The “virtual worlds” war: a look at the Metaverse economy

Metaverse or so-called “virtual worlds” are one of the most ambitious categories in the crypto-ecosystem, as they combine two emerging technologies — virtual reality and cryptography. The three largest Metaverse games in terms of trading volume — and most other indicators — are Decentraland, Somnium Space, and Cryptovoxels. While this is not the most important indicator, the trading volume highlights these games’ speculative nature, while the games are still in the early stages of building their virtual communities and economy. If virtual worlds follow the “winner gets the most” principle of value calculation, then the leading platform’s digital land can be valuable in the future. So, is there enough virtual space for several such platforms to coexist?

A brief introduction to Decentraland Metaverse

Projects such as Decentraland, Cryptovoxels, and Somnium Space combine virtual reality (VR) and several cryptographic primitives such as smart contracts and NFT to create virtual worlds with scarcity in mind. All the land in Decentraland’s virtual reality is tokenized and has a corresponding non-fungible token called LAND, which acts as ownership rights. Several parts — or parcels — of LAND can be combined to create real estate (EST), thereby increasing a particular digital property size. Any user is allowed to develop and monetize their digital property, regardless of whether they plan to create a casino or a digital art gallery.

Decentraland also uses its own asset called MANA, which is used to acquire LAND.

MANA tokens are also used to purchase in-game goods and services.

Decentraland’s Growing Economy

Decentraland has a fast-growing economy, surrounded by the speculative nature of its further development. The Decentraland’s pieces of land — NFT tokens, digital land plots in Decentraland Metaverse — and other NFTs have generated over 75,000 sales for a total of nearly $25 million.

The start of Decentraland sales shows a gradual increase, probably as a result of large individual purchases. However, the USD growth is slowing this year, and sales are likely to increase, with many smaller deals being discovered.

Decentraland figures become more indicative after filtering between primary NFT sales, Decentraland goods, and secondary sales between individuals.

Initial sales show the early purchases that occurred in the days following the Decentraland Metaverse Land offerings.

Initial sales account for approximately 24% of total dollar sales, most of which took place in December 2018. This perfectly demonstrates the speculative passion that accompanied the initial distribution of land in the Metaverse, especially as construction on Decentraland required additional technical capacity until the recent release of its Builder tool.

With the public launch of Decentraland in February this year, the team also released approximately 30,000 more assets that were purchased during the year. This graph clearly shows the large number of small purchases that have been made since the launch of Decentraland in February 2020.

However, Decentraland’s secondary sales confirm the continued speculative demand for Decentraland assets, in particular LAND, which accounts for most of Decentraland’s volume.

The strong secondary market for Decentraland’s NFT tokens shows a dynamic community that has grown with the launch of the project. Decentraland has made a concerted effort to increase its control in the NFT ecosystem.

Although OpenSea is the largest NFT trading platform, Decentraland Marketplace has started to expand its offer beyond land and now offers NFT from KnownOrigin and SuperRare. This is a sensible step from Decentraland, as the project is the second-largest in total sales over time and remains consistently in the top ten by weekly sales.

Decentraland also has a number of NFTs, which amounted to more than 1554.84 ETH, according to OpenSea.

Decentraland, which raised 86,260 ETH ($20 million at that time), probably still has a significant inventory and has introduced decentralized ownership by launching Aragon DAO. Decentraland DAO currently controls various contracts related to Decentraland, and the community is responsible for management proposals, including whitelisting new NFTs, determining future LAND auctions, and much more.

The addition of MANA — Decentraland’s own asset — as collateral for MakerDAO stores in July may prove to be an important step for Decentraland’s economy. While demand for MANA secured loans is low today, the ability to use Decentraland’s own currency outside the virtual world provides additional value for users and further enhances MANA tokens’ stability. Suppose MANA will become an acceptable form of collateral. In that case, it is possible that one day MakerDAO will be able to accept LAND as collateral, which will provide all sorts of interesting dynamics. For example, a user can put his virtual property as collateral for a DAI loan from Maker, which will be a real sign of success for the digital economy. To this end, Decentraland already offers mortgages using Ripio Credit Network smart contracts for payments. If Decentraland reaches the point where LAND owners earn a significant amount of money, the demand for mortgages will increase. However, Decentraland is still way ahead of its time and must achieve significant user growth before more complex financial transactions can become a reality.

Decentraland has received valuable awards for its launch in February 2020, which reportedly attracted over 12,000 users. And though not all of these users have executed on-chain transactions, the number of transactions with MANA tokens has increased significantly. In addition, the growth of the network, in which new users appear, over the past year has increased markedly, including during the launch and along with higher prices for MANA, which may indicate the emergence of new MANA speculators.

The daily number of active MANA users in Decentraland currently fluctuates around 400, but in early August reached almost 2000, probably due to higher MANA price levels.

Other worlds

While Decentraland remains a leader, two other virtual ecosystems have been gaining momentum over the past year.

Somnium Space

Founded in 2017, Somnium Space provides capabilities similar to Decentraland, as well as uses the Somnium Space Cubes native token. Somnium attracted $1M in a seed round last June and showed significant speculative growth last year, increasing trading volume by more than 700%.

Although total Somnium volumes are still pale compared to Decentraland, Somnium is ahead of the giant Metaverse in weekly trading volumes. This may be a sign of what awaits Somnium, or simply an advantage of a bull market that is beginning to shift into the NFT landscape.

Cryptovoxels

Cryptovoxels, founded in 2018, is the freshest game that began to conquer its niche by creating virtual art galleries. A quick guide to the game shows many virtual artworks that can be viewed in both 2D and 3D.

Cryptovoxels owns 3663 plots of land at 702 unique addresses. Cryptovoxel Metaverse consists of Origin City, which is owned by the Corporation, as well as “plots”, which are owned by individual users as ERC-721 tokens.

While Cryptovoxels was experimenting with its own token, the project decided to remove it in favor of using stablecoins, such as DAI, for the payments in its virtual world. Like Decentraland and Somnium, Cryptovoxels has other portable NFT items that can be traded between players.

Today, most plots are in Origin City, although other islands — large digital points adjacent to Origin City — are expanding. Cryptovoxel distributes new material via OpenSea every Tuesday at 14:00 Pacific Standard Time.

Compared to Somnium, Cryptovoxels project currently has a higher total sales volume, although the seven-day volume of Cryptovoxels is much lower.

Future of Metaverses’ framework

Metaverses can create enormous economic value through a combination of social interaction and codified property rights. The early nature of these virtual worlds and economies makes them inherently speculative. Nobody wants to own land in a world that nobody visits. It would be easier to buy a site on the third or fourth Google page if they did.

When assessing the continued viability of new virtual worlds or even other protocols that combine cryptocurrencies and new technology, it is important to study speculative growth along with user demand. If a particular niche, such as digital art galleries or casinos, becomes successful in Decentraland or some other Metaverse, there may be great growth potential. In its current form, Metaverses are looking for a product that matches the market and finding it can be a long and exhausting process.

Ownership of digital property is a bet on the fact that the wealth will continue to move towards the Internet and reach the deepest corners of the network. The “Internet suburbs” always seem to be worlds of their own, until they start expanding towards the virtual downtown.

Disclaimer: The contents of this article are not intended to be financial advice and should not be treated as such. 3commas and its authors do not take any responsibility for your profits or losses after you read this article. The article has been presented to provide readers with general information. There is only personal experience described herein. The user must do their own independent research to make informed decisions regarding their crypto investments.