The metaverse (an upgraded version of the internet capable of hosting interconnected digital worlds) has been trending since Facebook's parent company changed its name to Meta Platforms and began heavily investing in the concept. Blockchain platforms like The Sandbox (SAND 0.75%) and Decentraland (MANA 1.08%) are also staking their claims to this opportunity. Let's explore why they look poised for success.
1. The Sandbox
With a market cap of just $4.2 billion (the 36th largest cryptocurrency), the Sandbox is a cheap way to bet on the blockchain metaverse opportunity. The platform has an edge because of its user-generated content strategy and growing mainstream acceptance.
According to its white paper, The Sandbox aims to create a virtual world where players can "build, own, and monetize" gaming experiences using its native token SAND. The platform features an editor for creating 3D objects, a game maker to turn these assets into interactive games, and a marketplace where users can buy and sell their creations.
The user-generated content model has worked for many of the internet's most popular destinations like YouTube and Roblox. It saves development costs while also producing content that may be more timely and relevant for the target audience because they're the ones creating it.
The Sandbox is also working with mainstream companies. In February, it partnered with global fashion-giant Gucci to create an interactive experience where users can buy virtual products. This deal follows an agreement with Warner Music Group to build a virtual concert hall. The Sandbox's real-world partnerships are an impressive vote of confidence in its metaverse strategy.
While The Sandbox focuses on the gaming aspects of metaverse development, Decentraland boasts a broader focus on social interactions between users. With a market cap of just $5.9 billion, it's another relatively cheap way to bet on this fast-growing industry.
Launched in 2017 and opening to the public in early 2020, Decentraland focuses on virtual real estate -- plots of land within its metaverse represented as non-fungible tokens (NFTs), which are digital proof of ownership stored on the blockchain. Users can customize their land with everything from static 3D scenes to interactive games and experiences.
In October, Decentraland hosted a four-day music festival featuring over 80 music artists and celebrities, including the DJ Deadmau5 and Paris Hilton. Participants could use the platform's native token MANA to purchase NFT collectibles, making this event an impressive proof of concept for the platform's budding economy.
Both Decentraland and The Sandbox operate on the Ethereum blockchain, so they suffer from its shortcomings like traffic congestion and soaring fees -- which stand at about $66 per transaction at the time of this writing. The good news is that Ethereum plans to fix this through an update called the consensus layer, which will change how it validates transactions to speed things up.
It's unclear when Ethereum's changes will go live, but they could dramatically boost user uptake of Ethereum-based metaverse platforms, which would be great news for investors.
Two very similar assets
The Sandbox and Decentraland are building similar metaverse platforms: both operate on the Ethereum network and rely on user-generated content, to varying degrees. But with analysts at Bloomberg Intelligence expecting the total metaverse market to be worth $800 billion by 2024, there's plenty of room for many competing entities to share the opportunity.
Blockchain platforms have a unique edge in metaverse development because of their built-in virtual economies. The Sandbox and Decentraland have made impressive progress building the economic side of their platforms, which could help set them up for long-term success.