Coin of the Metaverse
In the 2010s, the video game world went through a significant evolution from the sale of new games as cartridges and discs to in-game purchases. As I wrote about when discussing blockchain gaming, this change led to megahits like Fortnite and Roblox, which do not charge players upfront to get started. Fortnite sells their players V-Bucks, and Roblox calls their digital currency Robux. Players use credit cards to purchase this in-game coin and then spends these on game assets. The problem with these web2 games is that the currency and assets purchased can only be used within that single game. If a player gets a rare asset, they can’t sell it for a profit on the platform or elsewhere. Also, the digital currencies are pegged 1:1 to the US dollar, offering no possible price appreciation if a game grows in popularity.
The Metaverse is going to be a very different place when one or more eventually emerge as leading gaming platforms. The idea of the Metaverse first hit pop culture with Neal Stephenson’s 1992 novel Snow Crash. The book was set in the future where people congregated in an online world that Stephenson called the Metaverse. It was a single virtual world, where players can buy and build on land, create experiences, meet people, and do much more. The real world outside the Metaverse is really grim in Snow Crash. Ernest Cline took the concept further in 2011 with his novel Ready Player One, which was later made into a movie by Steven Spielberg. Cline called his Metaverse the Oasis, and it had many of the features from Stephenson’s work. This book also portrayed a dystopian real world outside the digital one. Either way, these works are inspirations to current game developers trying to build a Metaverse for real.
Fortnite, Roblox, and Minecraft have all built early games that have many of the elements of a fully functional Metaverse. Matthew Ball published an important essay on what a Metaverse will look like that you can read here. In it, he defines the Metaverse as “massively scaled and interoperable network of real-time rendered 3D virtual worlds which can be experienced synchronously and persistently by an effectively unlimited number of users with an individual sense of presence, and with continuity of data, such as identity, history, entitlements, objects, communications, and payments.” There is a lot to chew on here, and you can read Ball’s full piece for more details.
Why is this all important and covered in a Crypto blog? I think that Cryptocurrencies and NFTs will be the unlock to allow a true Metaverse to emerge. V-Bucks and Robux are good innovations, but I believe the first Metaverse that meets Ball’s definition is going to need to be decentralized and interoperable. The currency used to make in-game purchases will need to be freely tradeable. It will also need to confirm some level of decentralized voting control, so that the players of the game will have a say in how the game is managing. A true Metaverse will need to be interoperable, whereby gaming assets will be NFTs that can be used and traded freely outside the game.
Today, Fortnite and Roblox can make major changes to their game and the players don’t have a voice. If you recall from my post on the launch of Ethereum, Vitalik Buterin had the first thoughts for his world changing Cryptocurrency when Blizzard changed the rules on their World of Warcraft came. Vitalik lost the value to one of his most prized in-game assets, and he thought there should be a fairer gaming ecosystem.
Future Metaverse games will allow their Crypto holders to vote on big changes. Holders of their digital currency will vote in a DAO or similar manner on the most important issues that affect the game play. If the game wants to change the way items work or the economics, they will have to get approval from their players. This will allow for a fairer balance between the game developer and their players. I would guess eventually, the best Metaverse game development companies will even be decentralized and controlled by their Crypto holders too.
The early leaders in the decentralized Metaverse race are Sandbox and Decentraland. Both have been around for a few years, and both have successful Cryptocurrencies. $SAND has a market cap of $3.8Bn, and Decentraland’s $MANA token is worth $4.8Bn. Both are just PC games right now. Frankly, they are nowhere near as good as Fortnite or Roblox yet, but they are improving fast. Additionally, while Fortnite and Roblox are playable on consoles and mobile phones, no one is close to the fully immersive VR worlds imagined by Stephenson or Cline.
In Sandbox and Decentraland, anyone can purchase digital land, which currently trades for around $10K per parcel. Land is purchased using the Crypto tokens, and these are also used to do things within the game like buying NFT assets. Once you buy land, you can use their builder programs to create experiences. Sandbox has brought in some amazing brands as partners including Atari, Snoop Dog, The Walking Dead, and HSBC. Decentraland also has a broad base of corporate partners including Adidas, Samsung, the Australian Open, and many more. These big brands are investing time and money, along with their reputations on these new digital worlds. Also, you’ll want to keep an eye out for a new Sports Metaverse coming from SportsIcon, one of our portfolio companies. They are collaborating with some big-name athletes and really fun brands on an online sports world. I’ve seen behind the curtain, it’s dope.
Ultimately, it is unclear whether we will see one huge dominant Metaverse or a bunch of significant ones that may or may not be interoperable. The other big unknown is what role big tech will play in this space. Facebook (now Meta) has invested billions and even changed their name to ensure a place in the Metaverse race. Their Oculus VR product is the clear leader. Probably no one outside the company wants to see them win, but they have huge resources. Apple is bringing some type of VR or AR glasses to market soon. Niantic create Pokemon Go and their CEO has talked aggressively about the Metaverse being in AR not VR, which plays to their strengths. No matter who wins this important battle, I think the use of a Crypto token and NFTs will be key. Keep an eye on this space for more.
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