Decentraland raises $24 million in 35 seconds, leaving retail investors out in the cold

Decentraland held its Initial Coin Offering (ICO) last week, but sold out so fast that the vast majority of users waiting for the launch never got any of their orders filled.

Roughly 10,000 potential investors lined up to grab some of the native tokens, MANA. “Due to the overwhelming response to the project, almost 7,000 transactions did not go through, which resulted in a lot of disappointment,” the leader developer said on Saturday.

“MANA will let users buy and sell virtual real estate, called LAND, and fully immerse themselves in Decentraland’s virtual reality economy.” - Decentraland

Decentraland provides the infrastructure for a shared virtual world, known as a metaverse. Development started in June 2015, with a proof of concept for allocating ownership of digital real estate to users on a blockchain.

Decentraland Grid3This digital real estate was modeled in a simple grid, where each pixel contained metadata identifying the owner and describing the pixel's color. The experiment was dubbed the “Stone Age.”

The team started developing the Bronze Age late in 2016, a virtual world now divided into land parcels dubbed LAND, which will be available to buy in exchange for MANA later this year. Each parcel has an area of 100 square meters, and can only be claimed if it’s adjacent to previously claimed parcels. LAND can be bought, sold, rented, or leased at will.

A ledger of LAND ownership is maintained using an Ethereum smart contract. Each parcel has unique (x, y) coordinates, an owner, and a reference to the content description file. This reference points to files that render the content for each parcel, stored on the battle-tested BitTorrent and Kademlia DHT networks.

As new land parcels must be contiguous to existing ones, Decentraland promises a virtual world where new content can be spatially explored and discovered. LAND parcels can be combined to create districts devoted to a special topic or theme, including transportation networks, regional Chambers of Commerce, virtual zoos, auction houses, and much more.

To encourage development, the Decentraland team is designing a layout for the first metropolis: Genesis City. A fraction of the funds raised last week will be used to allocate plots as public spaces, streets, parks, landmarks, and other value-add spaces. Artists and creatives will then be invited to populate these spaces.

“An ‘Entertainment District’ might include VR theaters, live musical performances, arcades, racetracks, and casinos.” - Decentraland

The next version of Decentraland, the Iron Age, will create a social experience with an economy driven by the existing layers of land ownership and content distribution. In the Iron Age, developers will be able to create applications on top of Decentraland, distribute them to other users, and monetize them.

The Iron Age will implement peer-to-peer communications, a scripting system to enable interactive content, and a system of fast cryptocurrency payments for in-world transactions. A communication layer is essential for social experiences, providing positioning, postures, voice chat, and more; Decentraland achieves this with a P2P network.

The scripting system is the tool that landowners will use to describe the behavior and interactions of 3D objects, sound, and applications running on land parcels. Finally, a payment system with low fees is key to developing an economy in the quick environment of a virtual world.

“Decentraland is designed to let everyone participate in its virtual world immediately. For example, communities hosted on offline and online forums like chat groups and centralized multiplayer games, can transition to Decentraland and integrate economic capabilities into their communities.” - Ari Meilich, Decentraland Project Lead and a Co-Founder

Unfortunately, the project is off to a bumpy start, with approximately 7,000 out of 10,000 interested buyers vociferously disgruntled.

While the token sale was designed to run for as long as 8 days, it sold out in 35 seconds. The majority of the US$24m raised came from a collection of small pools, Decentraland said yesterday. In one case, $40 million worth of ETH was placed in the pool to buy MANA. Such pools are becoming commonplace at ICO launches.

“Over 2,000 unique buyers” participated in the sale, according to Decentraland. “Taking a closer look at our token holders,” Meilich said on Saturday, “7 out of the top 10 MANA holders correspond to pools or crowdsale partners, which sold to the public."

• Decentraland retained 60% of the supply.

• ico.info: 18,000 ETH, 1,083 participants.

• BitcoinSuisse: 10,000 ETH, 87 participants.

• Gatecoin, 6,900 ETH, 34 participants.

• Cintix’s contract crowd buy, 6,668 ETH, 358 participants.

• TokenCapital, 2,500 ETH, 160 participants.

• 3ICO, 4,000 ETH, 357 participants.

After the sale immediately concluded, the official Decentraland Twitter account simply stated, “Our token launch was a success. Thanks to everyone who participated!” The tweet was quickly inundated with almost 200 responses from frustrated buyer. One respondent pointed to a transaction for 10,000 ETH, worth roughly US$3m, which had been sent to the ICO address before the event even started.

To further complicate the matter, 1,000 users that signed up to a whitelist weeks in advance were told that they had to use a Chrome browser plugin created for the occasion. The simple browser app allowed buyers to securely buy MANA with ether or other coins through Shapeshift.

Whitelisted buyers were told that they had to use the app the day before the public sale, along with the general public, and were mostly unable to participate. “We had to cancel the whitelist because the way it was being implemented posed some security risks for all of us,” Meilich stated.

The administrators responded by claiming that they are “going to honor our whitelist and sell 2% of the MANA tokens to the people who got whitelisted” in a follow-up mini-sale that “will take place early next week.”