In 2021 we witnessed the digital asset space climb to new heights. While last year can be considered a banner year for blockchain, it was also undoubtedly another “bandwagon” year for the industry as more overenthusiastic retail investors were drawn in than ever by the alluring yet speculative prospects of securing the next 100x investment.

Investors have been hungrier and more foolhardy than ever, looking for anything that is half-decent and marketable. For much of 2021, markets did not fail to deliver, as startup blockchain companies plastered their flashy buzzwords across websites, whitepapers, and slide decks. While overzealous investors threw caution to the wind and invested record amounts of capital, the blockchain space saw a surge of new projects, including a multitude of less than desirable and ill-conceived startups that were eagerly rushed to market.

Following the massive amounts of hype surrounding the “summer of DeFi” and the subsequent trends like non-fungible token marketplaces and play-to-earn blockchain games, the metaverse appears to be the next great heavyweight perfectly poised to disrupt zones of traditional industries while bringing the world closer than ever to mass adoption of Web3.

The metaverse carries with it near limitless potential, but much like other passing crazes, we are seeing plenty of misleading, underdeveloped, or flat-out malicious attempts to create a metaverse startup ecosystem. This is why it pays to be more discerning than ever when investing in a concept that is as risky as it is enticing and innovative.

Before one sets off to invest in this highly speculative space, it is critical to better understand what the metaverse is and why so many are betting on it.

Metaverse Defined

The metaverse can be simply explained as a network of interconnected virtual worlds built on the internet. Reuters describes the metaverse as digital spaces built to simulate fictional realities or mimic real-world ones that are typically accessed by users with the help of virtual reality (VR) or augmented reality (AR). 

While it has become a central focal point in the blockchain industry, the metaverse has been identified as a potential trillion-dollar revenue opportunity by notable investment authorities such as Grayscale and JP Morgan. 

Consequently, the industry has seen an influx of GameFi and play-to-earn startups claiming to incorporate the metaverse into their business model to capitalize on this outside interest.

The second half of 2021 saw an astonishing 700% increase in Blockchain gaming projects. Currently, over half of all IDOs (Initial DEX Offerings) today are GameFi projects touting at least a few metaverse characteristics in their pitch decks and whitepapers.

Metaverse x Blockchain

The lack of clarity around the development and integration of AR/VR technology is concerning. The majority of these GameFi-metaverse projects simply appear to be ecosystems that use the term interchangeably with “online gaming communities”. 

Nonetheless, this go-to-market strategy has garnered enough attention from investors with fast cash. GameFi projects have publicly raised well over $150 Million through IDOs, targeting retail investors more than ready to back the latest play-to-earn projects.

Why have these startups gained so much attention, and raised so much capital? The common theme of 2021 in the digital asset space reflects a similar methodology seen during the “growth stock” boom in the early stages of the COVID-19 pandemic. Investors are betting on the future potential of this technology, which may serve to improve or enhance many aspects of our digital lives.  

Here we offer an inside look at how the metaverse‘s development could unfold:

Use Cases of the Metaverse

Workplace Interactions 

Workplace environments have significantly changed since the Coronavirus pandemic. Even as governments ease restrictions, many companies choose to foster work-from-home culture after seeing improved employee productivity. However, the common criticism is the lack of employee interaction that cannot be overcome due to the limitations of Zoom and Microsoft Teams video meetings. 

The metaverse can help overcome this hurdle by offering a more hands-on and immersive environment where colleagues can collaborate without sharing the same physical location. Corporations like Microsoft are already betting on this future by developing their Hololens 2, to bring a virtual and collaborative workspace together for employees across multiple industries. 

Advertising

Major corporations with the funding to explore have always sought innovative ways to reach new customers. As major metaverse projects continue to develop, the industry will see an inundation of advertisement revenue as companies like Nike and Burger King push their marketing into high-traffic metaverse metropolises. 

Projects like Blocktopia, Decentraland, and Sandbox offer advertisement spaces to target users residing in the virtual world. These companies offer a means of reaching a new audience without the cost associated with building and maintaining physical ad space on billboards, newspapers, and various other traditional forms of advertisement media.

Business Development

Similar to benefits offered by metaverse advertising, companies can gain exposure to a fresh new audience by opening storefronts in a virtual environment. JP Morgan made headlines by establishing itself as the first virtual bank in the Decentraland Metaverse, for example, likely paving the way for other household names and international enterprises to join.

The majority of metaverse-first projects will provide storefront rental and retail space. , offering customers a VR experience in trying on new shoes, or speaking in-person with your local bank teller about a disputed transaction, all from the comfort of your living room.

Entertainment

Fortnite’s virtual concerts and Decentraland’s VR fashion shows have given us an early glimpse of the potential behind this incoming digital transformation. We imagine a future where metaverse movie premieres attract billions of users wanting to experience a pseudo-first-hand screening with the stars they adore. Virtual conferences, speaking engagements, and celebrity meetups all become more accessible with greater convenience. 

Socialization  

The emergence of Web2.0 social media infrastructure has helped connect people globally. Communication, content sharing, and interaction with loved ones has never been easier. Though, many believe the shift to Web3.0 technology in the metaverse will improve user experiences and prioritize data privacy.

Facebook saw its first-ever decline in users last quarter, tallying over 1 million exiting the platform following its data farming controversy. This decline coincided with growing interest in decentralization and accountability offered by blockchain technology. 

The metaverse brings us the same benefits of rekindling old connections and crafting new ones while conjuring futuristic visions rooted in science fiction films. Internet chatrooms receive a makeover and online interaction becomes more genuine as individuals may see a future where they can interact “face-to-face” with someone halfway across the globe.

Who is Building the Metaverse?

An eventful 2021 in the blockchain space brought with it a “Gold Rush” mentality, and history tends to repeat itself. Arcanum believes in the future potential of metaverse development, though we remain cautiously optimistic. 

We are careful to diversify our stake in the craze and secure investments from teams we believe share a common vision. While many investment firms appear to chase the hype in hopes of liquidating and securing gains before a potential down-cycle, we are thinking long-term and we look for projects that are doing the same.

Several notable mentions make our shortlist for both bringing talent and accumen to metaverse development.

Microsoft

This tech and gaming giant is positioning itself as the premier metaverse developer. With Xbox, Minecraft, and recently Activision within its portfolio, they are taking an alternate approach by focusing on building enterprise metaverse solutions in the gaming world. 

Microsoft is hedging its bets with the Hololens 2 by providing pickaxes and shovels for the metaverse gold rush. Currently hailed as the premier AR/VR platform, Microsoft has already established notable contracts with companies and governments to integrate this tech into training and workplace programs. One notable mention goes to Microvison, pioneering heads-up display technology used in the Hololens 2 which enables a compact design for wearable technology. 

MetaENGINE

Recognizing the demand for GameFi in the “Golden Year,” MetaENGINE provides a collaborative gaming development platform aiming at ease-of-use. Their innovative platform allows multiple developers to create virtual environments rapidly and in real-time, offering countless benefits over existing gaming engines and development platforms, such as Unreal and Unity. 

Affyn

Affyn is a Singapore-based company building an integrated ecosystem with a play-to-earn metaverse where the virtual and real world converge. This unique Singaporean startup is leveraging geo-location based mobile metaverse to unite the real world and the ever growing digital realms, all while improving the way we game, interact, and shop among other things.

Remaining Diligent and Cautious

Arcanum believes in the slow progression towards a virtual future. While we promote the development of the “metaverse” and its potential to change most aspects of daily life, we understand that there is still a long way to go. 

Arcanum Ventures invests with extreme caution, placing an emphasis on portfolio diversification to limit our exposure to various sections of the metaverse pipeline. We preach sound judgment and follow our fundamental principles to identify good investment opportunities and manage our risk accordingly. 

Our approach:

We will strategically invest in a limited number of actual end-user metaverse projects, those that meet our strict criteria of due diligence. 

Arcanum Ventures will also aim to identify companies building the products that lay the foundation of metaverse development, while also addressing the needs in other industries. Furthermore, Arcanum Ventures will continue to back teams that share a common foundational vision in building something that will move the collective industry forward.

Join Us

For more information on how you can learn more about the latest tech in the blockchain sector, feel free to visit our website or join us in our social media communities!

We also encourage you to reach out and work with us if you are aiming to help build the future of blockchain and the metaverse.

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