The Metaverse Revolution: How the Perception of Online Content is Redefined
As technology advances, digital identity is becoming an increasingly important part of people’s lives. The concept of the Metaverse has gained much attention, with users speculating on how the traditional and digital worlds could seamlessly interact. The Metaverse, blockchain, artificial intelligence, and machine learning have been buzzwords in recent months. While the Metaverse can exist without blockchain, Web3 enables digitally mapping values and enabling ownership in the digital world. This article provides an overview of the concepts of Web3 and the Metaverse, and how they could work together. The article also discusses the use of crypto tokens in the metaverse context and the possible implications of their use. Ultimately, the article highlights the relevance of digital assets and cryptocurrencies in the traditional world, and how digitalisation could lead to a seamless interplay between the real and digital world.
Authors: Hannes Detlefsen, Christian Viehof
Digitalisation is advancing rapidly, and with it, the possible applications that technologies can offer in the future. For many users, digital identity has long become an important part of their lives and already seems to be integrating more and more into traditional structures. Concepts such as the Metaverse have users speculating about how a seamless interplay between the traditional and digital worlds could become a reality.
Alongside blockchain, artificial intelligence and machine learning, the metaverse has been one of the buzzwords over the past few months. Companies are building offices in virtual worlds, investors are buying digital properties and in the NFT space there are many promises to make disruptive digital experiences a reality. In the blockchain space, too, there are many projects that issue tokens in order to obtain financing and implement projects, but contrary to what is often assumed, the Metaverse does not have much to do with blockchain and crypto or Web3 in principle.
The Metaverse can certainly exist without blockchain and content can also be presented immersively without tokens. Nevertheless, Web3 represents the possibility of digitally mapping values of all kinds and enabling ownership in the digital world — the interplay enables disruptive business models.
In the following, the terms Web3 and Metaverse are clarified in order to describe a possible interplay of the two concepts.
The Concept of Web3
In a nutshell, Web3 is currently the most advanced stage of the web, resulting from the developments of the internet to date. With each stage, we see advancements that fundamentally change the perception, user experience and capabilities of the internet.
The original Internet, i.e. Web1, was launched with the intention of allowing users to access digital content published by selected publishers, like an online library which reduced the transaction costs of information exchange.
Web2 expanded this concept by additionally allowing users to both create their own content and consume content from others. However, control always remained with centralized entities, which acted in a controlled manner and enabled, for example, censorship of various content. Accordingly, Web2 describes the concept of the Internet as it is used today, including the associated problems and limitations.
Web3, however, fundamentally changes this conception of the Internet:
Web3 users still have the possibility to create and consume digital content, but they now have the additional possibility to actually own this digital content.
Decentralized networks (DLTs) such as the blockchain are replacing centralized intermediaries, creating a form of trust and fundamentally changing the consumption and exchange of digital content. Blockchain-based cryptocurrencies, NFTs, digital securities and other types of tokens offer a range of new applications that are being used in the digital economies.
The Concept of the Metaverse
The concept of the metaverse is not about the one metaverse, but much more about perceiving digital content in a novel way and merging reality with digital content.
Looking at the internet, it is currently used through various websites and apps that navigate the user through the digital world. Apps such as TikTok or Instagram are becoming increasingly important in the lives of users and digital identities are not a vision of the future but already exist, as can be observed in the relevance of the social media presence of many users. Events like Covid-19 have led to the implementation of the digital world in everyday life becoming more and more relevant and things like virtual meetings via Zoom or Teams becoming commonplace.
Technologies such as AR, VR and MR (collectively referred to as XR) enable an immersive experience of digital content, for example by enriching physical products with AR components or enabling new digital experiences through VR content.
The hurdles for a mass adaptation of the Metaverse currently lie in the limited user experience and content as well as the partially unsolved problems of the technological components of the aforementioned technologies.
Contrary to what is often assumed in the crypto industry, a blockchain isn’t necessarily needed to create a successful metaverse experience — in fact, blockchain can be more of a hindrance, for example due to scaling problems.
Nevertheless, the combination of Metaverse with Web3 components certainly makes sense.
Web3 can be integrated into virtual worlds to create trust and security and enable new investment products. Whenever digital values need to be mapped, the integration of a blockchain should be considered.
Metaverse projects often include economies and incentive models that are implemented with the help of tokens and, for example, allow users to participate in the value creation of the respective project.
Crypto Tokens in the Metaverse Context
Issuing a token that represents value seems to make perfect sense in the context of the Metaverse. However, in the past there have been many projects that use tokens solely to create unsustainable incentive models to attract new users to the platform.
Such concepts are often seen in the GameFi space, for example, where rewards are created “out of thin air” and dilute the price of existing tokens. In this context, it should be noted that investors need to be aware of how the rewards are created and whether they are linked to an actual value creation.
Apart from this, tokens are a useful vehicle to manage economies within metaverse projects, to represent digital goods or to implement digital identities.
Accordingly, there are sensible use cases for various tokens in the metaverse context — however, it should be questioned why a project needs a token and what value this token represents.
What does the future hold?
Metaverse projects like Sandbox, Decentraland or Highstreet are becoming more and more important when it comes to dreaming of a digital future.
But what concepts could become reality and what approaches are pure speculation?
At this stage, it is too early to make statements about what the metaverse might look like, but digital assets and cryptocurrencies are becoming more and more relevant in the traditional world. Furthermore, digitalisation is an ongoing process that is increasingly revolutionizing parts of traditional systems and could lead to a seamless interplay between the real and digital world.
How the metaverse will shape up is pure speculation at this point, and ideas that seem revolutionary today may soon be outdated. Blockchain, Web3, Tokenized Assets and many other components are laying fundamental building blocks of a digital future that will replace traditional systems and fundamentally change the way we traditionally deal with digital content. From today’s perspective, however, a timely shift of everyday life into the metaverse does not seem very realistic.
The classification of Highstreet (HIGH) according to the ITC
Economic Purpose (EEP): HIGH is listed as a Governance Token (EEP22TU03) due to its on-chain governance functionality.
Industry Type (EIN): The issuer of Highstreet is active in the field of Entertainment, Sports and Gaming (EIN08ES).
Technological Setup (TTS): Highstreet is an Ethereum ERC-20 Standard Token (TTS41BC). The Class “Ethereum ERC-20 Standard Token” captures every Token that is implemented by means of the ERC-20 Standard on top of the Ethereum blockchain.
Legal Clam (LLC): Highstreet does not entitle its holder to any legal claim or rights against the issuing organization, therefore it is listed as a No-Claim Token (LLC31).
Issuer Type (LIT): The dimension “Issuer Type” provides information on the nature of the issuer of the token. Highstreet is developed by the company Highstreet World Limited, which employs a number of game developers and programmers. Its Issuer Type is a Private Sector Legal Entity (LIT61PV).
Regulatory Framework (EU) (REU): The dimension “Regulatory Status EU” provides information of the potential classification of a token according to the European Commission’s proposal for a Regulation on Markets in Crypto Assets (MiCA, Regulation Proposal COM/2020/593 final). Highstreet qualifies as an Utility Token (REU52) according to the definition provided in Article 3 (5) of Regulation Proposal COM/2020/593 final.
Consensus Mechanism (TCM): The dimension describes the mechanism that is deployed to achieve consensus on the token’s distributed ledger. Highstreet tokens are issued on Ethereum; therefore, they are listed as Proof-of-Stake (TCM71PS).
Type of Maximum Supply (EMS): The dimension describes the token’s type of maximum supply. Highstreet has a maximum supply of 100,000,000. Therefore, Highstreet’s supply is listed as Fixed (EMS81).
Primary Mode of Origination (EMO): A majority of Highstreet tokens have been distributed through private and public sales. Therefore, its Primary Mode of Origination is Sale (EMO92).
Taxes (RTA): One common distinction can be drawn between crypto-assets: those crypto-assets that resemble ‘conventional’ assets, like securities, and which are merely recorded on DLT systems (Conventional Asset Tokens DTA71), and those assets and activities that raise new regulatory challenges such as virtual currencies (New Asset Tokens DTA 72; OECD 2020). Highstreet is listed in the Tokenbase as a New Asset Token (RTA72).
The International Token Standardization Association (ITSA) e.V.
The International Token Standardization Association (ITSA) e.V. is a not-for-profit association of German law that aims at promoting the development and implementation of comprehensive market standards for the identification, classification, and analysis of DLT- and blockchain-based cryptographic tokens. As an independent industry membership body, ITSA unites over 100 international associated founding members from various interest groups. In order to increase transparency and safety on global token markets, ITSA currently develops and implements the International Token Identification Number (ITIN) as a market standard for the identification of cryptographic tokens, the International Token Classification (ITC) as a standard framework for the classification of cryptographic tokens according to their inherent characteristics. ITSA then adds the identified and classified token to the world’s largest register for tokens in our Tokenbase.
- The International Token Identification Number (ITIN) is a 9-digit alphanumeric technical identifier for both fungible and non-fungible DLT-based tokens. Thanks to its underlying Uniform Token Locator (UTL), ITIN presents a unique and fork-resilient identification of tokens. The ITIN also allows for the connecting and matching of other media and data to the token, such as legal contracts or price data, and increases safety and operational transparency when handling these tokens.
- The International Token Classification (ITC) is a multi-dimensional, expandable framework for the classification of tokens. Current dimensions include technological, economic, legal, and regulatory dimensions with multiple sub-dimensions. By mid-2021, there will be at least two new dimensions added, including a tax dimension. So far, our classification framework has been applied to 99% of the token market according to market capitalization of classified tokens.
- ITSA’s Tokenbase currently holds data on over 4000 tokens. Tokenbase is a holistic database for the analysis of tokens and combines our identification and classification data with market and blockchain data from external providers. Third-party data of several partners is already integrated, and API access is also in development.
Remarks
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Hannes Detlefsen is a Community Manager at the International Token Standardization Association (ITSA) e.V. and has been active in the blockchain field for several years. Currently he is studying Business Administration at the Christian-Albrechts University in Kiel. Besides his experience in the field of digital assets, his main focus is on decentralized finance. You can contact him via detlefsen@blockchain-sh.de and connect with him on LinkedIn.
Christian Viehof is an Executive Director at the International Token Standardization Association (ITSA) e.V., working to create the world’s largest token database including a classification framework and unique token identifiers and locators. He completed his Bachelor in Economics at the University of Bonn, the Hong Kong University and the London School of Economics and Political Science with a focus on Behavioral Economics and Finance. Currently pursuing his Master of Finance at the Frankfurt School of Finance and Management, you can contact him via christian.viehof@itsa.global and connect with him on Linkedin, if you would like to further discuss ITSA e.V. or have any open questions.
