Category: Decentraland

Two Recent Video Essays on the Metaverse: Straszfilms Looks at There.com, and Dan Olson Dissects Decentraland

I have a great deal of respect and admiration for those people who create metaverse-themed video essays and documentaries on YouTube. I simply don’t have the time and energy at this point in my life to fiddle with video editing software, and I don’t particularly consider myself photogenic enough to put my face on your screen! So today, I want to introduce you to two new (and very different!) documentaries about the metaverse, by two creators whom I admire.

A little over a year ago, I blogged about Straszfilm’s thoughtful and nostalgic video essay on Active Worlds, which can be considered the granddaddy of virtual worlds, founded on June 28th, 1995, and somehow still limping along 27-¾ years later. Well, Strasz (a.k.a. Chris Hornyak) is back with a second video essay about another almost-forgotten virtual world, There, in a video cleverly titled Nobody’s There: The First Failed Metaverse (I wrote about There on my blog here). And, as a fellow virtual worlds nerd myself, I really enjoyed it!

There has to go down as one of the worst possible names for a virtual world—something which becomes rapidly apparent when you try to search on Google for it. In his video essay, he compares and contrasts There with another virtual world started around the same time, Second Life. I recommend Strasz’s video because of his insightful commentary on why There ultimately failed, tying the discussion to Second Life and to the newer NFT metaverse platforms. Here’s a representative extract (but watch the whole 45-minute video, it’s great!):

It is utterly bizarre to me to look back on this almost two decades later for a bunch of interconnecting reasons. Obviously, the concept of buying digital goods isn’t new or interesting now. But in 2003, it absolutely was. Almost bizarrely so. It’s wild to read journalists fawning over buying Levi’s for your avatar [in There] in a time when buying actual Levi’s online was so new. It’s almost unbelievable, and I mean that in a very literal sense. So, just for a second, imagine taking that out-there idea and then deciding that you were going to build an online 3D chat program on it in 2003…While this sort of thing is a little more acceptable today, it’s still readily mocked, and for a pretty good reason. I was recently interviewed in Esquire for a story about virtual fashion in the metaverse. During that discussion, the concept of NFT clothing came up, or just metaversal clothing in general.

Fashion is expression. With it you can quickly communicate who you are to the world…Yet, in the real world, that expression is always a bit limited…On the internet, especially in 3D social places, you were free from those boundaries. You can be anything, you can wear anything. And yet, it’s in that context that folks have stood back, folded their arms, and gone, “Hey, what people really want to do is own things.” It’s so utterly bizzare to think that, in the period I’m writing this, places like Decentraland and The Sandbox are being widely mocked for the very same sort of attitude. These places took one look at past and current virtual spaces that exist, and essentially just tossed all the creativity and novelty to the side, somehow coming out the other end thinking that the most important part of a seemingly post-scarcity virtual world is owning something…

To be clear, I don’t think that there’s anything wrong with designers being paid. When someone in Second Life makes a piece of clothing for others to wear, or someone makes a model in VRChat, I think it’s important that those people get paid for their labour. Yet, when a big fashion brand comes in, it feels like you’re not paying for their handiwork, but rather the opportunity to paste a digital logo on your avatar. I mean, at least with IRL fashion, outrageous pricing is justified by craftsmanship, aesthetic leadership, small product runs, and exotic materials. But here, in this 3D space, there is limitless possibility, and we’re deciding to celebrate that by selling branded jean textures?

Of course, none of this worked. It didn’t work in There, and it isn’t working now. It would be fair to say that, in the last few months, the NFT market has just completely cratered. Just like with There, creators of these new technologies seem to have missed the part about people having to want to spend money before they, well, spend money. You have to be making something desirable before actual humans want to buy it.

There, as well as every metaverse/NFT/Web3 project or whatever, both fundamentally made the same mistake. They just didn’t pause to try and understand why people will dress up their avatars, or spend time in these spaces. It’s not just the peacock, it’s because it’s fun! It’s expression in its purest form. It’s finding your, well, YOU, then hanging out with other people who were doing the same.

In other words, it’s about the community and community-building first, with fashion as a secondary add-on, not the other way around! Second Life started as a place for people to gather, make friends, and form communities first. I was around during the big corporate boom in 2007 when companies like Playboy trooped into SL, set up shop, and tried to sell branded products. In all cases, these companies eventually left, because they didn’t understand what Second Life was all about. First you have to have places like role-play communities spring up, which then organically leads to things like stores selling medieval role-play outfits! Putting the sales cart before the community horse (for example, in Decentraland) doesn’t tend to lead to engaging metaverse platforms, which keep people coming back.

Speaking of Decentraland, last night I watched the latest documentary by Dan Olson, whose YouTube channel, Folding Ideas, is well-known for his year-old video critique on blockchain, cryptocurrencies, and non-fungible tokens (a.k.a. NFTs), titled Line Goes Up, which has racked up over 10 million views to date. Dan’s latest video essay is a nearly two-hour-long documentary about Decentraland titled The Future is a Dead Mall – Decentraland and the Metaverse, and it’s two hours very well spent!

Dan’s documentary, split into six chapters, is an intelligent dissection of the concept of the metaverse in general, and Decentraland in particular. He is obviously extremely well-read, citing a wide variety of sources, including Ryan Bolger’s concept of reified space and Johan Huizinga’s concept of the “magic circle”, in this video. Dan is someone who has clearly put a lot of research into this work, and it shows!

Like Straz, Dan casts a very critical eye upon recent corporate forays into the metaverse, remarking on Lindt’s virtual chocolate store in one section of his video as follows:

…[T]he whole of it is elevated to transcendental when you see the actual thing that they’re describing: a laggy, hideous, cheap, faux-3D website that would probably be a camp hit if it were pitched instead as a throwback to FMV video games from the 90s….The vast majority of these so-called metaverse offerings are virtual spaces only insofar as they are painted to resemble a store. We already tried this 25 years ago, and discarded it because it turns out the human brain can shop from a list of items or a grid of photos far better than in can from an imagemap photo of a display case.

However, the main part of this documentary is a devastatingly detailed critique of everything that’s wrong with Decentraland. Having followed the Decentraland saga almost from the beginning back in 2018 on my blog, I already knew most of this, but it’s a truly a joy to watch Dan do such a wonderful job of pulling everything together into such a neat package, with a bow on top! I highly recommend this documentary.

Among other topics, Dan Olson discusses the many corporate (mis)adventures in Decentraland, as well as a lawyer’s office that is really nothing more than a (presumably) expensive three-dimensional brochure with links to outside websites like Facebook. He critiques the Decentraland Report news site at great length. He also talks about marquee events such as the Metaverse Fashion Week and the Metaverse Music Festival, and he takes a whole chapter in his video essay to dissect, at length, Decentraland’s somewhat byzantine DAO or governance structure.

Dan sums up his tour-de-force opus with the following summary, again referring to Huizinga’s magic circle:

So the authors of Decentraland, its creators and users, paint a magic circle around it with a narrative of inevitability, a narrative of the metaverse, a narrative of a true, separate, new world that you will eventually move your life into. Because if your neighbours aren’t going to eventually be compelled to be here tomorrow, why would you ever want this today?

Decentraland is, at every level, a collective fairy tale. Just people playing pretend… Whether it be the Pedigree Fosterverse scraping data from Adopt a Pet, users playing lawyer in their corporate offices or purporting to be the future of news, Decentraland’s value to businesses is patently absurd. And, as we’ve seen, even its decentralized premise is a fantasy. The DAO has no authority and is comically hapless—content to play politics, all the while pretending they have a stake in a billion dollar product. And it’s not enough to convince themselves, they need to convince you. So that is what they do by any means necessary. They will pander, mislead, outright lie—whatever it takes for you to buy into their narrative. Because this only makes sense from inside the circle.

Decentraland is a farce and a tragedy. It is painted into a corner by a combination of ineptitude and inherently bad ideas, and it cannot escape its fundamental being. Whatever other ideals are spit out, whatever rhetoric about liberation or political experimentation is employed, the simple fact that it was materially born as a pre-sale of lots of “land” based on a fiction of people “moving in” sets off a chain of decisions and incentives about design and functionality that bind it, forever, to being little more than a fantasy real estate scheme, an endless world of uniquely scarce dead malls.

So, go pop some popcorn, perhaps grab some wine to go with it, and settle in for a some entertaining and enlightening videos about the metaverse! And please, leave a comment on the videos, and tell’em Ryan sent you. 😉

Editorial: New Year, New Directions, Part II—How I Plan to Cover Blockchain Metaverse Platforms Going Forward

Photo by Pierre Borthiry – Peiobty on Unsplash

There is simply no better place to watch as the dominoes fall in the beleaguered world of cryptocurrencies, blockchain, and non-fungible tokens (NFTs) than the cryptosnark subreddit, r/Buttcoin (tagline: “ButtCoin. It’s a scam. At least we’re honest about it!”).

And it was there where I learned that the latest domino had fallen—Genesis Trading, a crypto lender forming part of Barry Silbert’s Digital Currency Group (DCG), filed for bankruptcy:

Crypto lender Genesis filed for Chapter 11 bankruptcy protection late Thursday night in Manhattan federal court, the latest casualty in the industry contagion caused by the collapse of FTX and a crippling blow to a business once at the heart of Barry Silbert’s Digital Currency Group.

The company listed over 100,000 creditors in a “mega” bankruptcy filing, with aggregate liabilities ranging from $1.2 billion to $11 billion dollars, according to bankruptcy documents.

A list of the 50 largest unsecured creditors was leaked, and it turns out that both of the co-founders and the current Chief Financial Officer of blockchain metaverse Decentraland are owed an eye-watering US$55 million. Crypto news website The Block reports:

Virtual world platform Decentraland has not one but three of its executives and founders listed among the 50 largest non-insider unsecured claims against Genesis Global, the crypto lender that filed for bankruptcy protection on Thursday.

Decentraland CFO Santiago Esponda drew attention after his Decentraland email address was listed in court filings as the contact for Heliva International, a Panama-based company owed $55 million by Genesis. But a closer look reveals that Decentraland’s two co-founders are also listed in the documents with non-Decentraland email addresses.

Esteban Ordano, a Decentraland co-founder who now acts as an adviser, is listed as the contact for an entity called Winah Securities. Genesis owes Winah, which is located on the same floor in the same building as Heliva, almost $27 million. Ordano told The Block that Winah has no relationship with Decentraland.

Gaming company Big Time Studios is owed $20 million. It’s run by Ari Meilich, Decentraland’s other co-founder. He started Big Time in 2020 but also remains a Decentraland adviser. Meilich declined to comment. 

Which brings me, in a roundabout way, to the point of this particular editorial: how I will be covering blockchain-based metaverse platforms going forward on this blog.

In a previous editorial, I explained that I was substantially cutting back on my coverage of Second Life, to refocus my blog on virtual reality in general, and social VR in particular. Likewise, I have also decided that I will no longer be writing about any blockchain-based metaverse platform unless it incorporates virtual reality. According to my comprehensive and reasonably up-to-date list of virtual worlds and social VR, the only platforms which incorporate blockchain technology (cryptocurrencies and/or NFTs) and support virtual reality are three:

  • NeosVR (a social VR platform with an associated cryptocurrency called NCR, which was planned to be the in-world currency but has not been incorporated; please note that Neos does not have NFT-based virtual real estate, or use NFTs at all)
  • Sensorium Galaxy (this ultra-high-end social VR platform uses the SENSO cryptocurrency to purchase avatars in their online store; as far as I am aware, Sensorium Galaxy does not use NFTs)
  • Somnium Space (a blockchain-based virtual world that supports VR, with a cryptocurrency and NFT-based real estate)

All the other blockchain metaverse platforms I have written about on this blog (including the one that first attracted my attention, Decentraland) are either flatscreen virtual worlds which do not support virtual reality, or they have not yet launched (and, in the current crypto nuclear winter, are increasingly unlikely to do so; the only exception being The Sandbox, which is still in extended alpha testing).

And (as illustrated by my initial anecdote about the Decentraland co-founders and executive entangled in the Celsius bankruptcy case), those platforms which had the great good fortune to launch well before the current crypto carnage, are possibly still entangled in the web of interconnected crypto companies lending and borrowing from each other, in highly speculative cryptocurrencies whose actual value is based only on what the next greater fool is willing to pay for them. In particular, those who purchased overpriced NFT-based real estate on such platforms as The Sandbox, Somnium Space, and yes, even pioneering Decentraland, are going to find it very difficult, if not impossible, to make any sort of profit off their investments.

And one only has to observe the travails which NeosVR has gone through, after a cyncial pump-and-dump instigated by cryptobros, to see how a social VR project with such technical promise can be hamstrung by attaching a cryptocurrency to it. There has, to my knowledge, been no active development on the platform in over a year, and it is unclear what 2023 holds for NeosVR. It breaks my heart and it angers me.

While I will continue to follow the current crypto winter shenanigans as an interested (and bemused) observer, I have decided that I will no longer be writing about any blockchain metaverse unless it has launched, and it supports virtual reality. In particular, I will no longer waste my time (and your patience) writing about all the blockchain metaverse projects which consist of little more than an .io website, a Telegram or Discord channel, and a white paper long on hand-waving, but short on actual technical details. Enough with the bafflegab and bullshit.

If you happen to actually launch a product which incorporates blockchain in some way (cryptocurrencies and/or NFTs), and it supports users in a VR headset, then I will gladly write about it. Otherwise, I’m no longer interested.

Stick a fork in it; it’s DONE. (Image by Pete Linforth from Pixabay)

UPDATE 4:43 p.m.: Well, well, well…another news nugget I gleaned from the r/Buttcoin subreddit: AsiaMarkets.com is reporting this evening that the mighty SWIFT global financial network will, as of Feburary 1st, 2023, no longer process fiat currency transfers from bank accounts to cryptocurrency exchanges, if they are worth less than US$100,000:

The SWIFT payments network has made an extraordinary decision that will have widespread implications on cryptocurrencies.

Asia Markets can reveal SWIFT will no longer process fiat currency transfers from bank accounts to cryptocurrency exchanges, with a value of less than US$100,000, effective from February 1, 2023.

The move will thwart cryptocurrency access to tens of millions of people worldwide.

One of the first crypto giants to notify users of the development this weekend, has been the world’s largest exchange, Binance.

“The banking partner that services your account has advised that they are no longer able to process SWIFT fiat (USD) transaction for individuals of less than $100,000 USD as of February 1, 2023. This is the case for all their crypto exchange clients,” said Binance.

“Please be advised that until we are able to find an alternative solution, you may not be able to use your bank account to buy and sell crypto with USD via SWIFT with a value of less than $100,000 USD.”

Time to go get more popcorn; this three-ring circus is just getting started!

UPDATE Jan. 25th, 2023: It turns out that my previous update is not as all-encompassing as it first was reported! Amy Castor and David Gerard write in David’s blog, Attack of the 50-Foot Blockchain, today:

Binance sent a notice to customers that starting February 1, their banking partner, Signature, would not be processing SWIFT transfers of less than $100,000.

Retail customers of Binance have until the end of the month to get their US dollars off the exchange. After that, their money is stuck.

Rumors are swirling around this — not helped by an early news report (rapidly corrected) claiming that the SWIFT system itself was cutting off all crypto exchanges. Here are the facts that we know so far:

  • Binance is cut off from Signature for transactions below $100,000.
  • Signature’s other exchange customers have not said they’re affected, and we haven’t seen their customers saying so either.
  • We haven’t heard of other banks putting such a condition on Binance or another exchange.

So it’s so far just Binance, via Signature.

Still, it is significant that Binance, the biggest cryptobroker still standing, is facing such a stringent sanction by one of its banks. (By the way, Attack of the 50-Foot Blockchain is well worth following, for its expert analysis of the ongoing crisis in crypto!)

Editorial: A Kerfuffle Over Decentraland Usage Statistics

There are three kinds of lies: lies, damned lies, and statistics.

—quote popularized by Mark Twain, origin unknown

On October 7th, 2022, the CoinDesk crypto news website published an article by Cameron Thompson, titled It’s Lonely in the Metaverse: Decentraland’s 38 Daily Active Users in a $1.3B Ecosystem:

screen capture of the CoinDesk article

This article led to some animated discussions over on the cryptosnark subreddit on Reddit (memorably named r/Buttcoin). I would encourage you to take a look at the full discussion thread yourself, which features an interesting side discussion of Second Life, but I will pick out a few choice quotes to share here (please keep in mind that this is a community of cryptoskeptics, not necessarily fans of NFT metaverse platforms!):

[More like] Desertedland.

I’m a land owner on DCL, was super bullish on it when I bought in last year (and before Facebook renamed to Meta and there was the metaverse craze). However, I just can’t see how it can scale. The game is laggy as f*** every single time you load it, got even worse during the craze period. How the heck can a virtual ‘world’ scale when majority of the users can’t even ‘walk around’ the ‘world’ properly?

Now it’s just a ghost town.

It’s pushed as a pet project by certain vested interests who have sunk lots into this, so they need their money’s worth (cough GRAYSCALE cough). Grayscale went full stupid on this, they even created a Trust offering for MANA similar to Grayscale BTC trust where people could hold MANA in traditional IRA accounts

Grayscale® Decentraland Trust

My son’s Minecraft server has more active players.

Tried to use it once. Bounced after it presented me with a $250 gas fee for trying to use a virtual vending machine. That was about an entire ETH at the time. Sold what little MANA [Decentraland’s cryptocurrency] I had, a couple hundred bucks at the time… which would’ve been worth about 20 thousand at its height. I’d even started designing assets for it. Was gonna buy some land and make a go of it, but Ethereum being a terrible inefficient network killed my momentum. Can’t help but be a little bitter about it.

Tried using Decentraland on both a 2020 Microsoft Surface and an older laptop that could run World of Warcraft, [and I] couldn’t even walk around because the system demands were so high. If they are selling their ecosystem to gamers then they are going to require A LOT more development to make it actually fun (i.e. more to do than just poker and microtransactions). If they are selling to the everyday consumer then they are going to need to cut down the hardware requirements to entry for anyone without a $1000+ computer. It has potential, but still a long way to go before it sees the everyday popularity that other digital platforms enjoy.

Just to clarify, the article says an “active” user has to make an actual transaction or another smart contract interaction. So there are probably a lot more users who just log in [and] play the game without being counted.

With respect to that last comment, the CoinDesk article indeed does state:

An active user, according to DappRadar, is defined as a unique wallet address’ interaction with the platform’s smart contract. For example, logging onto The Sandbox or Decentraland to make a purchase with SAND or MANA, each platform’s respective native utility token, is counted as an “active use.”

This means that DappRadar’s compilation of daily active users doesn’t account for people who log in and mosey around a metaverse platform or drop in briefly for an event, such as a virtual fashion week. It also likely means that these spaces are not where people are making transactions, such as buying non-fungible tokens (NFT)…

The largest number of daily users ever on Decentraland was 675, according to DappRadar.

So, for example, if I visit Decentraland, wander around the virtual world, but not interact with a smart contract (e.g. buy something like arrows for a hunting game), I am not counted as a user that day. This is a good example of how statistics taken from blockchain transactions do not give the full picture of what’s going on in an NFT metaverse! So this is rather sloppy reporting, which hurts Decentraland.

Decentraland was very quick to push back on what they consider to be an inaccurate way to count usage of its platform:

Here’s part of their Twitter thread:

Lately, there has been a lot of misinformation on the number of active users of Decentraland. Some websites are tracking only specific smart contract transactions but reporting them as daily active users DAU, which is inaccurate.

Let’s have a look at some of September’s data:

56,697 MAU [monthly active users. i.e. the total number of unique visitors in one month]
1,074 Users interacting with smart contracts
1,732 minted Emotes
6,315 sold Wearables
300 Creators received royalties
161 created Community Events
148 DAO Proposals

For better data: DAO grantee DCL Metrics tracks Decentraland’s Daily Visitors looking at the catalyst server visits and provides a similar data point as DAU. https://dcl-metrics.com

The DCL Metrics website allows you to pull up charts showing statistics over the past 90 days: Unique visitors per day (the blue chart on the left) and parcels visited per day (the purple chart on the right). Over the past three months, DAU (daily active users, i.e. the total number of unique visitors to Decentraland in one day) ranges from 5,871 to 11,965 users, with a slight but noticeable downward trend. On the other hand, there is a slight upward trend in the number of parcels visited each day (perhaps as new venues are constructed?).

Also, according to another, older thread from the Decentraland subreddit, there are webpages you can check to see the number of currently connected users on the various DCL servers (here, and here). However, please remember that these are snapshots, minute-by-minute figures, as opposed to the total count of daily active users. (At the time I checked them today, on a Canadian Thanksgiving Monday afternoon, there were approximately 530 users in all of Decentraland.)

So, watching this whole kerfuffle unfold online, here are some of my thoughts.

First: accurate metaverse usage statistics are sometimes hard to come by. They can be even harder to come by, if the metaverse company building a particular platform decides not to release them (for example, if they are so low that it would prove embarrassing to the company, which is likely working hard to encourage new users to its platform, and don’t want to share any news that makes them look bad).

Case in point, Linden Lab used to provide detailed user statistics for Second Life, then stopped, aside from the rare announcement of their MAU (monthly active user) figures. The company largely left the gathering and reporting of statistics to crafty folks who were able to scrape data from various sources. If you’re looking for some up-to-date SL statistics (as of Sept. 30th, 2022), Daniel Voyager reports:

  • daily Second Life user concurrency figures (i.e. the number of avatars online at any one time) range from 27,000 to 51,000. with a peak of 55,737 on Feb. 5th, 2022
  • the official Second Life website regularly gets over 10 million visits a month
  • 27, 453 grid regions (more commonly known as “sims” in SL; please note that, unlike Decentraland, there is no artificial scarcity in virtual land in Second Life, since Linden Lab regularly creates and leases out new land to meet demand)

While we cannot directly compare DCL’s unique daily visitor count with SL’s user concurrency figures, we can compare the latter to the number of currently connected users on the various DCL servers (here, and here). While certainly better than the 38 figure touted in the CoinDesk article, the 530 user concurrency figure for Decentraland pales in comparison to the 27.000-to-51,000 user concurrency figures for Second Life.

Also, compare these figures with the user concurrency figures put out by Steam for VRChat, with an all-time peak user concurrency of 42,564 (and on Jan. 4th, 2022, Wagner James Au reported that VRchat hit an all-time high of 89,300 concurrent users during New Year’s Eve 2021 celebrations, citing statistics scraped by a VRChat user named Adeon). So, as you can see, even with more accurate stats, Decentraland is still not anywhere nearly as popular as Second Life or VRChat (while it certainly is more popular than, say, Sansar).

Now, let’s focus in on one of the statistics Decentraland shared in its rebuttal series of tweets. 6,315 avatar wearables sold in one month seems to me to be a relatively small number, especially when you compare it to the sales juggernaut that is Second Life (both in-world store sales and SL Marketplace online sales, the latter of which would be the most direct comparison to Decentraland’s Marketplace).

I don’t have exact stats on SL sales (again, they can be hard come by), but a January 13th, 2022 Linden Lab press release stated that “Second Life has had one of its strongest years ever, with a growing user base and booming economy including an annual GDP of $650 million USD with 345 million transactions of virtual goods, real estate, and services.” Second Life’s non-crypto economy appears to be doing well!

Metcalfe’s law states that the value of a telecommunications network is proportional to the square of the number of connected users of the system (n2), and I suspect that this rule would also seem to apply to social VR and flatscreen virtual worlds: the more users you meet on a metaverse platform, the more popular it becomes.

Hopefully, this becomes a virtuous circle, where more users lead to more events, more engagement, and people telling their friends, family, and colleagues about “this cool place I’ve found,” and getting them to join. But it can also lead to a vicious circle, where people eventually stop visiting a platform because every time they log in, there’s next to nobody there, almost zero events happening, and little or nothing engaging to do.

Given the resounding crash of the NFT marketplace overall, and the resulting growing antipathy towards crypto and NFTs after a series of well-publicized failures and scams, even those legitimate NFT metaverses which have actually launched a working platform (Decentraland among them) are facing unprecedented pressures. Both crypto prices and sales volumes for all these projects have crashed, leaving those who bought at the top of the market wondering when they will be able to recoup their investments.

Another thought: the 1.3 billion dollar ecosystem mentioned in the title of the CoinDesk article is a bit misleading, too; this valuation is, as far as I am aware, based on what people actually paid for their virtual lands, avatar accessories, etc. Of course, in the current crypto winter, these assets are probably worth a lot less today. However, since the investors won’t realize a loss until they sell, they can cling to the inflated value of their NFTs (or, as the cryptobros like to say, “hodl”, short for “hold on for dear life”).

Molly White, the creator of the sarcastically-named website Web3 is going just great, has written an excellent article on cryptocurrency “market caps” and notional value, which I recommend you read to get a better picture of what’s going on in this space. It’s all too easy to blindly accept what promoters are telling you is the “value” of cryptocurrency and NFTs. Molly outlines some of the shenanigans used to artificially inflate these “values”, such as wash trading. (And check out her website!)

O.K., let’s just wrap this editorial up with an executive summary: Decentraland is not as bad off as the CoinDesk article might suggest in this misleading article, but compared to other metaverse platforms like VRChat and Second Life, it’s lagging behind in usage, despite its billion-dollar valuation.

UPDATE Oct. 12th, 2022: From Futurism: $1.2 Billion Metaverse Horrified by Report It Only Had 38 Active Users. Here’s a choice quote from that article:

Of course, even 8,000 users on a given day is dismal for something that’s supposed to be the future of online communities. And if blockchain is the underlying economic mechanism of the endeavor, it’s outright embarrassing if only a few dozen transactions are happening per day.

In short, it’s a perfect example of the kind of massive disparity between market value and actual users that has been plaguing the Web3 world for years, and could also be indicative of a serious slowdown in appetite for virtual real estate and other blockchain-related assets, including cryptocurrencies and NFTs

Decentraland’s Twitter account also attempted to do some damage control, writing that the platform saw “1,074 users interacting with smart contracts” in all of September.

All told, though, none of these numbers really amount to much, given the amount of money being poured into metaverse platforms like Decentraland.

And that doesn’t bode well for the future of the metaverse.

UPDATED! How the Crypto Crash Is Affecting Blockchain-Based Metaverse Platforms: Will a Crypto Winter Kill Off Some Projects?

I have been waiting a while to write this editorial, but I think the right time has come.

(Somebody posted this to the r/buttcoin Reddit, and I had to laugh!)

I have been avidly following every twist and turn of the current crypto crash, following various Reddit communities and scouring Google and Apple News for the reports of the latest crypto companies to fail, taking their investors’ money with them. The chain of dominos continues to fall, and nobody can predict where or when this “crypto winter” will end.

In talking about all this, there’s lot of jargon being thrown around which can sometimes be difficult to understand: smart contracts, DeFi, NFTs, DAOs, etc. The following 7-minute YouTube video explains all these and other terms, and I can recommend it highly (and it can serve as a refresher for the rest of you):

From the moment I first began writing about the blockchain-based virtual worlds and social VR platforms (starting with Decentraland, years before they actually opened their doors to the general public), I have been fascinated by the new crop of metaverse projects boasting some blockchain component. These projects seem to split into two kinds:

1. Projects with Non-Fungible Token (NFT)-based virtual real estate (e.g. Decentraland, Cryptovoxels, Somnium Space, The Sandbox). All such projects tend to have their own cryptocurrency (or use Ether, ETH), and offer a marketplace where you can buy and sell other blockchain-based goods, such as avatar wearables.

2. Projects without NFT land, but with an associated cryptocurrency (e.g. Sensorium Galaxy and NeosVR).

While examples of the second category are few in number, there has been an explosion of projects announced in the first category over the past couple of years. Many of these projects had hoped to duplicate the success of Decentraland, which had the great good fortune to do an Initial Coin Offering at the absolute perfect time, in 2017 raising US$24 million dollars before ever building a platform.

Decentraland’s successful subsequent virtual land auctions (with their frenzied bidding wars for NFT-based virtual pieces of land called, naturally enough, LAND) also attracted a lot of attention and favourable press. This no doubt encouraged other companies to set up similar schemes in an effort to duplicate that success. Among those that have actually delivered a viable product to date are Cryptovoxels, Somnium Space, and the still-in-alpha/beta-testing-but-soon-to-launch platform The Sandbox. Each of these projects inspired similar bidding frenzies for artificially-scarce NFT-based parcels of virtual real estate, in some cases setting records.

The following charts show just how much the value of the cryptocurrencies associated with just these six projects has tumbled over the past three months (all charts are via the CoinMarketCap website):

Decentraland MANA to USD chart (past three months)
Somnium Space CUBE to USD chrt (past 3 months)
ETH (used in Cryptovoxels/Voxels) to USD chart (past three months)
The Sandbox’s SAND to USD chart (past three months)
Sensorium Galaxy’s SENSO to USD chart (past three months)

And here’s one that really hurts: the surge and plunge in value of Neos Credits (NCR) over the past year. At the moment, project development has come to a near-standstill as the CEO fights against the CTO and the rest of the dev team about the role crypto will play in the NeosVR platform (and the matter will likely land up in court for the lawyers to battle over).

It’s still not clear if NeosVR can recover from this fiasco, which breaks my heart because it has such great technology! I do consider this to be the textbook example of how crypto speculation and greed can cause problems with an otherwise stellar platform; without being hooked to NCR, a cryptocurrency which has as yet has no practical use on the platform, NeosVR would still be doing very well! Instead, it is bleeding investors.

In addition, you can see the clear downward trend in both sales volume and average sale price for the following NFT-based properties over time (all taken from the NFT Stats website). Some seem to be doing a bit better than others, but all are down:

Decentraland LAND sales volume and average sale price (past three months)
Somnium Space Land NFTs sales volumes and average sales price (past three months)
Voxels—foremerly called Cryptovoxels—sales volumes and average dale prices (past three months)
The Sandbox’s LAND sales volumes and average sale prices (past three months)

The overall situation is grim, particularly for those who bought cryptocurrencies and NFTs at the height of the market, perhaps expecting to flip them for a quick profit. But, for the countless blockchain-based metaverse projects who hopped on the bandwagon after Decentraland and the other market early movers, the situation is even worse. In many cases, the newer companies expected to raise funds by minting and selling NFTs to investors, often well before anything concrete was built! Examples of such projects include two I have written about earlier this year, Wilder World and VictoriaVR, but there are literally dozens and dozens more such projects, more than I could ever hope to cover in my blog. The prognosis for these newer projects is not looking especially promising, as potential investors head for the hills.

And, sadly, the bullish crypto market also brought out all the scammers who wanted to take advantage of the hothouse atmosphere of crypto investment, accepting money up front for what was essentially vapourware, and then pulling the rug out from under those who had not done their proper due diligence. Greed and FOMO (fear of missing out) drove a lot of ignorant cryptobros to pour money into a lot of projects which, to date, have had little to show for them but a slick website and an active Discord (or Telegram) server where everybody was pumping everybody else up to buy and HODL (hold on for dear life to) their associated crypto and NFT assets.

Some non-financially-savvy people, believing that they were truly on to a sure thing, gambled money they could not afford to lose—their life savings, their retirement funds, even their childrens’ college funds—and have lost everything, or next to everything, in the current bear market, holding near-worthless assets they cannot find anyone to sell to. I keep reading heartbreaking stories in the various subReddits of investors who have lost everything. Many have spoken of suicide, and many Reddit communities have posted resources to support those who are struggling with their mental health as a result of their poor financial decisions.

In the current environment, I believe that any blockchain-based metaverse (or a metaverse platform with an associated cryptocurrency), is going to be in for a very rough ride over the next few months, as governments around the world raise interest rates, and the easy, low-interest credit dries up, and a global recession looms. People are going to retreat to safer investments, fleeing the demonstrably high volatility of crypto and blockchain assets like NFTs. We can expect to see a mass stampede to the exits in some projects, and frankly, not all the blockchain-based metaverse platforms out there will survive.

UPDATE July 14th, 2022: In yet another sign of growing trouble in the NFT space, which has seen sales nosedive in recent months, the major NFT marketplace OpenSea has announced today that it is laying off 20% of its staff.