Decentraland, Virtual Real Estate, and Actual U.S. Land Values

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When I first heard of Decentraland (supported by the MANA token), I thought the person telling me about it and everyone involved in the project to be outright ridiculous.  In the simplest terms, the project is literally creating virtual real estate on the blockchain.  Over time, however, it slowly grew on me.  Seeing Steven Spielberg’s “Ready Player One” not long after and I began to think “OK, maybe they’re just brilliant devs who took a few too many drugs.”  A few more days go by and I recall a trip last year to Riot Games in Los Angeles, creator of League of Legends, and remember the fervent employees there who not only worked on the Google-esque corporate campus, but would play on their own product for hours on end after work in the campus’ PC방.  It started to click a little bit more each day: VR emergence, Video Game/Crypto adoption correlation, escapism (or is it?), blockchain mania…Virtual. Real. Estate.  Why the hell not?  Nowadays, it registers more as brilliant sans drugs.  So I looked into it further…specifically how Decentraland virtual real estate markets compare to actual real estate markets across the U.S. as show below.  (Note that Decentraland is sold in parcels “virtually” measuring 1076 SQF thus all prices are in $/SQF taken at the MANA market rate of ~$0.11 as of the time of this byt3):

Average Price per Square Foot of Land 2

If you have to do a double take that’s O.K. but yes…the going rate for a piece of virtual land compares with that of real-world U.S. states and actually edges out more than half of them! (It would rank 24th as a “state” in terms of $/SQF).  With that being said, the average $/SQF in Decentraland ($45 as of the time of this byt3) is still a bit under the average across all U.S. States ($59 in 2016Q1) according to the Lincoln Institute of Land Policy and doesn’t hold a candle to a state like Hawaii ($412/SQF!).  Furthermore, the development purposes and methods between these types of estates could not vary anymore drastically.  One type requires hammer and nail, the other some pretty savvy coders. The possibilities are interesting to think about since there are not many other projects going after this niche (saving the whales with blockchain is obviously numero uno at the moment) and with how far virtual reality has come, we can expect to see some pretty imaginative developments and the governance that follows.  Stay tuned with Dig3st to see how certain parcels of Decentraland are selling at market rates comparable to that of Las Vegas.



Categories: Crypto

2 replies

  1. No. You had it right the first time. It’s idiotic for several reasons:

    1) In the real world, value is a factor of scarcity. It does not matter if Decentraland claims to have a limit of scarcity (this is the argument with all blockchain tokens btw). What matters is that there is no limit on other Decentraland competitors. Anyone can sell you a series of digits. Just because they are “limited” on their own blockchain does not in any way make them scarce in the real world where anyone else can mimic Decentraland.

    2) Land value is also a factor of location. Location value is a derivative of accessibility, travel time, climate, population, services, governance and a host of other issues. First off, what does location mean in a virtual world where you can instantly transport anywhere? What does location mean in a virtual world where digital assets are also weightless and instantly transportable? What does location mean when climate doesn’t matter? Or when governance is universal? Or where the laws of physics don’t even apply? (eg: I can build a 10,000 story building on 100sqm plot. Now what?)

    I could go on.

    But ultimately the conceptual correlation between digital “real estate” (ie: Number chains) and physical real estate exists only in our minds as a fanciful metaphor. To try and impress real world market values on blocks of numbers — be they cryptographically secure or not — is idiocy.

    Of course, that won’t stop idiots from assigning value to that which has none. Nothing ever does.

    • Hey James, Thanks for chiming in…I appreciate dissenting opinions here more than echo chambers. Here are some of my thoughts on the very valid points you’ve raised:

      1. These numbers are a snapshot of the auction prices at a moment in time and yes, to your point, speculatively, as with most projects. I would not be surprised if they double or go to zero in the future, as with most other crypto projects. I also personally don’t own LAND (as purchased by the MANA token) because I agree with you in that my money at the moment is better spent on actual real estate because it is tangible to me and I could figure out something to do with it. I don’t own LAND because I’m not a computer developer so therefore I would have no idea what to do with it except trade it at speculative values. However, I do have a position in MANA because there ARE people who do value the utility of this token and virtual real estate. This was meant to be an insight into a project that holds a lot of intrinsic value to those who plan to actually develop the LAND for whatever use they see fit. You wouldn’t pay $1M for a house in a city that you don’t want to personally live in would you? But you may consider paying for an investment property in that same city if you knew that a lot of people would be coming in to rent/buy property…the willingness to pay for this real estate is reflected in the comps.

      2. To your point on scarcity, the virtual real estate is as scarce as there are competitors to create more of it, and right now, there are few. Decentraland has a first mover advantage and the blockchain space as a whole (and arguably tech industry as a whole) has a shortage of developer talent. And yes, while theoretically an infinite amount of virtual real estate can be created, no self-respecting project would ever do that because they know that scarcity=value. If they create infinite lands, they would be cutting their own valuation. With other competitor entrants, the question will be more of quality and novelty rather than scarcity (ex. Las Vegas vs. Atlantic City) If it sucks, people won’t go.

      This is no doubt a nascent project but to those who actually do value the intrinsic nature of the virtual real estate, it is their ecosystem to price, and this is a reflection of that regardless of our personal opinion on it.

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