Hear from the industry’s best and brightest about the latest news in crypto and blockchain from Australia and around the world with Jonathon Miller, managing director of Kraken Australia.
The non-fungible token (NFT) boom of 2021 not only brought mainstream attention to digital art investment, it also brought public attention to the development of the metaverse.
The metaverse refers to an online virtual world where individuals can experience a variety of interactions, environments and objects in real-time through unique, 3D digital identities.
The concept of the metaverse is still young, and poorly understood. The term itself is a portmanteau of ‘meta’ (meaning beyond) and ‘universe’. There are two main types: centralised metaverses (which don’t use blockchain technology, for example Meta’s Horizon Worlds) and crypto metaverses (which utilise blockchain, crypto and NFTs to provide functionality in their virtual worlds that go beyond socialisation). Good examples of this in action today are Decentraland and The Sandbox.
Crucially, the crypto metaverse enables a future for anyone with internet access in a virtual world of their choosing, where individuals can truly ‘own’ digital goods that are otherwise infinitely reproducible. Much like cryptocurrencies, crypto metaverses empower individuals through decentralisation.
A growing part of this space is virtual gaming worlds, for example Australian project Illuvium – an open-world exploration, NFT creature collector and autobattler game built on the Ethereum Blockchain. The use of NFTs in the Illuvium metaverse empowers individuals with control over their accounts and digital assets in the game.
Play-to-earn mechanics in games like Illuvium allow players to monetise their time spent in the metaverse in exchange for digital assets. In some cases, users can also lend their NFTs and monetise their use by others. These gaming platforms create an ecosystem such that users benefit from their time and resources invested in the platforms. Players can also help shape the development of the gaming platform through ‘governance voting’. Individuals can even purchase ownership rights of virtual land in these metaverses.
As the broader metaverse industry grows, Kraken Intelligence anticipates increased development effort will lead to greater adoption, just as happened with decentralised finance (DeFi) projects. Naturally, this space will also benefit from broader adoption of cryptocurrencies due to the integrability of applications across any single crypto protocol. In other words, if an individual’s invested into a cryptocurrency today that is later utilised by users of a metaverse to transact, their investment has gained a lot of new utility through this process.
As the market matures, we may come to see activities in the metaverse have impact in our ‘real life’ where virtual goods that are currently available on the metaverse translate to access to real-world outcomes. Owners of a specific NFT asset in the virtual world may be invited to exclusive events or offers from brands and organisations that want to reach this new demographic.
While the crypto metaverse offers a tantalising glimpse into a far more immersive digital future, it’s still very early in its development cycle. Despite its significant growth over the last two years, the metaverse NFT segment remains relatively small compared to the rest of the NFT industry. According to Nonfungible.com, in terms of total sales count, sales value, and active market wallet count, metaverse NFTs make up roughly 1%, 7% and 0.0002% of the total NFT industry, respectively.
More iterations of existing technology are required before social activities can seamlessly migrate onto the crypto metaverse. Likewise, crypto metaverses are hindered by the lack of common knowledge about crypto and NFTs. Individuals must first learn how to purchase crypto or NFTs before greater adoption can be achieved in these worlds.
However, it’s this very roughness, its promise of rapid development and possibilities that make it so compelling. Just as the pandemic and lockdowns changed the way we interact with the office, metaverses could have a similar effect on many other aspects of our lives as they continue to develop and gain momentum.
To offer some perspective, US-based market research and consulting company Grand View Research estimates that the metaverse industry will reach a market size of over $678 billion (USD) by 2030. For the long-term investor, they’re worth keeping an eye on.
This article was developed in collaboration with Kraken Australia, a Stockhead advertiser at the time of publishing.
This article does not constitute financial product advice. You should consider obtaining independent advice before making any financial decisions.