Opportunities in the metaverse – GeekWire

J.P. Morgan’s Christine Moy and Adit Gadgil share observations and insights to help business leaders develop their strategy and approach to the metaverse.

A metaverse is a 3D, immersive, fully-realized digital world, where humans can live a digital second life – working, socializing and building homes and communities. Uptake and awareness of the concept is growing exponentially as business leaders and boardrooms around the world ask ‘What is my metaverse strategy?’ ‘What opportunities should I consider?’ or ‘Is the metaverse all hype?’.

What is the metaverse?

Simply put, in the metaverse, the everyday activities that take place in the real world are replicated online, carried out by a digital version of yourself and others.

It might sound like the stuff of science fiction, it’s evolving all the time and no-one knows yet what direction it will take, but we’re far closer to inhabiting this new realm than you might think. We already spend hours of our physical-world days communicating with each other online – the metaverse is the next logical step.

Why Now?

The concept of the metaverse is not a new one. Online worlds like the Sims or Second Life have been around for nearly twenty years. Modern equivalents like Minecraft, World of Warcraft and Fortnite have hundreds of millions of users, and huge supporting economies. Around $54 billion is spent on virtual goods each year, almost double the amount spent buying music, demonstrating the huge growth and scale.

A number of new technologies have come together to enable this vision of the metaverse. Augmented reality (AR) and virtual reality (VR) headsets have become cheaper and more powerful, improving the user experience. Blockchain, has enabled digital currencies and non-fungible tokens (NFTs).

These new methods to transact and own digital goods are allowing creators to commercialize their assets and activities in new ways. This ownership economy, coupled with the possibility of interoperability, unlocks immense opportunities, whereby digital goods and services are no longer captive to a singular gaming platform or brand.

Meanwhile, COVID-19 accelerated the digitization of our lives and normalized more persistent and multipurpose online engagement and communication. This combination of technological, social, and economic drivers has resulted in explosive interest in the Metaverse.

What Opportunities should business leaders be considering?

While some familiar services and business models will continue to exist in the metaverse, we anticipate the virtual environment will facilitate the evolution of uniquely new opportunities. For example, there are already skilled craftsmen specializing in creating and selling digital wearables (often in the form of NFTs). As a result, we see the metaverse as a branding opportunity for luxury fashion designers and brands.

However, in a potential future, with the emergence of DeFi collateralized lending primitives and the composability of blockchain token-based digital assets, a next generation financing company could be underwriting virtual land and property mortgages, based on digital clothing collateral! In fact, the next generation financing company may not be a company at all, but instead, a self-organizing mission-based community of people that formed a decentralized autonomous organization (DAO) and funded the DAO treasury balance sheet by sending crypto to a multi-signature wallet escrow that disburses funds with majority votes to create the mortgages.

Not everything in the metaverse will be relevant for every business. However, there is little downside to learning about what is emerging, building internal intellectual property, upskilling internal talent, and assessing how relevant it can be to your business (if at all).

Consider if you will be a participant or a service provider. Monitor your competitors’ activity in the metaverse. If you are a consumer-facing brand, could you create new marketing opportunities through experiences, digital goods, sponsorships, and brand real estate presence? Assess how to prioritize targeting this younger generation audience, and decide how important it is to your business to be a first mover to capture the hearts and minds of these tech-forward sub-communities.

Hype vs. Reality

The possibilities are undoubtedly exciting, however, key areas listed below need to be further developed and matured to enable the full potential of metaverse engagement, community building, self-expression, and commerce. We see these as new opportunities for DAOs, businesses, technology providers and financial institutions to flourish together in vibrant ecosystems that address the following areas:

Technology
  • Improved performance in avatar movement and environment rendering
  • Reduction of environment ‘sharding’ so all participants can interact with each other live, in the same location
  • More capacity to support complexity in design and interactions
  • Reduction of local hardware requirements for complex interactions with 3D rendering
  • Expanded accessibility across devices (including mobile)
  • Development of interoperability or cross virtual world interactions, and ways to manage engagement and digital assets across virtual worlds
  • Definition of standards for digital assets (wearables, objects, brands) and virtual/cryptocurrencies to be transferable across various virtual worlds (with potentially different manifestations in each world, e.g. the same NFT manifests as a special edition t-shirt in a virtual world but is a uniquely designed car in race car video game)
  • Advanced discovery mechanisms (find your friends, recommended things to do and places to visit, customized virtual goods to shop)
  • Expanded data analytics & reporting for virtual spaces specifically designated for commercial & marketing use to track business KPIs
Privacy and Identity
  • Preservation of one’s ability to have multiple avatars/identities, with the addition of:
    • Private KYC/AML compliant commerce and payments
    • Verifiable credentials that can be easily structured to enable easier identification of fellow community/team members, or to enable configurable access to varying virtual world locations and experiences
    • Prevention against cyberbullying or online harassment/assault across virtual worlds
  • Expansion of NFT token-gated spaces to include the creation of private interactions, discussion, and messaging
Commercial Infrastructure
  • Web3 virtual world integrations with legacy payments rails, such as credit cards, pay by bank, debit, ACH/wires
  • Web2 virtual world integrations with crypto payments and NFT/digital assets marketplace commerce
  • Single wallet user experience, inclusive of:
    • Web2 traditional payments rails, virtual currencies, and virtual assets;
    • Web3 crypto, NFTs, and digital assets
    • Digital Identity verifiable credentials, KYC/AML compliance keys and reputation points
    • Multiple aliases to preserve privacy and enable digital freedom
  • Evolution of virtual/cryptocurrencies and digital asset backed financing and mortgages through using lending models, or leveraging DeFi (e.g. NFT-collateral backed virtual world mortgages)
  • Creation of cross-border and cross-metaverse FX & liquidity solutions
  • Improved user experience for mainstream adoptions of non-crypto/web3 natives
  • Expansion of tooling and services to support DAO community-based projects, business ventures, investments
Workforce of the Future
  • Training new designers and developers with specialization in 3D modeling of avatars, wearables, objects, architecture, and interiors, leveraging virtual world specific software development kits (SDKs)
  • Evolution of content creators and storytellers that can span across virtual worlds, virtual goods, NFTs (token-gates, varying manifestations of NFTs across platforms), commerce and communities
  • Redeployment of events producers that specialize in in-Metaverse experiences (concerts, parties, art showings, community meetings, sports events, sightseeing & travel)
  • Creation of community managers focused on creating robust online and offline relationship building and interactions to strengthen platform engagement and stickiness
Regulation, Tax, Accounting, and Social Infrastructure
  • Paved paths on regulatory, tax, and accounting treatment of Web3 digital real estate/property, and virtual world commercial transactions
  • Adept navigation of regulatory, tax, and accounting treatment of primarily Web2 virtual worlds with Web3 digital assets
  • Solutions and services to support virtual worlds that are globally accessible, but may be required to adhere to local jurisdictional requirements and rules in commerce and payments
  • Evolution of community governance e.g. Who sets rules in the virtual worlds? Who governs?

The Bottom Line

The component parts of the metaverse continues to evolve very quickly, so it is difficult to base a business strategy on such a dynamic space with explosive growth and new entrants introducing innovation around every corner. However, the costs and risks to engaging early and consistently to build internal intellectual property, develop hypothesis about future business models, and identify ecosystem partners and collaborators are relatively low. The asymmetrical risk of being left behind is worth the incremental investment to get started and to explore this new digital landscape for yourself.

Read the full report: Opportunities in the Metaverse: How Businesses Can Explore the Metaverse and Navigate the Hype vs. Reality by Christine Moy and Adit Gadgil, to learn more about navigating the metaverse, our approach to Web3, and sorting hype from reality. Includes a reading and podcast list for those interested in diving into the rabbit hole.

Visit J.P. Morgan in the Metaverse: Stop by the Onyx by J.P. Morgan lounge in Decentraland.

Christine Moy, Managing Director, Global Head of Liink, Crypto, & the Metaverse, Onyx by J.P. Morgan. Christine is tasked with setting a comprehensive cross-metaverse & video game ecosystem strategy (across both Web2 and Web3) for the firm and its various lines of business, designing and driving the development of cutting edge technology products, collaborating video game publishers, payments facilitators, developer marketplaces, NFT artists, digital assets ecosystems, and guiding clients on the journey. As one of the founding members of J.P. Morgan’s blockchain/crypto program, Christine created and drove its key initiatives in digital assets, tokenized payments, internet-of-things and digital identity.  LinkedIn  Twitter: @cmoyall

Adit Gadgil, Managing Director, Head of e-Commerce and Technology, Media & Telecommunications, J.P. Morgan Payments. Adit is responsible for managing J.P. Morgan’s Corporate & Investment Bank (CIB) Technology, Media & Telecommunications Solutions and Commercial Bank (CB) e-Commerce Solutions pipeline, maximizing strategic engagement with sales, product and banking teams and representing the ambitions and financial services needs of J.P. Morgan’s global e-Commerce clients. LinkedIn Twitter: @aditgadgil


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