Understanding the Metaverse Economy And How to Navigate It

Virtual reality and the metaverse
Credit: Amira Karaoud / Reuters -

By Bronwyn Williams, Co-Founder and Chief Commercial Officer, Metanomic

Although it’s the buzzword on everyone’s lips, the concept of the elusive metaverse remains largely incomprehensible to most of the general public. Making sense of a world in which anyone can access and utilize immersive augmented or virtual reality and 3D computing technologies on a daily basis is one thing, but understanding that the metaverse is an economy with valuable assets is another conundrum entirely on its own.

Simply put, the metaverse economy refers to the real value that has been placed upon virtual assets, motivated by the illusion of digital scarcity. In contrast to the real, financialized economy, the metaverse economy is based purely on mimesis and is untethered from actual scarcity – it only has value because we believe that it does. However, the virtual world’s economy is similar to the real-world economy in that it will have economic cycles that are similar to the real and financialized economy, but those fluctuations will be magnified. In other words, the highs and lows that take place in the economy of the real world are exaggerated and amplified in the metaverse. Markets in the metaverse are currently driven by sentiment more than real scarcity and are as such able to bend the laws of supply and demand - as long as they can convince people to believe in them. 

With the rapid expansion and growth taking place within the metaverse every day, it’s important that investors and businesses get a good handle on the ins and outs of this virtual world, and more importantly, the economics behind it.

The metaverse economy is affected by and reliant on the real economy

While at first glance the metaverse seems to be a standalone economy, it is in fact still connected to - and in fact, dependent on - the successful functioning of the real economy. Essentially, all metaverse funding and withdrawals are tied to the real economy – fiat currencies are used to pay for virtual assets, and virtual assets only materialize into real-world worth when users “cash-out” with hard currency in hand or in their bank account. Therefore, businesses should be aware that their metaverse activities will forever be linked to the traditional economy – an extension of their real-world dealings.

For example, a real estate investor might own multiple properties in different neighborhoods across the metaverse. Should the real world face a financial crisis, panic selling will set in, resulting in investors and businesses selling their assets and pulling out of funding in order to recover. This shake-up in the real world economy will have a knock-on effect on the metaverse economy, as it will cause a decline in the value of metaverse properties and currencies and could even bring some metaverse projects to a complete halt. Furthermore, the users or metaverse population will experience reduced trade, reduced population, and reduced activity – ultimately reflecting elements of what is happening in reality.

A business’ success in the metaverse economy is determined by its creativity

The metaverse is a realm that’s filled with endless possibilities. For businesses, the key determinant of success is the ability to put together imaginative and creative projects or solutions. If businesses want their metaverse economy to survive and have longevity, they must make their virtual environment a place in which people are excited to participate. This means that companies should avoid building anything in the metaverse that will be viewed as just another tradeable asset. The project needs to be better than every other real and imaginary asset it will be competing against in the space – real or virtual.

Standing out and grabbing user attention in the metaverse could be as complex as creating something that no one has ever seen before, or it could also mean offering a subtle point of difference compared to one’s competitors. For example, a well-designed and visually captivating, and interactive metaverse game has the potential to succeed based on the creativity that has been implemented through storytelling, community, experience, and brand. That same project could potentially hinder its own success by incorporating a specific currency such as fiat currency or stablecoins, using an established cryptocurrency such as Bitcoin or Ethereum, or launching its own token, simply because there are a myriad of games on the market that already do this. What could position the game better in the space is to find a creative solution as it relates to currency, which could be as simple as making the game free and offering loyalty points that can be traded by the players. Ultimately, the ability to think outside the box will be a business's greatest asset in ensuring a long-lasting existence in the metaverse economy.

No metaverse business is an island; partnerships are vital to survive

The financialized virtual economy of the metaverse is designed to be exploited for arbitrage opportunities by algorithms and bug bounty hunters alike. It’s important for businesses and investors to realize that they’re entering into a space where the smartest and strongest – the ones who know the rules and incentives and how to exploit them – prey on the weak and ignorant. Hiring a team of experts might be costly in the beginning, but is the best form of protection that new metaverse entrepreneurs can implement. Hiring an economist will ensure that the financial aspects of the business are in order, bringing a lawyer on board will assist with all intellectual property elements, and hiring an engineer will take care of all the technical aspects of the business. Alternatively, businesses can look to partnering with companies that already have these skills, leveraging strengths collaboratively in order to bring a robust offering to the market and providing a buffer should anything go wrong. The metaverse economy hasn’t yet reached a stage of maturity, so investors and businesses should also make use of advisors that have experience in the space and can offer guidance on how to skillfully navigate any pitfalls. 

Expertly take advantage of the metaverse economy

The metaverse is an alternate universe that’s growing and piquing the interest of the public at large, making it a space that investors and businesses should pay attention to. While the metaverse economy holds immense potential and myriad opportunities, it requires knowledge and expertise to navigate and build a sustainable business in the space. Achieving success in the metaverse economy hinges on keeping in mind that this new virtual world is impacted by the real world, understanding that partnerships are key to survival, and utilizing creativity to stand out from the competition.

About Bronwyn Williams

Bronwyn Williams is Co-Founder and Chief Commercial Officer at Metanomic, a metaverse and web3 economy-as-a-service platform for developers. She holds a Masters in Economics and Game Theory, and is a well-known trend analyst, keynote speaker, and futurist who has a history of helping to launch crypto and blockchain-based startups in South Africa. Bronwyn has co-authored best-selling books with Dion Chang (The New Urban Tribes of South Africa) and Theo Priestley (The Future Starts Now: Expert Insights Into the Future of Business, Technology and Society). Bronwyn is also the Chief Commercial Officer and Co-Founder at Carbon Based Lifeforms, a cutting-edge MMO gaming studio.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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