“What the internet is for information, the metaverse is going to do for social connections. I'm no longer bound by physical distance or all these constraints in terms of who I interact with or how I represent who I am. All these things are suddenly unleashed. It's insanely disruptive."
Craig Donato - CEO, Roblox
Each new evolution in technology poses one key question: who will identify its value first and reap the greatest reward, and who will scramble to catch up before it's too late?
The acronym NFT has been all over the news lately, but most people don’t even know what it stands for–non-fungible token–much less what one is. But that hasn’t stopped NFTs from developing into a massive marketplace. While some evidence suggests that this specific market is already past its peak, there’s strong evidence it will be back. And the next boom in the virtual marketplace is already forming, whether we see it or not.
One thing is clear: for those who understand and leverage NFTs and other emerging technologies, there are fortunes to be made. But for most, that’s easier said than done. In this piece, we’re going to break down the principles surrounding virtual product marketplaces into the core concepts that businesses should understand to get an early edge in this space.
OUR INCREASINGLY VIRTUAL WORLD
Once the purview of science fiction (if you haven’t, you really should read Snow Crash), virtual reality has graduated to science fact. From Fortnite to Roblox to Animal Crossing, hundreds of millions of people across the world are spending significant portions of their lives in persistent, networked virtual worlds.
But the applications go way beyond gaming. Today, as I write this, people are building lasting virtual relationships, owning and decorating virtual spaces, and competing for scarce virtual resources across a multitude of distinct virtual ecosystems. And as augmented reality becomes more pervasive, we find virtual overlays playing part in how we view the physical world that, at least so far, we still call the “real” one.
Today’s virtual worlds are mostly constrained to PC and tablet interfaces, and as such, they’re limited by the not-so-immersive capabilities of that hardware–a far-cry from the indistinguishable alternate realities of science fiction. But, as VR hardware becomes more advanced and more affordable, these virtual experiences will become more “real” and the line between our physical world and the virtual worlds we inhabit will begin to blur.
The Shift to the Metaverse
Aside from hardware, the biggest obstacle to the growth of virtual reality is the absence of a coherent cross-world ecosystem. While some virtual worlds strive toward universality, most common virtual environments are intentionally limited to certain games, objectives, or communities.
Eventually, a shared interface will develop to connect virtual spaces with the augmented-reality enhanced physical world. That collective, persistent layer of connected virtual worlds is known as “the metaverse.”
How that evolution will happen is unclear, but experts agree that virtual and augmented reality, the collective metaverses, are already becoming a ubiquitous part of human existence. That’s why smart companies are placing big bets in this space. In fact, 20% of Facebook’s entire workforce is currently invested in developing VR and AR technologies.
But most companies haven’t come close to this level of investment, mostly because they don’t know where to start. This ad/short film from Windows Mixed Reality should help you extend your imagination to the sphere of the metaverse.
OPPORTUNITIES FOR BUSINESSES
Selling Virtual Products
A virtual product is an exclusively digital representation of a product. It may be a virtual representation of a real product, or it may be a product that only exists in the virtual realm. While these products may not be “real” in the way we traditionally consider reality to be, they are plenty real enough for real people to be spending real money on them.
For many companies, the applications for virtual products might be obvious. It’s easy to imagine someone buying a virtual high-end Ferrari to get an edge in a virtual racing simulator. Someone wearing an expensive suit in a virtual environment gains a similar benefit to wearing one in real life.
It’s less easy to imagine how a company like Taco Bell might leverage virtual products. There are certain benefits to a Chalupa Supreme that don’t seem to easily translate into a virtual environment. That didn’t stop them from creating and selling tens of thousands of dollars in virtual products in the last month.
The message is simple. If you make and sell products in the real world, there’s probably a way to make and sell those products in virtual environments. And as we progress toward an immersive multiverse, the value of those products will only increase.
"After a flurry of more than 180 bids in the final hour, a JPG file made by Mike Winkelmann, the digital artist known as Beeple, was sold on Thursday by Christie’s in an online auction for $69.3 million with fees."
Scott Reyburn, The New York Times
Reaching Massive Audiences
Globally, the video game industry is larger than the sports and film industries combined. Think about that for a second. How badly would you like for your products and/or brand to be featured in a hit movie or on a sports broadcast? You’d reach more people with a downloadable skin in Fortnite or a product placement in Animal Crossing.
Even if you can’t make a fortune selling virtual products right now, you can immediately begin to leverage massive boosts in brand equity. Whether or not you have a product with a use case that matches one of today’s virtual worlds, you have a brand that can be put on virtual clothing, signage, artwork, and more.
Not only are these audiences large, but they’re likely divergent in important ways from your traditional brand audience. Companies are using NFTs and virtual products to reach younger audiences. Two-thirds of Fortnite players are 24 years old and younger. Roblox’s user base is even younger, with two-thirds of players under 16.
Luxury brands in particular find value in allowing virtual users to purchase virtual versions of their expensive products long before they might be able to do so in the “real” world.
Protecting Your IP
Most people’s first question about virtual products is how to maintain a product’s value when they are more easily imitated or counterfeited. Counterfeiting is obviously a problem in most industries in the real world, from sneakers to fine art. In the virtual world it gets even more complicated.
In the physical world, the details of materials and construction are what separate a counterfeit Rolex watch from a real one. In virtual worlds, it’s possible to generate “virtually” identical copies of virtual products with no apparent distinctions in the product files themselves. How do you maintain and enforce scarcity and exclusivity with virtual products? That’s where NFTs come in.
The blockchain can seem really complicated at first glance, but the best way to think about it is as a record of ownership for a certain virtual asset, be it a virtual product or a unit of cryptocurrency. The difference between a blockchain and another record of ownership–say, the ledger in your bank account–is that no one owns the blockchain. It’s decentralized and no one has authority to alter, change, or destroy it.
So, if you own one bitcoin, that unit is connected to a record in the blockchain. You can’t spend it twice because an identical record for that coin can’t be created. When you spend that bitcoin or give it to someone else, what you actually give them is the unique reference to its record in the blockchain.
NFTs are similar to units of cryptocurrency in that they are generated and protected via blockchain technology. How they differ is that there is no “fungible” or tradeable value assigned to an NFT in itself. One bitcoin is considered to have the same value as every other bitcoin in existence, and as such they can be indexed to a value relative to other currencies or commodities. An NFT has no value in itself. It’s simply an unalterable and indestructible record of ownership that can point to any virtual asset, from a piece of 3D digital art (we’re big fans of David O’Reilly in particular) to a clip of LeBron dunking to a copy of a Kings of Leon album.
An NFT is a secure means of asserting ownership over a virtual asset. If a virtual product is protected via an NFT, the NFT points directly to that product file and not to any other copy or forgery of that product. When you sell an NFT, you are selling proof of ownership of the asset.
How does that keep people from walking around in fake virtual Yeezys in the virtual worlds of tomorrow? The answer? It doesn’t, necessarily. What it does is allow virtual worlds to enforce rules around the use of identifiable products. It allows IP owners to sell and enforce licensed uses of their IP in virtual spaces. And an NFT is just one way to identify and protect virtual ownership, with many others–and likely the eventual standard–still to be developed.
Aside from protecting IP in virtual spaces, NFTs can also be used to protect physical products from counterfeiting and unauthorized reselling. For example, a major problem facing eCommerce companies today is competing against unauthorized resellers of their products on major marketplaces. One way to fight this would be to apply an NFT-linked virtual rendering of your product to authorized sales channels, acting as a verifiable certificate of authenticity.
"[Blockchain] is the biggest opportunity set we can think of over the next decade or so."
Bob Greifeld, CEO - NASDAQ
HOW THREEKIT CAN HELP
As virtual worlds continue to evolve and grow, use cases for virtual products will become clearer and more useful to both virtual consumers and producers. To be ready to leverage existing and future opportunities to make money and build your brand in the multiverse, you need to create virtual versions of your products.
Threekit is a scalable platform for generating 3D virtual content that can be leveraged in these different spaces. With Threekit, you have the capacity to quickly generate thousands or even millions of photorealistic 3D visual assets, layer critical digital information over the properties and contents of those assets, and output those assets in the file types you need to present them virtually.
You can use Threekit to generate 3D models of an entire catalog of configurable products and even embed a configurator on your website to allow your site visitors to create their own custom versions of your virtual products. You could protect each unique configuration of your product with an NFT and allow a single owner for each custom variant, or a specific number of copies permissible.
Threekit gives you the technology to ensure that you are only limited by your own imagination. Whether you use Threekit or some other means of digitizing your products or creating new virtual products to sell in virtual spaces, the clock is ticking. Companies that act now will reap the largest reward in this massive shift in how we define ownership and use products in the world to come.