The short version
- Decentraland is a metaverse game built on the Ethereum blockchain.
- Decentraland gamers buy LAND using the cryptocurrency MANA, but any investor can also buy MANA on a crypto exchange that offers it.
- Even if you plan on buying MANA, it’s best to continue building a diversified portfolio that includes tokens with larger market caps (like BTC and ETH) as well as more traditional assets like stocks and bonds.
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What is Decentraland?
The 3D virtual reality platform allows users to create, explore and interact with other users in a finite world. It was created by Esteban Ordano and Ari Meilich in 2015 and opened up to individual investors in 2017.
Decentraland isn’t the first virtual reality world, but it has one unique component: it’s fully decentralized. The Decentraland metaverse runs on the Ethereum blockchain, and transactions are made using smart contracts.
The community can introduce and vote on policy changes, auctions, and other activities within the platform. This takes place on Decentraland’s governance interface, the Decentralized Autonomous Organization (DOA).
How Decentraland works
Like other virtual realities, Decentraland is a fully immersive virtual universe. The platform operates using two digital assets: LAND and MANA.
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LAND is an NFT that defines ownership of a parcel of digital real estate or land.
The architecture of the platform uses Ethereum smart contracts to track that ownership. Once you purchase a plot of LAND, it’s yours to do what you want with it.
Users build within the Decentraland universe with a drag-and-drop editor and marketplace where they can make purchases. Here they can build scenes, buy in-game items, and develop their LAND. Users can also explore and interact with plots of LAND owned by others.
The other major component of Decentraland is MANA, which is the platform’s native cryptocurrency token.
MANA had its initial coin offering (ICO) in 2017. Within the Decentraland platform MANA, not fiat currency, is used for buying and selling.
More: What are real estate NFTS?
What to know about investing in Decentraland
Decentraland offers a cryptocurrency, meaning anyone can invest in it regardless of whether they plan to participate in the virtual universe. Anyone can purchase Decentraland (MANA) on a cryptocurrency exchange, such as Binance, eToro, or Coinbase. When you buy MANA, you will be able to invest in the project, and you’ll also get voting rights to provide input on how Decentraland is run.
There is currently about 1.85 billion MANA in circulation and there’s a market capitalization of $1.6 billion. The coin has a maximum supply of 2.19 billion coins. When it reaches that point, it will have a fully diluted market capitalization of about $1.89 billion.
As with most platforms, Decentraland does have some competitors on the market. Right now, its most significant competitors are The Sandbox and Axie Infinity.
The Sandbox (SAND) is similar to Decentraland in that it’s a virtual reality world built by users. Axie Infinity, on the other hand, is a blockchain-based trading and battling game inspired by games like Pokemon and Tamagotchi. Users can collect, raise and battle creatures within the platform.
The final question you might be asking yourself is whether Decentraland is a secure investment. The platform is built on the Ethereum blockchain, where transactions are recorded, verifiable, and trackable. And because it's recorded in a decentralized ledger, it's more challenging to hack. However, if you’re concerned about your cryptocurrency being hacked or stolen, you could store it in a more secure cold storage wallet.
Is Decentraland a good investment?
There’s no single answer as to whether Decentraland is a good investment. To determine if it’s MANA is a good investment for you, consider your financial situation, risk tolerance, goals, and other factors. And know that it's a very speculative investment, especially with the price of MANA crashing alongside other altcoins as crypto winter sets in.
In fact, according to CoinMarketCap, MANA currently costs $0.8637 per token, which is down from a historical high of around $5.48. This is a significant drop in price, and it shows how volatile investing in altcoins like MANA can be.
In our opinion, MANA isn't a good investment if you're just trying to swing trade this crypto gaming token and are hoping to strike it rich. The social media hype that helped fuel the token's bullish price increase has largely subsided. At this stage, investing in Decentraland is risky, and returns are unlikely unless crypto markets rally or exciting news breaks about the project.
It’s also worth asking whether you’re interested in Decentraland’s cryptocurrency or genuinely interested in the project itself. If you plan to participate in the Decentraland universe, you’ll need MANA to purchase LAND and to interact within the platform.
The bottom line
Ultimately, it’s important to remember that MANA is a very high-risk investment. Digital currencies tend to have high volatility and aren’t necessarily tied to any actual performance metrics like stocks often are. So while you may consider allocating a small portion of your capital to exciting metaverse projects like Decentraland, the bedrock of your portfolio should be time-tested investing strategies.
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