Virtual Worlds
Note: Data in this section last updated September 12th, 2022
What are Virtual Worlds?
Virtual worlds are online, immersive, 3D spaces that may replace the webpages of today as our primary means of accessing the internet.
Instead of simply logging on to a website and reading its content, 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.
Like the web of today, there will likely be thousands of virtual worlds, all intertwined in a network known as the “metaverse”.
Justin Bieber Hosting a Concert in the Metaverse
Virtual worlds often 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.
Zuck is Coming to Take Over the Metaverse…
Virtual worlds are becoming extremely popular. 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!)
Virtual Worlds and Virtual, Augmented and Mixed Reality
Although many virtual worlds are currently PC and / or mobile-based, it is expected that most will transition to a blend of virtual, augmented and mixed (or merged) reality known as “extended reality”.
Extended Reality is a Blend of Virtual, Augmented and Merged Reality
While closely related, it’s helpful to understand the difference between these three technologies:
Virtual reality (VR): a fully-immersive digital environment where the user is cut off from the outside world
Augmented reality (AR): an augmented representation of the real world that overlays virtual objects into our physical environment
Mixed Reality (MR): a medium combining VR and AR, allowing users to interact with both the physical and virtual world
This will create an experience that’s significantly more immersive than today’s internet. Instead of simply looking at a screen, users will feel like they are “in” the experience.
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 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 Decentralized 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 1.5 billion tokens available out of a maximum total supply of 3 billion. The current fully-diluted market capitalization of SAND is $2.9B.
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: The 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
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
Although activity has slowed in the bear market, The Sandbox has nonetheless achieved impressive traction, garnering nearly 3.5M users and generating over $500 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, Decentraland, NFT Worlds and NEO Tokyo.
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