Following Facebook's dramatic rebranding as 'Meta', interest in virtual environments and the metaverse as a whole has boomed. This has remained a hot topic lately amongst social media and news outlets, with investors jumping into the newest craze. Metaverse-related cryptocurrencies such as The Sandbox (SAND) and Decentraland (MANA) exploded with investors trading more than $500 million USD worth of digital land (a claim to a piece of land within a digital environment) across various games in the past 30 days with sales reaching highs of over $2 million for a single plot of LAND, according to data from Opensea.
So, what's all the hype about? We’re watching a space race unfold between the world's largest companies and crypto-developers for who will own this revolution. The metaverse is no longer a concept only seen in science fiction (think Steven Spielberg's Ready Player One) but a real developing vision of the future. In the current technological age, where our digital identity is highly integrated with our real identity, providing a virtual environment for immersion and interaction is now more important than ever.
Catch up on part 1 of our metaverse deep dive here: The Cyber Big Bang: What is the Metaverse?
The technology needed for the metaverse can be secured by the same underlying blockchain technology as cryptocurrencies and is the reason why we have seen enormous gains in the sector. Earlier in 2021, the narrative saw Layer 1 altcoins such as Solana (SOL) and Avalanche (AVAX) rally, and over the last few months this narrative has shifted to meta-related tokens such as The Sandbox (SAND) and Decentraland (MANA). Considering the security that blockchain technology provides, the rapid growth of digital assets, and the fact that digital interactions are becoming more prominent in a post-COVID world, the metaverse is inevitable.
If you take the view that the metaverse will play a large role in our lives, it’s important that the technology behind it is not only secured, but governed by its users. This is achieved though consensus mechanisms which allow users to confirm transactions and avoid spending errors, greatly reducing the likelihood of cyber-threats or hacks, thereby protecting the digital assets which will be stored on the virtual environment.
More importantly, blockchain technology will allow the metaverse to be governed by the users, meaning that users will vote on protocol improvement proposals and updates for the benefit of one another. This puts the interests of users and the ecosystem at the forefront rather than the interest of some centralised authority such as Facebook whose main incentive is profit. This point on governance is important as it provides confidence in the longevity of the metaverse, which in turn increases its value and utility.
Blockchain technology also allows for the tokenisation of digital assets and for their ownership to be publicly verifiable on an immutable distributed ledger. In essence, this ensures that transactions of assets are absolute and irreversible, with no party bearing the power of altering a transaction to serve their own interests. The blockchain is also the home for NFTs, whose properties spawned the possibility of the metaverse. As previously stated, NFTs allow parties to verifiably own digital assets and provide the infrastructure for users to interact within the metaverse.
Currently, the most notable players in the metaverse include The Sandbox (SAND) and Decentraland (MANA). The Sandbox, whose native token SAND and has seen more than 600% gains in the last few months, operates as a community-driven platform where creators can monetise voxel (essentially a 3D pixel whose name comes from ‘volume’ and ‘pixel’) assets and gaming experiences on the blockchain.
The SAND utility token allows players to purchase services, trade in-game, and govern the chain. The virtual universe is built on the Ethereum mainnet and consists of over 160,000 ‘LAND’ blocks, which act as digital real-estate that users can populate with assets and/or develop their own games on. Multiple LANDs combine to form estates and within the Sandbox multiverse you can visit those estates and play different people’s games, develop, trade, and operate a virtual world governed by other users. With the current average value of a LAND plot ranging from $10,000 to $15,000, the total value of LAND on the platform is around $2 billion. SAND has over 40 million downloads and over 1 million monthly users. In the same time that the SAND token grew from $1 to around $7, the average active users at any one time increased from around 50 to 210. This is mainly due to the attraction of the play-to-earn model that The Sandbox employs, garnering the attention of many users.
Decentraland is similar to The Sandbox in that land plots can be bought using the native token MANA. It operates on the Ethereum chain, however, unlike SAND it is a 3D virtual reality platform in which users can walk around using their avatars and interact with the different programs or assets that people have built on the land. The land in Decentraland is also extremely valuable. A plot of virtual real estate in Decentraland has recently sold for a record $2.43 million (618,000 MANA)—more than double the previous record of $913,000. Within Decentraland, different users can meet and interact just as they would in the real world, such as by going to concerts, meeting in buildings, etc. Decentraland has an average of 2,000 concurrent players using the platform, however (like The Sandbox) a large portion of current users only trade assets related with the metaverse rather than interacting with the play-to-earn features.
With metaverse projects performing so well and the overall metaverse market projected to reach $870 billion by 2028* (currently valued at c. $34 billion*), many players are emerging in hopes of capturing as much of the pie as possible. One project climbing quickly through the ranks since Facebook's announcement is Gala (GALA), currently ranking third highest by market cap amongst metaverse projects. GALA offers the same play-to-earn model that SAND and MANA do but focuses on simpler and "fun first" gameplay, attempting to attract mostly gamers rather than investors.
Supporting these projects are platforms like Ultra (UOS), a game publishing platform that supports blockchain games such as The Sandbox, Decentraland, and Gala, and allows users to distribute and re-sell games and items on their secondary marketplace. With Ultra as the centre of the ecosystem, the platform aims to be the ‘Steam’ equivalent of blockchain games. Steam, for context, is the ultimate destination for online game distribution, hosting more than 62 million daily active players with a current valuation of $12 billion.
The Sandbox and Decentraland are just two of the many players attempting to create the perfect metaverse. While both are providing an interesting view on the future of this concept, blockchain natives are not the only organisations looking to enter this area. A metaverse land grab is emerging between giants such as Apple, Amazon, and Microsoft, all aiming to capture market share in the metaverse by investing billions in research and development. Even companies like Nike and Adidas are preparing for a meta-revolution. Both companies have heavily invested in the space with Nike acquiring an NFT studio and Adidas partnering with many NFT producers including the extremely popular Bored Ape Yacht Club.
Each of these companies provide an interesting view on how to protect their property during the digitisation of assets. The question seems to be: will the resources and power of the centralised bodies or the technology and security seen in the decentralised world prevail in the metaverse?
Part 3 of our Metaverse deep dive next week will explore this. Stay tuned!
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