Gray Scale Metaverse Web 3.0 Report Full Text: Concepts, Opportunities, Economic Scale

Source: Grayscale
Compiled by: BlockBeats

As a top institution in the blockchain industry, Grayscale has made its own judgments on the metaverse and Web 3.0. Grayscale believes that the vision of the metaverse has the potential to change our social interactions, business dealings, and the entire internet economy. The open virtual world of Web 3.0 allows us a glimpse into the future of the internet. The market opportunity of bringing the metaverse into our lives holds the potential for annual revenues exceeding $1 trillion and could compete with today's Web 2.0 companies, which have a market value of about $15 trillion.

The following is the full report on Grayscale's Metaverse Web 3.0:

Metaverse

The crypto cloud economy is the next emerging investment market, and the metaverse is at the forefront of the evolution of the Web 3.0 internet. The metaverse is an interconnected, experiential 3D virtual world where people from anywhere can engage in real-time social interactions, forming a persistent and user-owned internet economic system that spans both the digital and physical worlds.

The metaverse is still in its infancy, but many key components are already taking shape and are fundamentally changing various aspects of everything from e-commerce to media and entertainment, and even real estate. We have previously published two articles, "Grayscale Decentraland Report" and "Decentraland Tour," which make the concept of the metaverse more tangible by introducing Decentraland, a leading blockchain-based virtual world.

Projects like Decentraland create an open-world metaverse where users can log in to play games and earn MANA (the native token of Decentraland, which users can use to purchase NFTs, including LAND or collectibles, and vote on economic governance). Users can also create NFTs and infuse the value of their time spent in the game into the NFTs, giving them the ability to interact with the real world.

This potential embedded in the evolution of the internet has begun to attract Web 2.0 companies like Facebook, which is transforming into a metaverse company and has changed its name to "Meta." At this turning point, other leading Web 2.0 tech companies may need to start exploring the metaverse to maintain future competitiveness. The attention brought by Facebook's name change has sparked a new wave of investment in this emerging crypto category of the metaverse.

Metaverse Concept

The internet has always connected people. Over the past 30 years, internet technology has continuously evolved, and the way we all interact with the web has also developed. Throughout the evolution of the internet, many things have changed, and we can categorize online communities into three eras:

• Web 1.0 Netscape connected us online

• Web 2.0 Facebook connected us to online communities

• Web 3.0 Decentraland connects us to the virtual worlds owned by communities

Evolution of Online Communities

As we have crossed these eras, the online interactions we can engage in and the media we can use have continually expanded. We have personally experienced the transformation of the organizational structures that connect us, the maturation of the computing infrastructure we rely on, and how control of the web has flowed back and forth between communities and large tech companies.

Key Points of Web 1.0, 2.0, 3.0

The Web 2.0 mobile internet has changed how, where, when, and why we use the internet. In turn, this has changed the products, services, and companies we use, thereby altering our business models, culture, and politics—Web 3.0 metaverse has the potential to do the same.

Metaverse Market Opportunity

We are increasingly directing our attention to digital activities, especially among the younger generation. Today, about one-third of our time (approximately 8 hours a day) is spent watching TV, playing games, or on social media. As we spend more time in the digital world, we also spend more money in these areas to establish our personal social status within these online communities.

Average Daily Time Americans Spend on Specific Leisure Activities

Our social lives and gaming are merging, creating a massive and rapidly growing economy for virtual goods consumption. It is estimated that revenues from virtual gaming worlds could grow from about $180 billion in 2020 to about $400 billion by 2025.

The ongoing shift in how game developers monetize their ideas is a key driver of this growth trend. Players are increasingly moving from paid games to free games, with developers profiting by selling items that enhance players' gaming experiences or elevate their social status in the virtual world.

Global Revenue Growth of Virtual Worlds

As the transition from Web 2.0 closed corporate metaverses to Web 3.0 open crypto metaverse networks accelerates, this shift is further propelled:

• Web 2.0 Closed Corporate Metaverse: Centrally owned and controlled by large tech companies;

• Web 3.0 Open Crypto Metaverse: Democratically owned and controlled by global users.

Today, many gamers are spending their money and time building digital wealth for themselves in the Web 2.0 closed corporate metaverse. The problem is that most game developers do not allow players to turn their investments and efforts into economic benefits. Developers prohibit players from trading items with each other and isolate the game world from the real world, preventing players from transferring their in-game wealth to the physical economy.

The Web 3.0 open crypto metaverse network addresses this issue by eliminating the capital controls imposed by Web 2.0 platforms on all these virtual worlds. This new paradigm allows users to own their digital assets in the form of NFTs, trade them with others in the game, and bring them to other digital experiences, creating a brand new internet-native economic system that enables the monetization of digital assets in the real world. This evolution of the creator economy is also known as "Play to Earn."

Examples of Open vs. Closed Games

In the metaverse, users determine these seamless interactions that span digital communities and are closely tied to the real world. For users, the closed nature of the Web 2.0 corporate metaverse is at a disadvantage compared to the Web 3.0 open crypto metaverse network.

Established Web 2.0 companies need to disrupt their business models by adopting open ecosystems and eliminating competitive barriers. We do not yet know how Facebook will realize its metaverse ambitions, but like other Web 2.0 companies, it faces the challenging transition under pressure to deliver quarterly results for shareholders.

Gaming is just one of the most direct and traceable segments where value has begun to naturally shift to Web 3.0, but the possibilities contained within the metaverse far exceed gaming. It is estimated that the metaverse will create trillions of dollars in revenue opportunities in advertising, social commerce, digital events, hardware, and creator monetization.

Potential Market Composition of the Metaverse

Currently, the total market capitalization of leading Web 3.0 metaverse crypto networks is about $27.5 billion. This pales in comparison to Facebook's market capitalization of about $900 billion, the gaming industry's market capitalization of about $2 trillion, and the $14.8 trillion market capitalization of Web 2.0 companies that may pivot to the metaverse or face disruption.

Market Capitalization of Web 2.0, Web 3.0, Facebook, and Gaming
Metaverse Web 3.0 Economy

The Web 3.0 crypto metaverse is an emerging market economy within a virtual world, composed of a complex mix of evolving digital goods, services, and assets that can create real-world value for users.

Early Web 3.0 metaverses are typically built on blockchain computing platforms (Layer 1), with many contributing to the development of these games and in-game items, which can also be freely traded on the blockchain.

Blockchain-based Gaming Ecosystem

Users purchasing these goods will unlock new e-commerce experiences. Some popular business activities in Decentraland and other virtual world economies include:

• Art Galleries: For example, Sotheby's has launched a platform allowing owners to showcase and sell their digital NFT artworks at auctions.

• Business Offices: Cryptocurrency companies like Binance have established digital headquarters in the metaverse where employees can meet and collaborate.

• Games and Casinos: Players can win MANA there.

• Advertising: Digital billboards have been erected to advertise to gamers and profit from it.

• Sponsored Content: For example, the recently announced Atari arcade, which will feature games playable in Decentraland.

• Music Venues: Musicians and DJs can perform or hold concerts there.

Metaverse Experience

These Web 3.0 metaverse worlds are part of a larger interconnected crypto cloud economy. These decentralized protocols interact with the metaverse's virtual economy and provide its technical infrastructure.

• Payment Networks: Web 3.0 metaverse economies can use their own tokens, such as MANA, or tokens from the public chains they are based on, such as ETH or SOL.

• DeFi: Decentralized trading platforms allow users to trade in-game items, while lending platforms allow users to use their virtual land as collateral for loans.

• NFT Sovereign Goods: Players can purchase NFTs from other creators and bring them into other virtual worlds for display or sale.

• Decentralized Governance: Reclaim control over the digital economy from centralized companies and allow a global network of Web 3.0 metaverse users to determine the rules in their collectively owned virtual spaces.

• Decentralized Cloud: Solutions like Filecoin provide a decentralized data storage infrastructure for the Web 3.0 metaverse, while services like Livepeer offer decentralized video transcoding infrastructure for virtual worlds.

• Self-Sovereign Identity: Data from internet-native social reputation tokens ("creator coins") from other platforms may be transferred into the metaverse for identification or credit scoring.

Blockchain-based Virtual Economy Segments

Scale of the Metaverse Web 3.0

These innovative combinations create a new online experience that has already attracted a considerable number of users. In recent years, the user growth of Web 3.0 metaverse virtual worlds has been rapid, with a total of 50,000 users (active wallets) today, growing about tenfold since early 2020.

Number of Active Metaverse Wallets Globally

Compared to other Web 3.0 and Web 2.0 segments, the number of users in the metaverse virtual world is still in its early stages, but if the current growth rate continues, this emerging segment could become mainstream in the coming years.

Comparison of User Numbers Across Different Fields Globally

The Web 3.0 metaverse virtual world is already creating real-world value for developers, third-party creators, and users who are collaboratively building this emerging market. The total value generated from sales of Web 3.0 metaverse projects (such as virtual land, goods, and services) has exceeded $200 million.

By excluding the centralized Web 2.0 companies that once controlled cyberspace, the Web 3.0 metaverse virtual world benefits from rapid innovation and productivity gains.

The crypto virtual world creates a primary and secondary market worth millions of dollars for creators and asset owners by eliminating capital controls and opening digital boundaries to free-market capitalism.

Global Sales Amount of Metaverse Products

In the third quarter of 2021, the total financing in the crypto industry was $8.2 billion, with $1.8 billion in the Web 3.0 and NFT segments. In the Web 3.0 and NFT space, blockchain-based games attracted about $1 billion in funding across 14 financing rounds, making it the top subfield in the crypto industry.

Global NFT Vertical Investment Activity in Q3 2021

Capital investment in the crypto industry has recently begun to accelerate, but compared to the $10 billion that companies like Facebook plan to invest and the amounts that other companies and VCs may follow up with, the metaverse is still in a relatively early stage.

Conclusion

The metaverse is a digital world that transcends the internet as we know it today. This vision of the future form of the web has the potential to change our social interactions, business dealings, and the entire internet economy. The metaverse is still taking shape, but the Web 3.0 open virtual world crypto network allows us a glimpse into the future of the internet. The market opportunity of bringing the metaverse into our lives holds the potential for annual revenues exceeding $1 trillion and could compete with today's Web 2.0 companies, which have a market value of about $15 trillion. This potential has attracted companies like Facebook to pivot to the metaverse, and Facebook's decision may serve as a catalyst for Web 2.0 tech giants and investors to shift their focus to the metaverse.