Where should you invest in the metaverse?

Where should you invest in the metaverse?

Published: 28-02-2023
Updated: 30-05-2023

As part of our metaverse series of the first part explaining who is building the metaverse, this article will delve deeper into the investment prospects and opportunities in the metaverse: What metaverse to keep an eye on and potentially invest in with either time or money.

What you need to know before investing in the metaverse

Metaverse

The term “metaverse” has numerous negative and positive connotations as it has become synonymous with Meta (former Facebook). But at its core, the metaverse is much older in definition and is defined as if the internet could be stepped into. In many ways, the metaverse overlaps with the third generation of the internet: Web 3.0.

The metaverse is a broad definition encompassing a virtual space where users can socialize, learn, collaborate, and/or play games. Today many precursor versions of the metaverse exit. The concept of Social VR is a crude version of the metaverse, whereas a virtual space developed in-house by an enterprise to, for example, onboard employees or hold events is an isolated metaverse. When we refer to the metaverse, it usually means it is the future of the internet experienced through either virtual or augmented reality.

NFTs

A shorthand for Non-Fungible Tokens. Non-Fungible is an economic term for something that cannot be replicated and is wholly unique, whereas a token is an item, i.e., an item that cannot be replicated legally. In other words, an NFT is a digital intangible asset unable to be copy-pasted and rightfully shared. This means if you own Jack Dorsey’s (founder of Twitter) first Tweet as an NFT, it is like a digital painting that either increases or decreases in value based on the demand for said digital artwork/NFT.

Cryptocurrency

Very simply, cryptocurrencies are digital means of transferring value supported by a decentralized and safe encryption technology called Blockchain. Money, by itself, is a substitute for what we actually value and can be anything. We can use Euros or the American dollar, and prisoners can use cigarettes for exchange: the money element doesn’t matter. The only crucial part is that we agree on the currency’s value, as that enables us to figure out how to trade and exchange. A cryptocurrency is purely digital and decentralized (not government- or state-backed) money.

User Generated Content

A metaverse built by User Generated Content (UGC) is a metaverse developed by its users from creator tools. In other words, a user in a metaverse can design and build a digital house from tools supplied by the metaverse’s owner. This digital UGC house can then be sold to another user turning into a creator economy.

Social VR

Social VR is like an MMO video game, an online space where players all over the world can interact and socialize. Social VR is not ‘the metaverse’ but the potential precursor to it.

Daily Active Users

Abbreviated to DAUs, Daily Active Users are how many people enter the metaverse in question consistently and for how long. Naturally, the higher DAUs a metaverse has, the better.

The top ways of earning money in the metaverse

Indirect investment

The first method to get in on the metaverse is to acquire stocks in a company that either resides over a metaverse or fund investing in metaverses. You do this through Exchange Traded Funds (ETFs). Three well-known ETFs to check out if you are interested in indirectly investing in the metaverse are ProShares Metaverse, Roundhill Ball Metaverse, and Subversive Metaverse.

Flipping digital assets (NFTs)

The best and most convenient way of making money in the metaverse is to buy and sell digital assets (NFTs) like wearables or virtual real estate. Flipping digital assets poses a high risk but potentially high reward as you are betting the digital asset you have bought will have higher demand when you sell it. See it as investing in physical real estate, stocks, or art.

Virtual real estate

In some metaverses, like Decentraland, you can purchase virtual land called ‘Parcels. You can build a house or venue, flip like an NFT, or rent out to willing users. Interestingly, the rapper Snoop Dogg has invested in virtual real estate in the Sandbox metaverse. The profitability of this metaverse investment strategy is determined by the popularity of the metaverse you have chosen, i.e., DAUs, and the desirability of the virtual land you own.

But as a note, compared to letting out your physical real estate, a metaverse property has no overhead or upkeep costs attached. Likewise, if you hold venues, the success depends on how desirable the event is with its topic and marketability. For example, the Ariana Grande metaverse concert was a roaring success because of the singer’s brand and popularity.

Displaying ads

Another way of earning income on your virtual real estate property is if your location experiences high traffic. In this case, you can let out your virtual space to display ads.

Designing and selling digital assets (NFTs)

If you are the creative type, designing and building digital assets like a virtual outfit or piece of artwork for a person’s virtual real estate property can be immensely profitable as these are wholly unique and cannot be replicated, similar to paintings or clothing. Like virtual real estate, you need a metaverse with consistently high Daily Active Users for this to be profitable.

Play-to-earn metaverse games

Battle Infinity (IBAT) is a new platform, pre-released in 2022, comprising five parts, one of which is a play-to-earn (P2E) game called Battle Infinity Battle Games. In its prelaunch event, IBAT found unprecedented success, selling out its 28% share of its cryptocurrency 24 days into its 90-day event. IBAT Battle Games are a series of multiplayer games where players earn NFTs by playing to be exchanged in a store using IBAT tokens.

The best metaverse to spend time in

Pico Worlds

Pico Worlds was announced with Pico’s new VR headsets: Pico 4 and Pico Enterprise. Pico Worlds will be creatively developed by its users known as User Generated Content (UGC). Because of this and Pico XR’s focus on its new Social VR platform and Pico 4’s superior offering to Oculus / Meta Quest 2 and Meta Quest Pro, Pico Worlds will grow in its Active Daily Users (ADUs). For now, we recommend keeping an eye on Pico Worlds as the Social VR platform is still in its infancy.

Roblox 

Roblox is a free-to-play game platform where users can play, develop, socialize, and trade items. While the games on Roblox are more akin to experiences and used for users to socialize in a virtual space, it is one of the best platforms to hang out.

Metaverse

The best metaverse to invest money in

The safest bets

The two most popular metaverse platforms are the gaming-focused Sandbox with its SAND cryptocurrency, and Decentraland with its MANA crypto, focusing more on content and applications in general.

Sandbox boasts almost double the number of virtual plots available compared to Dencentraland. While Sandbox also offers users to invest in larger districts. Both Decentraland and Sandbox are based on Blockchain technology for security and are decentralized, meaning the platforms are autonomous. The only point where they differ is Sandbox is more of a gaming platform, whereas Decentraland is on a broader metaverse vision with virtual events, art gallery shows, enterprise conferences, and musical concerts.

Enterprises which will move into a metaverse presence

Many businesses can find value and use in the metaverse. For example, the BMW Group is developing a ‘digital twin’ factory used to onboard and train employees. However, the enterprises to keep an eye on are the ones that will provide the infrastructure or backend to build metaverses that corporations like BMW use. This means entities like Unity3D or NVIDIA are companies that will be crucial to the future of the internet.

But this pales in the direction Epic Games is heading. As of April 2022, Epic Games had successfully funded US$2 billion to build its metaverse. Additionally, rumours have suggested the popular battle royale and social game Fortnite will soon get VR compatibility. Adding to this, Epic Games also resides over the software development engine UNREAL Engine, able to provide the backend for other metaverses to be developed.

Lastly, we will be remiss not to mention the elephant in the room, Meta. Meta’s Metaverse will turn present-day Facebook into an embodied virtual world through VR and AR. While it is a bumpy road for Meta to head in this direction, signs show Meta will be successful, and the platform is consistently growing.

The metaverse with the most prospects

This leads us to the metaverses with the most prospects of transforming the 2D internet into 3D. Meta’s Metaverse has an essential ingredient for a metaverse to succeed: platform influence. Essentially, Facebook is too big of a platform to ignore for businesses: an enterprise could choose to ignore Facebook but would lose out as a result. This needs to be the case for Meta’s future Metaverse, as third-party developers need to develop and populate its metaverse.

Similarly, Epic Games’ Fornite has this similar popularity amongst Gen Z gamers. The challenge for Fortnite is to not become a gaming fad to fizzle out as consistently seen within the industry: simply take Among Us as a recent example and Pokémon GO as a more dated one. As Fortnite is branching out to be a Social VR platform, this is being addressed while the software engine UNREAL Engine is set to become one of the toolkits to build the metaverse.

While both Sandbox and Decentraland currently cannot be experienced in virtual reality – Dencentraland is working on VR compatibility – Somnium Space is the metaverse that is natively built for VR. Additionally, Somnium Space is not segmented into different servers to host users but centralizes all into one vast VR metaverse. Because of these two aspects, Somnium Space is a VR metaverse to look out for when it matures