Token Sale

Decentraland Token Sale: Tokenized property ownership in an interactive virtual world

Project Description

Decentraland will be a Blockchain-based platform for Virtual Reality content. In this decentralized virtual world users can purchase virtual land and develop their own projects, such as 3D animations or peer-to-peer applications. Potential applications range from games to gambling, marketplaces, virtual workplaces for businesses, virtual tourist attractions, and virtual advertizing space. Users will have full control over their virtual parcels of land, including the right to any revenue they extract from their virtual property.  

Each parcel of land is limited to 100 square meters per project or site, a limit intended to create scarcity for virtual lands and protect their value. However, users can build as high as they want. Land can be purchased using the MANA tokens created during the token sale. The ownership of virtual land is transferable. Neighborhoods can come into existence around shared interests. On github there are already 82 proposals for Decentraland projects, including first person paintball competitions, virtual museums, and an auction house for provably rare digital art, similar to the RarePepe market.

Information about land ownership and content is managed on the Ethereum blockchain. Smart contracts validate that modifications were made by the owner of the virtual land. This prevents non-owners from making destructive changes to property. The content of the virtual world will be distributed using IPFS, an open-source protocol for storing data, removing duplicate files, and indexing storage locations in a distributed network. 

What is the token being sold?

The ERC20 token, MANA, will be burned to purchase LAND. Each parcel of land is represented by a non-fungible digital asset called LAND. LAND designates ownership of a 100 square meter parcel of land. Holders of MANA can claim LAND before deciding where to settle. After a Terraform Event scheduled for Q3 of 2017, MANA will be exchangeable for LAND. Further, MANA can be used to purchase in-world goods and services.

40 percent of the tokens are distributed via the sale. 20 percent are planned to be distributed via a system of grants for developers and content creators. Another 20 percent is reserved for development and the remaining 20 percent will be held by the Decentraland Foundation. After the sale, the foundation plans on issuing additional MANA at a target rate of 8 percent a year, though it’s unclear if this means more LAND will be opened as well. A DAO will manage future issuance of MANA tokens, though its unclear who would hold the voting powers of the DAO.

Ultimately, the economic logic of MANA is similar to that behind settling unsettled land: acquire it with the intent to develop it or speculate others will want to develop. Once converted into a unique piece of LAND, MANA is burned and all that is owned is the LAND itself, which is totally unique (similar to physical real estate) and presumably for which a market will emerge. If a neighbor creates a compelling experience that attracts attention, the value of your LAND will increase.

What is the project status?

Work on Decentraland began two years ago as a proof of concept for the allocation of digital real estate. The developers of Decentraland speak of their development stages in “epochs.” Currently they consider themselves in the Bronze Age, which is a live testnet. Development started with a fork of bcoin, a modified Bitcoin blockchain, and the team developed a 3D virtual world on top of it. A Hash is created for the content description of the parcel of land and stored on the Blockchain. Users can fetch the content using the BitTorrent network via the Kademlia protocol, which shards digital content and distributes it across a network of participant nodes. A modified version of the Kademila protocol is used by Storj and MaidSafe. In the testnet, only static content can be distributed through the network. Unity is used as a browser, and HTC Vive as the VR headset. The Bronze age release does not include any smart contracting capability.

The Decentraland world is currently filled with a variety of content, ranging from scale models of the White House, the Statue of Liberty, a seven story high-rise you can climb to get a better view of the landscape, and more.

For the next phase, the Iron Age, Decentraland will be redeployed on the Ethereum blockchain, which will allow the use of smart contracts for the transfer of ownership of land.  After the token sale the following is planned:

  1. A peer-to-peer network, allowing users to interact in the Virtual World and laying the ground for text messaging, avatars and other features.
  2. A micropayment system, creating an in-world economy.
  3. An identity system to secure ownership over the content created in the Virtual World.
  4. A land management interface to develop, buy, rent, and sell land without leaving the browser.
  5. A scripting language so landowners can program the in-world VR-experiences.
  6. Integration of third-party applications running in Decentraland.
  7. Integration with other VR headsets.

The Market for Decentraland

There are a handful of other projects at the intersection of blockchain and virtual reality, but none are quite comparable. Ultimately, the success of the Decentraland project depends on a set of three assumptions:

  • That there is a market for virtual property;
  • That the built-in scarcity of LAND will translate to increasing value for early adopters;
  • And that VR architects will choose to develop attractive projects on Decentraland instead of other viable alternatives.

The market for decentralized sandbox games and in-game economies is active but still relatively new. A handful of well-known and very successful sandbox games like The Sims, EVE Online and Minecraft, where players can actively transform the virtual world’s development and physical structure, have existed for years. Those games, together with other thriving open world games like World of Warcraft, have paved the way for in-world economies where items can be purchased or otherwise accumulated and traded for real world value. Crowfall, a virtual reality MMORG that was funded via kickstarter in 2015 to the tune of $1.5 million, features the ability to create and sell virtual property in the context of an ever-evolving fantasy world. For example, a player could purchase forts, horses, and parcels of land. With virtual reality markets now ranging into double-digit billions, the appeal and potential of virtual reality is clear.

Currently, there are two drivers for demand of virtual property and goods that underpin the market that has emerged so far.

  • Utility: owning virtual property lets the player/user acquire more resources, have better defenses, get more items, etc. In Crowfall, players can buy parcels that give them access to rare woods. In Minecraft, virtual tools and structures can provide better defenses. Having this as a driver requires a ruleset on top of the virtual world that governs types and purposes to virtual property.
  • Vanity: building on virtual property lets players showcase their skills or accomplishments. The goods don’t help them advance in any meaningful way but are more akin to virtual trophies. This requires a combination of player pride (it was difficult to acquire or create this) and social recognition (there are enough other people who will recognize the skill needed to acquire or create this).

Decentraland will launch with neither of these. The gambit of initially owning MANA and converting to LAND is that future developers will create both of these drivers: interesting digital experiences on top of LAND that others will pay for and enough traffic that building beautiful virtual things will be worth the social recognition. They mention launching a scripting language to program interactions on top of virtual land, but there are too few details to comment on how effective this will be.

The value of scarce virtual real estate

The amount of LAND available for development will initially be determined by the outcome of the MANA token sale. This distinguishes it from many other sandbox-style virtual worlds. For example, Minecraft is potentially infinitely large, since anyone can host their own Minecraft server.

If the maximum 833 million MANA tokens are sold, a total of 833,333 LAND tokens will be created, which equates to 32.1 square miles of virtual land–a piece of real estate roughly the same size as the Bronx. 40 percent of this, 333,333 LAND tokens or 12.8 square miles, will be distributed directly to token sale participants.  As a frame of reference, the four city blocks that comprise Time Square are about 17,221 square meters or 172.2 units of LAND (at scale). At the token sale price of $24 per LAND, it would cost a developer $4,133 to purchase the LAND necessary to build a Times Square sized attraction in Decentraland. To build an attraction the size of New York’s central park (1.32 million square meters or 13,200 units of LAND) it would cost $316,800.

In the context of popular open world games, these are modestly sized projects. Grand Theft Auto 3’s Liberty City is 3.5 square miles (90,650 units of LAND), which would cost $2.2 million to recreate in Decentraland, not including the cost of virtual development. The world of The Legend of Zelda: Breath of the Wild is 138 square miles ( 3.6 million units of LAND) which is more than 4 times the amount of LAND tokens being made available in the crowdsale.

The cost and scarcity of LAND in Decentraland will have an effect on the size and the type of projects which get developed. It is a significant point of distinction, as many other VR alternatives are limitless in scale. The more that is developed on Decentraland, the more valuable the remaining real estate will be, though it will ultimately limit the number of experiences Decentraland can offer in the emerging VR economy.

Why should users develop projects on Decentraland?

Unlike other sandbox virtual worlds like Minecraft, in which established protocols for resource extraction and use have been defined, LAND is a completely blank slate. In many virtual game worlds (including Minecraft) players could choose to mine for resources such as gold, because they know that their virtual land might have gold ore deposits. If a Decentraland user wanted to mine for gold on their LAND, they would first have to develop a set of protocols for allocating resources within their LAND, mining those resources, storing them, and finally utilizing them in some way that benefits the player. When Decentraland launches, it will be unclear what Developers will be able to do with their LAND outside of using it to display 3D digital art and eventually charging people to interact with it. It’s also not clear how additional rules that give utility to land and things built on top of it would emerge.

In addition, Decentraland will not launch with a unique user-friendly virtual reality editor that both limits and guides what users can create. Instead, it will presumably read VR files that the developer creates him or herself, presumably with programs like Unity. For any kind of platform that’s based on the creations of its users the capabilities, flexibility and usability of the toolset is paramount in understanding what potential adoption and development would look like. Decentraland at this point has not revealed any details on what unique tools, if any, exist for users to create on the platform and what the capabilities of those tools would be.

What Decentraland does have that developers can’t yet easily find elsewhere are the following:

  • Land Scarcity: First is the scarcity of developable space. Most other virtual worlds are larger than the equivalent of New York City and one of the exciting features is that it is limitless. In Decentraland, what gets built first has a profound impact on what gets built next, just as in physical real estate markets. One key distinction is the ability to “unbuild” without consequences like pollution, wreckage, etc.
  • P2P Transactions: Second is the ability to conduct P2P transactions. Decentraland will support a payment channel for users to transact directly using Ether. This could be the foundation of an in-world economy, but Decentraland will rely on users to make goods and experiences others want to buy. This won’t be unique for long: it’s not hard to imagine a Paypal integration with any future virtual world.
  • Digital Authenticity: Third, users will be able to cryptographically mark their creations and be able to distinguish digital forgeries. If digital authenticity starts having real value–as projects like RarePepe and Rakugo contend–Decentraland could become a place for truly unique virtual world experiences. On the other hand, digital authenticity can also be adapted on other platforms.

Ultimately, Decentraland is built on an “if you build it, they will come” premise. Their ability to attract an initial developer base–and the ability of those developers to create compelling VR experiences–will determine whether LAND ultimately proves valuable. The tools that will be critical to driving demand for LAND–a robust scripting language to enable developers to program interactions on top of land and a user-friendly toolkit for developing virtual land–are yet unspecified.

If they are successful, the economics of MANA and LAND are sound and in many ways, resemble land dynamics in unsettled territories: grab scarce LAND and either use it or speculate that others will want to use it in the future.

Who is the team behind the project?

The team behind Decentraland is fully transparent. The project is led by Ari Meilich, who has worked as an analyst the Silicon Valley venture fund, Charles River Ventures. Ari also founded the big-data company Benchrise. Esteban Ordano is the Technical lead. Ordano is a former software engineer at BitPay, he co-created the Bitcoin infrastructure library Bitcore and worked in the teams behind the bitcoin wallet Copay and the Bitcoin-Blockchain API, Insight. Ordano also co-founded Zeppelin Solutions, a company focused on smart contract security.

Decentraland’s board includes Manuel Araoz, the co-founder and CTO at Zeppelin Solutions; and Yemel Jardi, a former software engineer at BitPay and Chairman of the South American Business Forum; and Jake Brukman, the founder of CoinFund and an advisor to District0x and Aragon.

The Decentraland Foundation has announced partnerships with  Coral, a secure fundraiser platform for Ethereum ERC20 tokens; Aragon, a platform for managing DAOS; and district0x, a collective of decentralized market places. This partnership will allow to facilitated a secondary market for rental, leases and sales of digital property.

Project Details

Incorporation status Decentraland LVC, Lichtenstein, 2017.
Team openness Fully Transparen
Blockchain Developer Esteban Ordano
Technical White Paper Non-technical
Available Project Code Yes
Prototype Bronze Age test net live

Token Details

Role of token Bronze Age test net live
Token supply 2,083,333,333
Distributed in ICO 833,333,333
Emission rate Tokens will be created with an annual inflation of 8%
Blockchain Ethereum
Consensus method Proof of Work

ICO Details

Sale period August 17th, 2017 to August 25th, 2017
First price 1000 MANA (1 LAND): 24 USD
Accepted currencies ETH, BTC, other cryptotokens through shapeshift
Investment Round First public offering
Token distribution date After crowdsale
Min investment goal None
Max investment cap 20 million USD
How are funds held Smart contract
Minimal Viable Product Already live
Bonus schedule No Bonus

Official Resources

 

Authorship note: Alice Kohn, Matt Chwierut, Weston Anderson, and Brian Lio contributed to this report.

1 Comment

October 04, 2017 at 2:48 am, 192.168.0.1 said:

The Decentraland world is currently filled with a variety of content!

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