VR game startup earned $24m in 35 seconds from its ICO, but faces challenges

A Genesis plot of land with structures created by Decentraland community members. Photo credit: The Decentraland whitepaper.

More and more, startups are looking to raise capital outside of traditional VC and investment channels. Instead, many are opting to launch initial coin offerings (ICOs), which incentivize investors with cryptocurrency tokens that mirror the market’s faith in the underlying concept of the product.

It is unsurprising then that even industries such as virtual reality (VR) have jumped headfirst into the ICO game.

But VR ICOs can offer participants a different kind of incentive—virtual real estate. New VR startup Decentraland is looking to create a virtual world based entirely on the blockchain. It’s already rewriting the record books with its coin offering, which earned the startup US$24 million in just 35 seconds.

A whole new VR world

The prospect of owning a piece of in-game land which can be fully experienced in VR has been a successful draw for the company.

The startup will allow investors to buy and develop small plots of land which they fully own. Other users can also enter and interact with the space and buy and sell digital services. The landholders’ characters/avatars can also interact freely and securely via VR blockchain interfaces.

The game offers creative development tools that enable users to create new structures, acquire skills, pursue tailor-made hobbies, go shopping, make meaningful connections with other users, and even earn money.

Genesis City is one of the first VR spaces up for grabs, but some developers and investors are already annexing the outskirts of the city. One Github project is even looking to build the Las Vegas Strip in virtual form.

Behind the currency

Cryptocurrency is essential to the operation of this VR space, as issuing tokens motivate developers, artists, and content programmers to help bring the vision to fruition.

Decentraland uses an ERC20 token called MANA as a means of buying and claiming ownership of land. One MANA was set initially at US$0.024, using the then prevailing Ethereum-to-dollar rate. MANA token holders can also use and transfer their acquired currency to other digital wallets.

What lies ahead?

It started out with a simple proof-of-work (PoW) algorithm in June 2015, not unlike the one bitcoin employs. By March 2017, the team developed a 3D space, and by the end of August, the first Terraform Event was announced.

Soon, the company will allow users to create multiple avatars and access live chatting. By 2018, the VR world will be in place on the blockchain.

The VR challenge

But Decentraland faces a challenge. While VR has come out of the gates with a strong momentum, it remains niche at best, as gamers have yet to fully embrace the technology. While sales have gradually improved, a limited user base could be problematic for companies that plan to establish and populate a full online world using VR.

Collaboration is key