The 28th-largest cryptocurrency, according to CoinMarketCap, is Decentraland (CCC:MANA-USD), a metaverse platform that allows individuals to buy and sell virtual land.
What will they think of next?
Considering its digital real estate angle, I have to ask: has Decentraland become the modern version of the Florida swampland scam? Maybe. Maybe not. Here’s why.
Decentraland’s 90,000 Parcels
According to InvestorPlace’s Alex Sirois, Decentraland is 90,000 parcels of land, each of them 50 feet by 50 feet. In March, a parcel was worth approximately $5,800.
Today, they’re valued at more than $71,000 based on its market cap of $6.4 billion. That’s more than 1,000% higher over seven months and one heck of a return, but something hard to comprehend.
“I see the real potential in simply building and flipping on the platform. It won’t shock me to find out that a young kid makes a ton of money from a metaverse like Decentraland by building and selling,” Sirois wrote on Nov. 9.
I don’t have a problem with this statement. The one thing I’ve learned about cryptocurrencies is, never say never.
However, I have a tough time understanding why someone would want to own virtual land. You can’t use it, you can’t rent it out to a farmer, and you can’t build a home on it. At least, not one that you could live in.
With non-fungible tokens (NFTs), you’re paying for someone’s creativity or talent, whether it be an artwork, photo or a video. However, with Decentraland, all you get are a bunch of squares representing parcels of land, such as Genesis Plaza.
Where’s the value in that? It does feel like the modern-day version of Florida swampland.
Another Way to Look at It
The VR Soldier’s Mark Arguinbaev recently discussed how Sotheby’s Nov. 18 virtual auction of two pieces by street artist Banksy would allow buyers to bid using Ethereum (CCC:ETH-USD) instead of U.S. dollars.
It is another move by the auction house to gain a share of the digital artwork market. It comes on the heels of Sotheby’s October launch of Sotheby’s Metaverse and its April sale of $16.8 million in NFTs by an artist named Pak.
I’m not an art buff, but I understand the desire for people to bid on digital art.
Arguinbaev suggests that Decentraland’s appreciation is due to an increased user base. He argues user adoption is the biggest driver of valuation for any project. The stock equivalent would be social media platforms such as Meta Platforms (NASDAQ:FB), which can be moved by their monthly active users (MAUs) and daily active users (DAUs).
However, I think the first two sentences of Decentraland’s Whitepaper make the most sense:
“Decentraland is a virtual reality platform powered by the Ethereum blockchain. Users can create, experience, and monetize content and applications.”
The idea of spending time in a virtual world creating things reminds me of Roblox (NYSE:RBLX). The platform provides 3D experiences developed by users from around the world. Roblox stock is up 177% since it went public in March.
The Bottom Line on Decentraland
The rebranding of Facebook to Meta Platforms indicates how much interest there is in the metaverse and virtual world. Any cryptocurrency that participates in this realm, as Decentraland does, is bound to attract attention from investors.
So, while I have difficulty understanding why anyone would want to buy virtual land, it’s just a game that you pay to play. Sometimes, you win the game and MANA prices go up. Sometimes you lose, and prices go down.
From that perspective, I can see why some people might be attracted to the Decentraland platform. However, I’m not that person. I definitely feel there is some utility present — just not the kind I’m looking for.
Ultimately, Decentraland might not be Florida swampland. But I bet you there are a lot of investors out there who think it’s nothing but a bunch of horse manure.
I’ll follow Decentraland with interest.
On the date of publication, Will Ashworth did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
Will Ashworth has written about investments full-time since 2008. Publications where he’s appeared include InvestorPlace, The Motley Fool Canada, Investopedia, Kiplinger, and several others in both the U.S. and Canada. He particularly enjoys creating model portfolios that stand the test of time. He lives in Halifax, Nova Scotia.
