In 1992, author Neal Stephenson published a book entitled Snow Crash. In this dystopian, futuristic novel, there is a kind of virtual reality where people can “goggle in” to. This involves putting on a headset with an internet connection, pretty much exactly like the Oculus Rift common today. If you’ve seen the movie “Ready, Player One,” then you’ve probably got the idea.

The only difference between using the Oculus Rift and goggling into the metaverse, is that the metaverse of Snow Crash was seen as a unified world. It was more like walking down the street and visiting the shops you might see, rather than just a loading screen where a user can select which game they want to play.

But if you hear someone use the term metaverse today, what they’re probably talking about is a new trend in online gaming in which users are able to play games with each other, but some of the assets inside the game are able to leave their virtual world. In other words, value goes into the game but it can also come out of the game.

To explain what I mean, let’s retrace our steps over the last forty years with video games. In the 80’s there was the golden age of the arcade, dominated by names like Super Mario Brothers and Pacman. In the 90’s we started to see more advanced consoles and even some online games. In the 2000’s online games got much more popular, led by social gaming on Facebook and MMORPGs (massively multiplayer online role playing games), such as Farmville and World of Warcraft. Since the 2010’s cell phones have exploded in popularity and multiplayer online games can now be played from a mobile phone anywhere there’s a cell phone signal.

But as we enter the 2020’s, we are starting to see a new type of game emerge. These are the metaverse games powered by blockchain technology. You may have heard of digital rocks selling for millions of dollars, or profile pictures of apes or crypto punks mooning in price. However, the newest trend in gaming involves digital property that can be generated in a game and then sold on an open market outside of the game itself. Additionally, NFTs such as the Bored Apes can now be imported into certain games, where other players can view your digital art collection and even buy, sell or trade these assets inside of the games themselves.

Axie Infinity made a lot of headlines recently when articles started to circulate about disadvantaged kids in third-world countries who were able to actually help support their families by farming SLP, which stands for “Smooth Love Potion,” and its use case is to breed Axies, which are the critters from the Axie Infinity game. These creatures have DNA that lives on the blockchain and as they breed, they can produce offspring with unexpected traits. Some of these traits are useful for combat, which is how the current Axie game is played (three Axies battle against three others).

This is all made possible by in-game mechanics which are designed to return more value to the players rather than just the game developers. It’s possible to buy in-game assets without playing the game, and it’s possible to create assets just from playing the game (although Axies are required to start).

What we’re starting to see is a world in which things are more connected than ever before. The model that Sky Mavis has employed (Axie Infinity’s parent company) shows the potential of providing a platform and letting players create value and capture a meaningful portion of that value. It’s exciting to see, and already many other games are being released or being developed along that same vein.

In the future, we believe that digital assets will become much more liquid and much more normalized. They say time is money, and of course there’s value in people’s time. The question has been how to capture that and who will benefit? As we move from an analog world, to a digital world, as we move from siloed technology to hyper-connected clouds, as the internet of things emerges, as bridges connect blockchains to games to people to money to value, the world is being reshaped in new and exciting ways.

These changes have the potential to displace incumbents and middlemen. But they also have the potential to give people a way to create value for their time when there may not have been other desirable options. These are exciting changes and the prospect of playing a role is compelling; both the opportunity that it presents and for the fact that it can help people all over the world.

If executed properly, this could be a big win for our partners and for the world. Generally speaking, these are the kind of opportunities that we like.

Cheers,

Hans Hauge

Head of Quantitative Strategy

Ikigai Asset Management

References:
https://www.amazon.com/Snow-Crash-Neal-Stephenson/dp/0553380958
https://axieinfinity.com/
https://www.bloomberg.com/news/articles/2021-09-29/what-the-metaverse-is-who-s-in-it-and-why-it-matters-quicktake
https://www.imdb.com/title/tt1677720/
https://www.coingecko.com/buzz/how-playing-axie-infinity-nft-game-helps-filipinos-earn-income