We are at the starting line of the third phase of the internet, commonly referred to as Web3. The first phase of the internet was simple web pages connected by hyperlinks. Phase two ushered in social media and e-commerce. The new Web3 implementation is based on the metaverse and decentralized systems that enable people to create and acquire their own parts of the internet, rather than relying on large corporations to build (and control) one’s online experience. We provided a primer on what the metaverse is in the recent “The Metaverse: The Reality of Virtual Reality.” Here we will discuss metaverse games currently available and their virtual economies with real-world links.
The (Digital) Economy of Video Games
Today, many video games have in-game economies that enable users to buy items to upgrade (or enhance) their online experience. Roblox, one of the more widely known platforms took the aforementioned to another level by creating digital marketplaces that connect to the real world, where users (and companies) can sell goods and services. For example, the retailer, Forever21, recently entered the Roblox universe with “Forever21 Shop City.” This novel approach enables users to run stores just as they would in real life: from hiring non-player characters (NPCs) to re-stocking the stores and assisting customers.1 As the space continues to mature, more companies will follow and likely build on the model that Forever 21 has pioneered.
Intersection of Blockchain Technology and Gaming
Axie Infinity, Decentraland, and The Sandbox are examples of platforms that are bringing real-world commerce to the virtual world through the use of blockchain technology, including in-game tokens and non-fungible tokens (NFTs – see our NFT primer in the Appendix below). Not only do these platforms provide people with the ability to convert real-world currency into in-game currency, but users can also utilize ether (token of the Ethereum blockchain) or platform-specific tokens within the game and then withdraw those assets to their accounts outside of the game. Being able to work (or complete tasks) within each of these games in exchange for payment or being able to sell and spend within a marketplace and cash out of the digital world is what makes gaming in Web3 so different from previous generations.
Axie Infinity combines blockchain technology, non-fungible tokens, and cryptocurrencies. The game allows users to earn and spend ether within the game. There are money-earning tasks that users complete with their NFT avatars, known as “Axies.” Players can also spend money to create new NFTs which can then be sold and purchased on its marketplace. The Vietnam-based company has seen exponential growth since their inception (in 2018) with now more than 250,000 daily active users (DAUs). The real-world effects of this game are being seen in the Philippines, where 40% of the game’s players live.2 With low wages, and the pandemic still affecting the job market, people have turned to online sources of income. Some have found success in the virtual Axie Infinity World, where some report being able to earn thousands of dollars a day – a major increase from their expected wages working ‘real world’ jobs3.
Both Decentraland and The Sandbox have similar concepts in which users build, own, and monetize different NFT elements in their respective universes. Both are powered by the Ethereum blockchain and have their own tokens. For Decentraland, one can enter the virtual world without the need for a digital wallet, but data will only be stored locally and with limited access to the full-game experience. However, once a person utilizes a digital wallet (such as MetaMask, Fortmatic, WalletConnect), it will provide full access along with the ability to sell and buy parcels/estates of “LAND” and other items in the Decentraland Marketplace. Decentraland LAND are NFTs with unique in-game coordinates that give owners complete authority to edit the land as they wish, including creating 3D landscapes or adding in interactive games. Decentraland’s own token MANA, purchased with ether, can be used to create your world and to make in-game purchases.
The Sandbox is another virtual world game that runs on the blockchain in which players can create and monetize assets to sell within the universe, and cash out to the real world. In The Sandbox, users can use SAND tokens, also purchased with ether, to build and own different elements in the universe. There is a finite amount of ‘space’ in this metaverse – 166,464 LAND (not to be confused with Decentraland LAND) or areas of the universe, that players can buy and monetize for themselves.4 Total LAND sales between 2019 and December 2021 were $211 million.5
Conclusion
Web3, with its implementation of the metaverse and decentralized systems, is introducing new user experiences and creating robust virtual economies that can also link to the real world. Axie Infinity, Decentraland, and The Sandbox are examples of being able to enter a virtual world where one can socialize and develop your own corner of the metaverse, while generating money that can be withdrawn to the physical world. We expect that this is only the beginning of Web3 with greater development (and competition) to come of metaverse experiences and growth of the digital economies.
Appendix – What are Non-Fungible Tokens (NFTs)
NFTs have been around for less than a decade and have risen in popularity over the last year. What exactly is an NFT? An NFT is a unique code (smart contract) that is stored on the blockchain. Because of the blockchain implementation, much of an NFTs information and history (such as the creator, current and past owners, past trading prices) are immutably recorded on the blockchain. While we discussed NFTs as being a function of gameplay, or as a bartering item in digital virtual games, NFTs are very popular as a form of digital art that are bought and sold. What makes a digital art NFT different than just a jpeg or gif is the blockchain implementation that tracks the NFT’s provenance and historical record. As with other collectibles, much of the item’s value comes from what buyers believe it is worth, and how much they are willing to pay for it. There are NFTs that are sold for a couple of dollars, and others that have sold for millions of dollars.
For a brief video explanation on NFTs, see the video below, courtesy of the Wall Street Journal:
NFT Examples
Any digital item can be turned into an NFT, whether it’s a unique work of art, a video, or even a tweet. A collection of 10,000 NFTs depicting animals, known as the Bored Ape Yacht Club, have been a popular talking point recently due to an influx of celebrities buying the NFTs and touting their collections on shows and social media. NFTs are also able to grant owners special access: a David Bowie NFT has been released (via Starly and Melos Studio) which gives token owners access to never seen before photos and audio tracks.6
The NBA has also gotten into the NFT space, with the creation of NBA Top Shot – a sport-specific marketplace where one can buy NFTs of memorable NBA moments as video clips. Currently, Top Shot is featuring a ‘starter pack’ curated by Kevin Durant including 4 moments. NBA Top Shot packs can be purchased via credit card or cryptocurrency.
NFT Marketplaces
There are multiple marketplaces currently making a name for themselves as places to buy NFTs, such as OpenSea, Rarible, SuperRare, and Nifty Gateway. In 2021, transaction value on OpenSea was more than $14 billion, an incredible increase from $64 million in 2020.7 Bored Ape Yacht club, which started in April 2021, accounts for 6.3% of OpenSea’s volume.8
NFT Concerns
As with anything that is solely digital based, there is heightened concern about hacking or theft. Although existing NFT ownership is tracked through its blockchain records, the authenticity of the NFT creation can be problematic. There have been reports of artists having their works stolen, both in physical and digital format, then sold as NFTs or replicated many times diminishing its value. DeviantArt, a digital art platform, is working on behalf of artists by scanning blockchains for duplicates.
Sources:
1 Berthiaume, Dan. (2021, December 17). Forever21 enters metaverse with Roblox store. Chain Store Age. https://chainstoreage.com/forever-21-enters-metaverse-roblox-store
2 Axie Infinity Live Player Count. PlayerCounter. https://playercounter.com/axie-infinity/
3 Elliott, Vittoria. (2021, August 19). Workers in the Global South are making a living playing the blockchain game Axie Infinity. Rest of World. https://restofworld.org/2021/axie-infinity/
4 The Sandbox. https://www.sandbox.game/en/about/
5 Robertson, Harry. (2021, December 27). A co-founder of The Sandbox explains what on earth is going on in the metaverse- where land is selling for millions and Snoop Dogg is hanging out. Business Insider. https://markets.businessinsider.com/news/stocks/metaverse-the-sandbox-virtual-world-land-sales-decentraland-nfts-crypto-2021-12
6 Starly and Melos Studio launch David Bowie tribute NFT collection. (2022, January 25). Starly Press Release, Cointelegraph. https://cointelegraph.com/press-releases/starly-and-melos-studio-launch-david-bowie-tribute-nft-collection
7 Craig, Timothy. (2021, December 31). OpenSea saw a 646x increase in trading volume in 2021. Crypto Briefing. https://cryptobriefing.com/opensea-saw-a-646x-increase-in-trading-volume-in-2021/
8 Zafar, Tanvir. (2022, January 4). Bored Ape NFT Frenzy Prompts OpenSea NFT Trade Volume Surge. Yahoo Finance. https://www.yahoo.com/video/bored-ape-nft-frenzy-prompts-185000284.html
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