Welcome to Decentraland, where investors spend real-world dollars flipping virtual real estate
'I quickly realized I can flip these [pieces of] land that I was buying and sell them for a profit'
Mateen Soudagar has bought and sold dozens of pieces of land in the past year, making profit along way.
But none of those plots of land actually exist in reality.
Sougadar's investments went into a virtual city created by Decentraland, a virtual reality platform powered by the Ethereum blockchain.
The city, called Genesis City, is about the size of Washington, D.C. Plots of land appear on grids on users' screens, and each available parcel can be bought using a cryptocurrency called MANA. $1 USD converts into 0.03 MANA.
"Currently, I'm sitting on about 200 to 300 pieces of land, and each land is worth ... anywhere up to $300 to even up to probably $5,000 to $10,000," Soudagar told Day 6.
An engineer by training, Soudagar says he's always had a penchant for business. About a year ago, he stumbled upon Decentraland while doing research into cryptocurrency investments.
"I kind of stumbled upon the the idea of buying and selling for profit ... and I really took it as a business," he said.
For many people, investing real cash into virtual real estate is unimaginable. But according to financial journalist Camila Russo, Decentraland's investors have lofty ideals of what it will become once Genesis City develops into a full-fledged virtual metropolis.
"They see a world where virtual reality has caught on," said Russo, who is writing a book on Ethereum.
The vision is that users will put on virtual reality headsets and "go into this whole new parallel world" where they can meet their friends from all over the world in virtual malls, art galleries and movie theatres, Russo told Day 6 host Brent Bambury.
Parcels of land have sold for anywhere between $300 and $200,000. Spots closest to Genesis City's central plaza are most expensive, Russo explained.
Immersive parallel cities
At the core of Decentraland is the idea that as people spend more and more time online, they'll want their experience to be more social and immersive in a way that mimics offline reality.
While investors are snapping up parcels of land looking to make big profit, ordinary folks are also participating with hopes of creating a world better than the one they live in now, Russo said.
She adds that she spoke to one Decentraland user who bought a parcel of land because he wanted to build an art gallery.
"He was from a small town and he was like, 'I hate not having any art galleries around,'" Russo said.
"He was imagining a world where he would … put on his virtual reality headset or go into the Decentraland website and be able to, from his own bedroom ... see all sorts of art in a virtual reality setting."
If you're curious about the technology and want to see what this weird new world is like, I'd encourage people to check it out but never to put a lot of money at risk because it is super risky.- Camila Russo, financial journalist
In order to succeed, Decentraland will need both capitalists looking to make large returns and idealists on a quest to build a better parallel world.
"The speculators are giving the market liquidity, but it's the idealists that are making it interesting," she said.
Decentraland was founded in 2017. The developers auctioned off the parcels of land in Genesis City. There is now a thriving secondary market, Russo said.
Soudagar said his initial investments in MANA were equal to about $20,000 US. A year later, he says the current valuation of his property is $150,000 US.
Cryptocurrency investments are highly risky, and the past year has seen several crypto bubbles burst.
While Decentraland's relatively stronger organization gives it more credibility than other cryptocurrency projects she's seen, Russo wouldn't advise anyone to invest money in Decentraland that they're not prepared to lose.
"If you're curious about the technology and want to see what this weird new world is like, I'd encourage people to check it out but never to put a lot of money at risk because it is super risky."
Soudagar says he understands his investment is a highly risky one.
"I am nervous, but I'm also well-diversified," he said. "Decentraland is [just] one of the products I have invested in."
A step up from cell phones
A part of Decentraland's mission is to create a platform that's owned by users, Russo says. No one can unilaterally change its features or shut the system down.
In that sense, Decentraland hopes to have no central power. Decisions about the city will be made by votes in the community.
It's hard to imagine people will prefer this world to the one we're living in now, Russo says. But they might prefer it to "the cell phone world we're living in now."
"The world of smart phones right now is pretty flat," she said.
"It doesn't allow for that much … socializing. Sure, you can text or you can FaceTime, but if [Decentraland] evolves into actually being in a three-dimensional space with friends from all over the world, I think that's a step forward."
To hear more from Mateen Soudagar and Camila Russo, download our podcast or click the 'Listen' button at the top of this page.