Virtual Worlds
Note: Data in this section last updated May 28th, 2022
What are Virtual Worlds?
Often called “metaverses”, virtual worlds are online, immersive 3D spaces.
Using an avatar – a graphical representation of their persona– users can explore these virtual worlds, interact with other users, create and trade digital goods, participate in meetings, attend events, play games and build in-world objects and landscapes.
Although many virtual worlds are currently PC and / or mobile-based, it is expected that most will transition to virtual and augmented reality as the technology continues to mature.
Justin Bieber Hosting a Concert in the Metaverse
Virtual worlds host their own self-sufficient economies which include:
Land which can be bought, sold, rented and developed
Digital Goods which can be consumed and traded
Native currencies to buy and sell goods and services
While companies such as Meta (formerly Facebook) are making a strong push into the space, there is a sizable constituency hoping to create a user-owned and decentralized metaverse through the use of NFTs to represent land and goods and cryptocurrencies as the native currency.
The virtual worlds category has recently overtaken gaming to become the second largest category of NFTs, representing 12% of market value and 5% of all volume.
To date, users have spent nearly $2.5B on digital land and in-game items in the metaverse, and many researchers believe the space represents a multi-trillion dollar opportunity (with some projections ranging as high as $30 trillion!)
What are the Benefits of Decentralized Virtual Worlds?
Virtual worlds will offer numerous benefits to the consumer, including the ability to facilitate remote work, allow virtual doctor visits, create engaging and immersive games and generally just provide a “fantasy world” for us to escape reality and become anything we want to be.
One of the greatest threats to the metaverse is control by a digital monopoly. We have already seen the dangers of a centralized internet, and these threats have the potential to turn into a nightmare scenario as we move more of our lives online.
Indeed, if we aren’t careful, companies such as Facebook, Amazon, Microsoft, Apple, Google could gain even more power in the metaverse and form “digital dictatorships”, levying heavy taxes on usage and exercising absolute control over what we can and cannot do.
Fortunately, using NFTs and blockchain technology, we can create a decentralized metaverse, where ownership remains with the community – creators, consumers and developers.
This would have several benefits including:
Fair economics: The Apple store currently charges participants up to a 30% tax on every sale. Eliminating the middleman would allow creators to sell directly to consumers without having to pay outrageous fees like these
Permission-less Access: Facebook notoriously shut down its most popular game Farmville over a disagreement in economics. Decentralized virtual worlds would eliminate this threat, as users can’t be banned or restricted access in any way, can’t be shut down and anyone can access them at any time
Reduced Censorship: Platforms such as Twitter have full control over the decision to ban or censor users, and unfortunately they are exercising this power more and more frequently. Decentralized worlds, by contrast, would eliminate censorship, allowing users to upload any content – no matter how controversial – to any platform they so choose
Interoperability: In their current form, virtual worlds are not interoperable – you can’t buy an item of clothing in The Sims and wear it in Second Life. An open metaverse, on the other hand, would allow users to freely transfer their virtual goods from one world to the next. For instance, if you bought a flaming sword in World of Warcraft, you could theoretically use it in Farmville (🤯)
How do Virtual Worlds Work?
To understand how virtual worlds work, let’s look at one of the largest players – The Sandbox.
The Sandbox is a user-generated, 3D virtual world that allows users to own land, design characters and create and host their own play-to-earn games. While the project was originally created in 2012, it was acquired by Animoca Brands in 2018 for use as a blockchain-based gaming metaverse. The alpha version of The Sandbox was launch in late November 2021.
In many ways the platform functions like The Sims or Second Life, with one key difference – users maintain full ownership of their characters, land, games and virtual goods.
The Sandbox’s virtual economy is powered by several core tokens including:
SAND: The platform’s native in-game currency that is used for all transactions within the world
LAND: NFTs representing plots of digital real estate within the Sandbox Metaverse
ASSETS: NFTs representing digital goods such as characters, animals, vehicles, buildings, etc…
GAMES: Play-to-Earn games created and hosted by users
Core Tokens in The Sandbox
Let’s take a deeper look into each of these tokens…
SAND
The Sandbox’s virtual economy is powered by its native currency known as SAND. SAND is an ERC-20 token with a variety of uses, including:
Purchases: As the in-game currency for The Sandbox, SAND can be used to play games, purchase assets and land, customize and upgrade their characters, buy equipment, etc… Staking: Holders can stake SAND to earn passive income Governance: SAND also functions as a governance token, allowing users to vote on decisions impacting The Sandbox ecosystem
As of May 28th, 2022, there are currently 1.2 billion tokens available out of a maximum total supply of 3 billion. The current fully-diluted market capitalization of SAND is $3.8B.
LAND
The Sandbox contains NFTs representing 166,464 plots of LAND which can all be fully owned by users and traded much in the same way as physical real estate.
Developed Plot of Land in The Sandbox
Like in the real world, owners can also build whatever they want on their property, and we have already seen several commercial enterprises created on the system, including:
Casinos: There Sandbox has several virtual casinos
Concert Venues: Warner Music Group is launching a metaverse concert hall in partnership with Snoop Dogg
Cultural Venues: Several Hong Kong investors have joined to build “Mega City”, a cultural hub showcasing art, film, music and gaming
Nightclubs: The Sandbox boasts several nightclubs
Retail Stores: Gucci purchased land in February 2022 to create an online store
Sports: HSBC recently bought a plot of land to construct a virtual sports stadium
Virtual Offices: The government of Dubai has purchased a plot of land in The Sandbox to build a virtual headquarters for its Virtual Assets Regulatory Authority
Multiple plots of LAND can also be combined to form ESTATES.
ASSETS
ASSETS are the native digital goods of The Sandbox. They can include anything that will populate the platform’s virtual world, including characters, equipment, outfits, buildings, etc…
Sample of Assets in The Sandbox
After creating an asset, users can choose to upgrade them with two additional classes of token known as GEMS and CATALYSTS:
Gems: Gems are spent to give an asset “attributes” (i.e. a character’s inherent level of power, defense, magic or luck)
Catalysts: Catalyst tokens represent an assets “rarity” (i.e. users can assign “rarity tiers” to a character such as rare, epic or legendary)
All ASSETS are represented as ERC-1155 (“semi-fungible”) tokens, allowing users to create unlimited copies of a given piece.
GAMES
One of the key features of The Sandbox is that it allows users to create and host 3D, play-to-earn games on LAND that they own (or rent). To create a game, users have access to three tools.
VoxEdit: A program that allows users to create 3D virtual assets to populate the game such as characters, animals, structures, foliage, etc…
Marketplace: A decentralized platform that allows creators to buy and sell existing assets for use in the game
Game Maker: A simple editor that allows users to create games without needing to know how to code
Once created, creators can invite other users to play the game and also monetize it in any way they see fit – they can charge other users to play, sell the NFT ASSETS required to play the game or even sell the game itself.
While some describe The Sandbox itself as a game, it is more accurately described as a collection of user-generated games.
Traction
The Sandbox has achieved impressive traction, garnering over 2M users and generating over $350 million in sales volume to date.
In addition, the project has recorded over 165 high-profile partnerships with individuals and companies such as Snoop Dogg, Adidas, The Walking Dead, The Smurfs and Atari. The project recently raised $400M at a $4B valuation and notable investors include Softbank, Liberty City Ventures and Samsung Next.
Who are the Key Players in the Virtual World Ecosystem?
In addition to The Sandbox, there are several other notable projects include Otherside, The Sandbox, Decentraland, NFT Worlds, Cryptovoxels and Somnium Space.
Virtual World Infrastructure
Virtual worlds may represent the biggest computing challenge in history.
Vast amounts of processing power will be required to create entire digital economies composed of game engines, simulated environments, video streaming, spatial computing, holographic displays and virtual and augmented reality experiences.
Fortunately, blockchains offer a potential solution to this problem through a concept known as distributed (or “shared”) computing. Shared computing lets individuals lend the unused computing resources on their personal devices (e.g. processing power, storage space, network bandwidth) to those who need it in exchange for compensation through cryptocurrencies.
One of the interesting projects leveraging this model is known as the Render Network.
Founded in 2016 by Jules Urbach, Render is building a shared computing network that helps “render” visual effects and 3D graphics.
Rendering is the process used by computers to create 3D visual displays with texture and detail. This process is extremely difficult and computationally intensive, and often requires hours to render a single object or frame. For example, according to Pixar’s Peter Collingridge:
“Pixar has a huge "render farm," which is basically a supercomputer composed of 2000 machines, and 24,000 cores. This makes it one of the 25 largest supercomputers in the world. That said, with all that computing power, it still took two years to render Monster's University.”
The Render System Flow
Render operates as an automated marketplace – a sort of “AirBnB” for computing power – where:
Users who want to lend their unused computing power sign up for the network as “Node Operators” and install the required software
Content creators submit their job requests along with payment in the platform’s native token, RNDR
The Render network automatically assigns these jobs to the appropriate Node, matching the Creator’s need with the Node’s capabilities
Node operators run Render’s “OctaneRender” protocol to complete the work
Once complete, the escrow is released and Nodes receive compensation in RNDR
The network can be used to create several digital assets including videos, NFTs, high-resolution images, metaverse assets and 3D animations.
Render’s distributed computing model is very powerful, and offers several benefits to both the network, users and metaverse as a whole:
Global Ecosystem: By relying on a global network of computers, Render hopes that it will be able to aggregate more processing power than any single entity could on its own
Passive Income: Processors can lend their unused computing power to earn passive income
Lower Costs: Because distributed computing models can aggregate from a variety of sources, they are often significantly cheaper than centralized suppliers. According to Jules Urbach, the CEO of Render, “when you have really cheap GPU power and you want to render something 5,000 times—and the cost is 1/100th what it was before—that becomes tractable.”
Shared computing has made significant progress in the last year, and other notable projects include LivePeer, Akash and Golem.
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