Introduction
Neal Stephenson’s seminal 1992 science fiction novel, “Snow Crash” introduced the concept of the “metaverse” to the world, and inspired subsequent media such as “The Matrix” and “Ready Player One”. Stephenson defined the metaverse as an “all-encompassing digital world that exists parallel to the real world.” Though his vision was somewhat dystopian, the term has been co-opted by tech companies (most notably, Facebook, who rebranded as “Meta” in 2021) building what they believe is the next iteration of the internet. The concept of the metaverse involves an environment that is deeply immersive, with users given the ability to freely explore and experience it in parallel.
The metaverse draws upon a wide array of emerging technologies and trends including virtual reality (VR), augmented reality (AR), blockchains, NFTs and gaming, which presents a wide array of investment opportunities. However, before investing in the metaverse, it is crucial to know more about the virtual world that investors and institutions are so excited about.
What is the metaverse?
Many experts believe that the metaverse represents a logical evolution of the internet, a 3D model of the internet that exists parallel to the physical world. Of course, Stephenson’s vision of an “all-encompassing digital world” has not come to fruition yet. The current definition of “metaverse” describes a virtual space that allows real-time user interaction through a combination of software and physical hardware. This fusion of the real and digital realms is meant to deeply immerse people, so they are present and interactive in the space rather than an observer. It can be a 3D virtual reality accessed via headsets with avatars controlled by actual physical movements, or it can just be a 2D platform where avatars are controlled by keyboards and mice. The vision of the future is the metaverse being a network of immersive digital realities that recreate many aspects of our physical world in the digital world but also offer users the ability to have experiences not possible in the physical world. This can mean gaming, entertainment, and social events but also work and education, all as part of a digital economy.
The idea of the metaverse revolves around an online space where people get to connect and interact with each other. Right now there is not a singular metaverse but rather a number of competing platforms where people can do various activities, whether work, business or leisure. These platforms each have their own independent economy and some have associated crypto tokens. Though for now, crypto and the blockchain play an integral role in many of these platforms, the metaverse and metaverse platforms can certainly exist without it.
Decentraland
Decentraland is a 3D metaverse platform on the Ethereum blockchain that opened to the public in February 2020 after being in development since 2015. Users can buy and sell digital real estate and then customize and develop their parcels. The virtual world offers games, unique experiences and user interaction. It has acquired a number of brand partnerships, which include Samsung, Atari and Miller Lite. It also has held some of the most publicized metaverse events as of yet, including a Sotheby’s auction, Metaverse Fashion Week and concerts from artists Deadmau5 and Grimes.
There are 90,601 parcels of “LAND” in “Genesis City”, which sold for $20 apiece at the initial launch but now have a floor price close to $3,000. Multiple parcels can be bundled together in “Estates”. There are also wearable items for user avatars. All of these are represented by NFTs and can be bought, sold and traded on marketplaces like OpenSea. There are building tools on the platform so owners can customize their virtual land and create anything from stores to art galleries to event venues.
The native MANA token was trading for as low as $0.08 at the beginning of 2021, but reached a peak above $5 before dropping back down to around $0.30 as of January 2023.
Axie Infinity
More of a pure game than a metaverse platform, Axie Infinity was originally developed in 2017 and gained popularity in 2021. The “play-to-earn” (where players earn crypto tokens as they play) game revolves around Axies, cartoon characters that players collect in order to battle each other for rewards. Axies are NFTs available to purchase on marketplaces, which makes it easier to buy, sell and trade them. Each Axie has unique characteristics and attributes that have different strengths and weaknesses in battle. Players earn money via Ethereum-based tokens AXS and SLP, both of which have seen their value crash over the past year. They also have sold land (90,601 plots of “Terra” in “Lunacia”) but it is unclear how it fits into the mechanics of the game as of now.
It has also received negative press recently for its economic system, which led impoverished people, mostly in the Philippines, to try and make a living by playing the game. However, with the value of the tokens plummeting, many players ended up losing money. As currently constructed, the game relies on an influx of new players and money to maintain the value of the tokens and does not seem sustainable. Additionally, in March 2022, hackers breached their platform and stole over $600 million of cryptocurrency.
Sandbox
Originally developed in 2012 as a 2D mobile game, the Sandbox shifted gears in 2018 towards becoming a 3D Ethereum blockchain-based gaming platform. They raised a $93 million funding round in November 2021, and after years in development, it launched the first “Alpha” season shortly thereafter. Season 2 followed in March 2022 and season 3 recently launched in August 2022. The seasons, which have lasted from three to ten weeks, are essentially soft launches of the product, which does not have a launch date for the full version as of now. The Sandbox has partnerships with celebrities such as Snoop Dogg and Paris Hilton, brands such as Gucci and Adidas, and entertainment properties such as “The Walking Dead” and “Hell’s Kitchen”.
The in-game world has 166,464 plots of “LAND”, which can be customized and built on by owners. There are building tools that let owners develop their land and build customizable experiences, which can be monetized. Just as with the other platforms, the parcels of land are represented by NFTs and can be purchased on marketplaces like OpenSea. Other NFTs, such as avatars and in-universe items are available to buy, sell and trade.
The native SAND token was trading at $0.05 when launched in August 2020 and rose to a high of $8.40 when Alpha launched, though as of January 2023, it is trading around $0.40.
Otherside
Still in development, Otherside is the newest major entrant into the space, created by Yuga Labs, best known for the NFT collection the Bored Ape Yacht Club. The game will supposedly be a multiplayer online role playing game (MMORPG) where players’ Yuga Labs NFTs will be playable characters. This is the competitive advantage that Otherside may have, as Yuga not only has the Bored Ape Yacht Club, but also associated projects the Mutant Ape Yacht Club and the Bored Ape Kennel Club, as well as popular collections CryptoPunks and Meebits from its acquisition of Larva Labs. Yuga is also well-funded, having raised a $450 million funding round in March 2022.
There are a total of 200,000 Otherdeeds, the NFTs associated with in-game virtual land. The native token is ApeCoin, which rose above $26 per coin in April 2022 but is trading at around $4 per coin as of January 2023.
