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Crypto Categories: Enter the Metaverse

December 15, 2021

Read Time 4 MIN

In Sorting Out the Crypto World, we identified the need for a classification system for crypto coins and introduced the categorization scheme developed by MarketVector Indexes (MVIS), a VanEck subsidiary. This crypto categorization series will offer a closer look at several of these digital assets categories: smart contract platforms, media and entertainment (metaverse), DeFi and infrastructure applications. Here we explore media and entertainment protocols.

Understanding Media & Entertainment (Metaverse) Protocols

The open metaverse is a massively scaled, interoperable network of real-time, rendered 3D virtual worlds that can be experienced synchronously and persistently by an effectively unlimited number of users, each with an individual sense of presence, and with continuity of data such as identity, history, entitlements, objects, communications and payments. We define media and entertainment protocols as those tokens that are used to reward users for content, games, gambling or social media.

The decentralized, open metaverse may re-make advertising, gaming, conferences, payments, and the internet itself. The long-term TAM (total addressable market) comprises $8T of U.S. consumer spending, increasingly moving to digital. PwC estimates the metaverse market size to reach $476B by 2025E, with a 47% CAGR 2019-2025, implying a 6% take-rate ($476B / $8,000B). For context, walled garden gaming companies like Roblox take 30-90% of developer revenues.

The metaverse will potentially disrupt:

  • Gaming: Emerging play-to-earn (P2E) games could bring dramatic changes to the global game market. As NFTs (non-fungible tokens) allow gamers to have ownership of their items, metaverse gaming would enable the exchange of items across platforms, incentivizing gamers to spend more time on the platforms.
  • Advertising: The advertising industry has gone through many changes, starting from traditional TV and billboards ads to data-based targeted advertising. In our view, the digital advertising market will soon face another round of dramatic changes led by the metaverse. In the metaverse, users continuously experience real-time changes that can be shared by everyone simultaneously, making the metaverse a transparent environment where advertisers can quickly understand consumer preferences, figure out their needs, and efficiently execute their ad budget. Early adopters of the trend have already actively begun to leverage the metaverse.
  • Payments and Lending: E-commerce platforms will leverage the Metaverse to build virtual stores that incorporate VR/AR and may further enhance the consumer experience. In addition, many metaverse games platforms are developing features that will involve ecommerce. Interoperability may be augmented by decentralized exchanges facilitating peer-to-peer financial services.

Valuing Media and Entertainment Protocols

The combined market cap of the MVIS CryptoCompare Media & Entertainment Leaders Index sums to $34B as of 11/22/2021. The total number of active NFT wallets has surpassed 1M and active NFT user growth has accelerated from 5-10% m/m growth to 20%+ m/m growth since August. Transaction fees and tokenomics on many metaverse tokens are still to be determined. Thus, valuing media and entertainment protocols building on blockchain tech is generally done on a price-per-eyeball basis (with user growth tracked carefully for signs of deterioration) until more concrete tokenomics are established.

Number of Unique NFT Wallets

Number of Unique NFT Wallets

Source: nonfungible.com. Data as of 11/30/2021.

MVIS Digital Assets Media & Entertainment Leaders Index

Token What Is It? What's Special About It? Circulating Market Cap / ADV
Axie Infinity Play-to-earn pet training game and virtual world built on Ethereum blockchain. Players can collect, breed, battle and trade in-game pets called Axies. All in-game assets are represented via fungile ERC-20 or non-fungible ERC-721 tokens and thus trade on secondary markets. 1.2M traders have made 9.8M transactions at an average price of $352. $8B / $100M
Decentraland Decentralized, blockchain-based virtual world for users to create, experience and monetize content and applications. Users have made 129,000 separate transactions for a total of $96M on virtual land and other items. The largest sale, $2.4M for a land plot, occurred on November 22. $7B / $1.4B
Flow Flow is a blockchain created by Dapper Labs that makes it easy for developers to build decentralized applications and businesses. Backed by multiple NBA players such as Aaron Gordon and Andre Iguodola, the protocol pioneered mainstream NFTs by winning a deal with NBA Top Shots. 2.9M users have made 62M transactions YTD although activity peaked in April-June at 8M/month and has fallen by 50% since. Stakers currently earn 9%. $4B / $170M
Chiliz Provides sports and entertainment entities with blockchain-based tools to help them engage and monetize their audiences. Chiliz developed the Socios.com sports fan engagement platform, which is built on the Chiliz blockchain infrastructure and uses $CHZ as it's exclusive on-platform currency. Current Chiliz fan tokens include Paris Saint-Germain, Manchester City, AS Roma, AC Milan, Inter Milan, Arsenal and Juventus. $3B / $130M
Basic Attention Token (BAT) A blockchain-based digital advertising and rewards platform powered by BAT, an ERC-20 token, and Brave, an internet browser. BAT is used as a payment token allowing advertisers, publishers, and users to spend, receive and earn BAT. Brave browser has 42M monthly users, 8M of whom have downloaded wallets and made 3.5M on-chain transactions. YouTube, Twitter and Reddit have the most BAT users among Web2 platforms. $1.5B / $48M

Source: VanEck, Messari, protocol websites. Data as of 11/23/2021.

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