Metaverses embody a new economy based on crypto-currency exchanges. What is a metaverse? How are they revolutionizing the digital landscape? As metaverse crypto-currencies take off, we take a look at the landscape of these virtual worlds, to understand the forces at work, the indicators and above all their development potential.
What is the metaverse?
For many experts, the metaverse is the major digital revolution of the last ten years.
It marks the transition to Web 3.0. Web 1.0 offered access to information. Web 2.0, the era of social networks, brought interaction. The metaverse brings an additional dimension with immersivity, that is to say an environment in which we feel fully present. The metaverse is a real economy that is emerging, based on exchanges in crypto-currencies.
The term covers all virtual universes. The metaverse is a 3D, interactive, immersive parallel world in which users can experience things through an avatar (virtual character).
The concept applies to 3D video games, but also to new types of metavers built on the blockchain, such as Decentraland or The Sandbox. The blockchain brings a decentralized character to these worlds. The metaverse thus becomes an open and independent ecosystem where anyone can participate for free, build elements, and even spend and earn money.
Metaverse, blockchain, cryptocurrencies and NFTs
As in real life, metaverses are the place for commercial exchanges. Transactions are made in cryptocurrencies.
In a metaverse, it is possible to buy and sell land, buildings, clothes for one’s avatar, etc. These virtual products take the form of money, which can be used to buy or sell goods. These virtual products take the form of non-fungible tokens (NFTs).
NFTs are therefore an essential component of metavers. They represent all the goods that can be acquired or earned on the metaverse: 3D constructions, accessories for avatars, digital works of art exhibited in museums, or proof of participation in events to be collected (Proof of Attendance Protocol or POAP).
Blockchain and NFT technologies have enabled the development of interoperability between these different universes. Since NFTs are property titles registered on the blockchain, ownership of a digital asset is not limited to the boundaries of a particular platform or game. Technically, it is standards like ERC-721 that allow the use of an NFT in different applications and metaverses.
A pair of virtual sneakers in the form of NFTs can be worn on an avatar on Decentraland, but also in another virtual universe, and partially in the real world where they will be seen through augmented reality (AR) glasses. Hence the growing interest of brands like Adidas or Nike for metavers.
From a technical point of view, this is only possible with open and decentralized metavers based on the same blockchain. Such interoperability is not yet possible on the majority of existing metavers, but it is a possibility that is becoming increasingly popular.
The most important NFTs in the metaverse are virtual real estate, whose prices are constantly breaking records. Some of them are reaching new heights, like this virtual land that sold for 2.43 million dollars on Decentraland or a plot of Axie Infinity that went for 2.48 million dollars.
Historical dates of metaverses
If the metaverse has been in the news since November 2021, the concept is not new. The word originally came from the book Snow Crash by Neal Stephenson, published in 1992. It was popularized by the 2018 science fiction film Ready Player One.
The first metaverse dates back to 2003, with the video game Second Life. This one is still available and active in 2021 and. Second Life users can play as virtual characters and design the content of the game. The idea was there, but the technology was not ready in the early 2000’s for Second Life to be democratized and to really endure with users and brands.
Second Life remains the pioneer of the metaverse. Many brands and celebrities have deployed marketing actions there, such as Nike and American Apparel who have opened virtual stores. We could also meet Budweiser hostesses and Scion cars (Toyota).
Second Life has also played a major role in the development of Bitcoin. Indeed, Second Life’s crypto-currency, the Linen Dollar (L$), which can be exchanged for fiat currency, offered a gateway to Bitcoin holders long before the exchange platforms. The cryptocurrency only became exchangeable into dollars in 2011.
Next-generation metavers have started to emerge in the last 10 years, notably with The Sandbox, created in 2011, and Decentraland, created in 2015.
Metaverses have really accelerated in 2021 with the development of new augmented reality (AR) and virtual reality (VR) technologies, but also thanks to the development of blockchain, crypto-currencies and especially NFTs.
Finally, a key date to remember is October 28, 2021, with Mark Zuckerberg’s announcement to rename the Facebook group to “Meta” and to invest massively in the metaverse. The general public then became aware of the potential of metavers, and the prices of cryptocurrencies and land related to this universe skyrocketed in the days following the speech of the Facebook CEO.
How is this a digital revolution?
Metaverses will certainly disrupt the digital economy. They offer new experiences to users of digital tools. Augmented reality, virtual reality and volumetric video technologies that are developing and becoming popular at a rapid pace will make these experiences more and more immersive.
Users can visit stores, museums, or attend concerts. They can interact with each other, but also with products. They can also work, attend meetings or trade shows, study… There is even a university under development in Decentraland.
You have to imagine the metaverse as a parallel world. Artists can perform on virtual stages with an avatar or in real life, with a hologram. Consumers will be able to chat with a salesman and test drive a car. Major retailers will have their digital twins there (like Adidas on Sandbox). Public services will also be available on the metaverse in the future. For example, the city hall of Seoul, capital of South Korea, is currently developing its virtual version.
Metavers will become real places to live, communicate and consume. They provide advertisers with immense communication and marketing opportunities. They also allow users to earn money, as on Axie Infinity, a blockchain “Play-to-Earn” game.
What are the main metavers?
There are already many metavers, the best known being Decentraland, The Sandbox, Cryptovoxels, SomniumPlace, and the new and much commented Meta.
Plethora of other metavers are in development. In fact, most video game, social networking, and e-commerce players are planning to launch their metavers, such as Epic Games (creator of Fortnite), Roblox, Alibaba, TikTok, Reddit, VR Chat, and even Microsoft. The latter is in a good position to become one of the leaders of the sector since it owns the famous game Minecraft as well as the professional social network LinkedIn.
We are also waiting for Apple, which, according to the American investment bank Morgan Stanley, holds the keys to the mass adoption of augmented and virtual reality technologies, and therefore of the metaverse.
Who will be the leading metavers?
If a multitude of metavers will emerge, we can imagine that not all of them will survive, just like the Internet players of the 2000s.
First of all, we have to distinguish between metavers coming from the video game sector and those coming from social networks. The advantage of video game players is that their users are young and already comfortable with the idea of consuming wearable digital products. Social networks have the advantage of having billions of users (3 billion monthly users for Facebook).
It is also interesting to look at the different types of governance and decentralization of metavers. Decentraland belongs entirely to its users with a decentralized management system in which decisions are voted by the users (Decentralized Autonomous Organization or DAO). Facebook’s Meta will remain privately governed. The Sandbox is owned by the Chinese company Animoca Brands, but also operates under a DAO system. The question is: what will users prefer? Can CAD-based management really work in the long run? Only time will tell, and it will be interesting to follow the evolution of these two decision-making models.
Another key element to watch closely is the level of investment in the various projects. Meta has announced a $10 billion investment for 2022. The Sandbox raised $93 million in November 2021. Decentraland had raised $26 million in 2017 and holds more than 200 million MANA (about $900 million as of this writing).
There are other indicators to watch: the price of cryptocurrencies, of course, the sale prices of land, the number of users, but also the number of brands present (165 brands for The Sandbox, with Atari, the Smurfs and Snoop Dog among others).
It is also useful to subscribe to newsletters to judge the quantity and quality of activities and events proposed within a metaverse.
What is the potential of metavers?
According to a Bloomberg Intelligence report, the annual metaverse market could be worth $800 billion by 2024. In parallel, the American bank Morgan Stanley speaks of a market of 8 000 billion dollars. For comparison, the video game market will be worth about $180 billion in 2021.
The growth potential of augmented and virtual reality technologies is also exponential. PWC forecasts growth from €39.6 billion in 2019 to €1,280 billion in 2030 (+3,000%).
The metaverse is therefore a major shift in the Internet, and even represents a technological revolution comparable to the emergence of this field now anchored in our daily lives.
If many detractors warn against the dystopian risk of a virtual life, the potential for growth and the possibilities of innovation are immense, and metaverses will perhaps soon be part of our everyday life.
The big question remains who will take the lead, and which crypto-currencies will become major in this sector, in a new industry that is still quite unpredictable and promises fierce competition.