Everywhere we turn, there's a new metaverse or Web3 debut. Microsoft recently announced a $68.7 BILLION cash purchase of Activision.

Like AI in 2013 and blockchain in 2014, NFT growth in 2021 feels like this year's metaverse and Web3 growth. We are all bombarded with information, conflicting signals, and a sensation of FOMO.

How can we evaluate the metaverse and Web3 in a noisy, new world? My framework for evaluating upcoming technologies and themes is shown below. I hope you will also find them helpful.

Understand the “pipes” in a new space. 

Whatever people say, Metaverse and Web3 will have to coexist with the current Internet. Companies who host, move, and store data over the Internet have a lot of intriguing use cases in Metaverse and Web3, whether in infrastructure, data analytics, or compliance. Hence the following point.

## Understand the apps layer and their infrastructure.

Gaming, crypto exchanges, and NFT marketplaces would not exist today if not for technology that enables rapid app creation. Yes, according to Chainalysis and other research, 30–40% of Ethereum is self-hosted, with the rest hosted by large cloud providers. For Microsoft to acquire Activision makes strategic sense. It's not only about the games, but also the infrastructure that supports them.

Follow the money

Understanding how money and wealth flow in a complex and dynamic environment helps build clarity. Unless you are exceedingly wealthy, you have limited ability to significantly engage in the Web3 economy today. Few can just buy 10 ETH and spend it in one day. You must comprehend who benefits from the process, and how that 10 ETH circulates now and possibly tomorrow. Major holders and players control supply and liquidity in any market. Today, most Web3 apps are designed to increase capital inflow so existing significant holders can utilize it to create a nascent Web3 economy. When you see a new Metaverse or Web3 application, remember how money flows.

What is the use case? 

What does the app do? If there is no clear use case with clear makers and consumers solving a real problem, then the euphoria soon fades, and the only stakeholders who remain enthused are those who have too much to lose.

Time is a major competition that is often overlooked.

We're only busier, but each day is still 24 hours. Using new apps may mean that time is lost doing other things. The user must be eager to learn. Metaverse and Web3 vs. our time?  I don't think we know the answer yet (at least for working adults whose cost of time is higher).
I don't think we know the answer yet (at least for working adults whose cost of time is higher).

People and organizations need security and transparency.

For new technologies or apps to be widely used, they must be safe, transparent, and trustworthy. What does secure Metaverse and Web3 mean? This is an intriguing subject for both the business and public sectors. Cloud adoption grew in part due to improved security and data protection regulations.

I write on VC, startups, and leadership.

More on https://www.linkedin.com/in/joycejshen/ and https://joyceshen.substack.com/

This writing is my own opinion and does not represent investment advice.

The metaverse is the most commonly used term in current technology discussions. While the entire tech ecosystem awaits the metaverse's full arrival, defining it is difficult. Imagine the internet in the '80s! The metaverse is a three-dimensional virtual world where users can interact with digital solutions and each other as digital avatars.
The metaverse is a three-dimensional virtual world where users can interact with digital solutions and each other as digital avatars.

Among the metaverse hype, the Decentraland vs Sandbox debate has gained traction. Both are decentralized metaverse platforms with no central authority. So, what's the difference and which is better? Let us examine the distinctions between Decentraland and Sandbox.

2 Popular Metaverse Platforms Explained

The first step in comparing sandbox and Decentraland is to outline the definitions. Anyone keeping up with the metaverse news has heard of the two current leaders. Both have many similarities, but also many differences. Let us start with defining both platforms to see if there is a winner.

Decentraland

Decentraland, a fully immersive and engaging 3D metaverse, launched in 2017. It allows players to buy land while exploring the vast virtual universe. Decentraland offers a wide range of activities for its visitors, including games, casinos, galleries, and concerts. It is currently the longest-running metaverse project.

Decentraland began with a $24 million ICO and went public in 2020. The platform's virtual real estate parcels allow users to create a variety of experiences. MANA and LAND are two distinct tokens associated with Decentraland. MANA is the platform's native ERC-20 token, and users can burn MANA to get LAND, which is ERC-721 compliant. The MANA coin can be used to buy avatars, wearables, products, and names on Decentraland.

Sandbox

Sandbox, the next major player, began as a blockchain-based virtual world in 2011 and migrated to a 3D gaming platform in 2017. The virtual world allows users to create, play, own, and monetize their virtual experiences. Sandbox aims to empower artists, creators, and players in the blockchain community to customize the platform. Sandbox gives the ideal means for unleashing creativity in the development of the modern gaming ecosystem.

The project combines NFTs and DAOs to empower a growing community of gamers. A new play-to-earn model helps users grow as gamers and creators. The platform offers a utility token, SAND, which is required for all transactions.

What are the key points from both metaverse definitions to compare Decentraland vs sandbox?

It is ideal for individuals, businesses, and creators seeking new artistic, entertainment, and business opportunities. It is one of the rapidly growing Decentralized Autonomous Organization projects. Holders of MANA tokens also control the Decentraland domain.

Sandbox, on the other hand, is a blockchain-based virtual world that runs on the native token SAND. On the platform, users can create, sell, and buy digital assets and experiences, enabling blockchain-based gaming. Sandbox focuses on user-generated content and building an ecosystem of developers.

Sandbox vs. Decentraland

If you try to find what is better Sandbox or Decentraland, then you might struggle with only the basic definitions. Both are metaverse platforms offering immersive 3D experiences. Users can freely create, buy, sell, and trade digital assets. However, both have significant differences, especially in MANA vs SAND.

For starters, MANA has a market cap of $5,736,097,349 versus $4,528,715,461, giving Decentraland an advantage.
The MANA vs SAND pricing comparison is also noteworthy. A SAND is currently worth $3664, while a MANA is worth $2452.

The value of the native tokens and the market capitalization of the two metaverse platforms are not enough to make a choice. Let us compare Sandbox vs Decentraland based on the following factors.

Workstyle

The way Decentraland and Sandbox work is one of the main comparisons. From a distance, they both appear to work the same way. But there's a lot more to learn about both platforms' workings. Decentraland has 90,601 digital parcels of land.

Individual parcels of virtual real estate or estates with multiple parcels of land are assembled. It also has districts with similar themes and plazas, which are non-tradeable parcels owned by the community. It has three token types: MANA, LAND, and WEAR.

Sandbox has 166,464 plots of virtual land that can be grouped into estates. Estates are owned by one person, while districts are owned by two or more people. The Sandbox metaverse has four token types: SAND, GAMES, LAND, and ASSETS.

Age

The maturity of metaverse projects is also a factor in the debate. Decentraland is clearly the winner in terms of maturity. It was the first solution to create a 3D blockchain metaverse. Decentraland made the first working proof of concept public. However, Sandbox has only made an Alpha version available to the public.

Backing

The MANA vs SAND comparison would also include support for both platforms. Digital Currency Group, FBG Capital, and CoinFund are all supporters of Decentraland. It has also partnered with Polygon, the South Korean government, Cyberpunk, and Samsung.

SoftBank, a Japanese multinational conglomerate focused on investment management, is another major backer. Sandbox has the backing of one of the world's largest investment firms, as well as Slack and Uber.

Compatibility

Wallet compatibility is an important factor in comparing the two metaverse platforms. Decentraland currently has a competitive advantage. How? Both projects' marketplaces accept ERC-20 wallets. However, Decentraland has recently improved by bridging with Walletconnect. So it can let Polygon users join Decentraland.

Scalability

Because Sandbox and Decentraland use the Ethereum blockchain, scalability is an issue. Both platforms' scalability is constrained by volatile tokens and high gas fees. So, scalability issues can hinder large-scale adoption of both metaverse platforms.

Buying Land

Decentraland vs Sandbox comparisons often include virtual real estate. However, the ability to buy virtual land on both platforms defines the user experience and differentiates them. In this case, Sandbox offers better options for users to buy virtual land by combining OpenSea and Sandbox. In fact, Decentraland users can only buy from the MANA marketplace.

Innovation

The rate of development distinguishes Sandbox and Decentraland. Both platforms have been developing rapidly new features. However, Sandbox wins by adopting Polygon NFT layer 2 solutions, which consume almost 100 times less energy than Ethereum.

Collaborations

The platforms' collaborations are the key to determining "which is better Sandbox or Decentraland." Adoption of metaverse platforms like the two in question can be boosted by association with reputable brands. Among the partners are Atari, Cyberpunk, and Polygon. Rather, Sandbox has partnered with well-known brands like OpenSea, CryptoKitties, The Walking Dead, Snoop Dogg, and others.

Platform Adaptivity

Another key feature that distinguishes Sandbox and Decentraland is the ease of use. Sandbox clearly wins in terms of platform access. It allows easy access via social media, email, or a Metamask wallet. However, Decentraland requires a wallet connection.

Prospects

The future development plans also play a big role in defining Sandbox vs Decentraland. Sandbox's future development plans include bringing the platform to mobile devices. This includes consoles like PlayStation and Xbox. By the end of 2023, the platform expects to have around 5000 games.

Decentraland, on the other hand, has no set plan. In fact, the team defines the decisions that appear to have value. They plan to add celebrities, creators, and brands soon, along with NFT ads and drops.

Final Words

The comparison of Decentraland vs Sandbox provides a balanced view of both platforms. You can see how difficult it is to determine which decentralized metaverse is better now. Sandbox is still in Alpha, whereas Decentraland has a working proof of concept.

Sandbox, on the other hand, has better graphics and is backed by some big names. But both have a long way to go in the larger decentralized metaverse. 

Let's examine the differences between the three main token types and their functions.

As Ethereum grew, the term "token" became a catch-all term for all assets built on the Ethereum blockchain. However, different tokens were grouped based on their applications and features, causing some confusion. Let's examine the modification of three main token types: security, utility, and non-fungible.

Utility tokens

They provide a specific utility benefit (or a number of such). A utility token is similar to a casino chip, a table game ticket, or a voucher. Depending on the terms of issuing, they can be earned and used in various ways. A utility token is a type of token that represents a tool or mechanism required to use the application in question. Like a service, a utility token's price is determined by supply and demand. Tokens can also be used as a bonus or reward mechanism in decentralized systems: for example, if you like someone's work, give them an upvote and they get a certain number of tokens. This is a way for authors or creators to earn money indirectly.

The most common way to use a utility token is to pay with them instead of cash for discounted goods or services.

Utility tokens are the most widely used by blockchain companies. Most cryptocurrency exchanges accept fees in native utility tokens.

Utility tokens can also be used as a reward. Companies tokenize their loyalty programs so that points can be bought and sold on blockchain exchanges. These tokens are widely used in decentralized companies as a bonus system. You can use utility tokens to reward creators for their contributions to a platform, for example. It also allows members to exchange tokens for specific bonuses and rewards on your site.

Unlike security tokens, which are subject to legal restrictions, utility tokens can be freely traded.

Security tokens

Security tokens are essentially traditional securities like shares, bonds, and investment fund units in a crypto token form.

The key distinction is that security tokens are typically issued by private firms (rather than public companies) that are not listed on stock exchanges and in which you can not invest right now. Banks and large venture funds used to be the only sources of funding. A person could only invest in private firms if they had millions of dollars in their bank account. Privately issued security tokens outperform traditional public stocks in terms of yield. Private markets grew 50% faster than public markets over the last decade, according to McKinsey Private Equity Research.

A security token is a crypto token whose value is derived from an external asset or company. So it is governed as security (read about the Howey test further in this article). That is, an ownership token derives its value from the company's valuation, assets on the balance sheet, or dividends paid to token holders.

Why are Security Tokens Important?

Cryptocurrency is a lucrative investment. Choosing from thousands of crypto assets can mean the difference between millionaire and bankrupt. Without security tokens, crypto investing becomes riskier and generating long-term profits becomes difficult. These tokens have lower risk than other cryptocurrencies because they are backed by real assets or business cash flows. So having them helps to diversify a portfolio and preserve the return on investment in riskier assets.

Security tokens open up new funding avenues for businesses. As a result, investors can invest in high-profit businesses that are not listed on the stock exchange.

The distinction between utility and security tokens isn't as clear as it seems. However, this increases the risk for token issuers, especially in the USA. The Howey test is the main pillar regulating judicial precedent in this area.

What is a Howey Test?

An "investment contract" is determined by the Howey Test, a lawsuit settled by the US Supreme Court. If it does, it's a security and must be disclosed and registered under the Securities Act of 1933 and the Securities Exchange Act of 1934.

If the SEC decides that a cryptocurrency token is a security, a slew of issues arise. In practice, this ensures that the SEC will decide when a token can be offered to US investors and if the project is required to file a registration statement with the SEC.

Due to the Howey test's extensive wording, most utility tokens will be classified as securities, even if not intended to be. Because of these restrictions, most ICOs are not available to US investors. When asked about ICOs in 2018, then-SEC Chairman Jay Clayton said they were securities. The given statement adds to the risk. If a company issues utility tokens without registering them as securities, the regulator may impose huge fines or even criminal charges.

What other documents regulate tokens?

Securities Act (1993) or Securities Exchange Act (1934) in the USA; MiFID directive and Prospectus Regulation in the EU. These laws require registering the placement of security tokens, limiting their transfer, but protecting investors.

Utility tokens have much less regulation. The Howey test determines whether a given utility token is a security. Tokens recognized as securities are now regulated as such. Having a legal opinion that your token isn't makes the implementation process much easier. Most countries don't have strict regulations regarding utility tokens except KYC (Know Your Client) and AML (Anti Money-Laundering).

As cryptocurrency and blockchain technologies evolve, more countries create UT regulations. If your company is based in the US, be aware of the Howey test and the Bank Secrecy Act. It classifies UTs and their issuance as money transmission services in most states, necessitating a license and strict regulations. Due to high regulatory demands, UT issuers try to avoid the United States as a whole. A new law separating utility tokens from bank secrecy act will be introduced in the near future, giving hope to American issuers.

The rest of the world has much simpler rules requiring issuers to create basic investor disclosures. For example, the latest European legislation (MiCA) allows businesses to issue utility tokens without regulator approval. They must also prepare a paper with all the necessary information for the investors.

A payment token is a utility token that is used to make a payment. They may be subject to electronic money laws. 

Because non-fungible tokens are a new instrument, there is no regulating paper yet. However, if the NFT is fractionalized, the smaller tokens acquired may be seen as securities.

NFT Tokens

Collectible tokens are also known as non-fungible tokens. Their distinctive feature is that they denote unique items such as artwork, merch, or ranks. Unlike utility tokens, which are fungible, meaning that two of the same tokens are identical, NFTs represent a unit of possession that is strictly one of a kind. In a way, NFTs are like baseball cards, each one unique and valuable.

As for today, the most recognizable NFT function is to preserve the fact of possession. Owning an NFT with a particular gif, meme, or sketch does not transfer the intellectual right to the possessor, but is analogous to owning an original painting signed by the author.

Collectible tokens can also be used as digital souvenirs, so to say. Businesses can improve their brand image by issuing their own branded NFTs, which represent ranks or achievements within the corporate ecosystem. Gamifying business ecosystems would allow people to connect with a brand and feel part of a community. 

Which type of tokens is right for you as a business to raise capital?

For most businesses, it's best to raise capital with security tokens by selling existing shares to global investors. Utility tokens aren't meant to increase in value over time, so leave them for gamification and community engagement. In a blockchain-based business, however, a utility token is often the lifeblood of the operation, and its appreciation potential is directly linked to the company's growth. You can issue multiple tokens at once, rather than just one type. It exposes you to various investors and maximizes the use of digital assets.

Which tokens should I buy?

There are no universally best tokens. Their volatility, industry, and risk-reward profile vary. This means evaluating tokens in relation to your overall portfolio and personal preferences: what industries do you understand best, what excites you, how do you approach taxes, and what is your planning horizon? To build a balanced portfolio, you need to know these factors.

Conclusion

The three most common types of tokens today are security, utility, and NFT. Security tokens represent stocks, mutual funds, and bonds. Utility tokens can be perceived as an inside-product "currency" or "ignition key" that grants you access to goods and services or empowers with other perks. NFTs are unique collectible units that identify you as the owner of something.