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When We Meet in the Metaverse…

There is far too much misinformation and not enough facts on non‐fungible tokens (NFTs), the metaverse, and cryptocurrency in general in mainstream media today.

NFTs, in particular, due to their relative newness, are often in the limelight. However, the only time NFTs are mentioned are either when celebrities like Snoop Dogg drops millions on them or in a stand‐up comic's routine. Elon Musk debuting his music career with a techno‐house‐inspired single in the form of NFTs did not really help to make the masses more serious or educated about the technology either.

Prices of NFTs have leaped and crashed and people have been scammed to the tune of millions of dollars, yet there is still an undying fanbase. Self‐proclaimed degens “ape,” or go crazy, over new NFT drops and help spread hype for particular projects. But the average member of the public wonders why are all these people spending so much money on pictures of apes or punks and use them as their profile pictures when, if they are as valuable as physical art, they should be kept private from strangers who might replicate them.

The metaverse, which is touted as the next step in virtual reality, is frequently the butt of jokes as well. This is due to cartoonish, lackluster video presentations featuring primitive, budget‐restricted animations by big corporations.

As a prime example, Meta's metaverse introduction video does a good job at turning everyone off to the metaverse, or as one Twitter user put it, “Mark Zuckerberg's Metaverse looks worse than Quake did in 1996.” 3D virtual worlds are the domain of the gaming industry, and as such, other corporations that attempt to communicate their new metaverse strategy are often ridiculed.

Despite the jeers it has received, Facebook's pursuit of a name change and rebranding to Meta, as well as its reported US$10 billion of investment to embrace the future of social media and disrupt the economy in the metaverse, reflects the opportunity the company sees in the space. And they're not the only ones who believe in this future – banks are bullish as well.

JP Morgan estimates that the Web 3.0 metaverse economy would be worth a whopping US$1 trillion a year in 2040, while Goldman Sachs Research expects virtual and augmented reality (AR) to become a US$80 billion market by 2025, transforming sectors like real estate, healthcare, and education.

Source: JPMorgan Chase & Co.

JP Morgan was the first major bank to invest in virtual real estate. Its virtual lounge is named Onyx, after its platform of Ethereum‐based services. Located in Decentraland's Metajuku district, visitors are greeted by a roaming tiger and a portrait of bank chairman and CEO Jamie Dimon.

The banking behemoth believes that every single person or company of influence will soon build an identity in the metaverse. A report by the bank said, “The metaverse will likely infiltrate every sector in some way in the coming years, with the market opportunity estimated at over $1 trillion in yearly revenue. As a result, we see companies of all shapes and sizes entering the metaverse in different ways, including household names like Walmart, Nike, Gap, Verizon, Hulu, PWC, Adidas, Atari, and others.”

A recent milestone, a virtual concert held in the game Fortnight earned Travis Scott US$20 million, including sales and merchandise. In comparison, the US rapper's four‐month‐long, 56‐stop Astroworld tour from 2018 to 2019 brought in about US$53.5 million, or roughly just under US$1 million per show, according to Forbes. Some 45 million people attended his online concert, dwarfing concerts in the real world which have obvious logistical restrictions. This is only the tip of the iceberg of what is to come.

The virtual world is also expected to create more jobs. Reports estimate that consumers already spend US$54 billion annually on digital assets, a bulk of which (US$41 billion) are on NFTs.

As AR technology catches up, consumers are expected to spend more than US$1 billion on digital property in 2022. By 2027, the metaverse's advertising market will reach US$18.41 billion due to branding and immersive ad experiences. And by 2040, the metaverse will develop to become a refined, fully‐immersive, artificial intelligence (AI)‐assisted aspect of daily life for a billion or more people globally – at least that's what 54% of business leaders and technopreneurs believe today, according to Pew Research Center and Elon University's Imagining the Internet Center.

But these are all just predictions. Even JP Morgan is not 100% sure, as stated in the Wall Street giant's report. “It is difficult to base a business strategy on such a dynamic space, characterized by explosive growth and the continuous innovation of new entrants.” However, as the report noted, the costs and risks of engaging early to build internal intellectual property, use cases, and identify partners and collaborators are low. “The asymmetrical risk of being left behind is worth the incremental investment,” it said.

So, what's the real deal with the metaverse? Beyond bad corporate presentations, what are we really looking at in terms of the future of virtual reality?

NFTs, the metaverse, and crypto are three different things that will eventually be essential to each other in the new digital economy, but before all of this happens, a revolution in gaming is about to take place.

Beyond the Planet of the Bored Apes

Most NFTs that are currently highlighted in the news are static NFTs, typically profile pictures (PFPs), 1:1 digital art, or generative art.

They play an important role for alternative patrons of the arts. Patronage or financial support for artists is crucial because a new artist would starve without it.

The amount of time needed to perfect art (if there is such a thing, as art can never be) far outweighs the price of the art piece on sale. Patronage in the past was seen as a way to invest in an artist. Buying paintings before an artist becomes famous, supports them and in return, their artwork increases in value when they have found success.

But the problem with patronage in the art world is that it is still controlled by the elite who set the tone for the art world, and in the entertainment world, it is controlled by record labels, the media, conglomerates, and even governments who pour millions into the careers of certain pop stars and artists they pick, and who expect a return on investment or at least the favor of influencing fans in the way the patronage sees fit. The K‐pop industry today is a result of such government funding.

The emergence of the NFT art scene has given rise to a new market of artists who benefit from a decentralized form of patronage. New and established artists have used the innovation to create interesting new art, like artwork that can evolve and change according to the season, and have packaged art with real‐world experiences, like music albums with rare giveaways, including merch and special access to concerts. All while offering the uniqueness that is the un‐replicable code carried by each NFT that is verified by smart contracts on the blockchain, providing verification of ownership and usually with limited supply that drives its value up.

Art from social movements have also benefitted from being minted as NFTs. Political activist‐artists are able to raise funds with NFTs, as seen recently when Iranian women artists fought against the prosecution of women in the country.

Russian activist‐protest art rock band Pussy Riot made waves when two of its members were imprisoned by Putin's regime nearly a decade ago. The group became synonymous with left‐wing activism right in the heart of the former Soviet Union. This year, Pussy Riot co‐founder Nadya Tolokonnikova announced the launch of UnicornDAO, “a feminist movement aiming to tackle patriarchy in Web3” with plans to solely invest in female, non‐binary, and LGBTQ+ artists in Web3, and provide financial tools, aid, and education to underrepresented artists. Prior to UnicornDAO, the frontwoman co‐founded UkraineDAO which raised US$6.75 million in Ethereum in just five days with the sale of an NFT that depicts the Ukrainian flag.

However, just like in crypto, the profits from NFT flipping are often the focus. Two NFT projects that hugely benefited from hype are Bored Ape Yacht Club (BAYC) and CryptoKitties. Similarly, like how blockchain technology was dismissed as the byproduct to meet the needs of the greedy looking for a quick‐buck investment, when it should have been the focal point of our curiosity, NFTs suffer from a similar fate, and in these two examples the innovation of the projects was overlooked in view of their products' rise in value.

What makes both BAYC and CryptoKitties interesting is not the throngs of celebrities flashing their cartoon apes on social media – if anything Seth Green losing his Bored Ape NFT to a phishing scam just caused more doubt over security in the space. But the ability of these NFTs to multiply, with each newly birthed NFT unique and un‐replicable just like the originals, opens more possibilities to the potential of NFTs to interact with each other and increase in value. In gaming environments in the metaverse, these multiply‐able NFTs can be worked into the gameplay, providing endless scenarios in which gamers can reap rewards for their efforts.

Source: OpenSea

Caption: Bored Ape #8817

Bored Ape #8817 is currently the highest priced NFT in the collection at over US$3.4 million (ETH 2081.73 at time of writing) while Mutant Ape #4849 – a mutated NFT from the original BAYC collection, is currently priced at over US$800 000 (ETH 489.82) because it is one of the rarest in the collection, much like how rare trading cards in a baseball card collection are valued more than common cards.

Bored Ape prices still do not compare to the most expensive NFT ever sold – a piece called “The Merge” by digital artist Pak. It sold for US$91.8 million on Nifty Gateway, an NFT marketplace, in December 2021. The outrageous sum was gained from around 30 000 collectors who collectively purchased over 266 445 parts of this NFT that can be combined when a holder has more than one NFT of “The Merge” in their wallet.

Traditional establishments have also been taking advantage of NFTs to tokenize their existing assets. NBA Top Shots is an NFT project by the National Basketball Association and Dapper Labs that features footage from the basketball league's archives. However, as a static NFT, it is not as impressive as the LaMelo Ball dynamic NFT project, whose value is tied to the basketball player's stats.

NFTs have permeated modern pop culture to the point where it is common for owners to use their NFTs as profile pictures on social media, or at least make posts about buying them. NFTs that are popularly used as profile pictures even have their own name, PFPs.

It is partly bragging rights as the owner does have something unique that can't technically be copied. A screenshot would not be the original, and would not mutate into other NFTs and can't be resold.

But could it extend further from pure narcissism?

As exemplified with Seth Green losing his NFT, not all NFTs are equal in security. However, those that implement technical best practices have built‐in safety features – filing a report on the exchange the NFT was bought would usually enable the rightful owner the ability to deactivate the NFT, rendering it useless to whoever stole it. In addition, laws prohibit the sale of stolen goods including digital assets.

It is still very much the Wild West in crypto these days, and nothing is perfect, but the goal remains the same: NFTs will one day be a secure way to represent us online, as an avatar in the metaverse. Then, they would be as valuable as those coveted blue ticks on notable and trusted social media accounts. Or even part of the credentials a person carries around to participate in Barter 2.0.

But for now, it was the IP attached to Green's Bored Ape NFT that made him pay US$300 000 to get it back from a person who bought the NFT after it was discreetly resold on an exchange. NFTs do not always carry IP rights, but in Bored Ape's case, they do. Green had planned to have his NFT adapted into a starring role for an animation‐live action show about a bartending monkey named Fred Simian.

When the token was stolen, however, existing copyright laws meant the Family Guy star lost his commercial rights to the ape character.

It is clear that security and market regulation needs to be tightened for NFTs before they can reach the next step, but influential people and companies as well as governments, are already looking into how NFTs can expand their brands' online presence and replace legacy systems like ballot voting.

It is highly plausible that future elections will be run using NFTs as ballots. Politicians are currently minting NFTs containing their videos to sway younger voters and get people to engage with their candidates. And supporters see it as more bang for their buck – something that might appreciate in value in return for their donations, which they would normally just give freely during rallies.

Governments want to restore the people's faith in the voting system as allegations of voting fraud continue and people demand more ease in the process to exercise their right to vote. Without the need to travel to vote, more people can take part in democracy and ruling regimes would not be able to hinder certain populations from the ballot boxes by force.

There are various communities and even Decentralized Autonomous Organizations (DAOs) that surround and support NFTs, creating communities where there is trust and a positive feedback loop to take projects, ideas, and agendas forward.

When Worlds Collide…

The hype that surrounds NFTs is no doubt compounded by the fact that many unscrupulous parties try to benefit off it by either scamming or resorting to gimmickry.

Just before this book was published, Mexican millionaire Martin Mobarak burned a rare US$10 million Frida Kahlo painting in a martini glass in front of a live audience at the NFT launch of the same artwork, shocking the art world and the whole country.

Mobarak defended his amazing display of arrogance by claiming that the proceeds of the 10 000 unique NFT copies of Kahlo's Fantasmones Sinistros, which was considered a cultural treasure by Mexico, would go to charity including to benefit the Palace of Fine Arts and the Frida Kahlo Museum.

If Mobarak genuinely wanted to contribute to society, he could have tied the NFTs to a percentage of ownership of the original physical artwork and incorporated more features down the line that would enable NFT holders to interact with the digital art world and real world, and even provide them with exclusive access to gallery openings that benefit the artist's foundations. Instead, what he did was simply the destruction of priceless art to guarantee demand for 10 000 replicas minted by his own company.

You could dismiss Mobarak's actions as that of a selfish businessman, he is a millionaire after all so he would naturally be concerned with profit. However, even internationally acclaimed artists are jumping on the bandwagon.

Just a month before the burning of the Frida Kahlo painting, British artist Damien Hirst told buyers who bought pieces from his latest collection to choose to keep either the physical artwork or the NFT representing it. He then proceeded to burn the physical pieces for buyers who chose the NFTs. When asked how he felt about burning his works, Hirst said, “It feels good, better than I expected.”

Works burned by Hirst are estimated to total almost £10 million in value. It is Hirst's first NFT collection. Named “The Currency,” 10 000 NFTs were sold for £1800 each, corresponding to 10 000 unique physical pieces of art. Some 5149 buyers went for the physical artworks while 4851 chose their corresponding NFTs.

Boisterous acts like Mobarak's and Hirst's stunts need to be countered by facts, use cases, and a reiteration of decentralized finance (DeFi)'s vision of creating an inclusive decentralized Web 3.0 digital economy.

Use cases are particularly important. The more use cases we have, the more value and trust we build. It is particularly important how NFTs evolve from here on – dynamic NFTs are the way forward.

Considered technically superior over static NFTs, dynamic NFTs are more flexible and expand the possible use cases of NFTs, connecting the digital asset to the real world.

Metadata does not change in static NFTs. Dynamic NFTs, however, allow metadata to be altered using smart contracts. This enables the digital asset to evolve in ways never thought possible before as real‐world data interacts with it.

Smart contracts configured at the minting stage will determine the rules for the evolution of dynamic NFTs. And real‐world data can be a factor in how your NFT changes. Oracles, which provide a link between real‐world events and digital contracts, are now a common feature in smart contracts. This means off‐chain data from sources such as web API and IoT data could be accessed to influence the growth of dynamic NFTs.

Although the gaming world already has digital assets that can be upgraded or leveled‐up on their respective platforms, there is currently no portability between games and with the real world. With dynamic NFTs and AR, something a gamer does in real life could affect their digital asset in a game while art piece NFTs could change with the weather.

Currently, use cases are being developed for dynamic NFTs tied to personalities in the real world who are already using their performance and fame to determine their financial ranking. Musicians, celebrities, and athletes are just some of these people.

Let's take a closer look at a few dynamic NFTs around today.

LaMelo Ball is one of the pioneering dynamic NFT projects around. What makes this NFT project different is that the NFT of the NBA's Rookie of the Year is tied to his stats. This means the more Ball's career advances in the NBA, the more valuable his rookie NFTs get.

As digital collectibles, the NFTs level‐up and evolve based on Ball's real‐world performance. When he won Rookie of the Year in the 2020–2021 NBA season, the NFT changed its color to gold, and the planet Saturn that he was holding metamorphosed into the sun.

Source: NFT Stats https://www.nft-stats.com/collection/lamelo-ball-collectibles

Mike Tyson is creating his own gaming metaverse: an alien world built by the likes of former designers from Wargaming, Ubisoft, Blizzard, and Pixar. Part of the game's lore revolves around pigeons – Tyson's favorite animal – that are represented as dynamic NFTs that the metaverse users can use for gameplay in the Web 3.0 based trading card game Final Form. Some 10 000 trading card‐like NFTs called Iron Pigeons were made available in a free mint for users.

In P2E (play‐to‐earn) games, Chainlink Verifiable Randomness Function (VFR) – part of blockchain technology – allows random distribution of traits and in‐game items to determine the rarity of digital assets. Because it is built on‐chain, the random results are verifiable and invulnerable to any attempts at manipulation. What BAYC and CryptoKitties revealed is just the beginning as games break away from their vertical axis and cross‐game, cross‐platform play becomes more of the norm.

DJ Steve Aoki, who said he's made more money on NFTs than his music, launched his own series of collectible NFTs that feature clips from the upcoming stop‐motion series Dominion X. Using interactive Ether Cards Dynamic NFT technology, fans can own a piece of a show, both physical and digital, before it premieres on television or streaming platforms. In addition, the NFT investor has other plans to use dynamic NFTs to connect with his fans. Aoki said, “I think that the logical progression of where NFTs are going is a deeper and interactive experience between creators and fans facilitated by attaching real‐world utility to NFTs.”

All three examples above use Ether Cards to bring their NFTs to life.

Ether Cards is one of the leading NFT gamification and monetization platforms that connects real‐world utility with the digital world, allowing personalities like Aoki, Tyson, Ball, and the NBA to connect with their communities in engaging ways, while unlocking new monetization channels.

NFTs take up the lion's share of the digital assets market today, and it is only a matter of time until all NFTs become dynamic NFTs. But for this to happen, the metaverse has to be further developed and NFTs have to build more use cases. The gaming industry is the best place to do this.

Dynamic NFTs can come in the form of skins that evolve with the player's health, weapon upgrades that get better when players improve their stats – anything that is able to move out of an e‐wallet and into the metaverse would be possible as an NFT in the future. Portability is guaranteed as long as the games are built on the same blockchain. In this aspect, games will evolve so that assets are portable across games.

Games test skills and NFTs will increase in value if assets give players an edge. NFTs can be staked like in lootbox matches where the winner takes all, or in more formal competitive settings. A new gaming economy could emerge where gamers can commoditize their digital assets and time spent playing games going beyond the already multibillion dollar e‐sports industry.

Once it becomes the norm for games to be on the metaverse, e‐sports trophies will come in the form of NFTs, where they will carry value and can be used as a form of crowdsourcing for future tournaments. Reputation tokens that will be used as credentials in the Web 3.0 economy could also potentially be special NFTs awarded by decentralized community members to police behavior and encourage more ethical engagement and gameplay.

Since crypto can only exist in regulated exchanges as a currency, NFTs are seen as blockchain‐powered consumer products. And these products need a space to call home, whether they are still on‐sale on digital racks in digital malls or already bought and ready for display and use in digital homes.

Which brings us to where all marketplaces, companies, banks, personalities, governments, and people will meet to interact and have economic activity in the future: the metaverse.

A Meaningful Place

Believe it or not, the most popular game among 5–12 years old in the United States is not one game in particular, but a gaming platform that offers thousands of games from a variety of genres created by the users themselves.

Roblox is an online game platform and game creation system developed by Roblox Corporation that allows users to program games and play games created by other users, and it brings in big bucks although it is completely free to make a Roblox account. The game beat Fortnite in the United Kingdom in terms of in‐game spending and the company that owns Roblox recently began trading on the New York Stock Exchange, valued at a staggering US$45 billion.

Source: Roblox Corporation

The in‐game currency used is Robux, which can be purchased with real money. Game developers get paid a percentage of the subscription fee from premium users based on how much time players spend in their virtual worlds and when users purchase in‐game products – anyone can buy clothes to dress up their avatars directly from the games on the platform, but only premium membership users can sell them. If an item has limited edition status, it can only be traded between or sold by users with a Roblox Premium membership. The highest earning game creators on this platform make over US$100 000 annually on sales of in‐game items.

Released in 2006, the platform hosts user‐created games coded in the programming language Lua. It had been relatively quiet for Roblox until the second half of the 2010s, when investors started taking note of its potential. In 2020, the game platform's popularity exploded due to the COVID‐19 pandemic causing worldwide lockdowns.

Playable on‐the‐go, Roblox can be accessed on various devices, from XBox to phone to laptop. The platform has more than 32.6 million daily users with 8 million active creators and developers from 180 countries creating the games. Many creators on the platform have turned their hobby into a full‐time job, with the developer community estimated to have earned around US$250 million in 2020.

The sheer number of game creators in this rudimentary metaverse as well as its friendly user interface to create games is a sign of what is to come.

Mobile gaming, wearable VR, AR, e‐sports, online multiplayer settings, cloud gaming, and an ever‐growing legion of fans ensure the continued growth of the gaming industry. Being accustomed to paying for upgrades to their characters and customizable skins to make their appearances unique, the adoption of digital assets or NFTs that complements the gaming experience in metaverses is inevitable.

Gamers represent various segments of the market and there are millions of us around the globe. They are the perfect test subjects and highest potential adopters of in‐game currency and other digital assets based on supply and demand. It has already happened in Web 2.0, where digital assets were sold out of their gaming platforms on online marketplaces like Alibaba or Shopee, albeit crudely by the transferring of accounts, which carries a high risk of scams.

The gaming economy is prime to reach the next level where it transforms into a marketplace that allows trading of digital assets with real‐world assets. My upgraded, one‐of‐a‐kind Call of Duty sniper rifle in exchange for your outgoing iPhone perhaps? Gamers in countries currently heavily sanctioned with trade embargoes would jump at the opportunity.

Even if a gamer did not buy the digital asset but acquired it through gameplay – like if it was awarded to the gamer for completing certain tasks or side‐quests – the merit‐based gaming item could still be sold. After all, time equals money and that is what all gamers put in. This makes it all the more competitive and rewarding for serious gamers, while being inclusive toward newbies. Competitive gamers will see financial opportunities beyond winning championships, leading to the birth of in‐game entrepreneur‐gamers that will coincide with the adoption of metaverse marketplaces by traditional merchants.

Open‐world games are a vivid representation of what can be achieved visually in the metaverse. By far, these games have been the top performers in sales for the past 20 years or so. Metaverse gaming open worlds are likely to be multiplayer, multi‐server on a significantly larger scale than what gamers experience presently, and with blockchain integration, and all games would be linked to players' wallets.

Players competing with each other creates a digital GDP. From here, the use cases can be adapted to non‐gaming interactions in the metaverse, from trading to services.

If the aim is a decentralized Web 3.0, much like how the early internet was envisioned to be before central powers took over, metaverse regulations will be determined by DAOs and voting by users. Every interaction will be evaluated and ranked, and handing out Reputation Tokens will be a common right for digital citizens. Economic activity in the metaverse will take precedence when it comes to enforcement of appropriate behavior.

Forecasts for the metaverse have been bright and sunny. Major corporations all over the world are buying digital land from metaverse developers such as Decentraland and Sandbox.

With smart contracts validating ownership, more online transactions will enter the metaverse, adding to our virtual experience, and birthing the worldwide 24/7 digital economy. Games today are just the nexus or precursor to it all, and non‐gaming companies have noted the benefits.

As AI gets better, it will become a part of our daily lives. Companies will capitalize on AI technology as they continue to invest in the metaverse before the public adopts it. As rationalized in JP Morgan's report, the cost of investment is still relatively low compared to the benefits of having a stake in a plot of virtual land to awe customers in the future with products and services showcased in a fully developed Web 3.0 metaverse.

A recent example, Maxis, one of the leaders in a consortium of telcos bringing 5G to Malaysia, announced the Maxis Centre Decentraland – a virtual telco store where users will be able to purchase products and services with 3D technology, simulate how they could transform their homes with devices and appliances powered by 5G, and purchase collectible NFTs produced in collaboration with Malaysian artists, among other innovations.

Eventually, the metaverse will encompass the rest of the world as more big businesses and banks enter it, and governments launch their own Central Bank Digital Currencies (CBDCs) running on the blockchain.

Customer service could come in the form of non‐playable characters (NPC) who get better at understanding customers as more interaction and data is collected. This creates more meaningful economic activity, which is part of the vision that the DeFi movement wants realized.

Economic activity is a series of actions that creates a transaction, not just the transaction itself. It is everything we do before and after the transaction. Dynamic NFTs allow pre‐ and post‐data to be included inside these transactions.

Meaningful economic transactions happen when the evolving data they carry have records that are trustable. This is why everyone, from conglomerates to governments, wants your data. With data, what is unsellable today can be tweaked and turned into the sales‐hit of tomorrow. Data is the new goal of the global economy.

NFTs and crypto are just representations of that data's worth. A unique code that ties ownership to smart contracts on‐chain. Whether a picture of an ape that you can use as your profile, or an asset that is linked to real‐world behavior, you should always know what you are buying into because it just might be a piece of the future that we can't recognize for now.