Some Encouraging Signs For The Growth Of The Blockchain Metaverse

The term metaverse has become a tech buzzword, but it seems to be vague as to what exactly it is. It has never been a well-defined term, because in reality there are many types of metaverses. You can consider social media, gaming, and online chat groups as their own metaverse. It is a collection of social networks that bring value to a common interest, like playing a video game.

The other metaverse, which has become synonymous with big tech, are virtual worlds that bring mixed reality to light (e.g. Virtual Reality or VR and Augmented Reality or AR). This requires peripherals like headsets and compatible applications in order to use. It introduced the concept of avatars, or digital representations of users. While the technology has been around, it is still continuing to evolve but has not quite reached a level of adoption in the same way users have smartphones.

What we will discuss here is the blockchain metaverse, which brings the Internet-of-Value and ownership of digital assets through tokenization via NFTs (Non-Fungible Tokens) through a development framework called Web3. This is the least understood in the metaverse. It has also not quite reached the level of users where it can be considered as common as using TikTok or Instagram.

Now, we have more projects entering the metaverse space that integrate the blockchain with social media, gaming, entertainment, and finance. Even with the economic downturn in 2022, there are still encouraging signs of growth and development.

Projected Market Growth

The overall metaverse market, which includes both the blockchain and big tech, is expected to reach $678.8 Billion in revenues by the year 2030 (per Statista). That is a huge market value that opens many possibilities that could lead to opportunities.

The revenue estimates include the sales of devices (e.g. VR headsets), apps, digital assets, and services from the totality of the metaverse. It is not just blockchain-related, but app developers will want to take advantage of the opportunity this provides.

Rise In Wallet Addresses

The increase in wallet addresses is an indication of growth in activity. The metaverse would be useless if it didn’t have active users. To connect to the blockchain, users need to have digital wallets, which store their private keys. A private key is what authorizes transactions of cryptocurrency tokens, for exchanging value on the network.

A wallet is also required by metaverse apps, also called DApps (Decentralized Applications), to access digital assets. These digital assets can include NFTs that represent in-game asset purchases (e.g. skins, weapons, powers, rewards, game points, etc.) as well as other cryptocurrency tokens (e.g. ENJ, Gala, MANA) and stablecoins (e.g BUSD, USDC, Tether).

The Ethereum blockchain has the highest number of user wallets on the blockchain. According to Etherscan, the rise in unique wallet addresses in Ethereum continues in an upward trend. That means more new users are entering the space and this allows them access to the metaverse. As of July 2022, the total number of unique wallet addresses has reached more than 200 Million.

Each unique address does not have a one-to-one relation to a unique user. A user can have many addresses, but each is unique. Users can generate many unique addresses on their wallets and it is personal. These addresses can be used to receive digital assets and also serve as a form of digital identity on the network.

Another indicator is the number of active metaverse wallets or the user wallets involved in metaverse-related transactions. According to a Grayscale report, there were over 43,000 by June 2021. The trend has been on an upward climb, and if it continues on that projected trajectory it can further indicate more users entering the metaverse.

While active indicates more activity, this needs to be further defined. It has to do with the analytics of Web3 in relation to the metaverse. While data analytics firms use “active” to mean users transacting in the metaverse with their wallets, the platforms themselves do not think that is the most reliable measure of activity. Instead, it should be the number of users who enter the system and not just the transactions being generated from active wallets that should be specified. In other words, active users should also include those who are not using their wallets for transactions.

In a Blockworks report, the Web3 metaverse platform Decentraland stated that:

“ … metaverse platform accounted for 1,074 users interacting with smart contracts in September (2022) and a total of 56,697 monthly logged-in users.”

Decentraland further states how they define active users as:

“someone who enters Decentraland and moves out of the initial parcel they entered the world into, not just someone who engages in transactions.”

This is in response to reports like that from Coindesk, which stated that Decentraland had fewer than 38 daily active users in September 2022.

While there were some clarifications made to the explanation of active users, it seems that compared to non-blockchain metaverses the numbers still have a long way to go.

For example, Roblox has a total of 70 million registered users but counts a total of 200,000 average active daily users. Likewise, it would seem much fairer to gather data on active users as the number of users on the platform, whether or not they created a transaction.

Growing Developer Community

A major driver of the metaverse is the ecosystems that run on top of the blockchains. This requires developers, and they are building using Web3 to deliver the DApps. Key indicators of that are the level of activity among the developers. These applications bridge the world of traditional web development (e.g. React) with the blockchain (e.g. smart contracts).

According to blockchain software company Consensys, there were 350,000 developers using the Infura platform for Web3 development in 2021. This is a popular platform for an endpoint to the blockchain for DApps. The number of developers has tripled in 2021, showing a massive increase in the interest in building blockchain applications. In 2022, the number of developers has increased further to 430,000.

An even more encouraging sign from developers is that many of them are exploring ways to add blockchain connectivity to their products (according to a study made by Stratis). This includes interest in NFTs, which are a part of the metaverse space. According to the latest data, global spending on blockchain solutions is projected to hit $19 Billion by 2024 (Statista 2017–2024 data).

The projected increase in global spending will trickle into metaverse development since it involves the blockchain. While the percentage of that specifically to the metaverse is not yet known, it still shows a sign that there is a high level of interest from companies to develop in this space.

Disclaimer: The information shared is for reference or educational purposes and is not financial advice. Please DYOR to verify information.

NFT Marketplace

In 2022, NFTs have slowed down since its breakthrough year in 2021. This can be seen in the data figures from Statista. From a peak in January 2022 of 106,197 NFTs sold daily (average value of $189.50 Million per day) to 29,993 in May 2022 (average value of $28.81 Million per day). With miserable economic indicators, the cryptocurrency market as a whole has been affected. High interest rates are leading potential investors to hold off, while selling their cryptocurrency tokens to move to more risk off assets.

Despite the slowdown, more developers are entering this space bringing new concepts into the metaverse. We were introduced to NFT projects like CryptoPunks and Bored Apes Yacht Club (BAYC), and this opened up the market to copycats and other ideas. This includes virtual land, unique token collectibles, and gaming NFTs.

It is expected to become a hot market again, once the cryptocurrency market recovers. That is also expected since NFT growth will be what determines the market size. Based on analysis from Earthweb, there are good things to look forward to in this space. The total NFT market could be worth $231 Billion by 2030. That could correlate to further growth in the metaverse as well.

Gaming

While the gaming industry is broad, it is a big contributor to the metaverse. With Play-to-Earn (P2E) and Play-and-Earn (P&E) gameplay models, gamers are introduced to GameFi. This is a convergence of gaming with finance through the blockchain. That means users can access ways to earn passive income through playing games, and all purchases and rewards are recorded using a blockchain.

Blockchain gaming (i.e. Web3 gaming) has increased by over 2,000% in 2022. This takes into account the usage and investments made across the blockchain gaming sector. Here are some tidbits according to a DappRadar report:

• Blockchain games have 1.22 million unique active wallets (UAW) in March 2022, with Axie Infinity having 22,000 new wallets alone.
• Play-to-Earn NFT games (e.g. Crazy Defense Heroes, Aavegotchi) on Ethereum sidechains have contributed to growth, with a 219% increase on the Polygon blockchain.
• $2.5 billion of funding was raised in Q1 2022, up 150% from previous year.
• 52% of blockchain activity now comes from gaming DApps.

Key Takeaways

In order to assure success, the level of adoption must increase and the number of users must continue to grow. It is about the network growth across all blockchains, as users realize their value. If users decline, then networks will have less activity and that could lead to the downside or even the death of many projects. That is expected, since projects with no utility to attract users will not be able to continue.

The metaverse is also not clearly on most consumer’s minds. That is perhaps due to the confusion out there about what it is. Web3 projects building the apps for the metaverse are trying to convey that information, while big tech players like Meta continue to push their version of it.

What will be important for the blockchain metaverse, is interoperability. It would be nice to have a seamless user experience when using DApps that allow assets to cross different blockchains. It could be an obstacle to adoption if each blockchain remains its own ecosystem, isolating users and further creating niches.

Synopsis

There is potential for further growth in the metaverse. It could be like the beginning of the Internet boom in the 90’s. That began at the time when more users started getting online, and drove further adoption. On the negative side, the metaverse and its supporting infrastructure (e.g. DeFi, Gaming, DApps, etc.) could be in a bubble. Value could suddenly fall when investors realize there are no long term returns or utility in metaverse projects. That is the risk that needs to be taken into consideration.

There are risks to mitigate, like the economic uncertainties that have affected the cost of capital. The data in the projections could change to factor in economic indicators like inflation and interest rates. As a result there could be less capital flowing into metaverse projects, but existing ones can benefit from first-mover advantage.

Interoperability is also important for the blockchain metaverse. Once you have millions of users, they would want their assets to be available across any blockchain they connect to. It would otherwise be useless if assets on one chain cannot be used on another chain. Interoperability simplifies the transfer of value and inter-connectivity of DApps.

The encouraging signs are that there are projects that are creating ecosystems with tokens that have utility, specifically in Web3 gaming DApps. Consider projects like Decentraland, The Sandbox and Gala Games. These ecosystems have developer activity and their own tokens which provide a utility for users. There are also projects like Cosmos that are connecting blockchains using interoperability protocols. More projects like these are needed to expand the metaverse, and that creates further growth.

Disclaimer: The information shared is for reference or educational purposes and is not financial advice. Please DYOR to verify information.