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This article will break down what the metaverse is, fundamentals of how the metaverse is built and runs, what characteristics constitute a metaverse, technology behind the metaverse, the economy a metaverse creates and its participants, how assets can be monetized, and breakdowns of the metaverse platforms and how real estate is offered.
What is the metaverse?
“The metaverse refers to a collectively shared virtual space that arises through the convergence of virtual and augmented reality, as well as the internet” (MV Properties, 1). The metaverse is three dimensional, accessible to all, and regarded as a “shared virtual space residing within a larger virtual universe” (MV Properties, 1). The pandemic may have been a catalyst for the growth in virtual worlds. This has forced the adoption of individuals, entities, and institutions to merge their physical realm with a digital one. The blockchain metaverse as we see today has its roots dating back to 2016.
The projects in our article today will be Decentraland, Somnium, and The Sandbox. These implementations are still in early adoption. The content of these shared spaces is also in development. The importance of development determines the utility of each metaverse. Game or alternate reality are all decided based on features, products, services, and unique user experience. Growth of the metaverse has been a trickle, not a splash. Applications for expansion of metaverse rely on mainstream adoption. Essentially, how the metaverse and its use be practically implemented into everyday life? From education to social events through augmented and mixed reality, creating multiple levels of immersions into a digital realm that is not just limited to virtual access.
Characteristics of a Metaverse
- Interoperability: Digital information is transferable through the variety of ecosystems, networks, environments, and chains.
- Experience Hosting: omnipresent experience for users displayed through a virtual world. Quasi-decentralized development is likely, users engage with the world through their activities and unique digital selves. NFT based goods make the user experience non fungible.
- Size unconstrained: hosting audiences, groups, of any size at any time. Sharding is the technical terms through which large information, particularly data sets, is distributed to multiple machines so the large data set isn’t stored on a single data base. This helps with efficiency when data becomes massive, and requests are numerous
- Constant Availability: always in use, even when a user decides to log off, the metaverse is still active
- Multi-Device Accessibility: can be accessed through different devises and ISPs.
- Transactability: functional economies are present with buying and selling actions among consumers. Large variety of things to purchase and will expand rapidly with increased market providers who buy and sell goods and services just like in the real world.
- Multiplatform: Different platforms, apps, and digital realms make up the metaverse, even though it is interoperable.
- Governance: depending on the implementation of metaverse, how it is governed varies. Centrally managed, to DAOs. But the entirety of the metaverse isn’t owned, more similar to how the internet in and of itself isn’t owned.
The technology behind the metaverse
- 5/6G Networks: high quality streaming of data and content in real time
- Augmented reality, Virtual Reality, Mixed Reality: Access devices are used to engage with the applications and experiences in the metaverse.
- Language /protocols: diverse array of protocols and languages that underlie/will underlie, both applications and mechanisms for content delivery (direct language)
- Cryptocurrency: minimal transaction fees and public monitoring/auditability for enable on platform, trustless, p2p, transactions to support the functioning economies (direct language)
- NFTs: ownership of virtual and digital assets and items need to be verifiable and transferable, through blockchains.
- Sharding: in the context of metaverse attendance and virtual engagement, Sharding creates batches of users to attend the same broadcast of an event or gathering without having to impose heavy requests on the infrastructure. Spreading loads digitally.
- Smart contracts: user developed and executable agreements between the provider and the consumer. Manage relationships digitally.
The economy in the metaverse
“The metaverse is capable of containing larger and connected virtual marketplaces and economies. These economies are governed and facilitated by the applications of cryptocurrency and peer to peer transactions as mediums of exchange” (MV Properties, 6). “These metaverses and their native tokens may not be directly convertible to fiat, so they can purchase NFT based assets and sold for fiat” (MV Properties, 6). Barriers to entry for development of content inside the metaverse started out as high cost, niche developers who could do the work. Increased competition between development companies has placed downward pressure on costs associated with development. The parcels in which development occurs begins to appreciate raising the barriers to entry once again and creating demand for multiple parcels to be cost effective. This can place reliance on bigger institutional money who has the means of financing this development. Who will begin to participate in the economies of the metaverse? These early adopters (till 2023) will likely partake in the adoptions
- Speculators: those who sit on land and property parcels waiting for appreciation to accumulate through brand and corporate interests, purchasing large plots of land for commercial use and making passive appreciation as the metaverse becomes more valuable.
- Builders: Those who can focus on building more content for user adoptions and experience for implementation from the physical realm
- Leisure participants: entertainment experience focused.
Metaverse aimed business models, direct to avatar. $50B in virtual market and likely to grow.
“The combination of their exposure to online offerings throughout childhood/adolescence (i.e., gaming, streaming, video-watching, etc.) as well as an increased reliance on virtual media in the wake of COVID-19 lends well to the metaverses’ growth potential among this demographic” (MV Properties, 8)
How are metaverse assets monetized and valued
Metaverse economy and monetization is like that of physical realm. Minimal regulations adhering to the building, transactions, and experiences pertaining to the development of the metaverse, creating a realm of absent bureaucracy. The governing bodies, CeGov or DeGov by DAOs, obtain fees from mechanisms. Native token illiquidity in land and property comparative to other metaverse assets upheld by tokens. Land is priced by native currency/token, the question of if the demand for high priced real estate is feasible and theoretically creates a liquidity trap.
Real estate in the metaverse carries valuation similarities: size, dimensions, location, proximity, visual appeal, scarcity, utility, institutional adoption, and higher macroeconomic functions involved with expansion of virtual industry. Location value will vary through time, due to efforts derived by larger development for interest. Smart contract-based mortgages can be used for higher priced assets and manageable funding. How parcels are measured is the two dimensions are a factor of valuation and utility (length and width), but equally as important is the height thresholds. These 3 dimensions directly affect the utility as to which the user can must be made aware of. The cost of expansion, if needed, will likely play a factor in how much real estate one will acquire in the metaverse. If there is room to expand, one shall consider the feasibility of this option. In the future, the same virtual land acquisition can be more expensive.
Our First of three Metaverse with Real Estate Function engrained in the platform is Decentraland, the first decentralized world created in 2017 on the Ethereum Blockchain. Users can purchase parcels in Decentraland Metaverse and can “produce, experience, and monetize their own applications and content.” The ecosystem’s native token is MANA which enables transactional activity in the digital marketplace, Building is incentives and promoted through the world’s platform, and strong interaction via community-based gatherings and events. LAND is NFT based digital asset and maintained by smart contracts, identifiable by coordinates. Each parcel is 256 m^2 and they can be grouped together by liked minded “districts”. DAO and governance interface allow managers to control assets and smart contracts, servers, and the marketplace. MANA currently has a $4.66B market cap (USD)
Provides “open, social, and persistent” VR experience with its own economy, currency, marketplace, activities, and ownership of estate. Somnium can bridges and connect any device on desktop (via PC client) to VR Mode and compatibility. “Some of the key characteristics of Somnium’s platform include ownership security; origin authenticity; an open, social, persistent Blockchain VR Metaverse; tradable/translatable via decentralized marketplaces; build with proven/secure standards; variety of creative tools such as an SDK and builder; and a cross-platform VR client” (MV Properties, 13).
Physical reality’s interoperability with VR Technology makes Somnium unique.
Key partners in making use of characteristics “Pimax, Sony, Microsoft, Admix, Polygon, OpenSea, VR Education, Blockchain Gaming Alliance, High Fidelity, JanusVR, and Gemini.” Most VR immersive platform with all major VR headset providers. In house SDK enables users to simultaneously build and create with ease. No need for Sharding or mirrored instances, more detail and customization in the virtual world. VR to enable social events, leisure, work, bartering, and content creation. Ethereum blockchain allows trades of goods and services safely, privately, and encrypted traceability that proves authenticity and ownership. Tokenized digital assets, NFTs via decentralized markets and P2P mechanisms. ERC20 token is Somnium Cube, and Somnium used polygon to hedge against Ether gas fees. Karma level equates to social status and is based on building activity, event participation, and so on. Earn CUBEs or rewards backed by CUBE. Somnium promotes monetization and models of business for buying and selling tokenized assets, Collector exhibits, and creation of stores to facilitate economic activity. Scarce land with only 3000-4000 sets of parcels, but bigger build space for UX. Strong recreational experience and has an of MC $1.48B
The Sandbox is a user generated content platform to monetize digital assets and gaming experiences. “Provide creators with true forms of creations in the form of NFTs, in-turn rewarding them for their participation in the ecosystem” (MV Properties, 15). VoxEdit is the leading application for building in the Sandbox realm. Created NFT backed objects which have market actions on Sandbox marketplace. SAND is native token. Land, entity, equipment, art, wearables are some NFT categories. No coding necessary, VoxEdit interface helps users create in game designs and these games can be shared with community. Monetize games and play to earn. Game Maker Fund for resources and subsidies. LAND is ERC-721 token, ERC-721 is a with higher gas prices, but cannot be fungible. Lots of land makes ESTATE and users can create larger experiences. ASSETs are ERC-1155. Assets are built upon the ERC-721 token LAND, and ERC-20 tokens, GEMs, and CATALYSTs, are defining characteristics based on utility. SAND is ERC-20 and used for interactions, transfers of value, and liquidity by staking and governance.
The main goal for Sandbox is promoting user monetization via ecosystem participation. 300,000 parcels in the Sand Box with SAND at a $2.2B MC
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Author: Zach Cuellar (Website, Twitter)
Editor: Hunter Carter (Twitter)
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