Without question, blockchain is one of the most significant technology disruptions in human history and, owing to its dynamic nature, it has opened up a world of limitless possibilities.
Over the last decade, thousands of new digital assets have emerged in the crypto sector alone, with hundreds more entering the market every month. Non-fungible tokens (NFTs) and decentralised finance (DeFi) apps are also making waves, altering the narratives of the global financial system.
However, one project that stands out among many others is Decentraland. Apart from being the first of its kind, it also opens an entirely new realm for the application of blockchain technology.
How is this possible? You may ask. Well, let’s start by answering the question of “what is Decentraland?”
What is Decentraland? Understanding the basics of the virtual reality platform
Founded by Ari Meilich and Esteban Ordano, Decentraland was initially launched in 2015 as a simple, pixelated grid that allocated pixels to users through a proof-of-work algorithm.
By 2017, the Ethereum blockchain-based software project has evolved into a full-fledged 3D virtual project, allowing users to purchase, build, and sell virtual reality applications in a shared virtual ecosystem.
With the recent development, users can develop virtual real estate, monetise, and auction it for sale. They can also engage in other activities like playing games within the scope of the virtual world.
Decentraland is the first of its kind, as well as one of the few multi-purpose and multi-versatile metaverses built on the Ethereum blockchain. The platform not only integrates virtual apps but also NFTs.
The platform has evolved to include interactive apps, in-world payment, and peer-to-peer chat among its members. Currently, there are two native digital assets utilised on the platform – Land and Mana.
LAND is represented as NFT tokens used in certifying land ownership – the ownership of the virtual real estate in the Decentraland’s virtual world, for example. MANA token, on the other hand, is a cryptocurrency used in facilitating transactions such as the purchase of land, or any other virtual goods and services used on the Decentraland platform.
Changes to the Decentraland infrastructure are authenticated via blockchain-based smart contracts, similar to other decentralised blockchain initiatives that employ decentralised autonomous organizations (DAOs).
Members are also able to vote for or against any proposed modifications to the platform, althoug only those who own the Mana token can participate in blockchain governance.
How does Decentraland work?
Decentraland is a virtual representation of a real-life scenario that employs Ethereum blockchain technology.
Just like in real life, when a landed property is purchased, the new owner is given a certificate that acknowledges the property’s ownership. Similarly, a member who acquires a piece of property in the Decentraland’s virtual world is allocated a LAND parcel (in the form of NFT ERC-721 token) which defines the ownership of the virtual property.
Notably, the LAND parcel is available in limited numbers and, to purchase one, a member must first possess an amount of MANA – an ERC20 token that doubles as the platform’s native currency in the provided Ethereum wallet.
By purchasing a LAND parcel, a member is granted full control over the virtual property, as well as every application that is created within the land. Not only that, the LAND parcel or NFT tokens can be sold to another user on the platform’s marketplace.
Beyond trading virtual properties, members with LAND parcels can also fill their space with games, activities, or artworks, enabling interaction between them and other members of Decentraland.
In an attempt to expand its offering as well as accommodate new users, while fostering the overall network growth, the Decentraland foundation – an extension of the main platform – hosts a various variety of contests to create art, games and applications.
Developers and content creators who participate in the contests are subsequently rewarded with MANA tokens. It is also important to note that new members are also awarded a portion of MANA tokens to help them synergise with the platform seamlessly.
Let’s start with the platform’s decentralised autonomous organization (DAO). As mentioned earlier, Decentraland like any other decentralised project focuses on the distribution of authority. As a result, the members are in charge of LAND, virtual assets, and the overall project development.
As a DAO project, Decentraland makes use of an open-source program to regulate on-chain rules. To this end, a portion of MANA must be staked by members – by using it to purchase LAND, to create, as well as vote for or against proposals.
Decentraland DAO runs on Aragon, a DAO software solution that utilises an agent-like system to ensure interaction with Etherum smart contracts.
Also, given that Decentraland consists of metaverses or, simply put, multiple layers built using Ethereum smart contracts, it can track multiple activities simultaneously.
The consensus layer which connects other validation processes within the network tracks the ownership of LAND parcels, all of which are uniquely coordinated in the virtual world.
For instance, each LAND parcel has a reference to a description file that contains a code representation of the content within the virtual property.
The content layer includes “content file” which references all static audio and visual; “script file” which defines the placement and characteristic of referenced files and, lastly, “interaction definition” which takes record of peer-to-peer activities such as gesturing, voice chat, or messaging.
Finally, the Decentraland marketplace is where users gather to conduct exchanges and manage their LAND tokens, MANA, and other in-game assets. It is, however, important to note that all pair-to-pair transactions are carried out using the platform’s default Ethereum wallet.
Decentraland MANA token Vs. LAND
Mana plays an integral role in the virtual world. Of course, participation on the platform largely depends on the possession of the digital asset. Currently, the total supply MANA is fixed of 2.6 billion, with a single unit sold at $0.89 as at the time of press.
On the other hand, a LAND parcel which typically measures 33X33 feet per plot is priced differently based on the features and content locked in. However, when the platform launched in 2017, developers sold each piece for as high as $20. In comparison, the most expensive LAND sold for about $900K sometime in June 2021, suggesting a high level of profitability.
Ultimately, virtual real estate is an emerging asset class, and while it portrays an alternative to actual real estate business, its growth is driven by the wider adoption of cryptocurrency.
Disclaimer: The views and opinions expressed by the author should not be considered as financial advice. We do not give advice on financial products.