DECENTRALAND INVESTMENT ANALYSIS

Decentraland is a virtual reality platform powered by the Ethereum blockchain. Users can create, experience, and monetize content and applications. Land in Decentraland is permanently owned by the community, giving them full control over their creations. Users claim ownership of virtual land on a blockchain-based ledger of parcels. Landowners control what content is published to their portion of land, which is identified by a set of cartesian coordinates (x,y). Contents can range from static 3D scenes to interactive systems such as games.

Land is a non-fungible, transferrable, scarce digital asset stored in an Ethereum smart contract. It can be acquired by spending an ERC20 token called MANA. MANA can also be used to make in-world purchases of digital goods and services.

The world will be divided into 100m² (about 1078 ft²) parcels, with a non-fungible digital asset for each plot of land. These assets recognize the designated owner of the parcel, and describe what its contents are. We call this digital asset, LAND.

We are also introducing an ERC20 token named MANA. MANA can be burned to claim LAND. Holding MANA allows users to claim a big area of LAND before deciding where to settle

An interesting and possibly clever way that Decentraland has rolled out their road map is via “Ages” not including the token sale and beta launch (called Terra Event).

Decentraland Roadmap:

• Stone Age (June 2015)
• Bronze Age (March 2017)
• MANA Token Sale (August 2017)
• Terraform Event (Q3 2017)
• Iron Age (Q4 2017)
• Silicon Age (2018)

I will cover in greater detail the Road Map in the Road Map section below. The purpose of sharing the roadmap was to answer any questions as to certain terminology that one may find as they research Decentraland.

DECENTRALAND COINS (MANA & LAND)

Decentraland has created two digital assets: MANA & LAND

MANA is used to assess and buy LAND (Land Titles/Parcels) and to buy goods and services in Decentraland.

LAND is just that land, i.e. land titles/parcels, those two words (land titles and parcels) are interchangeable.

1000 MANA = 1 LAND

$24 -40 = 1000 MANA

1 LAND is 1 parcel which is 100m2

According to Ari Meilich, Project Lead, in the Decentraland Slack Forum:

“We have reserved 700,000 MANA tokens (equivalent to 700 land tiles if converted to land) to be distributed to members of our Slack community following the completion of our planned contribution period in August. Members of the Decentraland team will subjectively reward clear, well thought out proposals for Decentraland content (cinemas, games, museums, art galleries, markets, etc.), actual content creation and tech contributions, feedback on the overall project (white paper, economics, city planning, tech), thoughtful discussion, and other contributions made to the Decentraland project.

One of the main questions I had was:

Question:

Can someone tell me how once buy 1000 MANA and buy 1 LAND, how does one make stake as to where LAND is actually located?

Answer:

regarding where your land will be, there is going to be an event in Q3 where you can choose your land location. Anyway, it always has to be adjacent to existing land.

HOW TO EARN FREE MANA

700,000 MANA tokens (700 land tiles if converted to land) for use in our Decentraland Community Vision program, to be distributed to members of our Slack and Telegram communities following the completion of our planned contribution period in August.

[1] https://blog.decentraland.org/decentraland-community-vision-program-1962834d95b4

The Decentraland team will subjectively reward clear proposals for Decentraland content (cinemas, games, museums, etc.), content creation, feedback, thoughtful discussion, and other contributions made to the Decentraland project.

The rewarded MANA tokens can be tracked here: https://docs.google.com/spreadsheets/d/1-Xr5N2FgyLCfrPmnvz7lHufvCpqvAEXI2Vncb1iFu8o/edit?usp=sharing

Step 1) Join the Decentraland Slack. If you haven’t already, you can read the Decentraland white paper.

Step 2) You can:

a) Participate in valuable and thought-provoking discussion on Slack.

b) Submit Unity 3D models that can be immediately used in Decentraland. Rules for submitting Unity 3D models and proposals are HERE. Include your Slack username.

c) Propose comprehensive developments for Decentraland HERE. Include your Slack

username.

Step 3) Track MANA rewards in our Rewards Tracking Sheet and @ekelmenson will message you about your rewards on Slack.

Key takeaways:

• Increasing Sale: MANA tokens will sell at a price that goes from $24 USD per LAND equivalent to $40 USD. A hard cap is set at $20 million USD. The distribution of additional tokens is fixed.
• 40/20/20/20 distribution: 40 percent of the token supply will be sold to the crowdsale buyers, 20 percent is reserved to incentivize the community, 20 percent will go to the development team, early contributors and advisors, and the remaining 20 percent will be held by the Decentraland Foundation. Founders will have three-year vesting.
• Inflation rate: Included is an 8 percent increase of the token supply for the first year, and a lower rate in subsequent years. This is implemented through a Continuous Token Model. This structure will allow Decentraland to regularly expand while accommodating new users.

DECENTRALAND SCRIPTING SYSTEM

A scripting system to enable interactive content, and a system of fast cryptocurrency payments for in-world transactions. A communication layer is essential for social experiences, providing positioning, postures, voice chat, and more; Decentraland achieves this with a P2P network. The scripting system is the tool that landowners will use to describe the

behavior and interactions of 3D objects, sound, and applications running on land parcels. Finally, a payment system with low fees is key to developing an economy in the quick environment of a virtual world.

For services to be provided on Decentraland, we are developing a scripting system that enables developers to program the interactions between users and applications. This scripting system runs exclusively on the client side but allows for different data flow models: from mere local effects and traditional client-server architectures, to P2P

interactions based on state channels. Developers programming in it will benefit from the availability of fast, cheap micropayments, provably fair games, decentralized storage, and other features enabled by the advent of cryptographic techniques using blockchain-based smart contracts.

To foster the exchange of virtual goods, economic incentives must be in place to ensure the continued creation and distribution of avatars, items, and scripts. Because static content can be arbitrarily copied, the user experience should empower social agreements that recognize original creations. By implementing an identity system to establish authorship, users will be able to track and verify an author’s consent through cryptographic signatures.

APPLICATIONS

The Decentraland scripting language will allow the development of applications, games, gambling, and dynamic 3D scenes. This scripting language will be designed to handle a wide range of capabilities, including creating objects, loading textures, handling physics, encoding user interactions, sounds, payments, and external calls, among others.

Content Curation Users in Decentraland will gather around neighborhoods of shared interest. Being located near high-traffic hubs will drive users to the landowners’ content.

ADVERTISING

Brands may advertise using billboards near, or in, high-traffic land parcels to promote their products, services, and events. Some neighborhoods may become virtual versions of Times Square in New York City. Additionally, brands may position products and create shared experiences to engage with their audience.

DIGITAL COLLECTIBLES

We expect users to publish, distribute, and collect rare digital assets issued on the blockchain by their creators. Just as it occurs today in other virtual worlds or through online forums, these digital assets will be traded inside this world through the scripting system and be backed by the aforementioned naming system.

SOCIAL

Groups that currently gather in online forums, chat groups, or even other centralized multiplayer games could port their communities into Decentraland. Offline communities could also find in Decentraland a space to gather.

OTHER USE CASES

There are no technical specifications to what could be built in Decentraland. Therefore, other use cases could emerge, such as training and professional development, education, therapy, 3D design, and virtual tourism, among others.

To learn more about the Decentraland Scripting System please click the link:

https://github.com/decentraland/
https://decentraland.org/whitepaper.pdf

DECENTRALAND PROTOCOL

Figure 1: The Decentraland protocol for simultaneous users in a decentralized virtual world.

1. https://docs.google.com/document/d/1vqnga12fZEA3-2_J3LCVSlYGJHF0BfRkzUBlhBL4v1o/edit

2. https://blog.decentraland.org/the-decentraland-token-sale-terms-81861704c086

3. https://decentraland.org/whitepaper.pdf

CONSENSUS LAYER

Decentraland will use an Ethereum smart contract to maintain a ledger of ownership for land parcels in the virtual world. We call these non-fungible digital assets LAND: each LAND has unique (x, y) coordinates, an owner, and a reference to the content description file, which encodes what the landowner wants to serve there. Decentraland clients will connect to the Ethereum network to fetch updates to the state of the LAND smart contract. LAND is bought by burning MANA, a fungible ERC20 token of fixed supply. This token serves as a proxy for the cost of claiming a new parcel. The LAND contract uses a burn function to destroy MANA and create a new entry in the LAND registry. New parcels need to be adjacent to a non-empty parcel.

CONTENT DISTRIBUTION LAYER

Decentraland uses a decentralized storage system to distribute the content needed to render the world. For each parcel that needs to be rendered, a reference to a file with the description of the parcel’s content is retrieved from the smart contract. The current solution uses the battle-tested Bit Torrent and Karelia DHT networks by storing a magnet link for each parcel. However, the Inter-Planetary File System (IPFS)provides a compelling alternative as its technology matures.

This decentralized distribution system allows Decentraland to work without the need of any centralized server infrastructure. This allows the world to exist as long as it has users distributing content, shifting the cost of running the system to the same actors that benefit from it. It also provides Decentraland with strong censorship-resistance, eliminating the power of a central authority to change the rules or prevent users from participating.

However, hosting these files and the bandwidth required to serve this content has significant costs. Currently, users of the Decentraland P2P network are seeding the content without compensation and out of goodwill. However, in the future, this infrastructure cost can be covered by the use of protocols like Shift or Filecoin. Until this technology becomes available, automated micropayments can be used to pay for quality of service. The proceeds of Decentraland’s continuous sale of MANA can cover these costs over the long run

The description of a parcel will contain a list of different files required to render it, a list of services hosted by the landowner, and an entry point to orchestrate the placement of objects and their behavior. This document must declare:

Content files

References to, or blobs with, 3D meshes, as well as textures, audio files, and other relevant content required to render the parcel. These are specified so that the client knows what contents the renderization will need, without any instructions on how to place them.

Scripting entry point

The scripting system controls how the content is placed in the parcel, as well as its behavior. This enables applications and animations to take place within the parcel. It also coordinates behaviors such as the positioning and movement of objects, the timing and frequency of sounds played, the possible interactions with users, among other features.

P2P interactions

This allows the client to connect to a server that bootstraps user-to-user connections, coordinates positions and postures, and enables voice chat and messaging.

REAL TIME LAYER

Clients will communicate with each other by establishing peer-to-peer connections with the help of servers hosted by landowners or third parties. Without a centralized server, peer-to-peer connections are needed to provide social interactions between users, as well as applications that the landowner wants to run inside the parcel. To coordinate the bootstrap of peer-to-peer connections, landowners will have to provide rendezvous servers or understand that users will not be able to see each other in their parcel.

The maintenance of these servers can be incentivized the same way as content servers. When lightweight protocols like STUN can cover the functionality required from the server, the costs would be fairly low. But for more advanced features, such as a voice chat between multiple concurrent users or network traversal services, micropayments can be used to cover the operating costs.

The social experience of users in Decentraland will include avatars, the positioning of other users, voice chat, messaging, and interaction with the virtual environment. The different protocols used to coordinate these features can work on top of existing P2P solutions like Federated VoIP or WebRTC.

PAYMENT CHANNEL

General purpose, public, and distributed HTLC networks like Lightning may be at least one year away from materializing, but low-trust hub-and-spoke payment channel networks allow for fast and low-cost transactions that can be implemented today.

Payment channels are key for Decentraland for two reasons:

In-world purchases

Incentivizing quality of service of content and P2P servers

Today, platforms mitigate the risk inherent in credit card payments: users trust the platform, rather than the application, with their payment details. With payment channels, they could make direct purchases to the developer with no risk of identity theft.

Some parts of Decentraland’s infrastructure can be paid for with micropayments. These costs include hosting content, serving it, and running P2P protocols like spatial audio processing for multiple users. The marginal cost of running applications on Decentraland for developers, given a market of incentivized servers to provide the infrastructure, approaches its real cost as this becomes essentially commoditized. However, in order to have no barrier to entry for incoming developers, Decentraland will subsidize these services with the proceeds of selling MANA tokens

IDENTITY SYSTEM

Decentraland’s ownership of land is one kind of identity system, where credentials are the coordinates of one’s land. Economic incentives are also necessary to ensure that the creators of avatars, items, and scripts continue building and distributing them. Since content can be arbitrarily copied, we must rely in social agreements to enforce retribution to the creator.

Social agreements can make digital scarcity possible. In centralized systems, this scarcity is defended by the company that creates the platform. For Bitcoin and other proof-of-work blockchains, scarcity is enabled by a computational puzzle and the fact that mining blocks requires an onerous economic sacrifice.

Decentraland can use decentralized identity systems to create a layer of ownership over in-world items. This system must allow users to easily verify the consent of an author by linking public keys and signatures with human-readable names.

Projects like Civic or uPort or the Ethereum Name Service can be used to do this. Social reputation is also needed to facilitate contributions to the author. The ability to incentivize content creation on decentralized economies is evolving quickly, with multiple projects working in the space directly or indirectly. Potential solutions include Mediachain, Curation Markets, Rare Pepes, and more

DECENTRALAND CHALLENGES

• No marketing strategy public facing
• Lack of gaming experience.
• New technology unproven in decentralized marketplace
• Decentralized Content Distribution
• Scripting
• Content Curation

No marketing strategy

At the moment, I have been unable to get any type of marketing strategy from the team at Decentraland. I have sent an email and posted a number of times on their slack channel requesting some sort of strategy on how they plan on getting mass user adoption.

If I hear something from the folks at Decentraland, I will update this analysis but for now it is unknown, but this does not imply that there is none.

Lack of gaming experience

The team has great technology experience but lacks in overall gaming experience. I anticipate that they will remedy this situation after the ICO and hire talented people with gaming experience.

New technology unproven in decentralized marketplace

Decentraland is proposing something relatively new and as such it is untested. This unknown factor is a challenge as no one can say with absolute certainty how their product will be received. In addition, the virtual reality technology still has leaps and bounds to go before anyone can really benefit from a real-life experience. Moreover, the cost of entry to buy a virtual reality headset is somewhat costly. This, of course, will change with Moore’s law, as technology innovates and prices drop to meet mass adoption.

Decentralized Content Distribution

Content distribution through a P2P network has two main issues. The first involves download speed: retrieving a file from a DHT or distributed peer-to-peer storage system has traditionally been too slow. Specially, in a graphical application like Decentraland, users will be adverse to using a system that does not load the experience quickly. The second issue involves availability: ensuring that content is sufficiently distributed around the network without loss. IPFS such as Shift and the upcoming FileCoin protocol are addressing these issues and we’re looking forward to when they become production ready.

Scripting

Scripting will be the most important element used to create valuable experiences for users in Decentraland. Its APIs will need to be secure enough for clients to hold private keys and authorize micropayments frequently. Ease-of-use is also critical to penetrate a broad audience of developers.

Content Curation

The issue of filtering content for mature audiences (like pornography, violence, or gambling) is difficult to solve within a decentralized network. We expect a market to emerge here: with a reputation-based approach, users could select one or more providers of whitelists/blacklists that track the type of content being served on each parcel.

ROADMAP

TOKEN SALES TERMS

TEAM

From the creators of Proof of Existence, Streamium, Bitcore, and OpenZeppelin.

Advisory Board

Partners

TREND ANALYSIS

The statistic depicts a forecast regarding the number of active virtual reality users from 2014 to 2018. The total number of active virtual reality users is forecast to reach 171 million by 2018. The VR market is set to grow at an extraordinary rate in the coming years, with revenues from virtual reality software alone forecast to increase by over three thousand percent in four years.

Number of active virtual reality users worldwide from 2014 to 2018 (in millions)

The statistic shows three growth scenarios for global economic impact of augmented and virtual reality from 2016 to 2020. In the high-adoption scenario, the economic impact of VR/AR is forecast to amount to 29.5 billion U.S. dollars in 2020.

Projected economic impact of virtual and augmented reality technologies worldwide from 2016 to 2020 (in billion U.S. dollars)*

The statistic shows a forecast for the global augmented and virtual reality market size for 2016, 2017 and in 2020. In 2020, the augmented and virtual reality market is expected to reach a market size of 143.3 billion U.S. dollars.

Forecast augmented (AR) and virtual reality (VR) market size worldwide from 2016 to 2020 (in billion U.S. dollars)

CONCLUSION

Clearly virtual reality will have a huge impact on technology and the world in the next 10–20 years and beyond. The question is, who will be the dominant players in the space and will Decentraland be one of those leaders?

Only time will tell.

The challenges inherent to virtual reality are really cost of entry, such as virtual reality headsets and the overall platform itself. The elephant in the room as they say, is whether or not the public is ready for this type of virtual reality experience. Decentraland faces an even greater challenge which needs to be address and that is gaining mass user adoption.

Mass user adoption entails creating a user experience from start to finish that is super simple, essentially stupid proof.

And then the question therein lies who exactly is the target audience of Decentraland?

I would venture to say, that, as a business, they would want and welcome any and all users regardless of technical prowess, but that is just my opinion.

Decentraland has a long road ahead of themselves, and I foresee many competitors entering this space that already exist in the gaming centralized private sector space.

Decentraland is a great concept but what I would like to see is a DecentralGalaxy, where instead of one world, there are planets, maybe I am putting the cart before the horse.

In the end, virtual reality will only grow from here and time will only tell as to whether one of those leaders will be Decentraland.

[1] https://www.youtube.com/watch?v=j3ckylubGmk&ytbChannel=CryptoPortfolio

[2] https://blog.decentraland.org/the-decentraland-development-roadmap-51bf7903ff16