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Decentraland: The new frontier opportunity

Growing interest in the metaverse could unlock the next growth opportunity for virtual assets

Metaverse is a subject attracting a lot of eyeballs at the moment. Its reference can be seen not only in big budgeted movies, but also in the corporate world. And with the recent renaming of Facebook to Meta, the timing could not have been more appropriate.

We try to understand the decentralised virtual world, which is up for grabs. A recent report by Grayscale, states how the Decentraland virtual world is made up of around 90,000 plots of 16m x 16m real estate non-fungible tokens (NFTs).

Exhibit 1: Decentraland Genesis city map as of November 2021

“Decentraland, one of the leading blockchain-based virtual worlds, is creating an open-world metaverse where users can earn MANA (the native token), to purchase LAND, a NFT that divides Decentraland into virtual plots.” And over the past year, both the Decentraland token (MANA) and real estate (LAND) have grown in leaps and bounds. The weekly average price of the two have risen by 4,947% and 4,173% respectively.

Exhibit 2: Weekly average MANA token price vs Decentraland LAND price

Both MANA and LAND are scarce digital assets. And are equally divided between private land, which is 48% and non-private land (52%) which includes district land, roads and plazas.

In terms of market cap, the MANA token has outperformed the LAND and has also overtaken most of the digital economy’s market value.

Exhibit 3: Decentraland market cap: MANA token vs total and private LAND

And the virtual looks poised for further growth as most of the attention shifts to the digital world. It could potentially grow relatively to global real estate values which stands at around $230 trillion.

Economic activity

Although the Decentraland real estate market is relatively small, interest and sales activity is growing exponentially. Between October to November 2021, secondary market NFT sales in Decentraland grew from $3.6 million to around $20 million.

Exhibit 4: Decentraland secondary marketplace NFT sale

Additionally, the economic activity taking place in the Decentraland economy, adds to the intrinsic value of the MANA token price. With every transaction, a fee denominated in MANA is charged and burnt off to create deflationary pressure on the token price.

At issuance, MANA token supply was around 2.9 billion, which has decreased to around 2.2 billion as of December 2021 – while economic activity has grown.

Exhibit 5: Decentraland current MANA supply & all-time fees burned

Source: Coinmetrics

Growth opportunities

Global revenue from virtual worlds is expected to grow to from ~180 million in 2020 to ~400 billion in 2025, with consumers choosing to spend more on in-game spend than on purchasing premium games.

Exhibit 6: Global virtual world revenue growth

Metaverse will further add to this opportunity and Decentraland already boasts of around two-fifths of the available metaverse users.

Exhibit 7: Decentraland all time active wallets & metaverse share

Source: https://nonfungible.com/market/history/decentraland; Note: Others estimated using all time active Metaverse wallets less Decentraland wallets, which doesn’t take user overlap into account.

In the following piece, we understand the hype around metaverse, which has the potential to transform the way we interact – both physically and digitally.

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