Perhaps no digital asset other than Decentraland (CCC:MANA-USD) represents the ultimate barometer on how you really feel about cryptocurrencies.
In other words, it’s the litmus test, similar as if our voting record was easily acquirable public knowledge. You can dance around political issues but once your record is known, you have drawn a line in the sand.
About the only way Decentraland is not a contentious issue is if one hasn’t quite researched the implications behind digital decentralized real estate, the underlying specialty behind MANA tokens.
Otherwise, if you have strong opinions about the topic, it’s difficult to drift into related subjects without further crystallizing — or even backing out of — your original position.
Let’s get into some tangible examples. Back in early November, my InvestorPlace colleague Alex Sirois mentioned that the “Decentraland metaverse encompasses 90,000 pieces of land, or parcels. Each parcel is 16 square meters, roughly 50 feet by 50 feet.”
Therefore, “land is a limited resource in Decentraland as it is in the real world. Its value, as in the real world, is derived from a multitude of factors.”
For MANA, one of those factors involves an ecosystem built around non-fungible tokens (NFTs), or the curation and trading of specialized, unique digital assets.
Surprisingly, as Sirois notes, there are many people who have taken this thesis to heart with serious money. As a New York Times article pointed out late last year, some investors have even poured millions into digital land.
However, as I mentioned previously when discussing Decentraland, rarity is only one component of the valuation spectrum. It might not even be the most important component.
You see, unless somebody demands the product or service in question, its rarity (or lack thereof) isn’t much of a factor.
The Easy Take for Decentraland
Given the immense popularity of Decentraland and the digital land concept, though, it seemed few shared my concerns about the topic. That’s why I was absolutely delighted when Eric Ravenscraft, a contributor for Wired.com, stated that this rush for virtual real estate is an illusion.
Thank goodness I wasn’t alone in having this perhaps increasingly unpopular contrarian opinion.
Primarily, I appreciate that Ravenscraft mentioned that Decentraland and similar platforms involve the granting of permissions for people to build digital properties in someone else’s space. Ravenscraft wrote the following:
In other words, buying “real estate” on these platforms is like buying property in Manhattan, but in a world where anyone could feasibly create an infinite amount of alternative Manhattans that are just as easy to get to. Which means the only reason for users to buy into this Manhattan is if it offers a better service than the others.
The author hit the nail on the head. I will just add this. Personally, I don’t think it matters whether Decentraland or any other platform provides a better service or experience. Honestly, we wouldn’t be talking about MANA if it weren’t for the fact that it has garnered tremendous popularity.
That’s it. With other investments like stocks, you’re betting that a specific, unique business enterprise beats out other competitors. But with Decentraland, it’s an alternative Manhattan in a sea of alternative Manhattans.
What then separates this Manhattan from another? Crazily, because many people say so. Put another way, MANA is akin to speculation on the human emotion of speculation.
To be fair, Decentraland has some value because of its raging popularity — that’s why I bought some MANA early on. But we’ve probably entered a phase where its meteoric valuation can no longer be justified.
Heed the Obvious Warning
Listen, I understand the elementary nature of this thesis: people are buying Decentraland mostly because everyone else is doing so. It sounds too mundane, too obvious, but with all due respect, I’m not sure how you can argue otherwise.
As I write this, there are over 16,000 crypto coins and tokens available. At this rate, we’ll have over 17,000 cryptos in a month or two. Not only can someone create an alternative Manhattan, but there are also alternatives of everything that is decentralizable. And those have alternative copies upon alternative copies.
Without any substantive anchor holding people onto Decentraland, MANA is pure speculation. Don’t get me wrong — I’ve made money off this wild trade. But you’re not going to see me put down anything more than chump change into MANA, particularly when real real estate can be had for a relative discount.
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On the date of publication, Josh Enomoto held a LONG position in MANA. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
A former senior business analyst for Sony Electronics, Josh Enomoto has helped broker major contracts with Fortune Global 500 companies. Over the past several years, he has delivered unique, critical insights for the investment markets, as well as various other industries including legal, construction management, and healthcare.