The Metaverse, Blockchain Gaming, and NFTs: Navigating the Internet’s Uncharted Waters
Download PDFJun, 2022 NewzooTrend Report 2022
The Metaverse, Blockchain
Gaming, and NFTs: Navigating the
Internet’s Uncharted Waters
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1. Introduction
2. The Metaverse Foundation
3. Executive Summary
4. Top 10 Trends
i . The Metaverse, Entertainment, and
Implications for Brands
ii. P2E, Blockchain Gaming, and Digital Land
iii. NFTs, Crypto, and Interoperability
4. Limitations and Closing Thoughts
Table of Contents
© Newzoo2022
Welaunched thefirst edition ofour metaverse reportinJuly 2021.Then,
the metaverse, NFTs,andblockchain gamingtransitioned frombeing
largely unknown concepts toubiquitous termsonthe lips ofevery major
brand orinvestor .Despite thehype somewhat coolingdowninrecent
months —partly asaresult ofthe global macroeconomic situation—interest
in the metaverse asanatural andimmersive successortothe 2Dinternet
is still atan all-time high.
The transition fromWeb2.0toWeb 3.0 will not only impact themodus
operandi of(major) brands,butalso theway inwhich consumers live,
work, andexperience entertainment .
The evolution ofsimulated, 3D worlds presents aparticularly massive
opportunity forbrands .The transition fromdiffused physical spacesand
into virtual worlds provides themwithanew opportunity toreach ahighly
condensed massofusers thatismore difficult toboth approach and
monetize throughotherforms ofadvertising. Thistransition intovirtual
worlds canonly accelerate asthe current generations ofdigital natives
age and asvirtual experiences becomemoreauthentic .Fast- moving
brands likeNike, Louis Vuitton, Balenciaga, ortechnology brandslike
Meta —toname justafew —recognized thisshifting ofthe tide andhave
already developed metaversestrategies.
Moreover, whileNFTsandblockchain gameshaveexperienced a
spectacular 2021,a severe drawback inthe crypto market alongwithfears
of aglobal recession havebothledtopublic interest andcoin valuations
substantially waninginrecent months .As aresult, thiscorrection willlikely
end most ofthe (low effort) endeavors inthese areas.Nevertheless, we
remain optimistic aboutthefuture andremain confident thatthetop
projects willsucceed.
Given howfast-moving thisspace stillis,an elemental understanding of
the building blocksandtrends thatsurround itis essential .Therefore, in
this report, weidentify anddiscuss thetop 10prevailing trendsinthe
metaverse, blockchaingaming,andNFT space .Understanding these
trends (andwhat drives them)willhelp companies endemictogaming,
consumer brands,andconsumers aliketonavigate themurky waters of
the metaverse, alongwithitsconnection toNFTs andblockchain games.
We hope youfind thisreport insightful anduseful forshaping your
strategy in2022 andbeyond .
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The Metaverse in 2022 and Beyond
Foreword
Mihai Vicol
Metaverse Lead
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The Metaverse Foundation
Definition, ecosystem, and recent events
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Metaverse Ecosystem Diagram (1/2)
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Metaverse Ecosystem Diagram (2/2)
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Metaverse Ecosystem Diagram (2/2)
Blockchain Gaming Ecosystem Diagram
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What Is the Metaverse?
The metaverse has no authoritative definition; however, several
thought leaders have offered a framework
• Scaling: increasing the current cap of c. 100 per zone to potentially infinite.
• Persistence : technical limitations unlocked, actual digital persistence can improve
immersion and create new experiences.
• Interoperability : merging of different games and new systems of interaction between
them; value in one game can compound in others.
• Econom y: trading across different games, more depth, currencies.
• Identity : evolution of current online identities for avatars that can represent a player in
more imaginative or realistic ways.
• Digital & physical: spans across many aspects of life with open and closed platforms.
• Populated by multiple contributors : content from individuals, informal groups,
organizations, and commercial enterprises.
Persistent, shared, 3D virtual spaces in a virtual universe.
Key Attributes from Matthew Ball, Media & Gaming Investor
Realtime 3D social medium where people can create and engage in shared experiences as equal
participants in an economy with societal impact.
Tim Sweeney
CEO/Co
-Founder
Though often used interchangeably, the metaverse and virtual worlds are
different concepts. While the metaverse will be comprised of many individua,
interconnected virtual worlds, no one virtual world can be the metaverse.
Selected Definitions from Thought Leaders
https://www.matthewball.vc
An interconnected and interoperable network of persistent, virtual worlds that are populated by large
numbers of players who interact with each other via 3D digital avatars, which offer users a heightened
sense of immersion and presence.
A persistent, infinitely -scaling virtual space with its own economy and identity system.
Jonathan Lai
Partner
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NFTs and the Metaverse: A Year in Retrospect
Recent key events in the Metaverse and NFT space
Mike Winkelmann, also known as
Beeple, sold one of his digital
artworks entitled “ Everydays–The
First 5000 Days” for $69 million in an
auction at Christie’s. This is the first
digital -only art piece offered by a
major auction house and acted as a
kick -starter for the ensuing NFT
boom.
Beeple Record Sale
Adidas partnered with The Sandbox,
one of the most popular blockchain –
based virtual worlds. As part of the
collaboration, Adidas purchased a
plot of land inside The Sandbox in an
effort to increase its presence in the
digital realm.
Adidas x The Sandbox
Sky Mavis, Axie Infinity’s publisher,
announced the news in a Twitter
post.
Axie Infinity hits 350K DAU
While Sotheby’s auctioned and sold
a batch of 101 BAYC NFTS for over
$24 million, Christie’s sold 6
CryptoPunks, 4 BAYC, and 4 Meebits
for a combined $12.3 million. The two
auctions legitimized NFTs as a new
asset class.
Christie’s & Sotheby’s Auctions
Feb
2021
March April
Sept
Nov
2022
March Oct
July
Aug
Dec
The Bored Ape Yacht Club (BAYC)
profile picture (PFP) NFT collection
started minting. The collection
consists of 10,000 pictures of
monkeys that each have their own
traits of different rarities. The BAYC
drop laid the foundation for a new
wave of PFP NFT projects.
Bored Ape Yacht Club Launch
The event lasted for four days and
attracted some of the biggest brands
in the fashion industry, such as
Tommy Hilfiger or Dolce & Gabanna ,
which showcased some of their
upcoming physical collections in
Decentraland.
Decentraland Fashion Week
NFT NYC was a major NFT
conference held in New York City
that lasted for five days. It was
attended by various thought leaders
in the NFT, metaverse, and
blockchain gaming space.
NFT NYC
Yuga Labs, the founder of the BAYC
brand, acquired the IP rights for
LarvaLabs ’ NFT collections
CryptoPunks and Meebits .
Yuga Labs Buys CryptoPunks
The Ariana Grande concert in
Fortnite lasted three days and
attracted over 27.7 million unique
users. It also garnered over 11 million
live hours streamed on Twitch and
YouTube combined.
ArianaGrande Fortnite Concert
TheNFT fantasy football platform
raised $680 million inwhat wasthe
largest funding roundofany
blockchain gamingproject.
Sorare’s $680 Mfunding round
Facebook announced during the
Facebook Connect conference that
it is rebranding to Meta as part of
plans to increasingly shift the
company’s focus toward the
metaverse.
Facebook rebrandstoMeta
RTFKT Studios is one of the most
popular digital fashion brands on the
market. It has amassed a sizable
audience and is known for its virtual
sneakers and popular NFT
collections.
Nike acquires RTFKT Studios
Nyan CatNFT Sale
The Nyan Cat NFT, a one -of -a -kind
digital collectible inspired by the
popular GIF, sold for almost
$600,000 in an auction on
Foundation, a marketplace for art
NFTs.
© Newzoo2022
Executive Summary
© Newzoo2022
1. Big Tech and Brand Involvement
• Consumers spend increasingly more time in virtual worlds, and successful brands
follow them. As a result, consumer- facing companies will be forced to develop a
metaverse strategy to stay connected with their (future) customers and remain
relevant.
• Since there is no single “right” approach to tackling the metaverse, different brands
have approached it in distinct ways. Now, these can range from IP activations inside
virtual worlds and acquiring virtual land NFTs to outright M&As.
2. Roblox: A Peek into the Future of Virtual Worlds
• As gaming has increasingly transitioned towards a multi- layered experience that
encompasses viewing, playing, and socializing, Roblox has become one of the most
popular games on the planet and has managed to attract large numbers of creators,
players, events, and brands to its ecosystem. By analyzing its success, we can draw
important lessons and better understand the direction that the virtual worlds of the
future should (not) take.
• For all the praise it received, Roblox only allows developers building on its platform to
retain just above 25% of the revenue they generate. The evolution of pay structures
will be interesting to monitor, particularly considering the bad publicity that Meta
received for announcing an almost 50% take rate for developers building on its
proprietary virtual world, Horizon Worlds.
3. The Future of Music and Entertainment
• The inability for artists to go on tour during the COVID- 19 pandemic has forced them
to seek alternative revenue streams. Consequently, the last year has seen several high –
profile musical events in virtual worlds like Fortnite or Roblox, which managed to
pique the interest of millions of fans around the world.
• Music NFTs are an alternative way for artists— most of whom depend on extractive
record labels and centralized platforms to earn a living —to increase their earning
potential. This allows them to sell their singles, EPs, or albums as NFTs to their most
loyal fans.
4. The Future of Fashion and Luxury Brands
• As time spent in virtual worlds increases, our digital identity and representation will
grow in importance. This opens a wide array of opportunities for traditional and digital
fashion brands alike to dress our digital selves with in -game skins and virtual garments,
thus giving rise to the direct -to -avatar business model.
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Executive Summary (1/3)
The key global trends that are currently shaping the metaverse,
blockchain gaming, and NFT space
© Newzoo2022
• This also has important implications for the future of e -commerce. As the transition to
digital accelerates, consumers will want the choice of shopping in immersive online
environments that feature photo -realistic representations of a brand’s physical
garments, again increasing the incentives for fashion brands to invest in their digital
presence.
5. Play to Earn and Blockchain Gaming
• The early market for blockchain games is overrun by titles that feature rudimentary
gameplay without sustainable economies. This is natural, as complex gaming
experiences take time to develop. As time passes, we are likely to see more blockchain
games challenge traditional AAA titles in terms of technical complexity and —at some
point —size of the player base.
• Though blockchain gaming faces some notable challenges— particularly sustainability
and regulatory concerns— these are likely to be mitigated as the space matures.
6. P2E Guilds and the Future of Work
• Play to earn guilds have exploded in popularity in the last year. Their activities revolve
around acquiring and then loaning in -game assets to players who cannot otherwise
afford the high entry barriers of some blockchain -based titles. Their services are
generally popular in growth markets and usually depend on blockchain games offering
players enough (financial) incentives to engage with them.
• The future of work in the virtual realm extends beyond just gaming. As synthetic
environments and digital twin technologies— among others—become more advanced,
a wide range of “metaverse” native jobs will emerge to sustain our alternate digital
lives.
7. The Rush for Digital Real Estate
• The last 12 months have seen major brands like Samsung, Adidas, and Gucci jumping
on the bandwagon of digital- land NFTs. Acquiring digital real estate is essentially a bet
on the blockchain -based virtual worlds gaining in popularity but is also a low -risk way
for major companies to ensure they will be where their clientele is, should this become
a wide -ranging phenomenon in the future.
8. An Introduction to NFT Collections
• 2021 has undeniably been the year of NFTs, with several high -profile collections being
sought after for the boost in social status and financial incentives they offered. Despite
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Executive Summary (2/3)
The key global trends that are currently shaping the metaverse,
blockchain gaming, and NFT space
© Newzoo2022
the current market pullback, profile picture (PFP) NFTs are likely to be key elements
when it comes to digital identity in the metaverse.
• PFP NFTs are only a subset of the whole digital asset offering; virtual land, in -game
items, art, or utility NFTs are also popular among market participants.
9. The Transition from NFT Collections to Global IP
• The Bored Ape Yacht Club (BAYC) is an NFT collection made up of 10,000 cartoon
apes. Since its launch, it generated significant interest from celebrities and high -profile
individuals (though several celebrities were gifted their BAYC NFTs), being one of the
first NFT brands that managed to permeate into mainstream culture through music,
events, partnerships, and its dedicated network of individuals. This has prompted an
increasing number of NFT projects to extend their scope and become transmedia IPs
that span across multiple verticals.
• Loot is an exercise in decentralized IP building. Its evolution is fully controlled by its
community at large; everyone can build applications that enrich the Loot ecosystem
and bring it one step closer to becoming a major IP. Loot began a movement that was
then quickly adopted by other notable projects— like Treasure—and that will likely
reshape the way in which some brands of the future are born and evolve.
10. Crypto and the Promise of Interoperability
• Despite its limitations, Ethereum —together with its sidechains and layer 2s – is
currently the backbone of a sizable portion of the NFT & blockchain gaming space.
With the Ethereum merge –which will transition the blockchain from the unsustainable
proof of work towards proof of stake –on the horizon, it is poised to continue its rule
as the dominant smart contract platform.
• While interoperability at scale across games continues to be a hot topic among
metaverse enthusiasts, the path to adoption is currently filled with notable technical
and political roadblocks. Nevertheless, interoperability can potentially become a reality
as shared standards are being built and as player interest grows.
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Executive Summary (3/3)
The key global trends that are currently shaping the metaverse,
blockchain gaming, and NFT space
© Newzoo2022
10 Trends Shaping the
Metaverse
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1.1 Big Tech and Brand Involvement
All roads lead to the metaverse
Inthis early stage ofthe metaverse, itis brands
that stand togain themost byestablishing a
3 D, digital presence insidevirtual worlds.The
rush tobe present inthe metaverse isabet on
future generations spendingmoretimeonline
in increasingly gamifiedanddigital settings.
We already seethis today inthe gaming market,
where titleslikeRoblox, Minecraft, andFortnite
attract hundreds ofmillions ofusers every
month andarethe most popular gamesonthe
planet .While inpart accelerated bythe onset of
COVID -19 ,the transition fromphysical andinto
virtual worlds isalarger cultural shiftthathas
accelerated inrecent years.
As aresult, ithas become morechallenging for
brands toreach GenZand Gen Alpha through
traditional mediachannels liketelevision—which
have been thenorm inthe last decades .
Moreover, socialmedia andentertainment
platforms likeTikTok, Twitch,andTwitter —
among others—lack thegamified elements that
virtual worlds provide.Besides thefact that
advertising onthese platforms canbeintrusive
and irritating, itis also unidirectional .Individuals
are unable tointeract withthebrand thatis
being advertised inameaningful manner—they
can merely watch.This keeps conversion rates
at aminimum andmakes itdifficult forthe two
… sides
toform asubstantial connection.
Enter virtual worlds, wherebrands canestablish
a digital presence andbuild interactive
experiences foranyone toengage withina3D
environment .While itrequires moreeffort—
these experiences needtobe constantly
managed andrefreshed withnewcontent —they
are much morelikelytocreate apositive and
long- lasting impression ofabrand ifdone right.
Most traditional companies entertheWeb3
space toadvertise tothe younger generations
in away thatthese digital-native consumers
perceive asmore organic ,generally throughIP
activations insidevirtual worlds orby launching
NFT collections .However, thisneed notalways
be the case .The metaverse hypejumped into
mainstream attentionwhen
Facebookrenamed
the company toMeta .Facebook facesanaging
userbase andadrop inpopularity comparedto
platforms suchasDiscord orTwitter, which
currently accommodate mostofthe metaverse
discourse. WhileMeta isdeveloping its
proprietary virtualworld,calledHorizon Worlds,
and owns Reality Labs,thebusiness wingthat
focuses onVR, AR, and haptic technologies, its
focus ison building theplatform ofchoice—
through itsMeta Quest offering—forusers
seeking tojoin themetaverse .
Meta’s metaverse strategy primarily
revolves around haptics and VR
technology
After several temporary activations inside
Roblox,
Gucci established a permanent
presence in the virtual world with its new
Gucci Town.
© Newzoo2022
• HSBC’sfirstforay intothemetaverse comesin
the form ofapartnership withTheSandbox,
one ofthe most popular blockchain- based
virtual worlds.The banking giantintends touse
the platform asavehicle forfan engagement
by building educational financegamesforits
potential futurecustomers .
• WhileNike’s acquisition ofdigital fashion
company RTFKTStudios addsadigital
dimension toNike’s already popular physical
offering, itis also apowerful PRand revenue –
generating tool.RTFKT isone ofthe most
well -known brands inthe NFT space andisthe
creator ofseveral high-profile NFTcollections
such asCloneX orThe Meta- Pigeon .
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1.2 Big Tech and Brand Involvement
There is no one -size-fits-all solution for brands in the metaverse
• NBA TopShot Creator DapperLabsplans to
release officially licensedNFTsinthe form of
short videos thatcontain iconicplaysfromLa
Liga’s history .
• The partnership betweenNFLandEpic Games’
Fortnite resulted inover 3.3 million NFL
branded skinsbought byplayers in-game over
a two -month period.The collaboration netted
a combined $50 million andillustrated the
potential forbrand activations insidevirtual
worlds .
• Chipotle openedadigital storeinside Roblox
and offered itsfirst 30,000 visitors afree
burrito coderedeemable foronline orders or
inside physical Chipotle stores.
Nike Acquires RTFKT Studios
HSBC Buys Digital Land in The Sandbox
Dapper Labs Partners with La Liga
Chipotle Offers Discount Codes in Roblox
The NFL Releases Branded Fortnite Skins
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2.1 Roblox: A Peek Into the Future of Virtual Worlds
Roblox is currently one of the most popular games on the planet
Robloxiscurrently themost popular iteration of
a game asaplatform, havingreached over53.1
million DAUsonaverage in2021 .
2 However,
Roblox doesmore thansimply providing a
platform forplayers .According toYonatan Raz-
Friedman, CEOofSupersocial ,Roblox sitsatthe
intersection offour major verticals :
• It’s agame engine, allowing developers and
individuals tobuild theirowngames ontop of
Roblox.
• It’s avirtual socialhubandmeeting placefor
many ofits users .
• It’s aplatform thatallows forthe publishing
and distribution ofcontent .The developers
of Roblox gamescanpromote andadvertise
their experiences onthe Roblox marketplace
in exchange forafee .
• It’s acloud service provider. Robloxhas
made thetransition fromAWS toward
building itsproprietary cloudinfrastructure .
Gaminghasevolved overthelast decade to
become amulti -layered experience encompassing
playing, viewing, socializing, andengaging. All
these elements cometogether inthe wildly –
popular Roblox.Morethanagame, Roblox isa
platform where players cancreate andcapture
value -a feature whichmanygames from
previous generations didnot have .
Thetransition togames asaplatform provides
publishers andcontent creators withablank
canvas thatinvites awide range ofnon- gaming
experiences suchasmusic concerts, fashion
shows, IPactivations, andmedia partnerships,
among others.The appeal ofsuch opportunities
is powerful, forthey alsoattract members ofthe
non- native gaming audience. Importantly,
players ofall kinds seethese metaverse -like
experiences asplaces wheretheycanexpress
their identity, hostsocial events, orfree
themselves oftraditional societalstandards .
1 https://playadopt.me/
2 Roblox Corporation Q1 22 Financial Results
Roblox Premium is a monthly subscription
that provides players with Robuxeach
month. It also offers perks like in -game
discounts on skins and other accessories. Adopt Me! Is a Roblox game developed by
Uplift Games that has been played over 28
billion times and which currently features
64 million MAUs.
1
Jailbreak -one of the most popular games
on Roblox –was created by two amateur
developers. On Roblox’s platform, the
game creation process is not only limited to
professional studios.
Ghostopia
–a Roblox game developed by
professional game studio Supersocial–
partnered with MGM and brought the
characters from the Adams Family to the
game during Halloween.
© Newzoo2022 18
2.2 Roblox: A Peek Into the Future of Virtual Worlds
Developers building on Roblox only retain a small percentage of the
revenue they generate
The Cash Payout Structure of Roblox 1
• Robloxisnot aprofitable company,having
registered anet loss ofover $162 million inQ1
2022 alone.
4Therefore, loweringitstake rate
to match thatofits competitors (The
Sandbox hasatake rateof5% on digital asset
sales, though only300KMAU) canprove
challenging andcanlead tofurther growth
slowdowns .Ultimately, Robloxonlyneeds to
be concerned aboutitspayout structure if
one ofits competitors reachesasimilar scale,
which iscurrently farfrom thecase .
• Roblox isfacing recent declines inuser
growth andincreased competition froma
growing numberofpopular gamecreation
platforms (GCPs).
Despite itsrecurring netlosses—which are
primarily reinvested backintotheplatform to
expand itsalready dominant position—Roblox is
still currently theundisputed marketleader.
However, withEpic Games doubling downonits
vision forthe future —including Fortniteand
other metaverse -adjacent investments suchas
Manticore Games—and with many other
(blockchain -based) GCPslikeCrayta ,Zepeto,
and Kogama seekingalarger pieceofthe pie,
the race forthe metaverse ison.
As
opposed totraditional distribution platforms
like Steam andGoogle Play,which feature a
standard 30% cut onallgame orin-app
purchases formost developers, Robloxtakesa
much higher fee—close to75%—from game
developers buildingonitsplatform .
2 Thisis
substantial, evenwhen compared toMeta
announcing a47.5% take rateforHorizon
Worlds, amove thatgenerated ample
community backlash.
However, partofthe difference betweenRoblox
and traditional digitalstorefronts canbeexplained
by the various advantages associatedwith
building gamesonRoblox ,such asthe large user
base (53 .1 M DAU
3)and thealready existing game
engine— RobloxStudio—that game developers can
tap into.Compared totraditional games,creating
Roblox experiences ismuch moreaccessible in
terms ofboth manpower anddevelopment time.
Individuals canalso earn money fromcreating and
selling in-game items, skins,andaccessories .
These canbesold inside experiences —which
resemble in-game purchases intraditional
games —or on the Roblox marketplace .In the
latter case,Roblox’s cutincreases to70%.The
high takerates areespecially dangerous when
considering thefollowing :
1,2 https://developer.roblox.com/en -us/articles/developer -economics
3,4 Roblox Corporation Q1 22 Financial Results
Roblox game developers can retain up to
28.1% of the total earnings generated by
their experiences.
30%
30%
40%
Creator of the item
Seller of the item
Platform
© Newzoo2022
Withphysical concerts andtours grinding toahalt during theCOVID -19 pandemic, artistssought
alternative waystoperform andconnect withtheir fans.Many artists foundanopportunity to
perform invirtual worlds likeRoblox orFortnite asalternative concertvenues.
The popularization ofvirtual artistsemphasizes thataphysical existence isno longer aprerequisite
for success andthat (young) consumers areopen tothe idea offully digital artistsandinfluencers .
However, virtualbeings neednotbelimited tothe music realm—other entertainment sectorslikeTV
or film, among others,arelikely tofollow suit.
Justin Bieber performed hislatest album,
Justice, infront ofafully digital crowd on
Wave, anincreasingly popularvirtual
platform .What distinguishes thisvirtual
concert fromothers isthat theartist
performed liveinastudio whilewearing a
motion -capture suit.
His voice andbody movements werethen
transmitted inreal -time tothe audience
inside thevirtual world.During theshow,
audience members couldinteract witheach
other andtheartist, allowing fansto
connect withJustin Bieber moreclosely .
TheRiftTour amassed 1.3
million concurrent viewersat
its peak, withmore than75%
watching onTwitch. Moreover,
the concert generated 11.03
million livehours streamed on
Twitch andYouTube
combined.
0.0M 0.4M0.8M 1.2M
1.6M
8/1 8/6 8/118/16 8/218/26 8/31
19
3.1 The Future of Music and Entertainment
Virtual concerts and influencers become commonplace as the
transition to digital accelerates
The Impact of Ariana Grande’s Rift Tour
Peak Concurrent Fortnite Viewers in August 2021; YouTube & Twitch Combined
Perform live in virtual worlds
Interact with millions of fans
in a digital setting
Equip motion capture
suits
Twenty One Pilots Concert in
Roblox Coldplay Concert in
Joytopia FNMeka ,virtual influencer with
> 10 .1 million TikTokfollowers .
© Newzoo2022
• Earningaliving wageasan artist canbechallenging .Record labelsretainanywhere between
50 % to 90% of an artist’s revenue,
1andstreaming platformslikeSpotify payoutanywhere
between $0 .003 and$0 .005 perstream .
2
• Touring andselling merchandise areusually greatwaysforartists tosupplement thesewages,
but theCOVID -19 pandemic effectively removedthisincome, withphysical concerts andtouring
not being anoption anymore .
• Evenforhigh- profile bandsandartists ,touring canbenotoriously expensive,aswell astime –
and energy -consuming. Relyingontouring asasizable revenue -generating activitycantake atoll
on the (future) creative abilitiesofmany artists .
• NFTs canoffer artists theability tosell their singles, EPs,oralbums asNFTs, whileoffering
streaming royaltiesorother perks—such asconcert ticketsorexclusive VIPaccess —toNFT
owners .This creates amore intimate fan-artist relationship whilestillallowing fanstodirectly
support theirfavorite artistsandallowing artiststoretain mostrevenues forthemselves .Unlike
the traditional modusoperandi, musicNFTshavethepotential tomake bothfansandartists
better offwhile leaving theextractive intermediaries, i.e.,record labels,outofthe loop.
Can NFTs Reshape the Music Industry?
80%
8%
5%
7%
Diplo
offered acombined 20% of the
streaming royaltiesfromhislatest
single, Don’tForget MyLove, topeople
who acquired theNFT version ofthe
song onmusic platform Royal.The
music NFTsweresoldinthree different
editions withvarying raritiesandprices
and willallow NFTholders toshare in
part ofthe revenue generated bythe
song ontraditional streamingplatforms.
Chart Source: https://royal.io/ 1Indie Music Academy 2 Forbes
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3.2 The Future of Music and Entertainment
Music NFTs pave the way for increased revenues and fan engagement
Royalty distribution of Diplo’s Don’t Forget My LoveNFT Single
Coachella,oneofthe most popular music
festivals inthe world, allowed all2022
attendees toclaim anInBloom seedNFT.The
token provided immediate benefitstoall
holders ,such asvouchers forfood and
beverages duringthefestival, fasterentrylines,
and access tolimited- edition merch.More
importantly, thetoken evolved throughout the
festival, havingthechance tobloom intoone
of six rare flowers, whichprovided aselect few
with VIPupgrades, 2023passes, andother
premium festivalupgrades .
Diplo
Platinum Token Holders Gold Token Holders
Diamond Token Holders
© Newzoo2022 21
Spotlight on: Improbable
Herman Narula, CEO
Improbable
Improbable is a metaverse technology company pioneering new ways to connect, play, create, and build value
across interconnected virtual worlds.
Herman Narula, CEO
Q1: Though interoperability acrossgames and
experiences hasbeen ahot topic inthe last year, there
are some notable roadblocks thatcurrently preventit
from becoming anindustry standard.How areyou
thinking aboutinteroperability happeningatscale in
the gaming industry?
Interoperability maysound likeaHoly Grail right now,
and it’strue thatitdoes embody thetrue promise of
the metaverse, theseamlessness andspontaneity you
would expect.But interoperability alsomeans different
things todifferent people.AtImprobable, webreak
interoperability downintopeople, places,andthings .
What might surprise peopleisyou canfind current
examples ofall ofthese across thegames industry .
“ Interoperability ofpeople” ishaving acommon
identity youcantake from place toplace withyou,
including thingslikeyour profile, friendslist,and
achievements .You canseethis inaction onXbox Live,
Steam, orRoblox, although weneed towork onfurther
decentralization todetach theseprofiles fromplatform
owners .
“ Interoperability ofplace” isyour ability tomove from
experience toexperience inafrictionless manner.If
you’ve played SteamVR orOculus Questandmoved
between twoexperiences, oreven navigated between
two pages onaweb browser, you’veexperienced some
of this already .
Finally, “interoperability ofthings” referstodigital
objects youcantake from experience toexperience
that don’t justlook thesame, butthat alsohave
consistent meaningandbehaviour .It’s the foundation
of true cross- metaversal economies, andwhat most
………….. people
thinkofwhen theyhear“interoperability ”. There
was aglimpse ofinteroperability ofthings inSecond
Life, which launched wayback in2003 .It featured
objects authored bytotally different creatorsthatwere
able tocoexist inthe same experience andinteract with
one another .Making thiswork inamore general
context isthe one bigchallenge .
It goes without sayingthatthecurrent levelof
interoperability islimited, butatImprobable we’re
working onenabling thisinthe worlds we’recurrently
developing andstrongly believeitneeds tobe
designed intocontent fromthevery beginning .
Q 2: What isthe benefit ofsupporting interoperability
for traditional gamedevelopers andpublishers?
Interoperability opensthedoor tomore valuable
experiences involvinglargegroups ofpeople which
simply won’tworkoutina“walled garden”.Developers
and publishers alreadyclearlyseethevalue of
interoperability ofpeople, withXbox LiveandSteam
allowing youtoshare yourprofile across games, and
interoperability ofplaces whenyoucancirculate in
between separategameexperiences inthe same world.
The bigchallenge isaround interoperability ofthings,
which isas much about incentives asabout technical
obstacles .Balance incompetitive gamesisadelicate
thing, thusbringing weapons fromCallofDuty into
League ofLegends doesn’tparticularly makesense.In
more social experiences, thevalue isclearer ;studios
and game developers shouldseehow some oftheir
users would appreciate takingthecollectibles gathered
in agiven game withthem toanother title,such that
they areable tokeep theskins they’ve acquired .
© Newzoo2022 22
Spotlight on: Improbable
Herman Narula, CEO
Thiswould alsoallow companies topreserve and
guarantee thevalue ofrare items, including moving
them intofuture iterations ofthe game itself.
Q 3: You’ve recently partnered withYuga Labstohelp
them develop Otherside .What doyou think willattract
large numbers ofplayers tothe game, especially
considering thatsimilar “metaversal” experiences
include someofthe most popular gamesonthe
planet?
We areobviously ahuge fanofwhat Yuga Labsis
developing withOtherside andbelieve thisworld will
blow people’s mindswhileupending decades-long
ideas ofwhat gaming isand what’s possible withopen
platforms .Yuga Labsis,to date, thelargest andmost
successful creatorofNFTs .Its culture andintimate
understanding ofthe web3community’s expectations
put itat the forefront ofwhat canbefun forits
community .
For Otherside, weare working onmaking itfully
interoperable withallother metaverses builtonthe M²
network andother IPs.And with thepower ofour
Morpheus technology, over15,000 players willbeable
to interact simultaneously inasingle place, connect
with natural voicechat(even incrowds ofthousands),
and experience rich,immersive gameplaysupported by
AI and physics. Thisisnot currently something youcan
find easily inother metaversal projects.
Q 4: What arethe key elements thatcurrently prevent
shared virtualspaces frombeing inhabited bylarge
numbers ofplayers?
The central challenge isatechnical onestemming from
how networking architecture currentlyworks.Popular
games onthe market typically featurearound60-100
players perserver because networking requirements
scale quadratically .Simply put:a 200- player gamehas
four times thenetworking requirements ofa100- player
game. Ifwe’re going tobring tensofthousands of
players together inshared virtualspaces, weneed a
fundamental changeintechnology . Q
4.1 : How isImprobable tacklingthisissue, andhow
do you seeitevolving inthe medium- to-long term?
Our Morpheus technology tacklesthisscaling issue,
overcoming thebarriers ofdensity andpresence
traditionally metwithin games andreal-time
experiences .It enables enhanced socialinteraction and
a sense ofpresence insidevirtual spaces, withover
15 ,000 realusers interacting inthe same place, atthe
same time,inahigh fidelity, lag-free experience. Every
player’s avatarisfully customizable andcanseethe
entirety ofthe crowd heorshe isin.
We’ve already beenrunning publicteststoprove the
technology, bouncingover4000 liveplayers around
like tennis ballsinside Scavengers spin-offScavLab .
And inapioneering liveevent withK-Pop starAleXa,
over 1000 fansfreely roamed thearena, danced, and
interacted withthesinger .Our current focusfor
evolution iscontinuing toincrease thescale andfidelity
of what’s possible untilwe’re abletocreate worlds that
support virtually unlimited players.
Q 4.2: When doyou think we’llreach onemillion
players inthe same virtual world?
The metaverse isstill inits infancy, butweare
obviously veryoptimistic abouthowfastwe’ll hitthis
milestone .All ittakes isafew solid experiences and
worlds tobe successful forthe appeal togrow .We’re
pushing theboundaries oftechnology everyday,sowe
see amillion players inthe same virtual world
happening soonerratherthanlater.
Q 5: How doyou seetheevolution ofsynthetic
environments andvirtual simulation? Whatareits
implications forthe future ofwork andhuman society
in general?
We’re continually seeingmodels andsimulations
become morepowerful, moreaccurate, and,most
importantly, moreuseful. Thelatest synthetic
environments bringthese together, andasaresult
they’re rapidlyevolving beyondhelpingusaddress
……….
© Newzoo2022 23
Spotlight on: Improbable
Herman Narula, CEO
isolatedissuesandtowards beingabletoaddress
wider, morecomplex, interrelated challenges.And at
this stage, weare only justscratching thesurface of
what’s possible .
By using synthetic environments tobring together
different modelsthatgovern different systems, our
clients areable tounderstand howthey operate and
react todifferent situations.Ultimately these
simulations allowthemtoextract thefullvalue oftheir
data, toanalyze challenges morerigorously forfaster,
more effective, andbetter -informed decisions, beit
about howtorun critical infrastructure, combatclimate
change, orrespond topandemics .
Q 6: Fast forward to2035 .What doyou think virtual
worlds willlook like,andwhat willthekey differences
be between thecurrent andfuture iterations of
immersive gamingexperiences?
You could compare thecurrent metaverse tothe early
stages ofthe internet .In the early daysofthe internet,
buying booksonlinewasanawful experience. Butthe
reason youtolerated itwas because youcould
purchase booksyoucouldn’t otherwise easilyfind.And
I think we’re atthat phase withthemetaverse. Weneed
to find those experiences that,despite thejankiness ,
are worth doing—those thatwillchange theway we
experience thingsandthat wecould onlyfindinthe
metaverse. Itis that same leapfrog thatweshould see
in the coming yearsanditerations ofthe metaverse.
We should alsocome toterms withtheaccessibility
issue :do we need ARorVR tobe immersed? We
personally don’tseeitthat way, buthardware
improvements shouldalsocome intoplay inthe coming
years. Finally, therelationship betweenphysicaland
virtual spaces shouldalsomature, andbeenriching, and
this issomething thatwillmake ahuge difference in
how weembrace virtualworlds. Q
7: What isyour boldest prediction whenitcomes to
the evolution ofthe metaverse inthe next fiveyears?
The arrival ofthe metaverse marksthebeginning ofa
new ageofexploration andopens thedoor toanew
understanding ofhow wefunction andform society .
How wecan work towards positivefrontiers in
psychological fulfilmentandmental health;recenter our
economy andmodes oflearning andeducation around
individual needs;forge remarkable newcommunities
built onshared interests andexperiences ;and bring
about aworld asinteresting andfulfilling thantheone
we are afraid toleave behind .This isthe promise and
the hope .
© Newzoo2022 24
4.1 The Future of Fashion and Luxury Brands
Virtual runway shows offer a peek into the future of digital fashion
Dolce & Gabbana used virtual cat avatars to exhibit their fashion line
during the Metaverse Fashion Week.
1www.voguebusiness.com/technology/metaverse -fashion -week- the-hits -and -misses
• The first Metaverse FashionWeek(MVFW) tookplace in
Decentraland atthe end ofMarch 2022,spanning fourdays .
• The event attracted morethan60fashion andluxury
brands ,including TommyHilfiger, DolceGabbana, Puma,
and digital -only fashion houseTheFabricant .More than108
thousand uniqueusersattended theevent .
1
•MVFW offersaglimpse intothefuture offashion. Given
that consumers —particularly GenZand Gen Alpha —spend
increasingly moretimeonline, fashion brandsarelikely to
move partoftheir activities awayfromtheirphysical
business andinto virtual worlds.
• As virtual worlds willbepopulated by3D avatars wearing
branded digitalgarments, weexpect ashift from D2C to
direct -to- avatar (D2A). Brands willserve notonly
consumers butalso their digital representations .
• This shift brings several advantages, notablyaccessibility
and sustainability .While manyconsumers areusually
priced outwhen itcomes tophysical luxurygarments,
digital clothing ispoised tochange thestatus quo,allowing
brands toextend theirreach whiledecreasing their
ecological footprint.
The Transition toD2A
Louis Vuitton designed a set
of League of Legends skins. Balenciaga released a set of
branded Fortnite skins.
Estée Lauder offered 10,000
free NFT wearables to
Decentraland users.
Tommy Hilfiger showcased
its Spring 2022 collection
and allowed users to
purchase NFTs for their
avatars or physical garments
from within the virtual world.
The daily runway shows took
place in an arena built inside
the newly opened luxury
district in Decentraland.
A Gucci bag in Roblox sold
for more than its physical
counterpart.
Meta has partnered with
Balenciaga, Prada, and Thom
Browne, and plans to create a
digital fashion marketplace
where users will be able to
purchase in- game skins for
their digital avatars.
© Newzoo2022 25
4.2 The Future of Fashion and Luxury Brands
A paradigm shift is brewing in the fashion & e -commerce industry
Asthe gap between physicalandvirtual continues toblur, digital identity ispoised tofurther gain
in importance whencompared toone’s physical appearance .Higher -fidelity experiences and
better hardware willencourage manyconsumers tospend moretimeinimmersive virtualworlds
where 3D avatars willbethe primary medium ofinteraction withother people. Therefore, itis
vital thatavatars anddigital garments canreflect auser’s personal tastes.To this end, anumber of
digital -only fashion houseshavetaken themarket bystorm.
Digital fashion houseAuroboros
debuted itsfirst digital, ready-to –
wear fashion collection atLondon
Fashion Week2021. The
Fabricant soldthe world’s
first digital dressonthe
blockchain— calledIridescence —
for $9, 500. RTFKT
Studios—now owned by
Nike —has become oneofthe
most popular digitalfashion firms
by selling digital sneakers .
Digital is the new black
M-XR aims to produce hyper –
realistic models of objects in
the real world.
AnamXR plans to create high-
fidelity virtual worlds and
shopping experiences for
brands.
The transition to3D immersive environments ispoised tosubstantially transformthetraditional
shopping experience .Digital in-store shopping sessionswilllikely become morerealistic and
commonplace asXR and VRtechnologies evolve.Consumers willbeable tostroll through digital
storefronts andmake well-informed buyingdecisions asmore photo- realistic solutions arebrought
to market .AR filters willalso play animportant role,asthey allow consumers totry ondigital
garments seamlessly withoutrequiring themtobe physically presentinstores .
Ready Player Fashion
Perfitly allows consumers to
create realistic avatars and to
try on garments digitally
before purchasing them.
Matterverse enables brands
to create hyper- realistic
virtual stores.
Photo -realistic modelsofreal -life
garments andimmersive shopping
experiences areessential, ashigh –
end fashion isas much about
brand building asitis about the
product itself.Moreover, physical
elements thatare,fornow, absent
from digital stores—liketheability
to touch orsmell garments —are
key tocreating adeep connection
between consumers andbrands
that does notcurrently existinthe
online realm.Solving forthese
issues willlead tolonger digital
shopping sessions,increased
conversion rates,andlower
overhead andreturns, allthe while
allowing consumers toenjoy the
comfort oftheir homes .
© Newzoo2022 26
Spotlight on: Auroboros
Alissa Aulbekova & Paula Sello, Co- Founders
Auroboros
Auroboros is the luxury fashion house of the Metaverse. Creating culture and identity across physical and digital
worlds since 2021.
Alissa Aulbekova & Paula Sello, Co -Founders
Q1: Tell usabout Auroboros .What makes itunique
when compared toother digital fashion houses?
Auroboros isthe leading luxuryfashion houseofthe
metaverse, createdbyand forthe next generation .
Merging scienceandtechnology inthe 21st century, we
craft identity andstyle withphysical coutureanddigital –
only clothing .A revolutionary dualmodel utilising Web3
technologies combinedwithfuturistic creativevision,
beautifully craftedproducts andcarefully curated
experiences ,we are bridging thegap between reality
and themetaverse usingfashion asavehicle .
Coming soon,ourfemale founders, AlissaAulbekova
and Paula Sellowillberepresented bytheir owndigital
Auroboros Avatars—as the main heroines —breaking the
fourth wallandshowcasing aunique andinnovative
way forfounders toengage withtheir community, thus
p roviding adeeper dimension forallAuroboros NFT
holders tohave direct accountability and
representation offemale leadempowerment inWeb
3. 0 and digital fashion.
Q 2: How doyou seedigital fashion evolving overthe
next decade, andwhat arethe key pain points thatstill
need tobe addressed?
At Auroboros ,we see digital fashion evolving to
become intertwined withourphysical landscape. We
understand thereisadesire toexperience digital
clothing onthe body, sowe believe incombining both
the physical anddigital realms tocreate amixed reality.
Hence, duringLondon Fashion Week(LFW) lastyear,
we released ouriconic Venustrap DigitalDressasan
augmented realitySnapchat filtersousers could wear
………….. Auroboros
digitalgarments inthe real-world .The filter
reached morethan2.5 million usersoverthecourse of
our LFW launch.
Another consumer desireisthe need totransport your
digital wardrobe ofwearable assetsfromworld to
world, providing interoperability acrossdifferent virtual
worlds .This isan area which weatAuroboros have
already begunandcontinue toexplore, havingmade
our digital collections availablewithingaming, social
media andnow digital venues, asemphasized byour
recent venture intoDecentraland .
The keypain point isthat thecurrent technology
doesn’t alwaysallowthedigital toseamlessly blend
with reality, souser experience isan area thatstill
needs tobe addressed .
Q3: From yourconversations withother traditional
brands, whatarethe opportunities theyaremost
interested inand excited aboutwhenitcomes tothe
future ofdigital fashion?
Traditional brandsareexcited aboutthevalue andutility
we can provide through fashionNFTs.Through NFT
ownership, youcanoffer devotees ofyour brand
exclusive activations andreleases, suchasaccess toIRL
and virtual events andlimited -edition assets.Therefore,
NFTs havethepower tostrengthen acommunity, which
is why weatAuroboros arethrilled tobe releasing our
first NFT collection laterthisyear.With thisrelease, we
will beoffering ourcommunity anew andmore
meaningful waytoconnect withtheAuroboros brand,
alongside thechance toco-create anew world .
© Newzoo2022 27
Q4.1 : Digital identity hasgrown inimportance inthe
last years asconsumers —particularly GenZand Gen
Alpha— arespending increasingly moretimeinvirtual
worlds suchasRoblox orFortnite .What areyour plans
for tapping intothisexpanding demographic?
Built byand forthe next generation, atAuroboros we
have already engaged withtheGen Zand Gen Alpha
demographics andwillcontinue todo sointhe future .
The digital- focused visionofour brand comes naturally,
as we grew upsurrounded bythe evolution ofthe
internet andtheonline world.Most recently, we
participated inthe first-ever Metaverse FashionWeek
in Decentraland ,showcasing ourBiomimicry Digital
Collection withaperformance fromourmuse, the
acclaimed singerandartist Grimes.
With thisimmersive showcase, wepresented an
Auroboros DigitalBodysuit Wearable asworn by
Grimes’ avatar,whichvisitors couldpurchase asaskin
to wear within Decentraland .
Q 4.2: What arethe key elements thatdifferentiate
your garments fromother digital fashion itemsor
traditional in-game skins?
The release ofAuroboros brandedskinsacross
platforms areinstantly recognisable, duetothe
visionary, nature-tech aesthetic anddigital identity that
Auroboros hasdistinctly created.
Q 5: Traditional luxurybrands likeDolce &Gabbana,
Louis Vuitton, andGucci havealready released their
own digital collections orbranded skinsinside games,
and they arelikely tobe followed byaplethora of
other (fashion) brandsinthe future .Do you see
Auroboros asbeing indirect competition with(some
of) these companies? Ifyes, how doyou plan on
tackling thatcompetition?
As afemale -led, community -driven metaverse native
luxury fashion house,Auroboros isin aleague ofits
own .We arebuilding thefirst digitally nativeluxury
fashion brandwithacommunity oflike-minded
creators, collectors andfashion enthusiasts, usingWeb
……… 3.
0 technologies combinedwithafuturistic creative
vision, andcarefully curatedexperiences .We
encourage historicbrandstoengage withthe
metaverse. However,asnatives inthe space, webetter
understand thevalue andutility thatissought afterby
the next generation .
Q6: How doyou view therelationship between
physical anddigital fashion? Doyou consider themto
be two sides ofthe same coinordifferent concepts
targeted towarddistinct demographics?
At Auroboros ,whilst ourdigital ready-to -wear and
physical coutureexistinseparate realms,both
collections arebound together thematically .Our first
collection, Biomimicry, exploresavision ofnature -tech
across thetwo landscapes .The Auroboros physical
couture collection consistsofmade- to-order wearable
pieces ofart that utilise acrystallising chemicalreaction
to metamorphose theentire orpart ofthe couture .
These pieces areintended asexhibition piecesorfor
special eventsandtherefore drawadifferent
demographic toour digital collection .Our digital
collection targetsWeb3.0 natives, including Millennials
and Gen-Z’s that have astrong affinity forartistry,
technology andgaming .
Q 7: What isyour boldest prediction whenitcomes to
the evolution ofdigital fashion inthe next decade?
Whilst themedium ofdigital fashion hasbeen around
for along time inthe form ofcharacter andavatar
wearables withingaming andVFX costumes in
Hollywood films,weare still early oninits evolution
into theWeb 3.0 space, sothe trajectory isdifficult to
accurately predict.
Our boldest prediction wouldbethat thefashion
industry willbecome predominantly digital-first,
producing garmentsdigitallybeforecommitting to
material manufacture .The advantages ofthis approach
would include lessmaterial waste,allowing brandsto
see how wellpieces perform beforeselecting which
items tobring intothereal world .
Spotlight on: Auroboros
Alissa Aulbekova & Paula Sello, Co- Founders
© Newzoo2022 28
5.1 Play to Earn and Blockchain Gaming
The early iteration of blockchain games lacks the “fun” element
• Play-to -earn (P2E) isanovel business modelinwhich gamers arerewarded withcryptocurrencies
for playing aspecific title,generally asafunction oftheir performance .Most P2E native titleshave
a blockchain elementandgenerally requireplayers toset upacrypto walletinorder toplay them.
• P2E games haveseenexplosive growthinthe last year, fuelled inpart bythe uneven impactof
COVID -19 across theglobe. Theyhaveprimarily benefited individuals ingrowth markets whowere
left jobless bythe pandemic andturned totitles likeAxie Infinity tosupplement theirincomes .
• As the space isstill young, themarket iscurrently dominated byfinancially -oriented P2E titles
whose corefocus ison the economic aspectratherthanthegameplay itself.This ispartly
because developing complexgamingexperiences isatime- consuming anddelicate process.
Consequently, mostofthe current blockchain gamesareplagued withsustainability issues.
Players arenot incentivized toplay most titlesforreasons otherthanfinancial gain,which leadsto
a system thatcanonly sustain itselfifthere isacontinuous influxofplayers tothe game.
• The core audience forthe current iteration ofblockchain gamescomesfromgrowth markets such
as the Philippines, Vietnam,andBrazil .Most players inthese countries arenot primarily interested
in the richness ofthe gaming experience, butrather theease withwhich theycanusethese games
as income- generating activities.This may explain whygames withrudimentary gameplayhave
picked upinpopularity —they provide aneasy on-ramp forearning- oriented players.
TheSandbox Season2Alpha lasted fora
month andattracted over300Kunique active
users tothe virtual world.
1,2CryptoSlam ! data
The Pros and Cons of Blockchain Gaming
• Player ownership of in-game
assets
• The ability to earn while
playing the game
• The ability to freely trade in-
game assets
• Decentralized decision –
making through DAOs
• Composability —the ability to
build on top of already
existing applications without
the need to start from
scratch
Pros
Though there are many
obstacles for the mainstream
adoption of blockchain gaming —
most notably the gameplay
experience —they are likely to be
mitigated as more resources and
expertise are devoted to the
space.
However, it remains to be seen
whether and in which form will
P2E take off as a business model.
While early success in growth
markets is a promising sign, it
need not be indicative of future
prosperity.
Current Verdict
• Some games have high entry
barriers
• Gameplay is still rudimentary
and highly focused on
economic gain rather than a
fun player experience
• Most P2E games are currently
not sustainable
• Regulation concerns
• Player onboarding is difficult
given the need for crypto
wallets
• Most native gamers’ distaste
for NFTs and blockchain
Cons
49%
of unique wallets interacting withdecentralized
applications wereactive inblockchain gamesasof
December 2021.
1
The number ofunique activewallets (UAW) does
not automatically translateintodaily ormonthly
active users.Players generally havemore thanone
wallet, especially ingames thatrunonblockchains
with lowfees such asWAX orHarmony .
© Newzoo2022
5.2 Play to Earn and Blockchain Gaming
Hype aside, blockchain gaming has yet to reach a mainstream audience
29
AxieInfinity isacard collectible titlethat has
been theposter childofthe blockchain gaming
movement .While itbroke allthe records inthe
P 2E space andpioneered someimportant
concepts, italso poses several challenges .
Most importantly, itsin-game economy was
not sustainable —itssuccess depended on
continuous usergrowth .Once growth stalled,
the price ofthe in-game token started to
decrease, makingthegame lessattractive to
other users.At itspeak, AxieInfinity hasseen
over 2.7million unique wallets connecting to
the game daily.
1 DappRadar data
GuildofGuardians isatop -down action RPG
on mobile withover 150,000 players onthe
waitlist .Though ithas notyetbeen released,
the title generated substantial interest,
managing tosell several wavesofin-game
NFTs.
While mostP2E titles focus oncreating
experiences forPC, mobile maybewhere the
early wave ofblockchain gamesachieves
mainstream success,given theplatform’s
nearly threebillion gamers whoaremore
likely tobe interested inbite- sized, time-filling,
or less complex gamingexperiences .
Illuvium isamong thefirst AAA blockchain
games andone ofthe most anticipated titles
on the market .It is an open -world RPGwhere
players needtofind andcatch creatures
called Illuvials ,which canthen bebred, traded,
evolved, andused toengage inbattles with
others .
Illuvium hasrecently raisedover$72 million
after selling itsfirst 20,000 plots (outof
100 ,000 )of land. Land comes indifferent tiers
and grants players different earning,building,
and resource gathering opportunities.
Employing suchastrategy iscommon formost
blockchain titles–raising largeamounts of
funds byselling NFTs,which arethen used to
fund thedevelopment ofthe game.
Splinterlands isacard collectible game(CCG)
that featured over580,000 active usersin
March 2022,making itone ofthe most played
blockchain gamescurrently .Uniquely, users
are required topurchase a$10 in-game asset
to unlock theP2E component ofthe game .
Since theblockchain elementisparticularly
well suited forCCGs —allowing playersto
easily tradetheircards—itisalso acrowded
genre, withseveral titleslikeGods Unchained
and Skyweaver ,among others,competing for
the users’ attention .Notably, thebattles in
Splinterlands areautomated, meaningthatthe
players’ onlyinput isbuilding acard deck and
choosing astrategy .
© Newzoo2022 30
Spotlight on: Zilliqa
Tom Fleetham, Head of Business Development – Sports & Gaming
Zilliqa
Zilliqaisahighly -performant, secureandaffordable layer-1 blockchain designedtopower thecreator economy
and agrowing ecosystem ofweb 3apps across gaming, NFTs,andDeFi.
Tom Fleetham , Head of Business Development –Sports & Gaming
Q 1: Tell usabout Zilliqa.What makes itunique when
compared toother smart contract platforms?
Zilliqa isthe first layer-1 (L1) blockchain tolaunch
sharding ,something thatisin the long -term roadmap
for many otherchains including Ethereum.Our elegant
design iswell suited tothe demands ofgaming :we’re
fast, lowcost, andscalable .In addition, wedeveloped a
security- focused smartcontract programming
language calledScillathatminimizes “smartcontract
risk”— thetypical security flawsanderrors behind many
of the well-publicized hacksandthefts onEthereum
Virtual Machine (EVM)compatible smartcontract
platforms thatusetheSolidity programming language.
We arealso thefirst L1 chain tobuild ametaverse asa
service platform, calledMetapolis ,and ourown first-
person shooter.Developing ametaverse andgame in-
house issignificant because,asthe owners ofthese
products, wecan incentivise deeperandrepeat
engagement acrossthefullZilliqa gaming ecosystem.
Q 2: Most smart contract platforms thrivefromnetwork
effects .While Ethereum currentlyboaststhelargest
ecosystem ofdecentralized applications,other
platforms likeSolana andAvalanche alreadyattract
tangible developer interest.How does Zilliqa’s
ecosystem ofdapps looklike,andwhat arethe
incentives fordevelopers tobuild ontop ofit
considering thecompetition?
Our ambition isto become theleading blockchain for
…… competitive
gaming.To support thisgoal, we’ve
partnered withsome ofthe world’s leading esports
teams andareinvesting ingames thatwillappeal to
esports fans.We believe thatultimately gamerswon’t
and shouldn’t havetocare about which chainthey’re
using when playing games.Additionally, ouresports
partners giveusaccess tomillions oftraditional
gamers —no other chainoffers that.
From adeveloper perspective, weare actively looking
for high quality projects toinvest inand partner with.
We arebuilding outdev tools tomake iteasier tobuild
games onZilliqa ,with ourUnity SDKalready available
on Github andanUnreal Engine SDKslated for
development .
Q 3:What isMetapolis andwhere doyou seeitgoing in
the future? Howdoyou seeitscompetition going
forward, particularly considering thatthemarket for
virtual worlds hasahandful ofhighly popular
platforms (bothtraditional andblockchain- based)that
attract mostofthe players?
Metapolis isthe first “Metaverse asaService Platform”
( MaaS )powered byanL1 blockchain. Metapolisoffersa
data -centric andfully customizable XRexperience
accessible throughweb/AR &VR .Essentially, brands
and communities interestedinlaunching aweb -based
metaverse experience canplug intoMetapolis andbuild
a custom virtualcityinhabited by3D avatars .A brand’s
city will suittheir unique identity andoffer their
audience anew web3layer ofengagement .
© Newzoo2022 31
Spotlight on: Zilliqa
Tom Fleetham, Head of Business Development – Sports & Gaming
Metapolissimplifiesthemost popular web3activations
for brands andcommunities —these include NFTdrops,
custom tokencreation, andvirtual community events.
Traditional socialgaming platforms monopolize content
and economy throughtheir“walled garden” ecosystems.
By contrast, Metapolis offersasimultaneously openand
secure platform fordeveloping interconnected
ecosystems thatempower userstofreely engage with
brands, games,communities, andanopen economy allin
one place .
Q 4: You mentioned youseek toattract blockchain
games toZilliqa .How doyou plan ondoing thatinthe
short -to -medium term?
Our esports partners andthepotential forintegration
with Metapolis isalready attracting manyhigh-profile
projects toZilliqa .We plan onfurther developing our
gaming ecosystem inthree ways:
1. By investing inhigh- quality gaming projects thatare
yet tointegrate withablockchain and/orhavea
multi- chain strategy .
2. By partnering withpopular blockchain games
looking toreach atraditional gamingaudience .
3. Through gaminghackathons withinvestment prize
pools forthe winning projects.
Q 5: Platforms likePolygon orImmutable Xare
currently thego-to destinations formost blockchain
gaming projects.Considering theirpopularity and
already established ecosystems, whywould blockchain
gaming developers choosetobuild games onZilliqa
instead ofon the above -mentioned platforms?
A combination ofinvestment, technicalsupport(we
build games too!)andaccess toour community and
esports partners.The Zilliqa community hasbeen
crying outformore highquality dapps,andtheearly
games thatlaunch arelikely tohave alarge impact and
onboard animmediate userbase ofcrypto native
players. Thiswillthen allow ustotake thetitles to
millions oftraditional gamersthrough ouresports
partners andtheir social &streaming channels. Furthermore,
gamersdon’tnecessarily carewhat chain
they’re using—they justwant toplay great games and
go through theonboarding processwithaslittle
friction aspossible .
Q 6: What isyour boldest prediction whenitcomes to
the evolution ofthe Zilliqa gaming ecosystem inthe
next fewyears?
Zilllqa willbecome theValve ofcompetitive blockchain
gaming —contributing tothe development ofboth
games andunderlying platformsthatraise thequality
bar and unlock blockchain gamingformillions ofnon-
crypto nativegamers andtraditional gamestudios .
© Newzoo2022
P2E Guilds – A Glimpse into the Future of Work
32
6.1 P2E Guilds and The Future of Work
The market for P2E guilds is crowded and dominated by a few players
Guild # of scholars 1
Yield Guild Games 20,700+
AvocadoDAO 11,000+
Unix Gaming 5,000+
Earn Guild 5,000+
PathDAO 4,000+
Merit Circle 2,750+
Astra Guild Ventures 2,032+
AAG Ventures 2,000+
Rainmaker Games 2000+
• P
2E guilds areorganizations whoseprimary activities revolvearoundacquiring stakesin
select blockchain gamesinthe form ofcrypto tokens orin-game assets. Theythenproceed
to lend these assets toother players —also called scholars —whowould liketoplay acertain
game butcannot otherwise afforditshigh entry barriers .Players whousethese assets can
usually retainbetween 50%and 70% of the resulting revenue,withtherest going tothe
managers andtheguild itself.Therefore, guildsprimarily accruerevenue intwo ways :they
earn apercentage ofthe revenue generated bytheir scholars, andthey benefit ifthe price of
the native tokens orin-game assets increases .
• Many guilds attempt toeducate theirscholars indifferent cryptoandblockchain -related
matters toimprove theirfinancial literacywhilealsoorganizing socialevents meantto
strengthen theties between members.These events alsoserve asrecruitment groundsfor
new, interested players.Though theeconomic incentives arethe glue tying these
communities together,themore established guildsareactively tryingtocreate “digital
nations” —anonymous peopleofdifferent nationalities unitedviathe internet byacommon
culture, sharedbeliefs, andadecentralized financialframework .
• P2E guilds aremost popular ingrowth markets likeThe Philippines, Vietnam,andBrazil ,
primarily becausesomeblockchain gamesoffer(ed) higher—albeit oftentemporary —
earning opportunities comparedtoother IRLjobs inthese countries .Part ofthe recruiting is
still done viaword -of -mouth oreven physically —guilddelegates arephysically travelingto
several regions inthese countries totry and onboard users.Moreover, guildsgenerally focus
on specific geographical regionssinceonboarding scholarsfromaround theworld poses
several challenges likelanguage barriersorhigh searching costs.
• Most guilds investinP2E titles before thegame isreleased .This isbeneficial forthe game
developer andtheguilds ifthe game getspopular .However, itis uncertain whetherguilds
owning abig part ofatitle’s NFTsbefore thegame’s releaseisadvantageous forthe players
themselves, forthey arenow fullydependent onthe services ofaprofit -seeking thirdparty
to play thegame .While guilds thriveinabull market whenprices continuously increase,the
opposite istrue formarket downturns -crypto pricesdecrease, makingblockchain games
less attractive fromaP2E perspective andthus leading toadecrease inactive users,which
puts downward pressureonthe price ofin-game assets. Suchperiods restricttherevenue-
generating activitiesofguilds andwilllikely leadtothe disappearance ofmany suchentities .
14
76 66
55
4 4
Axie Infinity Thetan Arena
Star Atlas Big Time
Cyball
Illuvium Sipher
The Sandbox Sidus Heroes
Portfolio Breakdown by Game 2
Based on available data from 19 P2E guilds
1, 2 Company websites, Discord channels
© Newzoo2022 33
6.2 P2E Guilds and The Future of Work
Earning money in the metaverse is likely to extend beyond gaming as
technology evolves and mindsets shift
VoxEditis an engine that allows
for the design and creation of
voxel -based NFT assets. A digital twin of one of BMW’s
physical factories
was built using
Nvidia’s Omniverse.
• Play toearn isnot anew phenomenon. Earningmoneybyplaying videogames haslong existed
and hasbeen tacitly accepted bymajor publishers overtheyears asan industry standard.The
most popular example isgold farming inMMORPGs likeWorld ofWarcraft orRuneScape—
professional farmersgatherandsellthein-game goldforreal money tointerested players.
• This process usuallytakesplace onspecialized third-party websites suchasPlayerAuctions or
G2G. Itis, intheory, prohibited bygame publishers —players whoaretrading outside ofthe
game ecosystem riskgetting banned.It is also acumbersome andrisky process thatmany
players arenot familiar withorwilling togo through .
• Tothis end, akey contribution ofP2E isfacilitating thisprocess andenabling consumers to
share inthe value theycreate byplaying thesegames inasubstantially morefrictionless
manner .
• Nevertheless, workinthe metaverse cantake many forms.Though the creation ofcustom in-
game assets hastraditionally beendesignated toprofessional designers,theincreased demand
for personalized clothingandequipment invirtual worlds hasledtothe explosion inpopularity
of user -generated content(UGC)inrecent years.
• Games likeRoblox, Horizon Worlds,orThe Sandbox haveUGCattheir coreandencourage
users tocreate andsellassets ontheir platforms inexchange forvirtual currency, whichcan
then beconverted toreal money .For these platforms tothrive, theyneed toattract large
numbers ofplayers andbuilders alike,suchthatthey canbecome vibrantsocialandeconomic
hubs andincrease theirnetwork effects—much likeRoblox hasdone inrecent years.
• The shift todigital willalso enable thecreation ofvirtual economies andworlds thatwill
complement ourphysical existence. Muchliketheadvent ofthe internet hasledtothe creation
of new professions, sowill themetaverse bringabout awide array ofnew work opportunities .If
humans atlarge aretoadopt virtual worlds astheir digital homes, professions likevirtual fashion
designers, digitalarchitects, metaverse guides,aswell asother metaverse -native jobsarelikely
to become vitalelements ofawell -functioning digitalsociety .
•This phenomenon isnot only limited togaming .It also includes otherindustries suchas
manufacturing, automotive,fashion,andcityplanning .As technology progresses, high -fidelity
digital replicas offactories, buildings, andcities willserve asmodels thatcaninform real-life
decisions, increaseprofitability, andimprove safetystandards forworkers acrosstheglobe .
A hyper -realistic Matrix Awakens
experience was fully created in
Unreal Engine 5.
© Newzoo2022
Q1: What isYGG’s focusinthe short -to -medium term?
YGG willcontinue togrow itsreach andexpand its
scholarship programin2022 .To support thatgrowth
and toensure wedemocratize accesstoplay -to -earn
games globally, weare tailoring ouronboarding
services andcapacity tobuild localpartnerships
through YGG’sregional subDAOs ,including YGGSEA
(Southeast Asia),IndiGG (India), OlaGG(Hispanic
communities worldwide),YGGJapan, andBAYZ
(Brazil) .These subDAOs willallow communities across
the world tohave aYGG -styled, player-first experience
that ishyper -localized toaddress onboarding
challenges intheir market andtoensure thatlanguage –
specific content, education andsupport aremade
available .
In 2021 ,YGG partnered
withatotal of48 games, guilds
and play-to -earn infrastructure companiestohelp our
community .In 2022 ,we are ramping upour support for
these games toassist theirsuccessful launchand
sustainable growth,whilewealso continue tofuel the
development ofthe play-to -earn ecosystem
worldwide .
Q 1.1 : What doyou find most exciting aboutthecurrent
blockchain gamingspace?
To date, YGGhasover 40
game partners .Many ofthem
will belaunching in2022 ,so we are excited tosee
these games finallybeingplayed byour community .
YGG hasworked withthese partners toshare guidance
on developing theirin-game economies andalso
provided userfeedback onearly -stage pre-launch
games fromourgame testers . YGG
already offersscholarships inAxie Infinity and
CyBall .Soon, wewill launch additional scholarship
offerings ingames suchasFancy Birds,Crypto Raiders,
and others .We have alsoenabled earlyaccess tothe
game BigTime forsome members ofour community .
Q 1.2: What arethe best opportunities inthe blockchain
gaming spacenowandinthe immediate future?
Currently, theX-to -earn movement isabig focus for
YGG, aswe seek other gamified waysforour
community touse their time, leverage theirskills, and
earn crypto rewards beyondplay-to -earn .
Two examples, whichareboth partners toYGG are:
Genopets ,which isamove -to -earn NFTgame, and
Metacrafters ,which isalearn -to -earn protocol helping
Web 2developers maketheshift intoWeb 3.Ithink that
as increasingly morepeople getonboarded intoWeb 3,
builders andinnovators willcontinue tocreate
experiences thatwillmove thisspace forward .
Q 2: How doyou seeP2E guilds evolving overthenext
years andwhat arethe key pain points thatstillneed
to be addressed?
The purpose ofYGG’s subDAOs isto tailor itsactivities
to the needs andinterest ofasmaller, morespecialized
group, andultimately onboardmoreplayers with
greater efficiency andeffectiveness .YGG’s subDAO
model demonstrates theneed toprovide country and
region -specific onboarding andgame selection forits
community members,whoselocalpreferences, needs
and challenges varygreatly depending onwhere they
live inthe world .
34
Spotlight on: Yield
Guild Games
Gabby Dizon, Co -Founder
Yield Guild Games
Yield Guild Games is a play-to -earn gaming guild, bringing players together to earn via blockchain- based
economies.
Gabby Dizon, Co-Founder
© Newzoo2022 35
Spotlight on: Yield
Guild Games
Gabby Dizon, Co -Founder
Additionally, YGGhasestablished game-focused
subDAOs inYGG -Splinterlands (YGGSPL)andYGG-
League ofKingdoms (YGGLOK)forour most
dedicated playercommunities tobe able togovern
their ownactivities, decision-making, earnings and
assets .As more games launch, wewould liketosee
more communities takeownership andruntheir own
subDAOs usingYGGinfrastructure .
We also expect tosee more X-to -earn subDAOs
launching sothat ourcommunity canmove -to -earn,
learn- to-earn, create- to-earn, sing-to -earn, dance-to –
earn, andsoon.
Q 3: How does thecurrent bearmarket shift(oraffect)
your investment strategy?
We’re beingalot more careful abouthowwedeploy
our cash.Moreover, wewant tomake surethatwe
maximize ourcurrent (liquid)assetsbecause wedon’t
know howlong thisperiod isgoing tolast .
Having saidthat, anyone whohasbeen incrypto for
some yearswillknow andexpect thatthemarket is
cyclical .As such, thecurrent downturn hasnotchanged
our long-term vision atall.YGG isstill securing new
partnerships, collaborating closelywithourexisting
partners, continuing toacquire assetsinhigh- quality
games thatarein-demand byour community,
onboarding scholars,andworking onlaunching new
subDAOs togrow theX-to -earn ecosystem.
Q 4:How doyou decide whichgames toinvest in?What
are some keyelements thesegames should have?
YGG hasanasset acquisition teamthatdoes due
diligence onthe games wepartner with,forthe YGG
community .And asaguild, wehave specific criteria.
We scrutinize eachgame toweigh arange offactors
such astokenomics, utilityofNFTs inthe game, team
deliverables, ourown portfolio diversification amongst
different genres,andofcourse, wealso take the
general gameplay andthefunfactor intoconsideration .
We also want tosee that games havesustainable
virtual economies .With more games beingdeveloped,
we expect tosee even higher quality output, whichwill resultinYGG ramping upitspurchasing ofthe gaming
assets needed toensure ourguild members getaccess
to the best games .YGG’s community ofplayers or
“game testers” alsohelps toprovide earlyfeedback on
games indevelopment tosuggest improvements tothe
games beforetheylaunch.
Those whoareinterested canread more about our
latest partnerships inthe YGG
Q1 2022 Community
Update
.
Q 4.1 : What arethe biggest redflags inaP2E game?
The sheer number ofprojects released inthis space is
staggering, sothere areafew things thatwewatch out
for when purchasing assetsingames :
• Unsustainable economicmodelsandPonzi- like
tokenomics :implementing strongtokenomics is
crucial, especially asagame begins toscale -we
want ourpartnered gamestobe prepared forlarge
player basesentering thegame economy .
• Ateam thatisn’t doxed -we look fortrusted teams
that have agreat trackrecord intheir previous
endeavors andarecapable ofproducing gamesthat
our community canplay-to -earn foravery long
time .
• No play-to -earn element :we don’t acquire idle
assets thatcan’t generate yieldforthe community
to benefit from.
• Not community -first :we like ourpartnered gamesto
be community -first, meaning thatthey arereceptive
to the demands ofthe players, whilealsothinking
about thedevelopment ofthe game fromthe
players’ perspective .
Q 5: Do you think P2E guilds willexpand beyond
gaming inthe future? Ifyes, which industries arenext?
Blockchain gameshavebrought aboutmanypeople
who areinterested inthe play -to -earn aspect .Playing is
great because therearemore thantwobillion gamers
around theworld whoalready understand thebenefit
of being abletoown their digital assets.When
onboarded toNFT games, players learnWeb3skills in
the process, andthese arethe skills needed to
participate inthe decentralized economy.
© Newzoo2022 36
Spotlight on: Yield
Guild Games
Gabby Dizon, Co -Founder
But it’snot just games onoffer inWeb 3—or the
metaverse morebroadly .There arepeople whowant to
contribute byusing different formsofcreativity .For
example, itcould beacommunity moderatorwhois
applying theirskills toaDiscord orTelegram forum,or
it could beanartist creating NFTs,oritcould be
someone who’sintolorebuilding, andthelistgoes on.
This is“X- to-earn,” orcontribution inexchange for
rewards andownership, whichisthe central ideawe
expect tosee gain further importance inthe future .
Q 5.1 : How doyou seethefuture ofwork inthe
metaverse?
I think most people inthe future willwork, existand
spend avast majority oftheir timeinthe metaverse. As
automation takesover,alot ofthe jobs inthe physical
world willbelost.Though manypeople havebeen
worried aboutthis,such afuture willultimately free
them fromhaving todo things thatthey don’t really
enjoy .Freed fromtheneed towork inmenial jobs,
many ofthem willgoonline tofind other waystouse
their timeandtheir skills toearn money . These
formsofwork might notnecessarily resemble
the traditional 9-5jobs .I think thatpeople aregoing to
find themselves indifferent cryptocommunities,
different virtualworlds, maybepartofaDAO, orina
small group where theywillbeable toearn andbe
incentivized bytokens, orby acommunity thatgrants
NFTs .
We arealready starting tosee this shift happening,
along withagroup ofpeople whoseemore value in
digital assetsasopposed tophysical ones.Rather than
buying watches orcars, some havenowresorted to
buying blue-chip NFTs instead, likeCryptoPunks or
Mystic Axies.
Q 6: What isyour boldest prediction whenitcomes to
the evolution ofblockchain gamingingeneral —and
P 2E guilds inparticular— overthenext decade?
We willsee 10million wallets interacting with
blockchain gameslaterthisyear.We also seesome of
the most successful P2E games orNFT projects
become platforms forpeople tobuild applications and
experiences ontop of.
© Newzoo2022 37
7.1 The Rush for Digital Real Estate
Virtual land —essentially 3D ad space— has taken the NFT space by storm
Whileitcan bevaluable forconsumers ofall trades —artists, celebrities, orentrepreneurs —to own (orrent)
digital realestate foradvertisement orcreative purposes, brandsstandtogain themost byestablishing a
presence inthe metaverse .As traditional advertising channelsandsocial media platforms growless
popular withthecurrent younggenerations, creatinghigh-fidelity, interactive experiences invirtual worlds
will beakey avenue ofuser acquisition forbrands inthe future .Naturally, brandsexpecttoconvert partof
the users ofthese virtual worlds intofuture clients.However, owningvirtuallandisaprerequisite for
building suchgamified experiences thatconsumers canenjoy .Consequently, brandswillneed tomake use
of their virtual landinthe most creative ofways inorder togain afoothold inthe metaverse andbe
embraced bythe inhabitants ofthese digital spaces. Onthe other hand, failing toaccount forthe increase
in popularity ofgaming andsocial activities insidevirtual worlds willlikely leadtoaloss ofboth
reputation andrevenue forbrands inthe long term.
For example, HSBC—one ofthe largest investment banksinthe world —bought landinThe Sandbox and
plans touse itto offer users educational financegames.Similarly, BosonProtocol’s largelandpurchase
inside Decentraland —which willbeused tobuild avirtual shopping mall—hints atthe future ofimmersive
e -commerce experiences .However, theuse cases forvirtual landdon’t stophere— theycanbeused for
anything fromvirtual concert hallstosocial gathering spacesandadvertising hubs.
Speculation aside, what is the point of owning virtual land?
It’slargely acombination ofalong -term speculative investmentandtheutility thatdigital landprovides,
with theformer
currently dwarfing thelatter .The average consumer acquiresvirtuallandwith thehope
that itwill appreciate inthe future onceblockchain- basedvirtual worlds gaininpopularity .For this to
happen, suchplatforms needtoprovide compelling reasonsforacritical massofnon- crypto -native users
to join their ecosystems, whichwill,inturn, increase thenetwork effectsandmake these virtual worlds
more attractive .This isn’tanunreasonable expectation,assome ofthe most popular gamesonthe planet
are Roblox (49 .5 M DAU
1)and Minecraft (141 M MAU 2),which sharesome features withtitles likeThe
Sandbox .However, itis ultimately theas-of -yet unrealized expectation offuture success andmass
adoption ofblockchain- basedvirtual worlds thatcurrently drivespurchases ofvirtual landNFTs .
What is the appeal of virtual land to the average buyer?
Therush fordigital realestate hasbeen initiated byFacebook’s rebrandingintoMeta .As aresult ofthe
rebranding, pricesforvirtual landhave exploded acrossprominent virtualworlds suchasThe Sandbox,
Decentraland, orSomnium Space.Meta’s namechange essentially confirmedtomarket participants that
the metaverse —like theinternet inthe 90s— is the next technological paradigmshiftthatislikely to
change thefuture ofwork, play,andhuman interaction. Asaresult, buying virtuallandwasperceived as
the best waytoensure thatoneispart ofthe future thatMeta presented inthe keynote speech.Though
individual interestinvirtual landhassubstantially wanedinrecent months, agrowing numberofpopular
brands likeAdidas, Samsung, andGucci arestill eager todouble downontheir digital presence, giventhe
low -risk, high- reward natureofacquiring itfor brands oftheir size.
Digital realestate islikely toplay animportant roleinthe future ofthe metaverse. Thenetwork effectswill
grow asplayers areattracted bythe expanding numberofexperiences thatarebeing builtinthese digital
spaces .Considering thatmost brands arecurrently onlydrawn tothe two largest blockchain -based
virtual worlds— TheSandbox andDecentraland —and given thelimited supplyandtheneed forowning
several plotsofland tobuild experiences, combinedwiththeabundance ofbrands looking foraseat atthe
table, thecompetition isonly likely toexacerbate inthe years tocome .To this end, thenext page
highlights someofthe largest brands thathave already jumped onthe bandwagon ofvirtual land.
What does the future hold?
1Roblox Corporation FY21 Financial Results 2 Minecraft Live 2021
© Newzoo2022 38
7.2 The Rush for Digital Real Estate
The Sandbox and Decentraland are the most attractive metaverse
venues for brands
Binance| The Sandbox
Adidas | The Sandbox
Snoop Dog | The SandboxSamsung | Decentraland
JP Morgan | Decentraland PwC | The Sandbox &
Decentraland
Atari | The Sandbox
Warner Music Group | The
Sandbox
HSBC | The Sandbox
Gucci | The Sandbox
Ledger | The Sandbox
Prager
Matis| Decentraland
VICE | Decentraland
Slipknot | The Sandbox
Zepeto|The Sandbox
South China Morning Post |
The Sandbox
Sotheby’s | Decentraland
Standard Chartered | The
Sandbox
© Newzoo2022
• Trackrecord offounders
• The artstyle ofthe NFTs
• Endorsement frompopular influencers
• Mintprice
Though
inhindsight therearecertain attributes thatsuccessful NFTcollections share,itis generally
difficult toassess themedium -to -long term prospects ofaproject beforelaunch.However, some
factors toconsider include:
NFT trading volume has hit $18.3 billion in 2021,
1up a staggering 22,300% from 2020’s $82 million.
The Appeal for PFP NFTs Originates Primarily From Three Different Sources
Socialstatus andbeing partofan exclusive clubareimportant factorswhenacquiring aPFP NFT,
especially for—but notlimited to—celebrities andhigh-net -worth individuals seekingtokeep up
with thelatest popculture trends.However, thenetworking andcommunity aspectstheseassets
provide areequally important forsome buyers .
Social Status and Community Belonging
8.1 An Introduction to NFT Collections
Profile Picture (PFP) NFTs are status symbols and offer revenue-
generating capabilities
Social status aside,asubstantial portionofmarket participants tradesNFTsforthe (large) profit-
generating opportunities theyprovide .The novelty ofthe space allows forrampant market
manipulation byNFT influencers andwhales whoareusing their(Twitter) followers asexit liquidity .
Though thistends tohappen mostlywithlesspopular projects, itis still apervasive issueinthis
space .Moreover, mostPFPNFTs areilliquid assets.This makes themparticularly vulnerable
compared toother assetclasses insevere market downturns, suchasthe one weare currently
facing .Now, noteven thetop NFT collections seemtobe perceived asparticularly safeanymore, a
fact illustrated bythe substantial dropsinfloor prices across theboard .
Financial Incentives and Speculation
Thecreative commons (cc0) status ofmany popular projects—most notably BAYCor
CryptoPunks —providesownerswithIPrights overtheunderlying PFPasset .Such NFTs canthen be
used byindividuals andbrands invarious (revenue- generating) ways—from opening abusiness
created withthatNFT inmind toleasing itto interested thirdparties .Moreover, havingapopular
NFT asthe face ofabrand canmake iteasier toconvert NFTenthusiasts andyoung consumers into
clients, thusincreasing thebrand’s appealacrossthisgrowing demographic .
Advertising and Brand Building
Azuki #1775 Moonbird
#1551 CloneX
#16911 Goblintown
# 4426 BAYC
#8824 Doodle
#480
1 CryptoSlam! 39
What Makes PFP NFT Collections Successful?
• Notable
partnerships
• Innovative/original features
• Community engagement overandabove
the financial incentives theproject provides
© Newzoo2022
•VeeFriends NFTsprovide exclusive accessto
VeeCon ,a yearly conference attendedby
keynote speakers acrosstheglobe .
•These NFTsallow owners tomeet Gary
Vaynerchuk indifferent one-on -one sessions,
i .e ., lunch ortraining sessions.
•Theyalsofacilitate community -building and
allow GaryVaynerchuk toeasily engage withhis
most invested followers .
•Themoments havecollectible valueforfans and
are NFTs thatliveonthe Flow blockchain.
•Thebusiness modelpresents opportunities for
other (e)sports leagues,asfans appear eagerto
engage withtheir favorite playersandteams .
•Themoments provideanadditional, perpetual
revenue streamforboth theNBA andthe
NBPA.
•Metakey NFTsarepasses thatprovide owners
with certain premium perks—such asVIP
access, avatars, orin-game items—across a
number ofdifferent experiences .
•MetakeyNFTscome—for now —in four different
edition sizes,eachofwhich hasadifferent
supply .The early editions currently provide
more perks whencompared tothe newer ones.
•TheHabbo HotelNFTssoldoutinjust over 24
hours andgenerated over$14 million .
•Pitched as“Your chance toown anearly,
nostalgic, andiconic bitofthe internet”, they
were created torevitalize thecommunity
around thefranchise bycatering toboth
nostalgic old-time players andthegeneral NFT
public .
40
8.2 An Introduction to NFT Collections
PFPs are only a subset of the growing NFT ecosystem
Though PFPNFTs areusually inthe spotlight duetotheir highselling prices, high-profile
collaborations withlarge brands, andfervent mediacoverage, thereareother usecases forNFTs
that extend beyond that.These rangefromvirtual landandmusic collectibles todigital artand
utility NFTs, among others.A number ofnotable collections haverapidly gainedpopularity andhave
become textbook examples ofwhat non-PFPNFTs canachieve .
Not all NFTs are PFPs
VeeFriends isacollection of10,255 NFTs
created byentrepreneur GaryVaynerchuk .
NBATopShot allows fanstoown iconic
moments fromNBA’s history .
Habbo Hotelreleased 11,600 NFTs that
players canuseinside thegame.
Metakey isan example ofthe early potential
of interoperability acrossgames.
© Newzoo2022 41
9.1 The Transition from NFT Collections to Global IP
The BAYC collection is the poster child of the early rush for PFP NFTs
Celebrities and high profile
buyers acquire BAYC NFTs.
TurningHopeintoCertainty
Inthe weeks succeeding themint, salesquickly pickedup
on the secondary market.As time went onand theBAYC
ecosystem matured,celebrities likeEminem, Justin
Bieber, andGary Vaynerchuk ,among others,joinedthe
club (though someofthem weregifted theBAYC NFTs),
thus cementing BAYC’sstatusasone ofthe most popular
NFT collections onthe market .BAYC NFTswerenowused
as social status symbols thatemphasize one’sbelonging
to an exclusive socialorganization .While meetups across
the globe forcommunity membersbecamemorecommon,
it all culminated withtheApe Fest during NFTNYC—a
token -gated suiteofexperiences specificallydedicatedto
BAYC holders .
The Most Influential NFT Project
TheRoad Ahead
Thetraction aroundBAYChasledtoYuga Labsraising
$ 450 million inarecent funding series.This wasshortly
preceded byYuga Labs’ acquisition ofthe IPrights of
CryptoPunks —thesecond-most-popular NFTPFP
collection. Partofits plans includes buildingOtherside —an
interoperable MMORPGmeanttochallenge otherpopular
virtual worlds—and growing itsbrand outside theNFT
space .An early example ofthat isthe virtual band
featuring BAYCNFTscreated byThe Universal Music
Group .This ispossible because BAYCholders owntheIP
rights totheir NFTs, which inturn opens opportunities for
brands andconsumers tointegrate BAYCNFTsintotheir
future strategies . Globally Recognized IP
The Universal Music Group
creates a virtual band using
BAYC NFTs.
The Beginning
The Bored ApeYacht Club(BAYC) isaprofile picture
(PFP) NFTcollection createdbyYuga Labsthatstarted
minting atthe end ofApril 2021.Each picture hasdifferent
visual traitswithdistinct raritiesattached tothem .For
instance, the“Solid Gold”furismuch moresought out
when compared tothe “Cheetah” fur.Though notmany
NFTs wereminted inthe first fewdays, apopular NFT
trader bythe name ofPranksy —oneofthe most successful
and popular NFTtraders todate —made abig purchase of
BAYC NFTsandtweeted aboutiton May 1
st.The
collection wasthen soldoutwithin thenext 12hours .
PFP Collection of 10,000 NFTs
BAYC starts as an NFT
collection of 10,000 “JPEGs”.
© Newzoo2022 42
9.2 The Transition from NFT Collections to Global IP
Loot allows for the decentralized creation of completely new IP
• Loot(forAdventurers) initiallystartedasa
collection of8,000 NFTs andwas created byDom
Hofmann, thefounder ofVine .Unlike otherNFT
launches, Lootwasafree mint—except forgas
fees —and anyone withacrypto walletlike
Metamask couldacquire anNFT .
• Unlike BAYC, Lootisnot aPFP collection. Loot
NFTs arecomprised ofablack background
featuring severallinesofwhite text.These linesof
text represent fictionalitems,i.e.,Silk Hood, ina
gamified universethatdoes notyetexist.
Consequently, itis up tothe community atlarge to
build experiences fromscratch thatmake useof
the original NFTcollection andthat canexpand
the Loot ecosystem.
• Loot isan experiment indecentralized IP
building .Unlike intraditional companies, anyone
can build ontop ofthe Loot ecosystem and
increase thevalue ofthe IPwhile alsobenefiting
on apersonal levelifLoot picks upinpopularity .
• Because mostprojects inthe Loot ecosystem are
fully built on-chain, newdevelopers canleverage
the publicly available codeandresources tomore
easily buildnewexperiences thatenrich the
ecosystem asawhole.
• The Loot universe hasbeen steadily growing since
the initial dropatthe end ofAugust 2021.The
vision foratruly decentralized, globalIPhas
spawned tensofderivative projectsand
developer toolsthateach contribute tothe
growth ofthe ecosystem.
• The Loot ecosystem alsofeatures several
currencies, oneofwhich is$AGLD .$AGLD was
created bycommunity membersandairdropped
to Loot holders shortlyaftertheproject launch.
• Initiatives suchasBibliothecaDAO aimtoform a
governing bodyinthe form ofaDAO, which is
tasked withfacilitating theeasy inclusion of
future projects inthe Loot ecosystem.
• Lastly, DivineDAO planstoadd animmersive,
community -led storytelling layertothe Loot
ecosystem.
Bag #3989, part of the Loot ((for Adventurers)
NFT collection)
Role isacollection ofcharacters thatcan
wear theitems inthe Loot collection.
Loot Martallows owners tounbundle their
items tobe used ortraded individually .
Realmsare
procedurally
generated maps
that generate in –
game resources. Crypts and
Caverns: an on
–
chain dungeon
generator for Loot.
© Newzoo2022
What is Ethereum? Why is it important for NFTs?
• Ethereum is a smart contract platform —or programmable blockchain —that allows for the development of
dapps —these can range from decentralized exchanges and lending platforms to blockchain games and
NFT marketplaces. Ethereum also allows for the development of layer -2 solutions on top of it that keep
transactions secure while improving scalability and speed.
• Many of the most popular NFT collections are built on the Ethereum blockchain. Contrary to popular belief,
the actual image and the metadata behind most NFTs are usually stored on IPFS or centralized databases
like AWS ,primarily because the cost of storing data on the blockchain is high. Subsequently, the unique
digital identifier —which provides a verifiable and immutable proof of ownership and points to where the
data is located —is stored on the blockchain.
What is the difference between layer -1s and layer -2s?
• Layer -1 (L1) refers to the base layer of a network and is used to describe the main architecture of a
blockchain. According to Binance Academy, L1s are protocols that allow for th e processing and conclusion
of transactions on the same blockchain.
1Moreover , transactions on L1s— as opposed to L2s—can be
validated without the need of another network. Ethereum, Tezos, andBitcoin, among others, are all L1
blockchains.
• L2 solutions address some of the issues of L1s —most notably scalability and efficiency —while still enjoying
the benefits they provide, i.e., security and composability. Though the validity of the transactions is still
verified on the L1, L2s bundle many individual transactions and send it back to the base layer to be
verified —this allows L1s to operate more efficiently as a result of the decreased number of transactions
that need to be checked. Given that some— though not all—L1s can only handle a small number of
transactions per second, they are inappropriate for applications —like blockchain games —that need to
support large numbers of transactions.
• As opposed to being built on top of an already existing L1, sidechains are their own blockchains that are
connected to the mainchain via a bridge. The main difference between L2s and sidechains stems from the
fact that while the former’s security is tied to that of the L1, sidechains need to ensure the security of their
network themselves. To compensate for this, transactions on sidechains are generally both faster and
cheaper than on L2s.
43
10.1 Crypto and The Promise of Interoperability
Ethereum currently boasts the largest ecosystem of decentralized
applications (dapps)
1 https://academy.binance.com
What are Ethereum’s limitations?
• The Ethereum network can only process around 30 transactions per second (TPS). This can lead to
network congestion, slow processing of transactions, and high “gas” fees —the fees paid to miners for the
work involved in securing a transaction. In times of severe network congestion, the gas fees alone can
sometimes dwarf the cost of the NFT itself and can even reach three or four figures. However, the advent
of Ethereum 2.0 —which includes the switch to a proof of stake consensus mechanism —is likely to mitigate
these issues.
• High gas fees are especially impractical when it comes to blockchain games , which should, in theory,
allow for the frictionless trading of the many —relatively cheap —NFTs among the players of the game. This
is the primary reason for which most blockchain games are built on layer- 2s such as Polygon or Immutable
X or on other blockchains —like Solana or Avalanche —entirely.
© Newzoo2022 1 dune.com 2 coinmarketcap.com 44
10.2 Crypto and The Promise of Interoperability
The adoption of interoperability at scale faces multiple challenges
• Most NFTs are created on the Ethereum blockchain
—though Solana NFTs, among others, are catching up
in popularity —which currently uses the Proof of Work (PoW) consensus algorithm. PoW encourages
miners to compete in solving complex mathematical puzzles to add new blocks to the blockchain and to
get rewarded with the native cryptocurrency. However, the main issue with PoW is that solving such
puzzles requires a sizable amount of computational power in the form of high-end hardware, which in turn
leads to very high levels of energy consumption and carbon emissions , not to mention the electronic
waste coming from hardware that becomes outdated.
• For example, the yearly amount of electricity consumed by the Ethereum network is estimated to be
equivalent to the annual energy consumption of countries like Peru or Qatar
, according to the Ethereum
Energy Consumption Index
.As a result, everyone creating or transacting NFTs on the Ethereum blockchain
implicitly contributes to the high carbon emissions generated by mining the cryptocurrency. More
specifically, it is the carbon footprint of NFTs -the total emissions generated by the process of creating
and trading them on the secondary market – that is especially harmful. Hence, the carbon footprint of an
NFT includes not only the impact of the transaction itself but also the energy consumption required to
mine the ETH used to make that purchase. French artist Joanie Lemercierused a carbon calculation tool
from Offsetra to determine that the release of 6 NFTs in 10 seconds would consume approximately the
same amount of energy as his studio for a period of over two years .
• However, there is an ongoing debate on whether NFTs specifically are the source of increased carbon
emissions from the Ethereum blockchain. Given that they represent a relatively small percentage of total
transactions on the Ethereum network , it can be argued that Ethereum mining would continue to increase
even in the absence of NFTs. For example, January 2022 -the most prolific month for NFTs to date —saw a
total NFT trading volume on leading NFT marketplace OpenSea of almost $5 billion.
1 On the other hand,
over $15 billion worth of Ethereum was traded on the 25 thof April alone. 2
Are NFTs bad for the environment?
• Interoperability has been one of the most hotly debated topics when it comes to the future of the
metaverse and of blockchain gaming. This is not only limited to games but also to the wider crypto
ecosystem— projects like Polkadotor Cosmos aim to create a decentralized web powered by separate
blockchains that can communicate with each other.
• While the ability to transfer assets and NFTs across different experiences and games might sound
appealing, technical and political roadblocks are currently preventing true interoperability from
becoming an industry standard. For example, game publishers need to agree on a set of shared standards
that would allow assets to exist across a variety of vastly different games —while creating an asset in one
game is relatively straightforward, transferring it to a title that uses a different game engine or to one
where it doesn’t have a functional purpose can be difficult.
• Moreover, it might not be in the publishers’ best interest to foster an environment where players are
encouraged to take their items out of a game’s ecosystem at will since this is likely to lead to IP diffusion,
copyright infringements, and arbitrage opportunities that can prove damaging to some publishers—
players will buy skins and items wherever it’s cheaper and transfer them to their preferred virtual world.
• If interoperability is to be achieved, brand activations might not be limited to only the most popular
virtual worlds and games anymore. IP holders will partner with whoever offers the best rate while still
benefiting from their branded items reaching a large number of experiences.
• Despite that, some orgs have already made great strides when it comes to interoperability at scale. For
example, Ready Player Me is an avatar creator platform allowing users to explore over 2700 different apps
using one consistent digital identity.
Is interoperability feasible?
© Newzoo2022
Today’sgamingandtech ecosystems are
largely splitalong regional andcultural lines,
and thesame islikely tohold trueforthe early
metaverse .Political objectives mayclash with
business orconsumer desires,muchlikethey
already doingaming, forexample, whenIndia’s
government firstbanned PUBGMobile .
Beyond politics,moderation onaglobal scalein
an open metaverse withboundless UGCcontent
presents awealth ofchallenges, evenmore
hazardous thanthose thatalready existonan
unmoderated WorldWideWeb.It may notbe
enough tosimply havecommunity moderators;
individuals willneed totake amore active role
in keeping spacessafe.Imagining what
metaverse “deepfakes” couldevolve into,with
avatar duplicates impersonating others,it’seasy
to imagine howsocieties willstruggle with
evolved formsofexisting challenges like
disinformation, harassment,andidentity theft—
the highly realistic TomCruise deepfake created
by Metaphysic isbut aglimpse intothat future .
1
Similarly, privacyandethical considerations
have barely scratched thesurface .We willalso
need tocreate newlaws foramyriad ofnew
situations regarding IPand copyright, suchas “Do
theimage rightsthatIhave inreal life
extend tomy unique avatar, evenifthe avatar
doesn’t looklikeme?” Thepotential forabuse of
power inacentralized metaverseisalso non-
trivial, whichiswhy several organizations are
working tocreate openstandards .We also need
to keep inmind that,aswith anynew
technology, thetransition tothe metaverse will
happen gradually, anditis up tothe individuals
building itto do soinaresponsible manner.
Mass concurrency andinteroperability are
immature, butnew protocols arebeing
developed, andmore isyet tocome. Hopefully,
new standards canalso open doors tomore
equal participation, whichislikely tobe driven by
mobile morethananything else—though VRand
AR technologies arealso evolving; mobile
devices andapp stores arethe most global
ecosystems today,and it’shard toimagine a
true metaverse thatusers can’taccess via
mobile.
Finally, weexpect theleading companies of
tomorrow tobuild asolid foundation andcome out
stronger fromthisbear market .Until then, welook
forward toseeing youinthe metaverse! !……….
Metaverse activity –
tracking has the
potential to become
far more powerful
than web -tracking.
There already are
certain organizations
working toward an
open metaverse
rather than a closed
one controlled by a
few entities.
Privacy & Ethics
UGC spaces require
strong safety and
content moderation
processes in place,
supported by machine
learning and
trust/safety agents
.
Furthermore, IP and
copyright management
will need radical
modernizations to
account for a myriad of
new situations.
Moderation &
IP Rights
Governments will
want to control
virtual worlds, and
regulations may
create new barriers
between worlds.
E.g., in April 2020,
China banned Animal
Crossing: New
Horizons after the
platform was used to
stage digital protests
about Hong Kong.
Politics &
Regulations
The metaverse is not
yet accessible or
interoperable at
scale. New standards
and protocols are
needed.
Mass concurrency on
a global scale is still a
challenge, though
one that increasingly
more companies are
trying to solve.
Accessibility & Scale
45 1 https://metaphysic.ai/
What Stands Between Us and Virtual Utopia?
Key challenges and closing thoughts
© Newzoo2022
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