Decentraland’s Crisis Moment: Sales Market Share Drops To 3%

Key Points:

• Decentraland has experienced a “crisis moment” due to concerns about centralization, governance, and community engagement.
• It has launched many new functions and tools to break the deadlock and decentralize power.
• With the proposed changes and improvements, the platform may be able to regain the trust and support of its community and continue to grow and develop in the future.

Recently, Metaverse’s leading project, Decentraland, announced plans to create a new governance token to motivate users to participate in voting. Although Decentraland once exploded and many well-known companies and big names spared no expense, it is an indisputable fact that its popularity has declined at this stage.

This year, facing the embarrassing situation of declining transaction volume and active users, Decentraland has launched many new functions and tools to break the deadlock and decentralizes power around the concept of “open source, openness, and community co-creation.” However, due to the coldness of the metaverse and the fierce offensive of competitors, Decentraland is facing an unprecedented moment of crisis.

With the proposed launch of a new governance token, the value narrative of MANA may be challenged

Not long ago, the Uniswap proposal turmoil was raging, and the oligarchy governance of the community was exposed behind the voting war. Similarly, Decentraland DAO also has the problem of insufficient decentralization of chain governance.

Its community update in January 2023 pointed out that in recent months, the distribution of voting rights has been increasingly scrutinized by the community because A large number of “whales” can pass relevant proposals in the absence of a consistent community consensus or widespread opposition, and even some proposals will “flip” at the last minute, catching other community members by surprise.

Currently, Decentraland DAO has about 5,000 active members, but among the 85.5 million active voting rights, 60% of the voting rights are controlled by 18 wallets.

As an important layout for building a decentralized governance system, Decentraland DAO is responsible for controlling the update, maintenance and upgrade of core smart contracts. Core members include MANA, NAMES and LAND holders, who make proposals and vote. But the existing governance mechanism cannot effectively prevent the risk of monopoly by large players.

To this end, Decentraland DAO hopes to encourage voting participation incentives around incentives to improve transparency and achieve decentralization. In addition to the implemented voting delegation, it also plans to introduce monetary incentives, game elements, and new tokenized voting rights strategies.

Among them, Decentraland believes that creating new governance tokens can provide greater flexibility in token economics to better motivate and deter bad behavior, reducing the risk of manipulating the voting process by “malicious actors.” As the existing token of Decentraland, MANA can be used to participate in governance and purchase land and clothing items. If the new governance token used for voting is launched, the use of MANA will be greatly affected.

MANA’s current market performance is also relatively tiring, and investors may lack confidence. From the perspective of secondary market prices, CoinGecko data shows that as of February 22, MANA has fallen by more than 72.4% in the past year; from the perspective of currency holding addresses, Etherscan data shows that although the total number of MANA currency holding addresses has exceeded 31 million, the speed of holdings has slowed down significantly compared with the past, and it has only increased by 18.7% compared with 261,000 at the beginning of this year.

At the beginning of its establishment, Decentraland DAO was awarded 222 million MANA (released in ten years), accounting for 1/10 of the total. According to the latest proposal, since the funds of Decentraland DAO are basically MANA and DAI, the community proposed to sell some assets to diversify funds and deal with market risks, but the proposal was eventually rejected due to insufficient votes.

Once the new governance token is launched and the usage scenarios are limited, the value narrative of MANA may be unsustainable. In this regard, some community members also raised concerns that large-scale reform of the underlying token economic structure of DAO may be too complicated and may cause fluctuations in the wider ecosystem, which will have an unpredictable impact on the overall confidence of MANA.

So, for now, these proposals are still being discussed on the DAO Discord forums or recent proposals.

The number of users and transaction volume plummeted, and the market share was less than 8%

Decentraland’s on-chain governance reform is a step to change its own predicament. As a leading project, Decentraland once took advantage of the prosperity of the metaverse. Even though the virtual land sold to the outside world is expensive, high-priced transactions still occur frequently. For example, in November 2021, a piece of digital land was purchased by the virtual developer Metaverse at a high price of $2.43 million, setting a new record for the price of virtual real estate.

However, as the crypto market went bearish and the popularity of Metaverse faded, Decentraland’s trading activities also began to slow down sharply, and its popularity suffered from Waterloo.

DappRadar data shows that as of the latest data on February 22, the number of daily unique active wallets (UAW) in Decentraland, that is, the number of active users interacting with dApps is only 422, the number of transactions is 883, and the transaction volume is about $1700. Smart contracts’ asset balance is $27.02 million.

At the end of 2021, Decentraland’s daily active users exceeded 13,800, and its daily transaction volume exceeded $50,000, far exceeding its total number of users and transactions in the past month. In the past 30 days, the number of Decentraland users was about 5,860, the number of transactions was 86,000, and the transaction volume was $75,000.

According to Metacat data, the monthly sales of Decentraland land have dropped from a peak of US$34.18 million in November 2021 to US$343,000 today. Since 2023, the number of Decentraland land sales has only been 321. Not only that but from the perspective of the number of landholders each month, there has not been a significant increase since March 2022.

The slowdown in Decentraland’s trading activities has something to do with the overall coldness of the market. Metaverse real estate price trends, as measured by Metacat’s Metaverse Virtual Real Estate Index, show that Metaverse real estate prices have fallen from $11,000 in March 2022 to $3,366 today.

But Decentraland’s market is indeed being divided by other competitors. Metacat data shows that in 2022, Otherside’s land sales will be as high as $1.04 billion, followed by NFT Worlds at $120 million, The Sandbox will rank third with $85.1 million, and Decentraland will rank fifth with $48.2 million, accounting for only 3.4% of the total turnover for the year.

From the perspective of sales performance this year, Otherside still ranks first in the market with $104 million, accounting for 95.4% of the market, while Decentraland occupies 7.7% with $856,000. Compared with the latecomer Otherside, Decentraland was “beaten,” even worse than many other competitors in the same period.

Although Decentraland claims that it is not a company, but a DAO and an open-source Web3 metaverse platform, it will not regard users as a product to measure success. But from the current point of view, Decentraland is making frequent moves to broaden the entrance of user traffic and has designated 2023 as the “Year of the Creator” of Decentraland.

Locate public goods, promote decentralization, and break the deadlock

Decentraland positions itself as a public product in the Internet era and has been exploring feasible paths for community co-creation to gain more favor from the market. But what Decentraland urgently needs to solve at this stage is how to solve the problems of high creation threshold, expensive virtual real estate, and highly centralized governance. In the past few months, Decentraland has successively launched many functions to provide more creators with an open virtual world.

For example, because virtual land is too expensive for most ordinary users, it also makes large tracts of idle virtual land everywhere, and the imperfect construction scene also means that it cannot further attract more users.

To this end, Decentraland has launched a land leasing service. Users who do not have a certain financial capacity, can rent virtual real estate to hold events and establish clubs. Barriers to entry are lowered.

At the same time, Decentraland launched the Worlds function beta version, which allows users to build a 3D private space in the “suburbs” outside Genesis City without buying expensive virtual land NFT. The cost is only about 30 US dollars, but it cannot be sold or traded.

Of course, in order to attract more creators, Decentraland also released tutorials for fools and easy-to-use SDK components. Of course, Decentraland also often holds various competitions to stimulate the creative enthusiasm of the community and holds Metaverse Fashion Week, parties, exhibitions, etc., attracting Estee Lauder, Tommy Hilfiger, Fidelity, Mango, and many other well-known companies to join.

For example, in November 2022, Decentraland announced holding the second Metaverse Music Festival, inviting Chinese idol group SNH48, Japanese girl group Atarashii Gakko, K-Pop band 2AM, etc.; recently, Doritos officially announced its launch in Decentraland Doritos Triangle Studios and more.

According to the 2023 creator roadmap announced by Decentraland, it will provide more tools for scene developers and NFT content creators, including scene developers will get code editors for environmental scenes, new versions of SDK toolkits, the scene triggers the function of avatar animation, virtual smart wearable devices, etc., and content creators can also obtain tools for more convenient management and distribution of works, as well as fiat currency payment channels such as credit/debit cards.

The left hand is the unsatisfactory market performance, and the right hand is the competition. For the virtual world leader with a market value of nearly 1.3 billion US dollars, the prospect is facing a severe test.

DISCLAIMER: The Information on this website is provided as general market commentary and does not constitute investment advice. We encourage you to do your research before investing.

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Harold

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