The Blockchain Metaverse
The way the internet works is changing. Online content is now more interconnected than ever before. The concept of the ‘metaverse’ is often understood in terms of functional interactivity between virtual reality and physical reality known as ‘augmented reality’ — a seamless relationship between the real world, and that of the internet. The meaning of the metaverse for decentralised finance however, is deeper than simple functionality.
One aspect of the ‘metaverse’ in particular which perhaps best exemplifies its meaning is blockchain technology. By its very nature, interconnectivity and seamless interaction between users, platforms and developers is inherent in blockchain technology. Decentralisation is allowing developers and platforms functionality which prior to its emergence was impossible. Let’s take a look at how the metaverse can be understood in terms of blockchain and what platforms are helping it expand.
Metaverse Gaming — It’s More Important Than It Sounds
One of the clearest examples of what the metaverse means in the context of the blockchain is play-to-earn gaming. The traditional model of gaming since the days of arcades has been: consumer pays money in exchange for the ability to play the game. While money is typically required to play metaverse games, the revenue model is no longer as simple as it was.
The Sandbox is a metaverse game which involves players trading and customising virtual ERC-1155 ‘land-parcels’ — of which there are 166,000 in total. By building virtual interactive-experiences and charging players to visit, players can earn SAND tokens which can be sold as any other token can. SAND is currently sitting at around $0.70, and exemplifies what the metaverse means for the DeFi world.
The distinction between gains made in the game (virtual world) and those made in reality has been eroded. Some dedicated Sandbox players earn their living in the virtual space — earning as much as $200 a day in SAND tokens. In the past, making money online had traditionally only been possible insofar as it served the physical world — selling physical property, trading in commodity stocks or selling services to name just a few examples. Now, people are making their living by contributing value to the digital world alone, such as in the case of The Sandbox. There is no longer a necessity for this value to exist in the real world — the metaverse is emerging.
Another example is Axie Infinity: a breeding metaverse game in which players breed creatures to create more valuable varieties. Axies can battle, perform tasks and breed to create more Axies of varying value. The ultimate goal of the game however is to obtain SLP (smooth love potion) tokens which can be sold. Axie creatures themselves can also be traded as EIP-721 NFTs (non-fungible tokens). In the third quarter of 2021 alone, Axie Infinity generated more than $720M dollars through NFT-trading.
This highlights another important aspect of the blockchain metaverse: digital assets. In the metaverse — digital and physical assets are the same thing.
Digital’s The New Physical
Beyond play-to-earn gaming, the NFT craze witnessed over the last year has been demonstrating how the blockchain metaverse has been changing what we perceive ‘assets’ to be. Non-fungible tokens have blurred the line between real assets and physical ones — giving rise to the question of whether there really is a difference at all.
Value attributed to assets which only exist in the digital space (such as CryptoPunks or Bored Ape Yacht Club collectables) is now being translated directly into real-world value as a result of their trading-prices. It is true that not all NFTs exist solely in the digital realm. Some are created in order to digitally represent assets which exist in physical space. However the NFT space can undoubtedly be considered an aspect of blockchain technology which is blurring the line between physical and digital spaces and contributing to the emergence of the ‘metaverse’.
Web 3.0 Business Models
The emergence of the metaverse isn’t just changing how platforms function — it’s changing business models. In the context of business, the metaverse is sometimes known as Web 3.0. In traditional Web 2.0 business models, users generate revenue for businesses by engaging with advertisements or by directly paying for content. With the Web 3.0 model, value is attributed to things based on community opinion. Consumers are fully in control of what aspect of their engagement they wish to sell and in the case of metaverse games such as Sandbox, are creating the content themselves.
It is also worth mentioning that while web 3.0 models do afford more control to the consumer, the entry price of metaverse gaming can be extraordinarily high for the average customer. A player must own three separate Axies to begin playing Axie Infinity. With the floor price of an Axie NFT currently sitting at around $300, a new player could very possibly have to part with over $1000 even just to try the game. As a result, solutions like Blackpool and YGG (Yield Guild Gaming) allow their yield-generating NFTs to be loaned to new players — creating economies therein. It’s fair to say that the emergence of metaverse will likely continue to cause platforms to switch to web 3.0 business models.
What’s Next?
The blockchain metaverse is a relatively new concept — the technology required for blockchains to function as bridges between reality and digital-reality simply did not exist ten years ago. If recent developments are any indicator, it would seem that its emergence is continuing to accelerate. As blockchain and DeFi technology becomes more widely adopted, their capabilities will likely be taken advantage of in an increasing number of fields and industries.
The profits that people make from selling assets generated in metaverse games such as The Sandbox are currently taken in cryptocurrencies — which can of course be sold for fiat currency. However many believe it will soon be possible for assets from any metaverse game and indeed real-world assets to be interchanged and exchanged in some form of futuristic ‘meta-marketplace’. The physical and digital worlds will have become inseparable with the genie unable to be placed back in the bottle. We had all best prepare for the merge — as it would now be safe to consider it inevitable.
Written by Rob Henderson for Novum Insights.
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