2022 was the year the wheels fell off the metaverse bandwagon, which had been the most hyped narrative as the year began. By far the worst-performing sector in blockchain, the average drawdown was 89%.
Even Facebooks grand plans to dominate the metaverse are in disarray; its losing more than $1 billion a month, while the flagship Horizon Worlds attracts fewer than 200,000 users per month.
But amid all the gloom, there are still miles of runway left from unprecedented fundraising and signs from The Sandbox, play-to-earn games and niche metaverse platforms that 2023 will be much more productive.
Sbastien Borget, chief operations officer and co-founder of The Sandbox, has been on the road a lot lately visiting the companys new offices. He speaks from Argentina when we talk just before Christmas about the performance of metaverse platforms in 2022.
Many pundits say its been a mixed year at best for adoption, pointing to DappRadar statistics that appeared to indicate daily average visitors to The Sandbox were as low as 500, with just 50 people wandering about Decentraland. However, both companies actively pushed back on these stats, claiming the figures only reflected the number of daily users who made a transaction not the number of daily visitors overall.
Borget is dismissive of the low figures quoted and says there are on average 30,000 visitors every day to the metaverse platform. He expects a surge in user numbers when the platform goes mobile later this year.
That will make a big difference. 30,000 is still a small number when compared to Facebook for example, he says.
But when you enter The Sandbox, you see people running around it is full.
The Sandbox Alpha Season 3 has claimed 17 million visits since Aug. 24, a threefold increase over Season 2. Thats even more astonishing when you consider the word Alpha means its still in the earlier stages of development.
So, while 2022 was definitely the year that the word metaverse became a household name and was narrowly beaten to the Oxford Dictionarys word of the year by goblin mode theres hope that 2023 will see it gain wider adoption. McKinsey Global revealed that investors had tipped $120 billion into developing metaverse tech by June, and even though funding subsequently fell off a cliff, thats a lot of runway to produce the goods in 2023.
Iceland in The Sandbox
The Sandbox is one of the metaverse OGs, founded four years ago, hosting impressive land sales topping $530 million, and attracting big names, such as SnoopDogg.
Borget points out that staffing has doubled over the previous year, and the project has a financial runway of at least five years. The big push to attract more users is coming from design studios and builders who are using their digital land to create experiences.
There are 230 studios currently building on Sandbox, and that is only the beginning. We also see cultural experiences becoming popular when different nationalities have created a home from home in the metaverse, says Borget.
Can metaverse replace the real world?
Upland, also founded four years ago, is a virtual property trading game mapped to the real world on the EOS blockchain platform and is often described as Monopoly on the blockchain. The Sandbox and Upland are both parts of the Open Metaverse Alliance, which is chaired by Upland co-founder and CEO Dirk Lueth.
When we founded Upland in 2018, very few people had even heard of the word metaverse, says Lueth, noting that these days, the future is at least envisioned Id call that progress.
Upland partnered with FIFA World Cup to offer an online games element for fans. Source: Upland
He says the high point is the attention from non-crypto native audiences and brands. $2 billion has been spent on virtual land across metaverse platforms in the past 12 months as people and companies race to get a foothold in this new virtual territory.
At Upland, we are proud to have the largest number of unique landowners [more than 290,000] who come to socialize, create value, and build communities, says Lueth.
There is a core segment of users who are creators or meta-entrepreneurs who are building their own businesses in the metaverse. Artists can create decor items and sell them to other users, while others have opened shops for secondary sales of NFTs. One of the big factors drawing users in, and keeping them engaged, are the virtual communities that are emerging. In Upland, they are called nodes.
We also find that users who are part of communities tend to stay more, and much of their activity is around building their communities.
Some of them have game nights, create charity fundraising events together, make governance decisions about what to build in their neighborhoods, and even elect representatives. Some communities are formed around similar interests like racing, which is a feature in Upland. Theyve created racing leagues, are building their neighborhood tracks and creating digital assets for rewards, says Lueth.
Digital goods as the killer app
Digital ownership is often touted as the breakthrough factor for mass adoption along with the interoperability of assets across platforms. However, Alien Worlds chief marketing officer Kevin Rose points out that a lightsaber from one world would not necessarily translate into a medieval tournament. It doesnt always make sense, he argues.
Different land types are available from Alien Worlds. Source: Alien Worlds
Alien Worlds is an NFT-driven game in which users collect and trade unique digital items minted primarily on the Wax blockchain. Players compete to earn Alien Worlds in-game token, Trilium (TLM), which is needed to control one of the six rival DAOs.
Marja Konttinen, marketing director of the Decentraland Foundation, puts forward a compelling case for digital ownership in a different context: fashion. Decentraland is a 3D virtual world browser-based platform that opened to the public in February 2020.
Lets look at one use case for the metaverse where ownership will be fundamental: fashion. If you dont have a wallet to log in, it will be hard for you to experience digital fashion at its finest because you cant claim any wearables to add to your wardrobe, says Konttinen.
Others are banking on a combination of community with the appeal of new experiences made possible through fast-developing technology. Unlike most other metaverse platforms, which are still accessed via screens, Somnium Space is an immersive virtual reality-based metaverse built on the Ethereum blockchain. It launched in 2017. Interviewing its founder and CEO Artur Sychov entails a chat with his avatar.
Somnium Space is creating its own custom VR headsets. Since Sychov spends as many as several hours each day in his, he is well placed to provide feedback on comfort and features.
Artur Sychov, founder of Somnium Space in his headset. Source: Somnium Space
Compared with some of the bigger names, Somnium Space is still scaling up. There have been more than 250,000 downloads so far, which translates into 80150 daily visitors in VR and another 1,0002,000 users on the screen-based web client.
Immersive is what Somnium Space is all about, and visitors can compete in sports, attend discos, and actively participate in whatevers going on.
Since its VR, if I am kayaking, then I am moving my arms and it is tiring same as in real life, says Sychov.
Thats the power of VR if Im dancing, then Im dancing not just hitting a button that causes my avatar to move. People understand that you are actually present with them at social events or meetings.
Sychov views the future of metaverse platforms, such as Somnium Space, as dependent on the people they attract and their ownership. He says that 90% of landowners on the platform have bought their land to build on it, giving the platform stickiness and keeping the owners coming back from more.
Sychov has augmented the land with a new concept of worlds. Entry is via a stargate, and inside these new worlds, there is no limit to the space, building or action. He shows me how his avatar steps inside a gate to a world and immediately is in a new space.
Individuals and companies are buying these worlds its all about building, he says, echoing Borgets excitement over the increased activity by design studios over in The Sandbox. It might still be crypto winter, but thats when the builders emerge.
Great minds think alike:
Play-to-earn builds the metaverse
The other important development bringing us closer to the metaverse is the play-to-earn phenomenon spear-headed by the blockchain game Axie Infinity. The huge growth during the pandemic, and subsequent sharp decline after, did not dampen the enthusiasm of Yield Guild Games (YGG) for the sector.
The Guild brings players together to learn and earn in blockchain-based economies like Axie and rents NFTs to new players so they can get started. It now encompasses more than 80 games in the sector.
Co-founder Beryl Li is bullish on the future of the P2E industry and says the bear market is a time to prepare for the good times ahead.
Those who recognize the opportunity in Web3 are harnessing the bear market as a time to upskill and further educate themselves, to ensure they are well-positioned to capitalize on the growing skills demand of the decentralized, global digital economy, says Li.
The YGG Founders Coin is a transferable limited-edition NFT that gives holders access to special benefits. Source: YGG
The guild has developed educational opportunities, including a partnership with Nas Academy to launch the Web3 Metaversity, which provides opportunities for Guild members to learn crypto-native skills.
Less grinding, more fun
Another approach to clean up the bad rap of P2E games might be to change the focus of the tasks used to earn coins, says Rania Ajami, co-founder of Metropolis a 360 curated universe that blends e-commerce, gaming, art and experiences that span both the digital and real world. Instead of money being made from grinding play, she argues that P2E could be reimagined. You could utilize your skills as a digital artist to create unique assets for players, or your abilities in marketing to help a small business grow in the metaverse.
Or if you are grinding plays, perhaps those plays can be used as resources to create art or items or animations. Long story short, P2E is a very interesting concept for the metaverse, but only if it is reimagined to provide some sort of greater value in art, business or development of a metaverse world in some way, argues Ajami.
Metropolis was launched in June 2022 in one of the toughest bear markets but still sold out two NFT drops, including an initial sale of 5,000 passports at an average of 0.12 ETH each followed by a sale of 450 properties averaging 0.75 ETH each.
Water Passport for Metropolis World. Source: Metropolis World
Ajami says users are drawn to Metropolis World because of the immaculate art and the depth of storytelling.
Weve created a world where people are excited about living in because theres so much already there as opposed to a blank canvas in which you are expected to do all the heavy lifting yourself if you want to take part, she says.
The metaverse is not just about creating a video game. Its building a virtual world with all the depth and functionality of the physical one. People want a digital world that enhances their digital life instead of replacing it, and 2022 proved that again and again.
Furthermore, we are seeing more and more traditionally Web2-focused brands moving into the metaverse like Disney, Starbucks and even Time Out, which is featuring metaverse-based content for their users with Metropolis World. We just keep seeing more adoption of Web3 technologies in various ways across just about every industry, Ajami says.
Niche virtual reality
New metaverse platforms are also being created around niche sectors, such as design and intellectual property. Zara Zamani, co-founder of Neoki Metaverse, looks to intellectual property as a glue to hold her new community together.
Our vision in Neoki is to offer a profoundly immersive design-based metaverse to democratize the design industry, says Zamani. Neoki is a multi-metaverse looking to support designers across sectors.
Rising successful metaverses are those focusing on a smooth transition and bridging from Web2 to Web3 not only in tech aspects but also in business models and mentality. This can translate to securing as many IPs as possible now in order to be able to create relatable but extended life experiences for users, she says.
MetaMetaverse was formed by crypto OG Joel Dietz to provide metaverse as a service. As such, he views the development of the sector continuing in multiple ways from gaming, hanging out with friends, attending events, such as concerts, and shopping,
The possibilities are truly endless in what you can do, he says. For example, we have already seen multiple high-profile artists, such as Travis Scott and Ariana Grande, perform virtual shows in the popular online game Fortnite.
He also views the role of visual art as being important.
Weve seen a rise in virtual art galleries, showcasing mixes of priceless art and NFT collections that people can access, admire and purchase, Dietz says.
Decentralands Konttinen perhaps gets why there is so much FUD about metaverses in general. Its been vastly oversold and is tied in users minds to the ambitions of the somewhat unpopular Facebook founder Mark Zuckerberg.
People think that the entire metaverse is one company. Misinformation is spreading about metaverse users, and media companies and competitors running with the erroneous narrative.
Its a very good point. Interviewing the founders of diverse metaverses really makes it difficult to pinpoint what metaverse platforms are the best or will succeed in the future. Its like going to the theater or reading a book what one person likes is very different from anothers taste.
Konttinen also wonders about how to create better metrics to measure the success of a platform.
I hope we can coalesce around an answer next year of how to measure a user in the metaverse. What is an active user in a virtual world that isnt based on an advertising model of tracking and selling behavioral and demographic information of its uses? Is an active user someone who returns every day? Is it someone who moves more than one parcel? What we do know is that metaverse is such a powerful concept that the worlds biggest social media company is all-in on its development, she says.
So, what will the successful metaverse of the future look like? Thats the trillion-dollar question.
Dietz points out the estimated global metaverse market size grew from $63 billion in 2021 to over $100 billion in 2022. Considering all the doom and gloom, this is an impressive feat. There are even forecasts the metaverse could be worth well over $1 trillion by 2030.
All we know is that the early movers will have an advantage as long as they can build a community and give them reasons to return. And if their communities can make money and grow the platforms economy by helping build the virtual world, then the platform might take on a life of its own and grow organically, tailored to the needs and desires of its users.