The metaverse is one of the most intriguing concepts surrounding the blockchain industry. Although there is no official definition for this concept, we can understand the metaverse as a parallel augmented reality where numerous interconnected virtual worlds converge to enable a new economy with social aspects that mirror those in our modern society.
The term was first coined by Stephen Neal in its 1992 Sci-fi novel Snow Crash, with more recent adaptations in Hollywood movies like The Matrix and Ready Player One. However, since Facebook announced its rebranding to Meta, it became clear that the metaverse will transcend fiction, changing the way we socialize, entertain ourselves, earn, consume, and even trade.
The Meta announcement catalyzed the metaverse hype cycle, which provided a boost for the entire industry. In November, almost every cryptocurrency reached its respective all-time highs, highlighting the importance of this narrative in the blockchain landscape.
However, the panorama has changed entirely from six months ago. The industry went from a bull run that saw multiple ecosystems reaching all-time highs to something that looks eerily similar to a crypto winter.
This DappRadar Metaverse Report takes an in-depth look at the most relevant Web3 metaverse trends that will strongly influence the future of the industry.
Key takeaways
- Metaverse-based projects, including blockchain games and infrastructure, have raised $4.6 billion in 2022, surpassing the total collected last year.
- The digital real estate market is back on track; Otherside metaverse propels virtual worlds NFTs to their best month with $616 million in trades; TCG World set the record for largest metaverse land sale with $5 million in one purchase.
- Metaverse-based tokens lose 80% of their value amid crypto winter.
- ENS NFTs generated 60% ($34 million) of their all-time trading volume in the last two months.
- Vitalik Buterin published the Soulbound Tokens (SBT) paper, paving the way for a decentralized society.
Contents
- Blockchain games, digital fashion, and NFT retail present a $30 trillion market opportunity
- Gaming and metaverse related projects have raised at least $4.6 billion in 2022
- Metaverse tokens 80% down amid the crypto winter
- Record month for Virtual Worlds during bear market
- Decentralized Society: ENS 10K Club and the Soul of Web3
- ____ to earn
- Meta partners with Polygon but announces 47% creator fee
- Closing – where are we heading?
Blockchain games, digital fashion, and NFT retail present an $8 trillion market opportunity
The lines between the physical and digital realities are quickly blurring. Disrupting technologies like artificial intelligence (AI), the Internet-of-Things (IoT), augmented reality (AR), and blockchain, along with the 2020 pandemic, have accelerated the digital transformation of our society. According to Gartner, a US-based research and consulting firm, 25% of the world’s population will spend at least one hour inside a virtual reality by 2026.
It is no secret that immersive games will become a dominant model inside the metaverse. But it is a positive sign to see an increasing number of brands from different verticals making their dent into the metaverse narrative.
Luxury fashion is one of those industries. A report released by Morgan Stanley estimates that the metaverse will constitute a $50 billion market opportunity for luxury brands. Fashion giants Gucci, Dolce, LVMH, and Burberry, are only a few examples of luxury brands that have launched NFTs for their communities. Decentraland hosted the first metaverse fashion week in March, where Esteé Lauder, Forever 21, and other brands joined D&G, displaying immersive experiences in the platform’s Fashion District. This virtual parcel was bought for $2.4 million, setting the record for the highest digital real estate sale at that time. What’s more, visitors of the event could buy digital fashion items from renowned brands, and redeem their NFT to also receive a physical shirt, dress, sweater, or pair of shorts.
In the same way, entertainment and media groups like Warner Bros, financial institutions like HSCB or JPM, and practically every retail company will have an opportunity to include Web3 products and services as part of their offerings. The same Gartner report estimates that by 2026, 30% of businesses will have tailored products and services for the metaverse.
Without question, the metaverse represents one of the most exciting opportunities of our generation. The Web3 metaverse will provide asset ownership to millions of users while empowering artists, creators, and a myriad of brands with decentralized ways of monetizing their work. A report from Morgan Stanley estimates that the metaverse constitutes an $8 trillion opportunity, while McKinsey seems plausible that the web3 metaverse market size by the end of 2024 could be nearing $1 trillion. Citi is even less skeptical and estimates that the metaverse could become a $13 trillion economy by 2030.
There is still a long way to go with multiple challenges down the road. Nonetheless, it is clear that the metaverse will disrupt our current social and business structures.
VCs have committed $4.6 billion in metaverse projects this year
Despite the current market down sentiment, VCs and private investors seem to agree with the estimations of the aforementioned sources. Since the start of the year, blockchain games and metaverse related projects have raised an astounding $4.6 billion, surpassing the total raised in 2021 already.
This is just another example of the positive signals flashed by this narrative. In crypto winter periods, the interest in the blockchain industry tends to diminish. The falling prices and the lack of quick gains disincentivize most investors. For this exact reason, it is positive to see that the amount of capital flowing into the industry increases despite the bearish market conditions.
In the last week of May, Web3 investment company a16z announced a $4.5 billion fund to invest in blockchain-based projects. This automatically became the largest crypto fund ever. As a note, this amount will not be factored in the calculation to avoid double counting capital, as the money secured will be eventually used to invest in blockchain projects.
Metaverse tokens couldn’t resist the bear trend – down 80% from ATH
Even though the metaverse was able to fuel a bull run single-handedly in November, where most cryptocurrencies, including BTC and ETH, reached their all-time high, tokens backing metaverse projects and blockchain games have suffered the same fate as the whole crypto market.
Apecoin, the largest metaverse token with a $380 million market cap, has lost 65% since the Otherside mint. Meanwhile, tokens backing virtual worlds like MANA, SAND, and ENJ are 82% down since peaking in November. AXS, Axie Infinity’s native token, is trading at an 89% discount from the all-time high set in November, although the case of AXS deserves special consideration since the infamous Ronin bridge hack earlier this year.
With the current state of the markets, it is difficult to envision a trend reversal for metaverse tokens in the short term. Nonetheless, it is worth acknowledging that cryptocurrencies backing up metaverse platforms will enable the economy inside the digital reality, thus, carrying a massive upside depending on the project.
Record month for Virtual Worlds during bear market
Virtual lands represent one of the main pillars of the metaverse. These virtual lands are digital parcels of land owned by users to build immersive structures that give life to the virtual worlds. In the Web3 or blockchain-based metaverse, the deeds to these digital lands are represented as NFTs.
The market for NFT digital lands exploded in November for the same reasons explained above. At that time, virtual world NFTs generated over $251 million in trades, with The Sandbox (TSB) accounting for 73% of that trading volume. In the same way, the price of lands in Decentraland and TSB tripled during that month, although the price has scaled down 80% from November’s prices.
In the following months, the market for virtual lands stayed hot, surpassing $169 million in monthly trading volume in each of the next three months before cooling down in March. In April, the market for virtual real estate was on a free fall until the arrival of Otherside shifted the virtual world landscape completely and revived a market that was falling victim to the crypto winter.
Otherdeeds, the interoperable metaverse platform imagined by Yuga Labs, generated over 150,000 ETH ($420 million) in trades within the first hours of secondary market activity, outperforming the entire virtual real estate market that had generated only $60 million by the end of April. The mint congested the Ethereum network causing excessive gas fees and leaving millions behind in failed transactions that were later reimbursed by the Yuga team. Less than one month after launch, Otherdeeds became the most traded virtual world with over projects surpassing established metaverse platforms Decentraland and TSB.
Despite the bearish trend in the markets, the digital real estate market is posting positive metrics. Seven out of the top 10 NFT sales in May belong to the Otherside collection, with Otherdeed #24 netting 333 ETH worth $1 million. The floor price of TSB and Decentraland’s plots have gained 30-40% since the start of the month. Finally, the largest metaverse sale happened this week when financial publishing company Curzio Research bought 19 plots in TCG World, a metaverse dapp powered by BNB Chain. The TCG World sale surpasses Republic’s $4.3 million acquisition of Atari land in The Sandbox as the largest digital real estate sale ever.
We’ll continue to monitor the state of virtual worlds in DappRadar’s Metaverse Reports.
Decentralized Society: ENS 10K Club and the Soul of Web3
Ethereum Name Services (ENS) were launched in 2017 to enable a decentralized naming convention in Ethereum. ENS and other types of Web3 domains like Unstoppable Domains or Web3 names gain relevance in the metaverse by being part of our digital identity. Instead of having a 64-character hex string as a name, Web3 domains link human-readable names to our wallet addresses. Despite getting five years old this past May 4, ENS NFTs generated 60% of their all-time trading volume ($34 million) in the last two months.
ENS saw a significant spike in demand as soon as the 10k Club revealed its true meaning. The 10K Club is a community organized by owners of the ENS domains from 0000 to 9999. The floor price of the ENS belonging to the 10K Club sits around 0.7 ETH, while the ENS of the 999 club sits at a 9 ETH floor price.
The 10K Club and Web3 domains are representations of human behaviors in the metaverse context. Apart from human naming conventions, a 10K club type of phenomenon can be observed in the Middle East, where individuals pay millions for license plates with a unique combination of digits.
Besides the surge in demand for ENS during May, we learned about a new concept that will play an essential role in defining our decentralized digital society. A couple of weeks ago, Vitalik Buterin et al. published a paper defining Soulbound Tokens (SBT), which can be defined as NFTs that cannot be transferred in simple terms. SBTs represents a perfect use case for tokenizing documents such as National IDs, school certificates, or any other type of asset entitled only to a person that lacks commercial value. SBTs also unlock a trust aspect of the metaverse economy to establish provenance and reputation.
We’re witnessing the gradual construction of the foundations for human identity in the Web3 virtual reality. Not only virtual Worlds, art, collectibles, and games, but also intangible and sometimes abstract concepts that will make the metaverse really similar to our physical experience.
____ to earn
One of the most trending aspects of the dapp industry is the surge of move-to-earn dapps. This type of blockchain application allows users to earn rewards in crypto for completing certain levels of daily physical activity.
Although Genopets pioneered the move-to-earn concept in the summer of last year, STEPN, a Solana-based dapp, has become the spearhead of this paradigm. STEPN has attracted over 500,000 unique users in May, growing 60% from April’s statistics.
The move-to-earn paradigm is spreading quickly across multiple blockchains, with Solana leading the category. Polygon’s Dootmovs and Oliver-X, Calo, and Wirtual on BNB Chain, and Fitfi on Avalanche, are some examples of the rising Web3 paradigm.
Move-to-earn is just the latest routinary activity adapted to a monetizable Web3 paradigm. Play-to-earn, learn-to-earn, and contribute-to-earn add to a list of activities that can be monetized inside the metaverse. It will be interesting to see which of these paradigms and dapps can create a sustainable tokenomics model.
Meta
One of the most critical players in the metaverse narrative drew headlines once again. In mid-April, Mark Zuckerberg and the Meta corporation exposed their lack of understanding of the Web3 economy. In a blog post, Meta announced the start of a test period inside Horizon Worlds, the company’s metaverse platform. The announcement came with a surprise as they revealed a 47.5% trading fee. The proposed model by Zuckerberg goes against the ideals of Web3, which empowers creators and curators and contravenes Facebook’s CEO’s promises to cut down Apple’s App Store 30% developer fee.
To put in perspective, Ethereum’s most popular marketplaces, OpenSea and LooksRare, charge a 2.5% and 2% trading fee, respectively, while Solana’s Magic Eden also takes 2% on all transactions. Even when compared to Foundation or KnownOrigin, blockchain marketplaces with the highest percentile in terms of fees, there is a 32.5% difference with the proposed trading fees in Horizon Worlds.
A few weeks later, after drawing criticism for their traditional corporative mindset, Meta returned to Web3 headlines, albeit with a different intention. First, to announce the eventual integrations of NFTs inside Instagram. Then, Meta announced a partnership with Polygon, although it is still unclear whether they will be in charge of rolling out the NFT implementation.
The latest events surrounding Meta Platforms leave a bittersweet impression on the blockchain industry. On the one hand, the massive potential of onboarding millions using Instagram or any other Meta social platform. On the other hand, the latest blunder in a series of controversial actions taken by Meta, whose intentions appear to widely differ from the Web3 community.
Closing
A few years ago, mixing our physical world with an entirely new digital reality was only a sci-fi dream. Thanks to technologies like AI, AR, and XR, this new realm is closer than ever before. The metaverse is one of the most fascinating trends not only for the blockchain space but also for any industry out there. However, it is utterly relevant to distinguish between a Web2 metaverse that will bring only the immersive experience with considerable benefits for the corporations and a Web3 metaverse that empowers users and creators with an underlying economy.
By this point, almost any type of business is keen to explore this new frontier. Leading financial institutions are jumping into the metaverse bandwagon, forecasting a trillion-dollar market in different market researches. Meanwhile, more and more retail brands are making strides in preparation for this digital takeover. Just in the last few months, Starbucks, Absolut, Pepsi, Planet Hollywood, and a myriad of relevant retail brands have revealed plans to fit the metaverse at some point. Likewise, the adoption of financial institutions like Mastercard, Visa, HSBC, JPM, and many more prove that even the most rigorous corporations will be part of the revolution.
We’ll continue to monitor this trend’s impact in the blockchain industry. For now, it is safe to say that aside from cryptocurrency prices, metaverse projects are performing well against a harsh crypto winter characterized by lower interest levels.
