Editorial: The Current Business Land Rush in the Blockchain-Based Virtual Worlds (and the Forgotten Lessons from Second Life’s Corporate Boom)

It’s déjà vu all over again.

—Yogi Berra (source)
The virtual office of accounting firm Prager Metis International in Decentraland (image source: The Wall Street Journal)

This morning, I read a January 7th, 2022 article in The Wall Street Journal titled Accounting Firms Scoop Up Virtual Land in the Metaverse (archived version), which discusses how PricewaterhouseCoopers and Prager Metis made acquisitions last month to begin operating in the metaverse. Please go over there and read the article in full; below is the section pertinent to my editorial today:

Businesses across industries, including real estate, technology and cryptocurrency, have been purchasing digital land on platforms such as Decentraland and the Sandbox. Executives have started drafting business plans for operating in those virtual worlds, which are typically conceived by videogame developers.

Prager Metis International LLC, a New York-based accounting and advisory firm, on Friday said it opened a virtual three-story property on a site it bought for nearly $35,000 in late December. The firm, which operates 23 physical offices in the U.S., Europe and Asia, made its purchase on the Decentraland platform in partnership with Banquet LLC, a firm that funds and manages blockchain ventures.

Prager Metis plans to use its virtual building to advise companies and other new and existing clients on tax and accounting issues, Chief Executive Glenn Friedman said. The firm expects that many of its clients, particularly those in the entertainment and fashion industries, will seek its services in the metaverse as more companies decide to conduct business there, according to Mr. Friedman. “If the metaverse is going to replace the internet, then certainly business is going to use it,” he said.

Other accounting firms are also venturing into the metaverse. PricewaterhouseCoopers in late December said its Hong Kong unit acquired virtual real estate in the Sandbox, a subsidiary of software firm Animoca Brands Corp., for an undisclosed amount.

“The Metaverse offers new possibilities for organizations to create value through innovative business models, as well as introducing new ways to engage with their customers and communities,” William Gee, a partner at PwC Hong Kong, said in a statement.

And, like Yogi Berra once famously said, I got déjà  vu all over again.

In November 2017, in the earliest days of the RyanSchultz.com blog, I wrote:

I still remember the crazy heyday of Second Life, with the hype machine set to maximum, from 2006 to 2008. Everybody was going on about how virtual worlds in general, and Second Life in particular, were going to revolutionize business and education. News organizations like Reuters, countries like Sweden, and big corporations like American Apparel and IBM trooped into SL and set up sims.

(Of course, most of those organizations trooped out of SL just as quickly as they trooped in, leaving the field to the many mom-and-pop businesses that give SL its vibrancy.)

And in July of 2018, I wrote:

Second Life went through a period (around 2006-2007) where many real-life companies, like American Apparel and Playboy, trooped in and set up shop. Almost all of those corporations left after a year or two, not seeing any real value for their investment of time and money in SL.

But, you may say; but!! It’s different this time around, you may say. And you may well be right. Perhaps, this time, all the stars will align and people will create an avatar, go into a social VR platform or a virtual world like Decentraland or the Sandbox, figure out how to dress themselves, move around and talk, locate your virtual office or shop, and actually transact business. But, for anybody who was in Second Life between 2006 and 2008, during a previous iteration to the current metaverse hype cycle, this all has a rather familiar ring to it.

Businesses who want to set up a virtual office or shop in any metaverse platform—Decentraland, the Sandbox, venerable old Second Life, wherever—need to stop and ask themselves the following pertinent questions (and yes, a consultant like Cathy Hackl, Godmother of the Metaverse, would probably charge you a pretty penny for this advice, but hey, me, I’m going to give it to you for free!):

  1. What is your use case? Prepare a written-down description of the ways in which a user would interact with your virtual office. Yes, I’m serious! WRITE IT DOWN AND THINK IT OUT. A formal use case would establish the success scenarios, the failure scenarios, and any critical variations or exceptions to your plan, before you commit.
  2. Who is your target audience? Who are you hoping to reach by setting up a virtual office in social VR or a virtual world, that you you wouldn’t already reach? NFT enthusiasts? Crypto bros? Your Joe or Jane Average consumer? If there’s a mismatch between your target audience and the people who actually use the platform, you need to take a step back and rethink this. You shouldn’t expect a sudden influx of people who are different from the demographic of the current userbase, either.
  3. How technically savvy is your target audience? For example, during Second Life’s boom, many academic libraries set up virtual versions, only to later close them when they realized that expecting people to install and set up a Second Life client, just to look for information or ask a reference question, was too steep a learning curve. In other words, the price of admission was too high. (Yes, I know, Decentraland is web-based, but that, too, has a learning curve and its tricky set-up bits, particularly if you are new to cryptocurrencies, blockchain, and NFTs.)
  4. Will this virtual office be staffed? Or will it just be a place where an avatar can get information, kind of like a fancy, three-dimensional brochure, but with NFTs and videos? 😉 And, if you do plan to staff it, will you have posted office hours? Keep in mind that most metaverse platforms operate 24/7/365; will you have people working in shifts? At the same time, paying someone to hang around in Decentraland or the Sandbox, waiting for someone to wander in, could potentially be expensive.
  5. Seriously, ask yourself why you are doing this, and keep digging until you hit bedrock! Are you setting up a virtual office just for the bragging rights? Are you just responding to all the recent articles about the blockchain-based metaverse which are triggering your FOMO (Fear Of Missing Out)? Are you responding to someone else’s FOMO (e.g. your CEO or CTO)?

    So go look into the mirror, and ask yourself why. And whatever answer you give, keep asking yourself why, again and again and again, until you strip out all the corporate-speak and bafflegab and bullshit and you hit your underlying bedrock, your true motivations and intentions. THEN act.

There, you see? Auntie Ryan could definitely give the Godmother of the Metaverse a run for her money! 😜 (Seriously, love you, Cathy! Don’t change what you’re doing!)

Look, people (and by “people”, I mean corporations); I’m not saying don’t do this. I’m saying: if you choose to do this, then carefully think about what you are doing, and why you are doing it, before you jump in feet-first, and start flailing about. And (shout-out to Cathy!) hire consultants who will advise you. (Hey, forget Cathy, hire me! Me!!!)

I remain optimistic that this iteration of the metaverse will take off (unlike Second Life’s relatively short-lived and now seemingly-forgotten corporate boom). But my optimism is tempered by my 14 years of experience in SL…I often joke that I got my Ph.D. in the Metaverse from the University of Second Life! 😉 That experience informs my perspective as I passionately explore and write about the ever-evolving metaverse on this blog.

Second Life is the perfect model of a mature, fully-evolved metaverse platform, which newer entrants into the marketplace would be wise to study, and learn from both its many success stories and its failures, controversies, and scandals.

Editorial: Fuelled by the NFT Boom, Blockchain-Based Virtual Worlds Are Having a Moment—But Will It Last? Is It a Bubble?

A Reuters news article posted today, titled The ‘metaverse’ bet: crypto-rich investors snap up virtual real estate, which first came to my admittedly-distracted attention as a trending news item in my Twitter news feed, starts off as follows:

What do you do with a $69 million artwork that doesn’t physically exist?

That’s the question faced by the Singapore-based investor calling himself Metakovan, who made headlines last month when he bought the digital artwork “Everydays: The First 5000 Days” by the American artist Beeple at Christie’s.

The work is a non-fungible token (NFT) – a new type of virtual asset that has its ownership status and authenticity verified by blockchain. NFTs have exploded in popularity in 2021, with prices skyrocketing.

Metakovan, real name Vignesh Sundaresan, plans to put the artwork on display in four virtual world environments. He is working with architects to design gallery complexes that the public can enter via web browsers or virtual reality technology.

Blockchain-based virtual worlds are definitely having a moment: the following trending news story showed up on my Twitter feed

It is clear to anybody that is paying attention that the NFT (Non-Fungible Token) boom is sparking intense interest and resulting speculation in the blockchain-based virtual worlds where such NFTs can be displayed: Cryptovoxels, Decentraland, Somnium Space (all already launched and seeing more and more business) and The Sandbox (which launched its first phase on March 31st, 2021). It seems like every second room on the hot new drop-in social audio app Clubhouse is about NFTs and how to get into the market.

Market speculation in the first three blockchain-based virtual worlds has only intensified recently, with previously unheard-of trading volumes and rapidly escalating prices as bidding wars break out over virtual properties. Here is a graphic linked to from the aforementioned Reuters article, showing just how suddenly land values have jumped in Decentraland (and I’m quite sure that early investors are rubbing their hands with glee!):

And some big-name companies are being attracted to the blockchain-based virtual world marketplace (quotes are from the Reuters article up top):

In what will be one of the biggest names to join the party, videogame maker Atari told Reuters it planned to launch its own blockchain-based virtual world and would soon announce details.

Online environments are going to be “very very big”, regardless of fluctuations in the price of bitcoin, said Frederic Chesnais, head of Atari’s blockchain division and the company’s former CEO. NFT real estate could one day fetch millions of dollars, he added.

Atari, ahead of its plans to open its own blockchain-based world, has licensed a retro arcade within Decentraland and is due to open a casino.

Among the people interviewed for the Reuters article was the creator of Cryptovoxels, Ben Nolan, who expresses caution in the current feverish NFT market:

“I expect that there’ll be a crypto winter in the next couple of months, the whole NFT boom will explode and then all the value will absolutely collapse,” said Ben Nolan, founder of the virtual world Cryptovoxels.

“Doing NFTs as an investment or as a way to make money is really ill-advised.”

However he does see a future for virtual worlds and NFTs.

“Do I think most people will use virtual worlds? Probably not, but I think a lot of people will and I think NFTs are a big part of that growth,” he said.

“Actually walking around with another person in a virtual space and looking at art together is a really nice way to spend time,” he added.

We can expect that more companies will enter the blockchain-based virtual worlds marketplace, attracted by the possibility of making profits from virtual real estate—whether that real estate is used for galleries to show NFTs or not.

Interesting times! I choose to remain safely outside the fray, peering in occasionally to write the odd blogpost—emphasis on odd 😉 . The following are links to all my previous blogposts written about four of the currently available (or soon-to-be-available) platforms:

Stay tuned for further dispatches from the blockchain-based virtual worlds and social VR platforms! (Yes, both Cryptovoxels and Somnium Space support VR.)

And I’d love to hear from you: Do you hold land on these four platforms? Do you think we are in a financial bubble? Feel free to sound off in the comment section!

We’d love to hear form you!

The Sandbox: A Brief Introduction

Yep, yet another blockchain-based virtual world. This one is called The Sandbox:

Here’s the requisite promotional video:

Basically, you build and animate voxel-based assets, and you can put them up for sale in the store to earn cryptocurrency called Sand (get it?). Their virtual land parcels, 96 by 96 metres square, are called LAND (gee, sounds familiar, doesn’t it?) and the presale starts in eleven days from now, when 166,464 LANDS will go up for sale (with all the expected talk about land scarcity, buy now, supplies are limited, etc. etc. etc.):

The Sandbox looks an awful lot like a cross between Cryptovoxels and Decentraland (there’s no mention of virtual reality support). A potentially interesting twist is their VoxEdit software, which they claim is “the first software that allows you to create your own voxel models, rig them and animate them in no time”. They have an alpha version of VoxEdit available to download for Windows and Mac users.

They also are offering cash rewards to attract game developers for their new platform, from a US$2 million fund called the Game Maker Fund, which will grant amounts from US$5,000-30,000 each to fund up to 100 games:

We are happy to announce the creation of the Game Maker Fund, our exclusive program that will reward the first 100 original game proposals that get accepted. Yes, you read that right: we’re offering free exposure for the games you create in The Sandbox, one of the most anticipated blockchain games of 2019. The Fund will be used to reward and incentivize Game Crafters to submit unique experiences. Don’t worry if you have more than one great idea: there is no limit on the number of proposals that each candidate can submit!

If you want to follow The Sandbox as the project develops (as far as I can tell, they haven’t launched yet), they have accounts on all the standard social media: Facebook, Instagram, Twitter, Medium, Telegram, and Discord.