Decentraland: The Metaverse’s Early Mover

Hey friends,

We are back. And heading straight for the future: the magical, mystical world of the “metaverse.” In this week’s piece, we’ll dive into Decentraland, a virtual world that has grown 3,300% over the past year and reached a peak market cap of roughly $12 billion.

As everyone from Meta’s Mark Zuckerberg to Epic’s Tim Sweeney train their sights on what may be tech’s next great platform shift, Decentraland’s story is more relevant than ever. By the end of our session, you’ll have a concrete definition of the “metaverse”, an understanding of how digital land is valued and developed, and a grasp on how this industry might evolve. We’ll also highlight some of the most interesting alternative projects to keep an eye on.

Time to strap on your headsets and jump in.

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Actionable insights

If you only have a couple of minutes to spare, here's what investors, operators, and founders should know about Decentraland:

• There is only one metaverse. While the buzzword's meaning is often stretched into different configurations, there is a clear definition. The metaverse is simply the internet, updated to accommodate spatial experiences.
• Decentraland's world is scaling rapidly. Over the past year, Decentraland has grown its users by 3,300% and increased its token price even more. They have Mark Zuckerberg to thank, at least in part.
• Virtual property can make real money. Projects like Decentral Games prove that money can be made in the "metaverse." The startup runs popular casinos within Decentraland. That's attracted serious developers, putting millions to work.
• Digital cities can act differently from physical ones. While we're used to our cities changing slowly, brick by brick, building by building, virtual metropolises can play by different rules. "Dynamic land" that changes based on one's activity is just one example.
• We are just beginning. Though projects like Decentraland have achieved lofty valuations, it feels as if we are in the very opening stages of a long-term shift toward more expressive digital experiences. Creating a world with deep, enduring appeal will take time.

***

In 1905, a railroad linking Salt Lake City and Los Angeles was completed. It passed through a small, sparsely inhabited town. Boosted by its position as a way-station, it secured a stretch of 110 acres and formally established itself as a city. It was called Las Vegas.

Over the succeeding decades, Las Vegas established itself as a thriving metropolis. It attracted investment – first from the mafia, later from more salubrious sources – and established itself as an iconic, global tourist destination. By 2000, it had a little under half a million population, making it the largest American city founded in the 20th century. In 2019, Las Vegas valley's GDP peaked at $131 billion.

A few people still living may remember Las Vegas's early decades as a city – what it felt like to be pre-preeminent. Could you sense the opportunity; could you smell the money?

If I had to guess, I imagine it felt similar to walking into Decentraland today. Despite its gaudy colors and nineties-era graphics, the blockchain-based "metaverse" bears more than a passing resemblance to America's "Sin City." It is home to green-felted casinos, extravagant art galleries, dingy drinking holes, ticketed nightclubs, and cloistered brothels. There are locals, plying their trade and "out of towners," passing through for a concert or convention or just the hell of it.

Decentraland's "population" of roughly 800,000 registered profiles has already surpassed Vegas's own. According to its current CTO, its "city" expanded by 3,300% between December 2020 and December 2021. This figure doesn't include the ~70% of visitors that are "guests," and as such, not recorded in the system.

Decentraland's token, MANA, has reflected this upsurge. Over last year, its price appreciated more than 4,100%. At the time of writing, the project's fully diluted market cap is $6.5 billion.

What should we make of such startling growth and price appreciation?

It depends on who you ask. Some sources I spoke to pointed to Decentraland's halting performance, and low daily user accounts as evidence that the project's valuation was less a reflection of its particular strengths than the attention Mark Zuckerberg has shone on the "metaverse." Others suggested Decentraland's market cap undersold a project with the potential to become the next big social network, a thriving commercial city, and the portal to a new kind of "spatial" internet – wrapped in a single package.

In today's piece, we'll explore these differing perspectives and unpack some of the trends animating the space. We'll touch on:

• The metaverse. We'll land on a concrete definition for a much abused and misused buzzword.
• Decentraland's origins. The virtual world was born in a hacker house in Buenos Aires. It served as a breeding ground for crypto innovation.
• The Meta effect. Decentraland has been on a massive bull-run. In many respects, it has Zuckerberg to thank.
• Strange journeys. What can you do in Decentraland? A guided tour through a wild and occasionally wonderful land.
• Beneath the city. Decentraland is not just a virtual game. It's a token, a community, and a system of governance. Those might prove more important in time.
• Tricky valuations. Some believe Decentraland's property will become the most valuable in the world. How do you assess digital real estate and the project that powers it?
• Spectral futures. New virtual worlds are entering the market, innovating on the concept and encroaching on Decentrland's turf. We should expect many more iterations.

By the end of the investigation, we'll have a firm understanding of the sector's potential and Decentraland's chances of becoming the largest city founded this century.

IN A MEME

For the pictorially inclined, here's the whole piece — all 7,800 words of it — in a single meme.

PUZZLER

All guesses welcome and clues given to anyone that would like one. Just respond to this email for a hint.

Jim W closed out 2021 at the top of the podium, correctly answering our final puzzler of the year. He was joined by Mikaela R, Krishna N, Ashita M, Steven R, Jean-Marc B, Lorenzo C, and Nancy X. Ankit J and Scott provided an excellent different response to theat teaser.

The answer? A candle, or as was alternatively suggested, an ice cream cone with a cherry on top. Good work to all respondents.

It is true winter in New York right now. Snow on the ground and a biting chill blowing off the East River. I think I’ll go for a cold walk and a coffee and then maybe some Marie Kondo-ing.

Until next time,

Mario