What is the Role of Native Tokens in Metaverse Projects?

A metaverse is a virtual world that users can access through a specific cryptocurrency known as a “native token”. In this article, we will explore a couple of native tokens and find out what their functionalities are inside their respective metaverses.

Key Takeaways

Native tokens are cryptocurrencies specifically designed to operate in a particular virtual ecosystem. They usually support Layer-2 operations and are based on another coin’s blockchain system.

The Decentraland metaverse, with its native token MANA, and The Sandbox, with native token SAND, are two popular ecosystems.

Common functionalities of both these tokens are governance, staking, and trade of in-game NFTs.

What Are Native Tokens?

Native tokens are cryptocurrencies specifically designed to operate in a particular virtual ecosystem. They usually support Layer-2 operations and are based on another coin’s blockchain system. They use the underlying blockchain to power their transactions safely while offering unique functionalities to their users.

For a more detailed overview of how all of it works, do check out this piece on Metaverse, NFTs, and Crypto Tokens

For the purposes of this article, we’ll look at two native tokens that serve their respective metaverses. They operate just like any other native token, but in their parent ecosystems, they have more versatility and liquidity than normal.

Let’s dive right into it.

Two Popular Native Tokens on CoinSwitch

The Decentraland metaverse and The Sandbox are two popular ecosystems. Their native tokens are MANA and SAND, respectively. Both these metaverses, combined, serve a collection of more than one million users, which is leaps and bounds ahead of any other project their size.

Decentraland (MANA)

Decentraland is a virtual world that operates around the concept of buying and selling parcels of LAND Non-Fungible Tokens (NFTs). These NFTs represent real estate in the metaverse. Users may trade land parcels or develop them by constructing valuable buildings on them.

When prices appreciate, these parcels can also be sold for a profit through the Decentraland Marketplace.

In this ecosystem, MANA is the currency. This means that most transactions in Decentraland take place in MANA and values are generally represented in it.

The Sandbox (SAND)

The Sandbox is a virtual platform that promotes decentralized interactions within groups of users. It uses Decentralized Finance (DeFi), NFTs, and other technologies to reward community participants who win games or create their own.

SAND is for The Sandbox what MANA is for Decentraland. If users need to represent value on The Sandbox, they do it in SAND. This goes for everything ranging from shoes for your avatar, to in-game NFTs.

Common Functionalities of Native Tokens

What is the Role of Native Tokens in Metaverse Projects?

Both these native tokens are ERC-20 tokens. This means they use the Ethereum blockchain to track and verify transactions and can be used as governance tokens and for staking (both of which we cover below).

Governance

Every virtual world needs to be supervised to facilitate smooth functioning. However, because these concepts are decentralized, their administration also has to be. Governance tokens make that possible.

Governance tokens refer to tokens that help engineers and developers make better decisions about the future of the platform. They do so by incorporating the conflicting opinions of all stakeholders.

MANA is a governance token on Decentraland. This means that users who have MANA in their connected crypto wallets are eligible to vote on governance issues in this ecosystem. This system ensures that the power to alter the platform or make decisions on its future does not lie with the founders; rather, it lies in the hands of the users.

The same is also the case with SAND tokens. They too can be used to vote on major issues on The Sandbox and make changes to the way things are done. All users with these tokens can put forth proposals for other users to vote on, but the ultimate decision is left to the discretion of the biggest players. Users with more SAND have a higher voting share in comparison to others.

By ensuring a decentralized and fair way of voting on DeFi projects, these metaverses make the existence of such permissionless virtual worlds possible.

Staking

Staking is a concept that’s very important in the cryptocurrency world.

In staking, users pledge their holdings on the blockchain. These pledges help verify transactions and secure the network. They do this through the application of a Proof of Stake consensus algorithm.

All users who stake their tokens get a proportionate reward in return. Read more about staking here.

Both MANA and SAND can be staked on their respective blockchains. Users can not only earn passive dividends on their investments through staking but also help keep the network secure.

MANA roughly provides its users with a 1% APY on stakes, and SAND 24%. (Please note that these rates differ depending on lots of arbitrary market conditions and are not fixed).

In-game NFTs

Decentraland and The Sandbox are both metaverses that operate on NFTs. They offer users the opportunity to collect and trade collectibles in the form of NFTs. They have their respective marketplaces where users can congregate and display their items for sale.

It goes without saying that Decentraland and The Sandbox extensively use MANA and SAND, respectively, at their marketplaces. Most sales happen through these native tokens and users wanting to use other currencies are required to convert them before engaging in transactions.

For example, LAND parcels on Decentraland can go for more than 1,00,000 MANA easily. If a user wants to buy a piece of LAND, they have to transfer the requisite amount to the target wallet under certain protocols and receive the corresponding NFT, which will be deposited in their wallet.

Wrap-Up

While native tokens like MANA and SAND are extensively used on their respective metaverses, for all the functionalities mentioned above, they are also regular cryptocurrency tokens. That is to say that they have also appreciated in value over the last decade, and have clocked huge returns for their investors.

They are thus excellent stores and exchanges of value, apart from being decentralized and secure.

If you want to invest in SAND and MANA in India, do it through CoinSwitch for a user-friendly experience.