Defining the important business of the metaverse

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A closer study looks into the process of monetization in the Metaverse. 

The history of the internet: The term metaverse made up of meta and universe often describes the anticipated future iteration or evolution of the internet powered by Web3 technologies like blockchain and decentralized resource distribution and consumption principles. But the main focus has often been on metaverse modalities such as augmented reality (AR), virtual reality (VR), gaming, Second Life, avatars and so forth, in my view, these modalities represent an interesting evolution or shift from the digital transformation of recent decades to the “transformation of digital.” And this is exactly what the Metaverse aims to achieve. It might seem abstract and clunky today, but if we dissect the components that make up the Metaverse, we get a glimpse of a transformed digital future.The things we value the represented in the form of tokenized assets with valuation vehicles that not only prevent double-spending but also leverage blockchain as a transaction system, which brings the fundamental tenets of blockchain (trade, trust and ownership) to the Metaverse But the avatars that represent us can interact with various universes and their value systems, and we reserve the right and ability to monetize our data, effort, talent and all the value they generate. And, as our representation traverses various modalities  such as our avatars via VR to in-game representations , we can use things we value and apply that to an economic and value system of our choosing.

Business In Metaverse: Monetizing the metaverse. Now ;ets break into category: 

Category 1: Commercializing protocols

This category represents the current landscape of infrastructure and projects that rely on community development and broader infrastructure development and support services. These projects monetize in the following ways:

  • Token-based models: Operation fees to write to the blockchain-powered business network’s distributed database.
  • Tokens as a medium of exchange: Lending or selling a token as a “step-through” currency, such as with in-network tokens.
  • Asset-pair trading: Monetizing margins.
  • Commercialization of the protocol: Technology services including cloud and software labs and consulting services.
  • The power of networks: Extrapolating the power of networks and exponential power of co-creation models, leading to new business models and resulting in economic value.

Category 2: Simple token sales

 the second category applies to the majority of projects that rely on token sales. Tokens are used as a funding mechanism to fuel development. In many cases, these fit a classical definition of security, which is a token sale with a profit expectation. While these tokens can be viewed as in-network token currency, the expectation is that if they become ubiquitous, that ubiquity subsequently extends itself to fungibility and these tokens take on the status of a currency. These concepts are laden with new terms, definitions and twisted economic models and often face regulatory headwinds, but we are just discussing the state of the industry as it evolves.One of the subcategories here is nonfungible tokens (NFTs), where the NFT as an asset class begins to surface as a symbol and community belief instrument, valued by a section or subsection of the community. 

The financialization of NFTs in the digital realm can be compared to an analog to the mobile payments movement triggered by M-Pesa — a concept that started almost two decades ago and in its infancy reached a transaction volume of over $22 million a week with absolutely no financial intermediary, just preloaded conversational minutes traded to move money. While financial institutions salivated at the volume, M-Pesa eventually ended up becoming regulated, and financial institutions got into it via a telco-bank relationship structure. This modality morphed and took the form of actual payments over mobile devices using telco as rails.

Category 3: The emerging crypto market structure

The third category is an important one, as it represents the market structure that has the power to facilitate exchange, interoperability and seamless value transfer and all the tokens and forms of valued assets exposed to some form of financial primitives which  include buying/selling, borrowing/lending/collateralization and others. 

Implication and challenges: These are not limited but the challenges include:

Regulation and compliance: The industry is aware of the changing attitudes and regulatory posture around the globe. There is a pervasive lack of regulatory clarity on basic digital assets, as there are many exotic tokens and digital assets emerging and entering the Metaverse. That is to say that taking advantage of what used to be regulatory arbitrage is now an impediment in the global movement of various asset classes in the Metaverse. The broader industry will need to dedicate some capacity to help craft a relevant and fair structure or framework.

Technology or protocol risk: Technological challenges around interoperability and identity are still massive roadblocks to the progress and promise of blockchain and, eventually, the Metaverse. If we want the Metaverse to go beyond modality and have an interchangeable mix of digital assets, we need it to be interoperable across various networks and universal ID transactions to be a seamless process with non-repudiation. Incidentally, this also will help with regulatory simplicity.

Talent: Industry has a profound shortage of talent, including technologists, token economists and business leaders, to create a team that can stay in place to build, maintain and improvise on projects. This is a huge issue. We also see so much capital chasing too few projects, which historically has never been a good balance to attract talent and incentivize the development, retention and commitment of the right people.

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