The first successful metaverse stablecoin actually predates crypto! (photo by CoinWire Japan on Unsplash)
In a five-minute YouTube video which dropped today, Amy Jo Kim speaks with Linden Lab’s founding CEO, Philip Rosedale, about a stable digital currency that powers a vibrant metaverse economy—and has kept it running for almost two decades! Of course, I am talking about the Linden dollar.
As I often like to say on this blog, Second Life is the perfect mature, fully-evolved model of a working metaverse which newer entrants to the space would benefit from studying! And whether or not you are already familiar with Second Life, Philip is always a good interview: insightful, personable, understandable, and articulate. Highly recommended!
In related news, were you aware that Linden Lab’s financial subsidiary, Tilia, has recently secured a strategic investment (amount unnamed) from J.P. Morgan Payments? According to the official press release:
Tilia LLC, the all-in-one payments platform, today announced it has secured a strategic investment from J.P. Morgan Payments. Tilia’s solution, built for game, virtual world and mobile application developers handles payment processing, in-game transactions, as well as payouts to creators by converting in-world tokens to fiat currency including USD, which serves as the backbone of any functioning virtual economy. Drew Soinski, Senior Payments Executive, Managing Director, J.P. Morgan Payments said “We believe that contextualized commerce – such as virtual economies within games and virtual worlds – is an area perfectly positioned for innovative payments solutions to play a critical role in the coming years. We’re delighted to invest in Tilia LLC, a market leading provider of software gaming payments tools, to develop solutions for these new and exciting marketplaces.”
Tilia’s virtual payment system easily and securely converts in-game tokens and currency into fiat currency. Built from the ground up to power Second Life and its creator-based economy, Tilia was developed over several years to build its unique capabilities. Tilia has secured the required money transmitter licenses in the U.S. to support payouts, allowing for secure transactions on a large scale. Tilia provides developers with the tools to enable thriving, profitable in-world economies that empower their players and users to buy and sell virtual goods and services and facilitate robust play-to-earn programs.
“Virtual economies represent a huge financial opportunity particularly for game, app and virtual world developers,” said Brad Oberwager, Executive Chairman of Tilia LLC. “J.P. Morgan Payments, a worldwide leader and recognized innovator in payments, is the right partner as we continue to expand capabilities in line with these rapidly growing creator-based economies”.
Tilia has been running Second Life’s $650 million dollar economy for the past seven years. Financing for the new company is coming from their strategic partner, JP Morgan. “It’s very important virtual worlds have the instantaneous settlement Tilia provides,” said Brad Oberwager, Executive Chairman of Tilia, and acting CEO of Linden Lab. “We can handle very high transaction volume at very low dollar amount that even with USDC, the systems aren’t built for that kind of stuff. We move one 250th of a dollar sometimes.”
In addition to the investment, Tilia is also working with J.P. Morgan Payments to increase payout methods and expand the number of pay-out currencies. Perhaps most importantly, partnering with the world’s largest bank will enable Tilia to scale to the potential size of the putative metaverse.
Oberwager sees his company as crucial for the metaverse.
“Tilia is money into the metaverse. It’s money moved into the metaverse and money moved out of the metaverse,” said Oberwager. “And why this is so important is because you cannot have this concept of the metaverse without a social economy. It is both the social aspect and the financial aspect. Those two things must work in harmony. To do money, you need some virtual token to make money work.”
He added, “Money has to be rock solid. That is JP Morgan. That’s the partnership. What’s the value of Tilia? You can’t build a metaverse without user-generated content. You can’t build a metaverse without social interaction. You can’t build a metaverse without some sort of financial token that allows people to build a world.”
The company will use the funds to expand its business and go into new markets.
“We are moving money in the metaverse,” Oberwager said. “It’s a real thing. that’s where the investment is going. We have a customer list and people are coming to us.”
Tilia fuels commerce in Second Life, which generated $86 million in payments in the past 12 months. The Second Life economy is still measured at $650 million nearly 20 years after its founding. Tilia has about 48 employees.
Oberwager said the deal took about a year to work out with J.P. Morgan Payments. During that time, Tilia made sure it could be interoperable with J.P. Morgan.
Finance giants like J.P. Morgan make strategic investments like this on the expectation they’ll be accessing a larger market down the road, i.e. burgeoning metaverse platforms with less experience than Linden Lab handling international payments/virtual currency.
On the other hand, Tilia has been a standalone company since 2019 and only counts Second Life and below-the-radar metaverse platform Upland as its major consumer-facing clients. (Despite a partnership with Unity in early 2022.) But with JP Morgan as a backer, I’d expect other customers to come along soon.
I agree with Wagner; I’m pretty sure that this partnership will lead to more metaverse platforms using Tilia to implement their in-world economies! (By the way, this news has absolutely zero impact on Second Life. Everything stays the same.)
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
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:
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.
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.
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.
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
One thing that I did not know about the contest is that each accepted entry will receive 200 MANA, which works out to about US$5.00 at the current exchange rates. I understand that you can submit up to 20 entries per person, which means that a user who submits the maximum number of entries earns 4,000 MANA, worth about US$100. (This information comes from a recent blogpost on the DCLPlazas blog, which is a good source of news about Decentraland.)
This reminds me of how High Fidelity was offering US$300 per accepted entry to an avatar contest at one of its final big events (this was before its abrupt pivot earlier this year to promote business use of HiFi for remote workteams, and an attempt to rein in runaway costs). For a while there, High Fidelity was spending money like a drunken sailor, and I am starting to wonder if the same thing is starting to happen over at Decentraland, which has been extremely generous with its contest prizes this year.
I have absolutely no problem with large cash prizes for contest winners, and I know that contests encourage the creation of good content, which drives usage of the platform. But in my opinion, paying for every single contest entry is only going to encourage a flood of people gaming the system with the maximum number of contest entries, just to collect the most money they can and then cash it out.
This is essentially bribing people to use your platform, which means that as soon as the money stops flowing, fickle users, who were there only because they were paid, will abandon the platform (which is exactly what happened to High Fidelity).
Want to play a hunting game? You’ve got to pay for the arrows. Want your choice of avatar username? You’ve got to buy one. One person on the official Decentraland Discord server recently asked whether they would be allowed to erect a paywall in front of a constructed scene, so you couldn’t even look at it without paying. Everybody seems out to make a buck.
The blockchain/cryptocurrency community is a world apart, and most current Decentraland users and investors do not see this sort of setup as strange. But I wonder how well this will play out with the casual, non-crypto visitors which DCL needs to attract in order to survive and thrive long-term. Will potential users be put off by having to pay for everything, even buying their username? I guess we’ll find out once the doors open to the general public.
UPDATE Dec. 6th, 2019: Ari Meilich, the Project Lead at Decentraland, says:
The idea behind subsidizing content creation is trying to crack the chicken and egg problem. A lot of people have been building in the absence of incentives, but other are more likely to create better scenes provided they receive tokens, particularly before we have launched and there isn’t an immediate flux of users. In the previous contests it has worked out great. This contest will be the last one before launch, Ryan. And it’s looking like there’ll be enough interactive content to put us in a good position to open the world publicly soon 🙂
Ebbe Altberg, the CEO of Linden Lab (the makers of Second Life and Sansar), recently gave an interview to Tonya Hall of ZDNet:
A couple of quick facts from the fifteen-minute interview:
Ebbe Altberg’s previous employment history includes stints at both Microsoft (12 years, working on Microsoft Office) and Yahoo! (where he was a senior vice president);
Last year, Second Life users cashed out $64 million in earnings;
Second Life has had over 200,000 virtual marriages in its lifetime!
Ebbe spends the bulk of the interview discussing the in-world economy of Second Life and Sansar (which Linden Lab is currently building based on the lessons learned from the 16 years of experience the company has gained by operating Second Life). He also talks about recent corporate branding partnerships in Sansar, such as Monstercat, Sanrio (the brand behind the Hello Kitty phenomenon) and Levi’s.
It’s clear that Ebbe wants to pursue more corporate partnerships and branding opportunities with Sansar. One thing that puzzles me is that this video, posted on Sept. 24th, 2019, had only had 22 views so far on YouTube! So please give it a watch, and spread the good word. Thanks 😉 perhaps we can send a few more companies Ebbe’s way, to strike a few more deals!
