The beginning of the year was marked by a cascade of corporate announcements about their plans for the metaverse, the cryptosphere and NFTs.
Faced with the multitude of announcements, it is logical to wonder what is the business model behind it and especially if these are not simply smokescreens motivated by the fear of missing out (FOMO).
‘Fundamentally Huge Paradigm Shift’
“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 revenues,” the report said.
JPMorgan Chase took its own first steps into the metaverse this week when the financial giant opened its Onxy lounge in Decentraland, a 3D virtual world browser-based platform.
“Instead of having stores in every city, a major retailer might build a global hub in the metaverse that is able to serve millions of customers,” the report said.
JPMorgan said it believes existing virtual gaming landscape has elements that parallel the existing global economy.
“This is where our long-standing core competencies in crossborder payments, foreign exchange, financial assets creation, trading and safekeeping, in addition to our at-scale consumer foothold, can play a major role in the metaverse,” the report said.
The company said it is building and scaling new emerging technologies to modernize infrastructure and business models, including tokenization and digital identity, as it looks for better ways to organize financial transactions and payments in the decentralized web.”
It is interesting to note that JPMorgan Chase is a legacy bank, a centralized entity. However, web3 and the metaverse aim to make centralized entities obsolete by eliminating intermediaries. Besides, Jamie Dimon, the CEO, does not really believe in bitcoin, the most popular digital currency.
Walmart filed several new trademarks in December that indicate its intent to make and sell virtual goods, including electronics, home decorations, toys, sporting goods and personal care products.
Walmart also said it would offer users a virtual currency, as well as NFTs or non-fungible tokens.
It all sounds very exciting but there are some skeptics.
Ken Kutaragi, a former Sony executive who has been called “Father of PlayStation” told Bloomberg that he doesn’t see much value in the metaverse.
“Being in the real world is very important, but the metaverse is about making quasi-real in the virtual world, and I can’t see the point of doing it,” Kutaragi said.
Justin Lacche, CEO of four minor league sports teams competing physically and in the Metaverse, said that a “Web3 blockchain-backed application is a fundamentally huge paradigm shift in any industry.”
“A blockchain is actually run by a decentralized technological system so your computer, my computer, the president’s computer, a student’s computer half across the world — all can verify the code, the transaction, the decision, decentrally via an encryption process,” he said.
Instead of a software being controlled by a computer, Lacche said “it is truly decentralized across endless computers.”
“When the governor of Oregon ordered a lockdown due to the Covid-19 pandemic. Lacche said, “every restaurant, every school, every non-digital company was facing bankruptcy and the cycle we saw in the United States was multiple professional sports leagues going bankrupt because they had no alternative revenue stream.”
‘Everyday People Need to be a Part of It’
In a blockchain based world, known in the industry as the Metaverse or Web3, he said “you can create athletes and hold meaningful competitions with advanced graphics.”
“And because it’s decentralized, it can’t be hacked because there’s nothing centrally to hack,” he said. “You can also have digital art called NFTs and have an entire ecosystem that mirrors your real-world sports model.”
Lacche said sports teams have the option of selling real world items, such as t-shirts and posters, or NFTs, with some selling much higher than real-world rookie cards.
“Web3 has been getting lots of buzz lately, and understandably so,” said Aaron Barbieri-Aghib, co-founder of Dime, an NFT marketplace. “It promises a world where users won’t rely on massive centralized companies and instead will maintain control over their personal data.”
But in order for this vision to come to fruition, Barbieri-Aghib said, “everyday people need to be a part of it.”
“No matter how cool the idea of Web3 is, if it’s not easy and intuitive to use, people won’t adopt it,” he said.
Pavel Bains, CEO of Bluzelle and executive producer with MixMob is a play-to-earn game powered by the Solana blockchain, said “we sell NFTs that can be used within the game.”
“These are masks and MixBots,” he said. “They can be entry into the game, upgrades, and more. We will run an in-game marketplace which generates revenue on sales.”
‘Great Leaps in Creativity’
Mixmob recently secured $7 million in funding. DeFinance Capital, a DeFi-focused crypto-asset fund, led this round of funding, along with such firms as Ascensive Assets, Not3lau Capital, IOSG.
Bains noted the importance of connecting with younger people.
“It’s easier to teach them finance through a video game than telling them the history of money,” he said.
Lou Leporace, the chief marketing officer with Zakeke, a global software company specializing in 2D, 3D and AR customization, said that, at least at the beginning, the new paradigm business models may not be all that different from today.”
Leporace said that NFT marketplaces have delivered nearly $1.5 billion in royalties to artists in just the last three months “indicating a significant level of traction for just this one business.”
“At one level this model is not much different than the way that business is conducted today and that should be no surprise,” he said. “There are also tens of thousands of developers building new tools and services with blockchain.”
As these technologies mature and become easier to adopt, he said, “we will begin to see more significant changes to business models.”
“In the beginning of any technology,” he said, “everyone is trying to figure it out. If you look at the internet in the mid-90s, it was slow and limited due to dial up access and other technology limits.”
As people experiment, learn and adapt Leporace said, “we will see great leaps in creativity in the three to five year range.”