Any references to projects in this article are purely for information and should not be deemed financial advice, or promotional.
With Facebook changing its name to Meta and top investor Cathie Wood CEO of Ask Invest predicting that the future market value of metaverse would be in trillions of dollars, is it worth ‘getting in on the ground floor’ and investing in metaverse tokens? It’s worth having an investor approach, of course, not just being swept along by these headline announcements, but in such an innovative technology how do you decide what’s worth investing in? We’ve therefore compiled a watchlist of metaverse tokens that we believe will play a significant role in realizing the metaverse’s potential to become a trillion-dollar industry.
But just as importantly we’ve set our stall out by asking investors to consider metaverse tokens in terms of the wider thesis about what adds value from a web3 perspective. Apart from having a clear purpose or problem they are trying to solve, not just a white paper and a cute explainer video, they need to have a strong community foundation. Of course, every crypto startup talks the talk when it comes to community. But having a Discord server busy with airdrops and users waiting for the next price pump isn’t going to make it in the longer term. What is worth looking for when assessing which metaverse project to invest in is the degree to which they are actually community-owned, and how well they share the revenue and the control with their users.
Flying somewhat under the radar has been Layer 1 blockchain Zilliqa, notable as the first Layer 1 to use sharding to solve the blockchain scaling problem that Ethereum has faced. What’s interesting is that with a recent change in leadership, and a new CEO with Ben Livshits who comes from the Brave browser, Zilliqa has already announced that is launching its own metaverse, ‘Metapolis’.
The obvious challenge for Metapolis will be its competitors Decentraland and Sandbox that currently have captured the majority of the blockchain metaverse users. Despite the current depressed value of the ZIL in 2022, the plans for a landmark event at the start of April, built around Zilliqa’s “position as the first layer-1 to build multiple commercial avenues of Web3” look exciting. The Q2 landmark event, which is built around Zilliqa’s “position as the first layer-1 to build multiple commercial avenues of Web3” is also a great opportunity for the Zilliqa team to organize PR and messaging – getting the consistency in messaging and confidence in its delivery should be a significant driver in the value of the ZIL token. The price of the token has been on a downward decline from a price on CMC of $0.2376 in mid-April 2021 to $0.0456 on 22 March 2022. But by the same token, this could be an ideal time to buy the dip in light of the Metapolis launch, the succession of new hires being announced, and the publicity surrounding the event itself.
It’s instructive that Ethereum’s co-founder Joseph Lubin recently criticized Zilliqa rival Solana for over-generous rewards to users validating transactions on the network. Solana Labs responded that “simply looking at protocol revenue doesn’t tell the full story of the long-term performance” of a blockchain’s economic model. That also begs the question as to whether in the longer term Zilliqa sufficiently incentivizes its mining community. After all the key to web3 isn’t merely community-engaged, but community ‘ownership’ in terms of the token structure and for governance.
Axie Infinity (AXS)
The growth of play-to-earn gaming, led by Axie Infinity, where engagement with a younger generation of gamers in countries like the Philippines shows how this can make a real financial difference to people’s lives. This is also why the role of DeFi in the metaverse, can be so important in providing people with a low-cost way to earn, save and send money from person to person. Back in October last year it hit a $3 billion equity valuation. Token Terminal estimates AXS is driving about $28.9 million in weekly revenue. Annualized, this equates to $1.5 billion in revenue, which is comparable to blockbuster games in the traditional gaming sector. Last month, Axie reduced production of its main in-game rewards to avoid what its blog post describes as “total and permanent economic collapse.” These changes should make a positive difference. However, as the chart from CoinMarketCap shows, the value appears to correlate heavily to the price of Bitcoin.
Tracking the price of AXS vs BTC (AXS: see green trend line; BTC orange trend line)
Decentraland is an Ethereum-based blockchain-powered virtual-reality pioneer. Decentraland has the largest market capitalization in the metaverse space, and as one of the early adopters, the company is well-positioned to maintain its dominance in this space. Decentraland is divided into LAND parcels that are NFTs, and LAND ownership gives users complete control over what they build. In total there are 90,601 land parcels, and the LAND NFTs can be purchased using Decentraland’s native token MANA.
Users in Decentraland can use MANA tokens to buy and develop land, as well as some of the game’s tools to create spaces and works of art. Users are free to create whatever they want. Decentraland also holds various entertainment activities regularly, with users able to attend parties, play games, and visit digital art exhibitions. Decentraland recently hosted the world’s first multi-day music festival, with many well-known artists performing. Adding to the utility, as reported by Motley Fool, this month it will host Metaverse Fashion Week from March 24–27, featuring global brands, including Tommy Hilfiger, and Dolce & Gabbana.
The Sandbox (SAND)
Sandbox is similar to Decentraland in that users can use SAND tokens to purchase land, build houses, and share games on the purchased land. Sandbox has announced several collaborations in recent months, including top NFT marketplace OpenSea, Snoop Dogg, and The Walking Dead. At the same time, it recently completed a US$93 million round of financing led by Softbank, a leading investor in the blockchain space. There are three billion SAND tokens, and a third of its total supply is circulating at $3.06. Compared to MANA, SAND has been hit harder by the market downturn, with a drop in the last month alone from $4.20 in early Feb to $2.90 on March 7, a 30% decrease. However, recent price aside the fundamentals suggests SAND is a good bet for the future, based on a successful implementation of their project roadmap to date.
Coming back to the guiding thesis about the importance of community ownership for the longer-term viability of metaverse tokens one of the key benefits of Sandbox is that it’s decentralized both in name and in terms of its community governance. Indeed, the play-to-earn approach type revenue is shared throughout the gaming ecosystem via tokens, while Sandbox users can earn a passive income by charging other users to access their land. With both rewards and fees paid in SAND underline how this core web3 approach to community ownership supports the value of the SAND token to investors.
Somnium Space (CUBE)
Somnium Space is another metaverse ecosystem BigONE believes is worth investigating. Somnium space’s goal is to create an immersive metaverse. Users can buy lands, customize their avatars, and invest in real estate in Somnium, which was founded in 2017. Gemini supports the Somnium space, and the FTX exchange recently built a metaverse headquarters on the Somnium space.
In the last month, its native token $CUBE’s price movement has been very similar to SAND’s. The market capitalization of CUBE is $59 million, with 12.5 million circulating supply out of a total supply of 100 million. Somnium Space is ideal for users to build their real estate using their builder tools and create custom avatars using the Unity SDK. In addition, in 2019 they partnered with Sony to allow users to create full embodiment avatars of themselves in minutes alongside any 3D models for Somnium Store. Sony’s VR store in Somnium Space was among the world’s first.
By providing more incentives and giving back to users, the metaverse will constantly flip the script and change how things will be done. BigONE anticipates a more transparent, open, and fully decentralized experience from the vibrant creative landscapes and avatars. The landscape itself will be visually stunning, a virtual place where the imagination is no longer constrained. Clearly, the development of a fully functional metaverse has the potential to fundamentally alter how people interact with the digital world. A collective virtual experience would reimagine the creative industry and open new doors for creators, gamers, and artists. BigONE Chairman Anndy Lian said: “The metaverse is here to stay, it’s clear the success already of Sandbox and Decentraland shows it has tremendous potential to bring people together. That potential in terms of GameFi we can see with Axie Infinity’s play-to-earn gaming which is making a real difference to people’s lives. However, there remain obstacles to its growth. Countries like China and South Korea have had laws about converting in-game tokens into fiat currency for nearly 15 years, for instance.
“However, I believe like any disruptive paradigm-shifting technology, which is attracting the attention of global players such as Facebook and governments keen to keep control of the internet, there are risks involved. But I’m optimistic that the decentralized community-owned development of an interoperable metaverse will deliver lasting value to both users and investors,” Lian added.