This year, interest in metaverses crashed. While 2021 saw record sales of land and NFTs in the new virtual worlds, 2022 saw dwindling transaction rates, a shadow of their former selves.
Battered by Zuckerberg’s repeated attempts at making Meta’s online world a pioneering virtual reality success story, reports have shown dismal adoption rates, and the mass unveiling of crypto-focused businesses as Ponzi schemes has rocked the wider community.
What promised to be a game changer has, so far, solidified critics’ forewarnings; Investors’ only yield being gems of entertainment that make one question the sanity of the industry.
Despite this, news of incumbent banks and major brands engaging in the technology continues to surface. JP Morgan has a “lounge”, Gucci launched its “vault” and rumors have surfaced that even Apple may be creating its own VR world.
“It’s still very early on early days for metaverses,” said Sebastien Borget, COO and Co-Founder of The Sandbox, in an interview with Fintech Nexus at WebSummit. “You only see a limited amount of content of what could be there.”
Something is brewing that has the usually cautious conglomerates excited. Is the current failure of the Web3 worlds really just a case of the sector still being too nascent?
Gamification in metaverses could improve Web3 accessibility
DeFi is increasingly criticized for its complicated user experience as its adoption by the masses has not yet taken place. Built on the idea of decentralization and eradication of “the middle man” the ability to engage in the space has relied on an understanding of alien abbreviations and memorizing a string of keywords.
Generations, now used to the ease of Web2 access through centralized web browsers, have had a hard time adapting to DeFi’s “not your keys, not your coins” ideal. Instead, the general consensus has been the use of CeFi- centralized entities with dubious regulatory conditions working within the DeFi space.
The result is a strange middle ground, which some have called Web2.5. This year is a testament to how well that’s gone for everyone.
Many of the metaverses receiving the most investment from incumbents and large brands, namely The Sandbox and Decentraland, are different. While private blockchains can be built on top of the platforms, the underlying foundations are Web3 native. Governed by DAOs and built on public blockchains, the platforms rely on individual creators and investors to build their environments. All trade is conducted on-chain, forming the digital economy within it.
While many other DeFi entities rely on the interfaces originally developed for the early adopters, metaverses package the technology into a videogame interface. Borget explained the gamification element of metaverses could improve the accessibility of the Web3 space, creating a more tangible experience for the everyday user.
A whole new world
Despite recent setbacks in the DeFi space, the insurgence of a digital economy is ongoing. Increasingly, digital adoption is taking place, demonstrating numerous amounts of benefits in the process. The last few years have cemented the move to digital even further.
The need to work from the confines of lockdown measures opened the eyes of businesses and consumers alike, to the possibilities of virtual, digital engagement.
“COVID has accelerated our idea that we can actually spend time in virtual worlds,” said Borget. “People now have this overdose of Zoom because it’s very flat, you can’t do something more than watch. Virtual worlds are more interesting, you have a lot of other possibilities for interaction. It’s a matter of trying to be more open-minded about that.”
“The Sandbox is a digital nation without frontiers. It has different types of jobs, creators, event organizers, people who are owning or spending assets, as well as players consuming services. That economy is flowing. And just like in the real world, where you have the primary, secondary, and tertiary sectors producing and generating a physical economy, you have a full digital economy that could evolve much faster because it doesn’t have mutations around things like logistics or cross-border issues.”
Unlike the physical world, the digital, decentralized plane can exist without borders, creating a potential for trade transcending jurisdictions and opening out businesses to a global market of eight billion people. The development of DeFi and blockchain is proving to enhance these benefits.
“It’s touching many people all over the world. We are seeing many people in developing countries showing the most adoption,” he continued.
According to Chainanalysis, developing economies made up more than half of the top twenty grassroots crypto adopters.
In areas of political instability and volatile inflation, an engagement in DeFi can make all the difference. Citizens in some areas have opted to transact and hold wealth in DeFi rather than local banks, finding the landscape less risky than their own nation.
“When you are online in the metaverse world, it has new frontiers. There’s no longer a difference and it doesn’t matter where you work from it’s based more on your contribution.”
He explained this development within decentralized digital worlds could then, by default, affect the physical world. “There’s a lot of permeability between the physical world and the virtual world. The value you create in the virtual world is not designed to be stuck in a virtual world. People will decide to eventually cash it out and you will have your real-world impact.”
Financial services supporting the emerging digital economy
While the incumbents buying up metaverse space are by no means decentralized, and many have their downfalls, they do represent a financial services industry poised for deployment.
“There is a future in financial services and even banks or other financial service providers supporting the growth of that digital economy,” said Borget. That’s why there’s a growing interest in Sandbox from actors like HSBC, AXA, and PwC, just to name a few.”
“Right now, they are not here just to sell financial services, they are just learning from the space. But there will be a moment where they’re going to start offering those financial services, crypto native, on those platforms because they are close to the user.”
Borget explained that as the number of digitally native individual creators increases on the platforms, the access to different communities and ideas will grow.
Open-sourcing the ideas for uses of the metaverse could drive an increase in meaningful and engaging experiences. As the number of experiences and points of engagement increases, so too do the possibilities for financial services.
“The traditional world economy we’re living in is fitted for the physical world,” said Borget. “When you evolve into a virtual world with new possibilities, services will also evolve quite naturally.”
“We’ve already seen that certain applications have contributed to making finance more mainstream…Progressively people will no longer have the physical bank account and will be fully crypto. It will be normal to have more than one wallet to stake, to earn and get rewarded for your engagement. There will be a diversification of the revenue stream, ease of access to crypto, and an increased understanding of complex financial topics in a simplified way.”
“I don’t know any generation that has had access to so much information and such an ease of access to complex financial products.”
While financial services are just one part of blockchain’s potential, they could play a significant role as decentralized digital adoption takes hold. Their positioning within the virtual worlds that could drive engagement, may be critical for a functioning economy to develop.
With over five years in the art and design sector, Isabelle has worked on various projects, writing for real estate development magazines and design websites, and project managing art industry initiatives. She has also directed independent documentaries on artists and the esports sector.
Isabelle's interest in fintech comes from a yearning to understand the rapid digitalization of society and the potential it holds, a topic she has addressed many times during her academic pursuits and journalistic career.