However its final form might look like, the Metaverse, will probably rely on some combination of different technologies. The most promising ones available today are Virtual / Augmented Realities and Blockchain technology.
While most crypto markets are taking a dive, many companies, DAOs and other organisations rush to develop new experiences in what is already being called the Metaverse, many ask themselves if these solutions are not only a temporary hype and will fade away as soon as the next buzzword floods their social media feeds. The sceptics can only be proven wrong, if the application of these emerging technologies can create a sustainable value for its users.
That is why we should be asking ourselves: How can long-term value even be achieved in the arriving Metaverse?
The Pay-To-Win Model
The best-known experiences in the Metaverse that exist as of 2022, like Roblox, Fortnite, Axie Infinity, Decentraland and Sandbox can be best compared to pay-to-win games. This is a model, in which the game is at first free to play, but players will have to spend money to get advantages in the game, in extreme forms even requiring players to do so to continue the progress. Many mobile games and MMORPGs rely on this business model to create income.
As social media apps are becoming increasingly gamified, they also rely on this game mechanism to drive engagement. Not only do they reward high posting activity and engagement, but they limit organic reach in order to create an incentive for companies and creators to buy ads on the platform.
In the web3 space of cryptocurrencies and NFTs (non-fungible tokens), most often even the first access requires an investment or acquiring a stake in the platform to participate in the communities.
For example, in order to get involved with projects like CryptoPunks or Bored Ape Yacht Club, you need to either spend money on acquiring them, or if you can get in early, spend crypto minting them on the blockchain.
Even though some platforms facilitate the minting process or cover the fee when the NFT is purchased, the capabilities are still very limited without sufficient funds.
In virtual worlds, that rely heavily on blockchain technology such as Decentraland and Sandbox it is free to participate, but only as a consumer.
To create your own spaces, you have to first invest in virtual real estate (does anyone say virtual estate yet?).
In these spaces, the mantra always states “Be rich or get in early”, because the value of such properties is always reliant on the hype the surrounding project can create.
Buy low, sell high
The problem with these applications is that participation is only rewarded, if an initial financial commitment is made. In other words, you pay first, then you receive the benefits of having invested early and only then you can be a part of this newly emerging virtual world.
There are some problems that arise through this practice:
Firstly, it excludes low and middle class individuals who don’t necessarily have a considerable dispensable income and raises the entry barrier for third world countries where inflated crypto prices translate even worse into the equivalent local currency.
Secondly, there are only very few rewards for long-term engagement of users already in place. Some projects already feature perks for early supporters, such as air-drops, exclusive events, etc. but these are given out sporadically only as a secondary reward and are usually not included in the official project roadmap.
Instead, (short-term) speculation is the activity that is rewarded the most.
“Buy low, sell high” - this is the strategy that dominates the web3-Metaverse space.
Whether it’s virtual real estate, digital collectibles or NFTs - the only incentive for users to hold on to an asset or to engage longer in a world is even higher value growth, so it can be traded off for a profit at a later time.
From pay-to-win to play-to-win
So what is the alternative?
High-engagement platforms like TikTok, YouTube and Instagram optimise their recommendation algorithms for watch time among other metrics.
That means the longer the content will engage users, the better the algorithm will pick them up.
The same can be said for participation, such as shares, comments and likes.
The reason for this is that watch time, or in other words, the time users spend engaging with the content, is one of the most important performance indicators for content relevance.
If you reverse this logic, rewarding participation and engagement in a virtual world can grow use time per user and thus establish a relevant platform.
By creating an artificial scarcity for otherwise unobtainable exclusive rewards that give players an advantage, they become more drawn in to the experience.
The time spent in a world should directly translate into the value of the reward.
By doing this, you can ensure that the highest performing users will be the ones who spent the most time & engagement on the platform, i.e. the biggest fans of the platform.
These users can become influencers or creators who create meaning and cultural relevance around a virtual world and in turn, the hype created around it can generate additional streams of new users.
Thus, creators, such as live streamers and other influencers should be especially rewarded and enabled.
Examples for this could be: By making X friends on the platform, by giving x gifts, by exploring x places you get a reward, such as a rare item or your own customisable land asset.
Tokenomics
One method to implement a reward system is by introducing a native token. This token acts as an intermediate between players, who are seeking to earn rewards and investors, who want to grow their investment and the platform itself.
Through this, the value of the engagement becomes measurable in the same way that the investors' equity in the platform becomes tangible.
TL;DR
Taking all of this into account, developers of new platforms and virtual worlds in the Metaverse and web3 should realise that a “pay-to-win” strategy is less sustainable in the long run than a model that includes “play-to-win” mechanics.
Whether it’s a decentralized social app or a VR game, rewarding users based on engagement time and activity lowers the entry barrier for new users and keeps them engaged.
Empowering creators to deliver cultural meaning through content can create more traction, which in turn helps to to gain more users and grow the platform.
Introducing a native token can then connect players and investors to work together by incentivising players with monetary rewards and investors with cultural rewards and higher returns. This will help to make sure, that the platform becomes more sustainable and is there to stay.
