The Decentraland Effect: Virtual Millionaires or an Anomaly?
People Investing in Gaming Cryptocurrencies should Beware?
By now we’ve seen almost everything come from the crypto-space, from supply chain (V-chain), electricity and home power (power ledger), internet access, and security (tron), it seems like there is nothing that blockchain can’t tokenize or turn into a digital asset. Crypto gaming has been around for quite a while, back in 2020 Decentraland was already up and running and attracting users to its SIMS-like world. Fast-forward to 2022 and we see that Decentraland (MANA) is one of the most popular “gaming” crypto assets. However, I question the true value of gaming crypto coins, and there is a simple reason for that: user interest.
We’ve all heard the stories of people selling their virtual world land and making millions of dollars — but it doesn’t happen frequently. However, while transactions like this have occurred they are relatively rare on the whole within Decentraland. Many land parcels in the game are priced very high, true, but the rate at which people are buying these parcels is laughably low. Since there is no way to assess virtual land sales without tediously analyzing all transactions on the blockchain ledger, it’s really difficult to definitively state how many of these types of transactions actually occur on a monthly basis — seeing as Decentraland runs on the Ethereum network which has egregiously high fees, it’s probably not often.
Speaking of Ethereum, you can’t really talk about Decentraland without discussing Ethereum since the coin runs on the most expensive blockchain in the world at the moment. Ethereum based coins have high transaction fees since the network still runs on a proof-of-work consensus protocol. The transaction fees for Ethereum are referred to as “gas.” The prices can fluctuate between $20 — $280 for a single transaction and there have been reports of even higher costs (this does not include platform-specific fees). You can imagine that in most cases, an individual with average finances in this day and age will probably not find instant success using crypto gaming platforms. This isn’t to say it isn’t possible, but it does mean that for 95% of players positive income will not come easily. High fees will cripple user interest.
As mentioned earlier, attention span will also hinder gaming platforms like Decentraland. If you’ve ever owned a game console and got excited for big releases like Skyrim, Pokemon, Halo, etc then you probably know that the number of players actually playing the game increase and decreases with hype or interest in that game. Virtual world platforms will inevitably have the same problem, running around on these gaming platforms is boring — plain and simple. The games that do exist are not engaging, fun, or interesting by any standard. They are either elementary platformers, simple puzzlers, or cheap knock-offs of other games already in existence. This doesn’t mean that high-quality games will never come to Decentraland, but it does make one wonder if their technology can even support games AAA games like the ones mentioned above. If all Decentraland has to offer is a bunch of mini-games and clothes trading, you can bet people will get bored and move on.
The last elephant in the room to address is how crypto-games’ tokens will retain their value. How easy is it for someone to just make a virtual world of their own and call it the next best thing? The holders of the previous “hype” virtual world will be left to take the deficit once everyone moves to another virtual world and token. It happens now with games that don’t have virtual tokens. Look at Amazon’s New World, it just released (at the time of writing 3 months ago) and has already lost more than 75% of its player-base. One could look at its own in-game transactions as an indicator of what will happen to these virtual world-focused cryptocurrencies.
While I’m not opposed to virtual worlds or their push of crypto assets, I think there’s a lot of danger for new investors and casual gamers who will not understand how their value can ebb and flow with a game’s popularity. Even games like World of Warcraft experience huge player exoduses that can completely tank an individual’s investment in the platform. As usual, doing your own research and understanding the time to buy and sell is crucial when doing crypto game investments.
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