- The Metaverse is a shared virtual universe. Anything that exists in reality is possible there.
- It’s expected to be a multi-billion industry, with big, new opportunities for businesses and individuals.
In these almost dystopian times of pandemic reality, the virtual revolution is happening. Part of the world is steadily moving to the metaverse and, more importantly, is reaping real profits there.
So, as this new, trendy buzzword captures the headlines, now is the right time to learn more about how money is made in the virtual universe.
What is the Metaverse?
The virtual environment. 3D internet. Alternative worlds and economies. All of these names describe the trendy buzzword of today’s world: the metaverse.
It is actually almost like a parallel universe, as the metaverse blends both the physical and digital worlds. Simply speaking, it’s like a shared virtual world in which anything that exists in reality is also possible in the metaverse.
The metaverse is still an evolving concept, but there are a variety of them. Be it Decentraland, Roblox, Sandbox, Cryptovoxels, or Axie Infinity, each of them allows you to do multiple things in their virtual world. Users can shop, study, meet with friends, go to concerts and galleries, and even do business. All users need to have to enter the space are their avatars.
The key thing about metaverses is decentralization. The majority of the existing virtual worlds are built on a blockchain, particularly on Ethereum. This means the smart contracts are governed mostly by DAOs, not by any central authority. Autonomous worlds use cryptocurrencies to run their economies.
Another critical aspect is monetization. Blockchain-based virtual worlds allow users to create digital content, develop it and later sell, rent or trade it to earn cryptocurrencies.
The range of options is wide: from selling in-game avatar skins, to renting digital land or even selling advertising space pixels on them.
No Longer a Niche Space
The concept of the metaverse is not new. The 3D universe ‘Second Life’ already invited millions to build their dream realities back in 2003. After that the concept was quiet, until the global pandemic sparked the rapid evolution of virtual worlds.
Worldwide Lockdowns forced millions of people to postpone their social lives and shift them entirely online. A huge part of this group of people were the generations that grew up with video games. They moved into virtual spaces looking for new experiences and opportunities. The big businesses followed their clients and their money. This is when metaverses exploded.
First came the NFT boom, with Beeple selling his tokenized artwork for $69 million and NFT-based play-to-earn games escalating. Then massive investments in virtual land, parcels and pixels of space on the metaverses. The prices have skyrocketed within a few years, from just $20 back in 2017, to over $5,800 in 2021.
Legendary auction houses and real estate agencies spent hundreds of millions of dollars to have their own spaces on digital land. Virtual property became a new form of hedge against inflation. And more importantly, a new El Dorado.
Ways to Make Money on the Metaverse
Virtual property rent
Metaverse developers usually sell their virtual land parcels as a blank space. Meaning, that owners have full creativity to build whatever they want: be it a hotel, an art gallery, a casino, a cinema, or a sports stadium.
It’s their choice what to build and how to charge users. The opportunities to generate revenue are endless, from renting a building to charging admission fees or selling advertising space.
Not to mention the fact that the virtual property itself could be an investment, the value of which might grow over time.
Virtual worlds can mimic any activity from the real world, and the possibilities for users to interact with each other are endless. So too are those of interacting with companies, brands, and products.
In-game advertising is already a multi-billion industry. Moreover, online game environments and even virtual shopping malls are primary social spaces for younger Gen Zers. This is where they meet, socialize, collaborate, and spend time. It’s not ‘old-school’ Instagram where they spend time anymore.
Developers do everything in their power to create the most exclusive, engaging and rewarding spaces. The number of metaverse users is rapidly growing. It’s logical to say that virtual worlds and their new social spaces will become a massive marketing channel over time.
Investing in the metaverse industry
The metaverse is a new dimension of the internet. At some point, it can be incorporated into each of our lives. Logically, this is a big opportunity for businesses, so visionary companies are jumping on the bandwagon.
The growth potential of virtual spaces of multi-million users is massive. The native digital currencies of separate metaverses (like Decentraland’s MANA, or The Sandbox’s SAND) have increased in value multiple times over the months.
For those preferring a more traditional investing approach, stocks of metaverse-focused companies are also an option. Tech, gaming, e-commerce and social media giants like Roblox, Unity Software, Microsoft Corp, Amazon, Nvidia, Walt Disney and Facebook revealed their interests in developing their own metaverses. All of them are publicly listed on stock exchanges.
Investing in underlying technology protocols
Currently, the majority of metaverses are built on the Ethereum network. The hype around them is reflected in the massive price surge of Ether (ETH), the native cryptocurrency of the underlying Ethereum blockchain.
The landscape is changing, however, as competing blockchains enable their own smart contracts with NFT functionalities. Solana (SOL), for instance, witnessed almost vertical growth in recent months, due to the NFT craze and attention from institutional investors.
Blockchain protocols that aim to solve scalability issues and offer lower network fees than Ethereum have solid fundamentals to grow in terms of NFT-driven demand.
Investing in NFTs
Non-Fungible Tokens (NFTs) themselves are collectibles, and hence speculative assets. Because of technological features, NFTs are unique pieces of digital data which makes them scarce and valuable at some point.
Investors expect their value to rise over time. But although NFTs are trendy, they are also a new type of investment, sometimes at risk of being overpriced.
Blockchain-based games and NFTs enabled a new revolutionary play-to-earn gaming model. The principle here is simple: gamers have ownership and control over their in-game assets and full ability to trade or exchange them for real-world money.
Gaming economies like Axie Infinity are the perfect example of how metaverses can change the real ones. During the pandemic, thousands of Filipinos stormed into the game, grew digital pets, called “Axies,” and traded them online, making more money than in their real-life jobs. Axie Infinity’s (AXS) price skyrocketed by more than 2140% within two months alone.
On The Flipside
- Metaverses currently exist like separate universes. They cannot be connected between themselves. This means that Axie Infinity metaverse users can not jump into the Fortnite or Roblox metaverse with their own digital assets. The lack of interconnection is one of the biggest issues slowing the evolution of the virtual universe.
- The whole infrastructure is still in its baby phase. The space is evolving with each investor and project developer, but most of the necessary apps have not been developed yet.
- Internet speed might be a real issue sometimes. Virtual realities require a fast connection, but the lack of competition among internet service providers keeps the situation stagnant, especially in the U.S.
Why You Should Care?
Metaverses are the next big thing, and are expected to reach a value of $800 billion by 2024. The scale of their current growth leaves no doubt: they are the future and most of us will be involved with them sooner or later.