The term “Metaverse” has quickly become part of the lexicon for internet users, even though many disagree on what it is ultimately going to become.
Nonetheless, various businesses are beginning to spring up in virtual spaces because of the untapped opportunities that exist. What makes the Metaverse an attractive space to open up a new service or company comes down to the Web3 technology it is built on, namely blockchain, smart contracts, and Non Fungible Tokens (NFTs).
A blockchain is an immutable ledger of digital assets, while smart contracts interact with this ledger to transfer assets between different parties. Together, this means that developers can create not only new currencies but a myriad of more complex assets as well. NFTs are one such example, which go beyond money and act more like individual items with a discernible history. This verifiable data is the basis on which these assets can be monetized and used.
This is what’s going on at a technical level but there are some practical steps that every metaverse business founder should also know about.
Pick your blockchain network(s)
When looking to create a successful business in the Metaverse, there are several things to consider. As with physical businesses, location is very important. In Web3, this means deciding which blockchain networks your business will support, choosing which virtual world it will use, and picking a place within that world where your business can be found.
When choosing which network to launch on, things like speed, cost of transactions, and interoperability with other networks are all important considerations. Ethereum, for example, has the largest user base out of all its competitors, meaning that it offers the potential for a business to be accessible to the most people. However, Ethereum currently only offers around 15 transactions per second and users can experience prohibitively high fees.
There are many smart contract blockchain platforms available beyond Ethereum, such as Solana and the Binance Smart Chain, if you’re looking for faster transactions and are happy to engage with fewer users. There are also Layer 2 solutions, like Polygon, that can both significantly improve speed and fees, as well as serve as a link between multiple chains. Each of these options comes with their own pros and cons, so ultimately businesses need to do a bit of homework to decide which one aligns with their company, products and long-term goals.
Choose your preferred “location”
Once a network has been established, the next step is to choose a Metaverse platform to set up shop in. There’s no shortage of available options, such as Decentraland, The Sandbox and Somnium Space. Most Metaverse worlds allow for the purchase of land and the ability to build within the space, but every business should understand the specifics of what’s on offer in each one before committing to any of them.
Of our examples, Decentraland has the feel of a world that is still in development but is also host to some of the most premier events. The Sandbox has a more curated set of experiences, with an emphasis towards gaming. Somnium Space is focused on VR and acts somewhat like a 3D social media service. Of course, there’s overlap in what the platforms can offer and many others out there, with more being launched all the time.
Just like with the blockchains themselves, there’s also nothing stopping a company from having a presence across multiple Metaverses. The takeaway here is to align your new business with a community that makes sense and who will be receptive to what you are selling.
Define your ‘value’ proposition
Once a virtual location is secured, the next question is: “what is actually being offered?”.
One possibility could involve providing an existing business’s services via a Web3 interface. This might mean building a fully 3D shop that lets users browse and purchase digital recreations of real-world products. Upon checkout, the product would then be shipped to the customer, just like how online ordering works today.
However, a more interesting approach might be to build your business around the native ways of offering value and earning income that the Metaverse makes possible. This is likely to be based around the utilization of NFTs. In adopting this metaverse business model, you need to be aware that the digital market is already flooded with assets and therefore put some work into making sure the assets you sell are desirable.
Digital businesses need to focus on the same things that bring value to any asset. Namely the balance of scarcity, utility, liquidity and reputation. Scarcity means there needs to be some kind of limit on supply. Utility implies there must be some practical use or need for the good. Liquidity means it must be able to be bought and sold easily, and reputation speaks to how customers rate the product or service, especially in relation to its competitors.
Investigate your digital land options
To understand how these principles work in practice, it's worth looking at how valuable assets are perceived in the Metaverse already and digital land is a good example. In a world with limited space, where adoption is already occurring, real estate has real value. For example, in
The Sandbox, three plots of land adjacent to Snoop Dogg’s virtual mansion sold for over $1.2 million.
Owning such a high profile plot isn’t just about the status of being a virtual neighbor to a famous celebrity. That land can be fairly easily monetized, most obviously through renting. The owner can lease out the property to generate an ongoing income stream, exactly as many do with real land. The owner could also build. Whether the land is developed to offer services based around entertainment, shopping, or other attractions, the location will help to bring in higher rates than the same offerings in a less prestigious place.
Renting isn’t limited to land, either. Any sufficiently valuable NFT asset can be rented out and smart contracts can help to make this process easy, safe and efficient. With smart contracts, explicit terms for rates and timeframes can be established that cannot be broken by either party. Payment will be automatically linked to delivery and the item will be effortlessly returned when the rental window expires.
Seize the NFT gaming opportunity
These dynamics are important to understand when it comes to seizing the metaverse-enabled opportunities that exist around NFTs and gaming.
Today, blockchain games often have hefty entry fees, as usually one or more NFTs need to be owned to get involved. For popular titles, like Axie Infinity, these can cost hundreds or even thousands of dollars. However, existing asset holders have already made a business out of renting them to players with less means. This can earn the owner both a flat rate for the rental and a cut of any earnings that the rentee generates.
These are just some of the most immediate and obvious ways to build a business out of monetized Metaverse assets. In the coming years, many new models will emerge that leverage the possibilities of a blockchain-enabled digital space. However, there may never be a better time to get in on the action than right now because of how new and untapped this field is today.
The businesses built in the next few years may be industry leaders in ten years time, especially if the Metaverse becomes the driving force behind digital commerce that many expect it to.
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