The concept of the Ryan Reynolds movie ‘Free Guy’ was all about Guy, a bank teller and his self-realisation that he is an AI and his development to live like human beings in the virtual world. What if you could also live like Guy? According to the White Paper on Decentraland, the Virtual world, also known as Metaverse, is a virtual space created for human beings to interact collectively through high-end techs like VR, AR, and the internet.

Etymologically, the term first appeared in a science fiction novel published in 1992 by author Neal Stephenson which can be further dissected into Meta, meaning beyond and Verse, meaning world.

It is like Keanu Reeves’ Matrix. Replace Matrix with Decentraland; the only difference is that humans are actually aware of both the concrete and virtual world.

What is Decentraland?

A brainchild of Web 3.0 movement, it is a virtual space designed in 3D on Ethereum. It was launched in 2015 by an Argentinian duo of cryptographers, i.e., Ari Meilich and Esteban Ordano. The underlying philosophy behind its creation is to have a social space free from the control of any centralised agency like government, social media giants like Facebook, Instagram, YouTube and many more as asserted by Cataline Goanta in her book Disruptive Technology, Legal Innovation, and the Future of Real Estate.

What makes Decentraland?

Our world is made of elemental things like cells and atoms. We occupy space here, live in a house, and are aware of our surroundings. But what are the building blocks of Decentraland?

The Development

It began as a virtual space made on a 2D grid in which pixels were allocated to users through Proof of Concept. These pixels contained metadata to identify owners in the Decentraland’s Stone Age.

The 3D world as we know it today started with its Bronze Age in 2016. Here, the land was divided into parcels that could be allocated through a Hash File. It could be accessed through Distributed Hash Table and BitTorrent.

The Iron Age of Decentraland has made it open for all users. Michael Dowling in his research Fertile Land: Non-Fungible Tokens reveal that to become a member of Decentraland, one must buy a piece of land or parcels.

Decentraland is made of NFTs

Land or Parcels are coded pieces of NFTs or Non-Fungible Tokens. Non-Fungible Tokens are virtual certificates that record proof of Digital ownership over a piece of a digitised packet of information that could be a photo, file, song, a virtual cloth for your virtual avatar or a video.

NFT is a packet of information or data stored on the blockchain. Unlike Bitcoin, which is a currency, NFT is an asset or virtual property that could be sold, traded, or bartered. NFT doesn’t have any value of its own, rather its value is defined by the price of information or data it is holding. For instance, the Doge NFT is a photo of a Shiba Inu dog, which was featured as a meme was sold for 1696 ETH. Many NFTs similar to this, such as Rick and Morty NFT, Run Dino Run, Everydays, Grimes NFT, all tokenize the art so that the owner of the NFT has an ownership certificate that confirms the NFT asset they own is an original.

In Decentraland, a parcel contains 16X16 portions of Land with coordinates of a cartesian plane (x,y) identifying the location of land in the virtual world. A total of 90,601 pieces of Land exist in Decentraland of which 43,689 have been allocated for private use.

Who runs Decentraland?

Whoever owns a piece of land or MANA can give suggestions or participate in voting for implementing administrative decisions. The goal is to make the platform decentralised. Members can vote on:-

  • Whitelisting NFT smart contracts
  • Managing Land auctions
  • Creating a marketplace
  • Upgrading features of Land to improve interaction
  • Size of common marketplace
  • Allocating MANA for the collective development of the virtual space
  • Adding options in collective items like wearables, pieces of art, songs, etc.
  • Replacing or installing members of the Security Advisory Board

Voting is conducted on a Decentralised Autonomous Organisation which is independent of the control of any central agency. It is powered by Aragon.

Currency of Decentraland

The virtual world runs as a decentralised economy. The value of Land depends on the rarity of NFT, its location, and the value of an adjacent property. Like brick-and-mortar world, it has a capital named Genesis City. The land can be brought and sold through: –

  • MANA- It is a cryptocurrency exclusively used in trading in the metaverse. It is an ERC-20 token that is burnt to buy collective items and Land. The person holding a MANA is like a citizen of Decentraland having the power to vote and participate in administration and governance.
  • Land- It is a coded piece of NFT having a virtual space on the Decentraland. Owners can create anything on their land to experience the metaverse and other MANA holders can interact with items created on other parcels. You can create art shows, songs, casinos, build hotels, games etc. and whatever you earn from there goes in your pocket.

Land and Mana, both can be held on by the owner. They can sell them at a higher price later in an in-app marketplace.

The Boom in the Virtual Economy

In the Bronze age, the cost of land parcels in Decentraland was as low as $ 20 per piece as reported by CNBC news. Now the average cost of Land per piece ranges from $6,000 to more than $100,000.

Real Estate in Decentraland

Reuters reported the sale of the most expensive parcel of virtual land for $900,000 in June 2021. The piece of land sold was is made of 259 units or parcels sprawled across 16 virtual acres or 66,304 virtual square metres. The cost of the parcel was 1,295,000 MANA. The value of this size of virtual currency was around $913,228.2 when the sale was made.

The purchase was made in favour of Republic Realm, an investment platform owned by Republic sponsored by Binance and Prosus.

Art in Decentraland

Statista claimed that artworks sold in NFTs accounted for generating sales of $12.9 million in 2020 alone. Everydays – The First 5000 Days is a digital artwork encoded on NFT created by American artist Mike Winelmann aka Beeple was auctioned off at a whopping price of $ 70 million at Christie’s in March 2021 as reported by Reuters.

In June 2021, Sotheby, a London based art auction house created a digital avatar of its New Bond Street headquarters in Decentraland. The auction house sold CryptoPunk, an artwork made from 10,000 pixels coded in NFT for $ 11.8 million.

Bottom line

NFT market exploded in 2021 and generated a record $2.5 billion in sales as against 2020 generating only $13.5 million. NFT will revamp virtual reality. In this light, the burgeoning traction of virtual worlds is no surprise and it will shape how things operate in near future.