The phrase was firstly used by sci-fi author Neal Stephenson almost 30 years ago. Who could know that it would skyrocket and get to the hottest topics of this decade? “Metaverse” – one of the most trending words of the year but does everybody know the real potential of this phenomenon, what benefits, but also what kind of negative effects are associated with the mentioned technology. Compared to the year 2020, in which the market value was estimated at 46 billion US dollars, scientists expect the Metaverse market to reach the level of 280 billion US dollars by 2025.
Firstly, what is the Metaverse and why did it come down the pike so quickly?
Also called the AR Cloud, the Magicverse or the Mirror world – a place where people can socialize, play, or even work. Nevertheless, what does “Metaverse” really means? To put it simply, it is an online virtual world that incorporates augmented reality, virtual reality, as well as artificial intelligence, and enables people to coexist in this world as their 3D avatars, creating a hyper-real alternative digital space for them to “live” within. As Meta’s (previously: Facebook) CEO – Mark Zuckerberg said: “In the metaverse, you’ll be able to do almost anything you can imagine.”, and there is no better explanation for what a metaverse hypothetically is is it is going to be. Imagine virtual conferences, meetings, classes using our virtual 3D avatars, which look like our twins. But is it something worth the attention, can’t we just use meeting platforms? Why is the design side of this concept so important?
Let’s explain it on examples of virtual games or social media, which became, undeniably, an inseparable element of today’s world. Just as in real life, the digital world is extremely crucial for us. Our smartphones became extensions of ourselves. Even Elon Musk called people cyborgs, due to this statement. There is this saying that “if you do not exist in social media, you do not exist in the real world” and there is something behind it, as our social media profiles play an important role, and as a matter of fact, present who we are. Therefore, why shouldn’t we pay attention to the visual side of our avatars? Here comes in handy the concept of Non-Fungible Tokens (NFTs) – unique collectables, art or even real estate secured by, for instance, Ethereum, Solana etc., blockchains, which give us ownership of mentioned assets. Consequently, we see a strong correlation between NFTs and cryptocurrencies, as these pieces of art can be bought by only paying in cryptocurrencies.
How did cryptocurrencies impact the metaverse?
The world of virtual currencies is still at its highest phase of development. Provided that, it is not surprising that masses of money are invested in blockchain-related industries. Along with the advancement of new technologies, millions of start-ups and artists are becoming pioneers of this era. Cryptocurrencies, backed by almost instantaneous transactions and blockchain technology, which is designed to build trust and ensure security, act as virtual cash in virtual universes. Companies use them in their play-to-win models. Players, engaging themselves in the game and accomplishing certain tasks, can acquire certain amounts of the token used in the metauniverse. They are already used in, for instance, The Sandbox, where the SAND token is required or Decentraland, in which MANA token is used. Users of this platform are then enabled to buy digital properties, skins for their virtual avatars or unique traits, all in the form of NFTs, or even transfer earned cryptocurrencies and trade them for another digital art or withdraw the money.
The hype around NFTs comes from the money that flows on each transaction. “The First 5000 days”, the most expensive NFT ever sold, was fetched for 69 million US dollars, back in March this year. According to the biggest NFTs marketplace, Opensea.io, the volume traded on the most expensive collection of NFTs, CryptoPunks, is estimated at nearly 750 thousand Ethereum tokens, which equals 3 billion US-dollars. Another interesting statistic is that, according to data collected by NonFungible.com, the approximate number of NFT sales currently ranges from 15,000 to 50,000 per week, which equals around 10 - 30 million US dollars, but there were times when this number soared even up to 170 million US-dollars. Compared to 2017, before the big boom, this data estimated at merely 100 sales per week.
Venture Capital Funds’ gold Rush
The whole concept of possible virtual interaction, working, shopping or playing games with others made people go crazy about it. The idea of non-fungible tokens (NFTs) and cryptocurrencies being used in digital worlds, online gaming, social media or even as a currency in real-life allures start-ups, big tech companies, Venture Capital, or Private Equity funds, which are entirely immersed by this ecosystem. Notwithstanding, experts predict that it is just the beginning of the metaverse, as there is still a great number of technologies and solutions that need to be developed to make the whole structure work properly. The main categories that Venture Capital and Private Equity funds are eager to invest in belong to hardware, networking, virtual platforms, payments’ optimization and computing power. Blockchain technologies have moved us several decades forward and made the idea of the metaverse develop, as they enable, first, all kinds of payments and commerce within the ecosystem, and second, they make it possible for people to have a consistent identity, while travelling from one structure to another.
All those opportunities open the door to IT companies from various industries and attract masses of capital simultaneously. Just this year, according to Crunchbase data, companies attracted by this industry have raised almost 10.4 billion US dollars across 612 deals. The leader at their head was, well known Epic Games with nearly 1 billion US dollars gained in the funding round in April this year. Compared to the year 2020, those companies were accumulated 4.5 billion US dollars more. The most capital-fed sectors were Gaming (7.5 billion US dollars in 382 rounds), Online Games (around 2.5 billion US dollars in 110 rounds), Augmented Reality (2.1 billion US dollars in 176 rounds) and the Virtual world (62.8 million US-dollars in 9 rounds).
Such enormous additional backing to the metaverse-geared enterprises created several big players, especially this year. It is expected that global digital game spending will reach 129 billion US dollars in 2021. Another technology that gained attention during this year are mentioned before non-fungible tokens (NFTs). Platforms related to this concept are now one of the most dynamically growing industries. Opensea.io, the NFT marketplace, is on its track to become a 100 billion US-dollars company in record time. Another platform, The Sandbox, a virtual Metaverse where players can play, build, own, and monetize their virtual experiences, is near to selling its 10,000th plot of land just in 6 months. Unity, one of the main game developing engines in this space, acquired Parsec for 320 million US dollars during SIGGRAPH week. VR-based game, VRChat, which enables players to interact with others in 3D worlds, raised 80 million US dollars in its financing round to expand its metaverse platform. These examples show that no matter where you turn, capital flows in this market are huge.
Which start-ups attract the most attention……. and funding?
Such an infrastructure requires the involvement of almost every industry. However, some sectors are mainly concerned with the new ecosystem. As mentioned before, the gaming industry received the bulk of venture funding, as players are indeed the first who entered, so-called, metaverse. To those companies, that managed to acquire the most amounts of capital, belong, among others, NFT game - Genopets, video game engine - Mythical games and The Sandbox. The last two have reached their peak with funding worth, respectively, 150 million US dollars – collected in Series C and 93 million US dollars – collected in Series B.
According to the Crunchbase database, the total amount of funding raised just this year by companies that used the phrase “metaverse” in their description equalled almost 96 million US dollars, collected mostly from pre-seed, seed and Series A funding rounds. Upland, a blockchain-based NFT platform, for instance, has succeeded in gaining 18 million US dollars during Series A. On the other hand, Inworld AI, a developer platform for creating AI-powered virtual characters to populate immersive realities has received 7 million US dollars in Seed round.
Another great example, which presents the future of metaverse and some of the most insightful perspectives on its economy is IMVU, a platform, which is considered one of the world’s largest 3D avatar social platforms. With 7 million monthly active users, a marketplace of over 50 million items, its own cryptocurrency VCOIN, it has attracted 35 million US dollars in funding in January ’21.
“Metaverse”, a phrase that sounds like a science-fiction, matrix-related word, is something that we cannot reject. Masses and masses of capital are invested in this field and the development of mentioned industry has its golden age. Undeniably, it is something that we will sooner or later, or even now encounter. Right now, we should just look, how important it is for us to be recognizable on social media, how crucial it is for us to share what are we doing, where are we, who are we with. They play a huge role in our lives and the idea of the metaverse is taking it just a couple, or even over a dozen of steps forward. The question is how fast we will adapt to dynamically changing meta-environment, as it is something we cannot avoid.