How to Invest in Virtual Land in Decentraland. A Beginner to Pro Guide.

Investing in Virtual Land has REALLY picked up in the last few years. Another strong use case unlocked by the NFT industry where ‘Non Fungible Tokens’ can be traded on the blockchain that reference ownership of a specific plot of land.

In 2018, I saved my crypto portfolio from a 2-3 year bear market by Investing/Trading in Decentraland land. The NFT Industry went on to grow into collectibles, games, art, etc, but virtual land has still remained an interesting place for investors and builders to help grow.

In this guide I’ll try put together some guidelines on how Digital land investing has worked so far across the top blockchain based virtual worlds, mainly Decentraland in which I’ve bought and sold 1,000’s of ETH worth of land.

Currently there are 4-5 prominent projects that offer ‘virtual land’ as an investment, each having slightly different value mechanics. Decentraland, Cryptovoxels, Axie Infinity, Somnium Space, Sandbox come to mind.

Decentraland

NFT Game Axie Infinity Raises $860K in Governance Token Sale - CoinDesk

Axie Infinity

Somnium Space VR on Steam

Somnium Space

Artist Overview

CryptoVoxels

THE SANDBOX | CoLivingValley.com

Sandbox

Above are some of the many that will spring up moving forward. So what makes these valuable? The content? The neighbourhood? Speculation? Let’s explore.

Investing in Decentraland

Ok, let’s talk about Decentraland. I’ll start with a quick timeline.

History + Historical Data

  • Mid 2017Decentraland ICO for MANA raises ~$20M, (68k ETH).
  • Dec 2017First LAND Auction sale ~$15M spent on land, (161M MANA – which all got burnt). (Most land sold for 1-2k MANA, ($100-$200), some for a LOT more, (500k+ MANA near the central locations).
  • Jan 2018Crypto bull run ending, people rush to throw their money at other digital assets, big influx of new Decentraland investors here buying for around 2-5k MANA, ($200-$500), via private discord/rocket chat messaging.
  • March 2018 – Decentraland Marketplace launches. People start listing, buying and selling. Price discovery happens and lands slowly increase to around 5-7,000 MANA floor price.

  • September 2018 – (A massive whale, who the community calls ‘Nessie’), buys up a TON of land increasing floor from 7k MANA to 15k MANA. (Below shows the start of the Marketplace and in September when Nessie intered). Green bars indicate Volume, i.e, amount of Land being bought and sold daily, Blue line indicates MANA currency transacted.

 

  • December 2018 – Second Land Sale to sell the rest of lands that didn’t sell in 2017. Another 110M MANA spent here along with 9,300 lands introduced into current supply. ($6.6M USD)
  • February 2020 – Decentraland Finally launches to public with lands being around 12-15,000 MANA.
  • Rest of 2020 – Decentraland continues to optimize and bug fix releasing more features and slowly getting companies onboarded. Bitcoin recovers, goes from $8k to $36k

The prices of land I’ve mentioned above are ‘floor prices’, meaning the cheapest at the time. There were many instances where lands went for MUCH more, 20-200k MANA at some stages.

What Makes Land Valuable?

Let’s cover the factors that contribute to ‘land value’. I’m basing everything below on data and what I’ve seen in the past.

Speculation: We’re in a crypto environment. Everything born out of here has a HEAVY degree of speculation. What people ‘think’ it will be worth in the future. Decentraland is no different. A lot of the first 1-2 years was speculating which lands will be valuable and where the traffic will flow.

Good thing bad thing? I don’t know but it’s there just like in the Art market or anything else in the crypto/NFT space. I feel like we need to take this into our valuation formula and plan accordingly. When there’s 1,000’s of land sales then it becomes less speculative and more based on ‘market price’.

Scarcity: A value appreciation mechanic. Exactly why Bitcoin is going up. because there’s a limited amount. Decentraland land is fixed at ~45,000 private parcels of land, (not including district land).

But some lands are considered scarce due to the nature of demand/supply. let’s look at the below image which is a small part of the overall map.

To break this down, purple areas are ‘districts’, in this case, District X, Fashion District, etc. They’re managed and developed by a small team sometimes an individual. Some are built well, some remain empty and are looking for collabs.

Green box area at the bottom is a ‘genesis plaza’ there are 9 of these main ones in total and the area is managed and built by the Decentraland team. Events, games, etc.

Squiggly light grey lines are roads. There’s a double road running through the middle of the image below.

Dark grey are private lands. These are what you can buy and sell, each is 16x16m in world. The map below is zoomed out massively.

 

I’ve put some dots around,

Light Purple: In a hot pocket between two major districts, district X & Fashion st. Land here has gone for 20-40k MANA! In fact an estate recently sold at 20k per parcel.

Red: Touching a single road AND in a hot pocket. Double scarce. Usually 20-30k MANA.

Dark Purple: Touching a single road. If DCL gets millions of visitors and creators roads are expected to guarantee visibility. Generally roads are more expensive than non road connections. (I’d consider all those central land not connected to anything or on the far outskirsts non-roads. Usually non-road lands are priced at floor.

Yellow: Direct district connection. Depends heavily on the district. In this case, District X seems to get some attention. I can see this going for 15-25k MANA.

Green: Connected to a double road. Usually these go for 20-40k MANA

Orange: 2 Sides connected to a single road. More scarce.

The above are an example of how scarce lands can hold stronger value compared to non-scarce, (usually lands on the far outskirts or not connected to anything. These make up the bulk of DCL land and thus floor price is filled with them).

Neighbourhood: Some places are having clusters of content being deployed and thus the neighbouring land is becoming more valuable. One perfect example is the ‘crypto valley’ area where a $146k USD land recently sold. This land was made of 45 joined parcels of land at around 28k MANA each.

As we explored above lands connected to districts and double roads have historically sold for more right? So in this case we have 2 districts, one where Ethermon are going to deploy their MMO game.

It’s also where a multitude of companies have set up shop including Binance, Kraken, Matic, Game Credits, Whale Token, GDA Capital and many others.

Kraken Exchange HQ - Decentraland - 3D model by Decentraland (@decentraland) [9a81339] - Sketchfab

And where we hold Conferences in Crypto Valley,

Fair to say the neighbourhood & district/road connections AND size of the estate, (It’s not easy to find an estate this big in a good area), contributed to the price here.

How will the buyer recuperate the cost? Let’s discuss that below under ‘utility’

Utility: Meaning what are you using your land for? Is it making $ back to warrant that much of a spend? Some people just use it for fun, they put up their art work, host some podcasts and meetups here and there and build a community they regularly chat with.

Another more ‘macro’ commercial approach is signalling. Projects like Binance & Kraken want to make sure they are keeping up with new tech and accommodating to new parts of the industry growth.

So a 5-6 figure spend makes sense when their company is worth 100s of millions, sometimes billions. Launching parties and giving away wearables grows their community and community culture is what keeps their companies relevant.

Also, Galleries is a HUGE use case for virtual worlds. Some collectors have 6-7 figure NFT Art portfolios. How will they display these? Recently I helped sell 1.5M mana worth of land to about 10-15 Collectors who were keen to build galleries to display their art.

Displaying, Tweeting, sharing, hosting meetups etc all go together in increasing the value of their Art purchases. So to large galleries/collectors that hope to increase their portfolio, showcasing and hosting events on their own land makes sense and justifies big buys.

I personally have a 6 figure NFT Art portfolio that I’ll happily spend $10-$20k on buying land/displaying.

We gotta remember that a lot of this innovation is born in a highly speculative environment where the currency is ETH and BTC not USD. So when we see big USD sales it’s usually someone who’s ‘just’ spent 100 ETH. 100 of their stack of 30,000 that they bought at $1-$10 each. I know a few of those and they are in the art scene.

Prestige: Some people just like the most rare lands just for prestige and that’s just how they do business. In many cases they overpay but maybe they’re a market of their own. The below is central genesis plaza. Land connected here went for 500k+ MANA during auction!

But later started going for 200-400k MANA. This is where newbies spawn from and will have some quests.

Building/Creating: You’d think when land comes with a building it goes up in value right? I haven’t seen much of this. As it’s hard to value and there’s a lack of historical data to look into previous sales of similar nature.

I do know that buildings near certain land allow for the area to increase in value but individual creations don’t seem to. Although there are builds you can buy and deploy from Metazone which will be NFTs of their own soon. I can imagine this bundling will allow for lands to be sold with content of value.

So how do you search through the above to make an investment decision? Data & Community. Community can give you a vibe as to what’s building where. I’d recommend joining Decentraland Discord.

Data gives you an indication as to what recent sales happened in your area and thus what a ‘good deal’ looks like. You can check out recent sales in my discord. Where there’s a sales bot that notifies you when a land sells. Or a name or wearable, etc.

Personally, I buy in areas I actively develop. The land just sold for $146k USD, I had bought it a couple years back for around 700-900k MANA. After all the development near Crypto Valley, interest has luckily kept strong which lead to a good sell price.

Although still great for the buyer considering it’s in a very active location.

I also keep an eye on ‘floor prices’. If you sort by the cheapest you can see what’s the lowest price the market has listed. Gives you an indication of the health of the market.

I also keep watching Opensea Rankings where you can see the 7 Day Volume and some additional stats. Decentraland has been able to keep 100-300 ETH in 7 day volume for 2-3 years now which is very healthy to keep my money in.

I get worried when it drops below 100 ETH volume, this shows liquidity is drying up and if it continues for a long time can really effect the project investors.

It takes some time to learn. You can check out lands listed for sale here, and sort by cheapest to see which are inn good locations. I’d recommend to talk to community members and even negotiate a better price. Most of my deals happen via negotiation.

I’d say the other projects have similar investment mechanics. Lands close to the centre, scarce in nature, near some prominent community members or brands, etc would demand a higher price.

Hope the above helps shed some light on DCL Land investing, good luck!

 

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