Some encouraging signs for the growth of the Blockchain Metaverse

by Arthur · November 7, 2022

The concept metaverse has become a tech buzzword, but it seems to be vague about what it is. It has never been a well-defined term, because in reality there are many types of metaverses. You can consider social media, games and online chat groups as their own metaverse. It is a collection of social networks that provide value to a shared interest, such as playing a video game.

The other metaverse, which has become synonymous with big technology, is virtual worlds that bring mixed reality to light (e.g Virtual reality or VR and Augmented reality or YEAR). This requires peripherals such as headsets and compatible applications to be used. It introduced the term avatars, or digital representations of users. While the technology has been around, it continues to evolve, but hasn’t quite reached a level of adoption the way users have smartphones.

What we are going to discuss here is blockchain metaverse, which brings Internet-of-value and ownership of digital assets through tokenization via NFTs (Non-Fungible Tokens) through a development framework called Web3. This is the least understood in the metaverse. Nor has it quite reached the level of users where it can be considered as common as using TikTok or Instagram.

Now we have several projects entering the metaverse space that integrate the blockchain with social media, gaming, entertainment and finance. Even with the economic downturn in 2022, there are still encouraging signs of growth and development.

Table of Contents

Estimated market growth

The total metaverse market, which includes both blockchain and big tech, is expected to reach $678.8 billion in revenue by the year 2030 (per Statista). It is a huge market value that opens up many opportunities that can lead to opportunities.

The revenue estimates include sales of devices (eg VR headsets), apps, digital assets and services from across the metaverse. It’s not just blockchain related, but app developers will want to take advantage of the opportunity this presents.

Increase in wallet addresses

The increase in wallet addresses is an indication of growth in activity. The metaverse would be useless if it had no active users. To connect to the blockchain, users must have digital wallets, which store their private keys. A private key is what authorizes transactions by cryptocurrency tokens, for exchanging value on the network.

A wallet is also required by metaverse apps, also called DApps (Decentralized Applications), to access digital assets. These digital assets may include NFTs representing the purchase of in-game assets (e.g. skins, weapons, powers, rewards, game points, etc.) as well as other cryptocurrency tokens (e.g. ENJ, Gala, MANA) and stable coins (eg BUSD, USDC, Tether).

The Ethereum blockchain has the highest number of user wallets on the blockchain. According to Etherscan, the increase in unique wallet addresses in Ethereum continues in an upward trend. This means that more new users enter the space, and this gives them access to the metaverse. As of July 2022, the total number of unique wallet addresses has reached more than 200 million.

Each unique address does not have a one-to-one relationship to a unique user. A user can have many addresses, but each is unique. Users can generate many unique addresses on the wallet and it is personal. These addresses can be used to receive digital assets and also act as a form of digital identity on the network.

Another indicator is the number of active metaverse wallets or user wallets involved in metaverse-related transactions. According to a grayscale report, it was over 43,000 by June 2021. The trend has been on an upward climb, and if it continues on the projected trajectory, it could further indicate that more users are entering the metaverse.

While active indicates more activity, this must be defined more closely. It has to do with the analyzes of Web3 in relation to the metaverse. While data analytics firms use “active” to mean users transacting in the metaverse with their wallets, the platforms themselves don’t believe it’s the most reliable measure of activity. Instead, it should be the number of users entering the system and not just the transactions generated from active wallets that should be specified. In other words, active users should also include those who do not use the wallet for transactions.

In a Blockworks report, Web3 metaverse platform Decentraland stated that:

“…the metaverse platform accounted for 1,074 users interacting with smart contracts in September (2022) and a total of 56,697 monthly logged-in users.”

Decentraland further states how they define active users as:

“someone who enters Decentraland and moves out of the original package they entered the world into, not just someone who engages in transactions.”

This is in response to such reports from Coindesk, which stated that Decentraland had fewer than 38 daily active users in September 2022.

Although some clarifications were made in the explanation of active users, it seems that compared to non-blockchain metaverses, the numbers still have a long way to go.

For example, Roblox has a total of 70 million registered users, but counts a total of 200,000 average active daily users. Likewise, it would seem much fairer to collect data on active users such as the number of users on the platform, whether they created a transaction or not.

Growing developer community

An important driver of the metaverse is the ecosystems that run on top of the blockchains. This requires developers, and they build using Web3 to deliver DApps. Key indicators of that are the level of activity among developers. These applications bridge the world of traditional web development (e.g React) with the blockchain (e.g smart contracts).

According to blockchain software company Consensys, there were 350,000 developers using the Infura platform for Web3 development in 2021. This is a popular blockchain endpoint platform for DApps. The number of developers has tripled in 2021, showing a massive increase in interest in building blockchain applications. In 2022, the number of developers has increased further to 430,000.

An even more encouraging sign from developers is that many of them are exploring ways to add blockchain connectivity to their products (according to a study done by Stratis). This includes interest in NFTs, which are part of the metaverse space. According to the latest data, global spending on blockchain solutions is estimated to reach $19 billion by 2024 (Statista 2017-2024 data).

The projected increase in global spending will trickle into metaverse’s development since it involves the blockchain. Although the percentage of it specific to the metaverse is not yet known, it still shows a sign that there is a high level of interest from companies to develop in this area.

Disclaimer: The information shared is for reference or educational purposes and is not financial advice. Please DYOR to confirm information

NFT Marketplace

In 2022, the NFTs have slowed down since the breakthrough year in 2021. This can be seen in the data figures from Statista. From a peak in January 2022 of 106,197 NFTs traded daily (average value of $189.50 million per day) to 29,993 in May 2022 (average value of $28.81 million per day). With dismal economic indicators, the cryptocurrency market as a whole has been affected. High interest rates cause potential investors to hold off, as they sell their cryptocurrency tokens to move to riskier assets.

Despite the decline, more developers are entering this space and bringing new concepts into the metaverse. We were introduced to NFT projects like CryptoPunks and Bored Apes Yacht Club (BAYC) and this opened up the market for copycats and other ideas. This includes virtual land, unique token collectibles and NFT games.

It is expected to be a hot market again, once the cryptocurrency market recovers. It is also expected since NFT growth will be what determines the market size. Based on analysis from Earthweb, there are good things to look forward to in this space. The total NFT market could be worth $231 billion by 2030. That could also correlate with further growth in the metaverse.

Gaming

While the gaming industry is broad, it is a major contributor to the metaverse. With Play to Earn (P2E) and Play-and-earn (P&E) game models, players are introduced to GameFi. This is a convergence of gaming with finance through the blockchain. That means users can access ways to earn passive income by playing games, and all purchases and rewards are recorded using a blockchain.

Blockchain games (i.e Web3 games) has increased by over 2000% in 2022. This takes into account the usage and investments made across the blockchain gaming sector. Here are some tidbits according to a DappRadar report:

Blockchain games have 1.22 million unique active wallets (UAW) in March 2022, with Axie Infinity having 22,000 new wallets alone.
Play-to-Earn NFT games (eg Crazy Defense Heroes, Aavegotchi) on Ethereum sidechains have contributed to growth, with a 219% increase on the Polygon blockchain.
$2.5 billion in funding was raised in Q1 2022, up 150% from the previous year.
52% of blockchain activity now comes from gaming DApps.

Important takeaways

To ensure success, the level of adoption must increase and the number of users must continue to grow. It’s about network growth across all blockchains, as users realize their value. If users reject, network will have less activity and it can lead to inconvenience or even death of many projects. It is expected, since projects without benefit to attract users will not be able to continue.

Nor is the metaverse clear on most consumers’ minds. It may be because of the confusion out there about what it is. Web3 projects building the apps for the metaverse are trying to convey this information, while major tech players like Meta continue to push their version of it.

What will be important to the blockchain metaverse is interoperability. It would be nice to have a seamless user experience when using DApps that allow assets to cross different blockchains. It could be a barrier to adoption if each blockchain remains its own ecosystem, isolating users and further creating niches.

Synopsis

There is potential for further growth in the metaverse. It could be like the beginning of the internet boom in the 90s. It started at the time when more users started to get online, and led to further adoption. On the downside, the metaverse and its supporting infrastructure (eg DeFi, Gaming, DApps, etc.) may be in a bubble. The value can suddenly drop when investors realize that there is no long-term return or utility in metaverse projects. It is the risk that must be taken into account.

There are risks to mitigate, such as the economic uncertainty that has affected the cost of capital. The data in the projections can be changed to take account of economic indicators such as inflation and interest rates. As a result, there may be less capital flowing into metaverse projects, but existing ones may benefit from first-mover advantage.

Interoperability is also important to the blockchain metaverse. When you have millions of users, they want their assets to be accessible across all blockchains they connect to. It would otherwise be useless if assets in one chain cannot be used on another chain. Interoperability facilitates the transfer of value and the interconnection of DApps.

The encouraging signs are that there are projects creating ecosystems with tokens that are useful, especially in Web3 gaming DApps. Consider projects like Decentraland, The Sandbox and Gala Games. These ecosystems have developer activity and their own tokens that give users a tool. There are also projects like Cosmos that connect blockchains using interoperability protocols. More projects like these are needed to expand the metaverse, and that creates further growth.