 9-digit alphanumeric technical identifier for both fungible and non-fungible DLT-based tokens. Thanks to its underlying Uniform Token Locator (UTL), ITIN presents a unique and fork-resilient identification of tokens. The ITIN also allows for the connecting and matching of other media and data to the token, such as legal contracts or price data, and increases safety and operational transparency when handling these tokens.
- The International Token Classification (ITC) is a multi-dimensional, expandable framework for the classification of tokens. Current dimensions include technological, economic, legal, and regulatory dimensions with multiple sub-dimensions. By mid-2021, there will be at least two new dimensions added, including a tax dimension. So far, our classification framework has been applied to 99% of the token market according to the market capitalization of classified tokens.
- ITSA’s Tokenbase currently holds data on over 4000 tokens. Tokenbase is a holistic database for the analysis of tokens and combines our identification and classification data with market and blockchain data from external providers. Third-party data of several partners is already integrated, and API access is also in development.
Remarks
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Stephan Raubach is a Research Associate at the Frankfurt School Blockchain Center FSBC). He is currently pursuing his Bachelor in Business Administration at the Frankfurt School of Finance. You can contact him via stephan.raubach@fs-blockchain.de and connect with him on Linkedin, if you would like to further discuss FSBC or have any open questions.
