Metaverse Latest

Metaverse technologies and virtual gaming have surged in popularity during the Covid19 pandemic and are continuing to evolve, grow, and converge each month. Coresight Research has identified the expanding metaverse as a key trend to watch in global retail in 2022 and beyond.

Our Metaverse Latest series provides regular updates on metaverse developments (including NFT (non-fungible token) collection drops), showing how key players and new entrants are seizing opportunities in the space. We also discuss metaverse trends we have seen recently.

In this report, we present developments as of August 8, 2022, and discuss the upcoming Ethereum merge and its implications for retailers, business and virtual world economies. 

Recent Metaverse Developments 

Virtual Worlds and Platforms

• On July 11, 2022, aiming to build a cross-chain and interoperable portfolio of blockchain projects, online card game Heroes of NFT announced a partnership with cross-chain network Axelar. 
• On July 12, 2022, following the launch of its $360 million fund in January, Animoca Brands, which funds many of the larger blockchain projects, announced a new $75 million fund to support the open (interoperable and decentralized) metaverse concept.  
• On July 14, 2022, the first metaverse platform dedicated entirely to sports, The Sports Metaverse, held its initial land sale. The project aims to bring sports fans, brands and teams together where users can trade and collect NFTs and explore stadiums. 
• On July 14, 2022, Yuga Labs, creator of some of the most popular NFT collections, took a step closer to launching its highly anticipated metaverse, Otherside, inviting first-look users (land owners) for a demonstration of the environment.
• On July 26, 2022, metaverse project Aftermath Islands raised $25 million from its initial token sale. The project is built on Unreal Engine 5, which provides fairly realistic graphics (compared to current projects, which are more akin to traditional video and mobile games). 
• On July 28, 2022, GameFi service platform Game Space announced an AirDrop (random token giveaway) of its NFTs for players in the Steam Ecosystem, becoming a Web 3.0 portal for over 1 billion active users. 
• On August 5, 2022, first-person shooter game, StarHeroes, which is built on the blockchain and is angling itself as a metaverse, received a grant from Microsoft that will allow its ecosystem to be interoperable with Microsoft’s Azure PlayFab games. 

Brands and Retailers (Excluding NFT Collections)

• On July 7, 2022, luxury hotel group Oetker Collection announced a partnership with fashion application Drest to enter the metaverse. The experience will allow users to customize looks with pieces from over 250 designer brands with a virtual daily photo challenge, with Oetker hotels as backgrounds.
• On July 11, 2022, sports equipment provider Taylor Made announced a partnership with Canada-based fintech company Dello to offer cryptocurrency payments for customers.
• On July 12, 2022, gaming retailer GameStop officially launched its NFT marketplace, which will allow users to connect their personal digital wallets as well as the recently launched GameStop Wallet.  
• On July 12, 2022, fashion model Karlie Kloss launched a designer showcase in the metaverse. Partnering with five community Roblox designers, Kloss is creating a centralized hub to transport avatars to one of five unique pop-up stores featuring a wide variety of fashion genres.
• On July 12, 2022, beauty brand owner L’Oréal filed patents for an augmented reality (AR) virtual makeup app. The application will provide recommendations and highly personalized looks for customers, as well as common looks to choose from.
• On July 13, 2022, food-packaging retailer Hormel Foods reported that it is seeking trademarks for its Spam, Planters, Skippy and Mr. Peanut brands to enter the metaverse, specifying “downloadable virtual goods,” or NFTs.
• On July 13, 2022, Burberry launched an exclusive virtual handbag collection in partnership with Roblox. The bags, created with top Roblox designer Builder Boy, can only be purchased and worn by avatars in the Roblox universe.
• On July 13, 2022, electronics manufacturer Samsung announced the launch of the “Space Tycoon” metaverse experience in partnership with Roblox. The experience will allow users to construct virtual Samsung products and will feature an in-game store for collectibles.
• On July 14, 2022, men’s lifestyle brand Playboy announced that it is partnering with The Sandbox to create a “MetaMansion.” The experience will feature games, collectibles and organized events.
• On July 17, 2022, beverage brand Mountain Dew hosted a watch party for esports event “Call of Duty League Major 4” in Decentraland. Attendees had the opportunity to win exclusive collectibles and discounts on Mountain Dew’s Game Fuel beverage.
• On July 18, 2022, beauty brand Nars Cosmetics launched a “Nars Color Quest” inspired by its blush, Laguna and Light Reflecting products. Each product line represents a virtual tropical island in Roblox, targeting Gen Z consumers.
• On July 19, 2022, Meta announced a collaboration with digitally native fashion brand DressX for a digital-only fashion collection in its avatar store. The partnership aims to provide metaverse users with a means of expression.
• On July 20, 2022, car manufacturer Nissan released a virtual advertising campaign for its all-electric Ariya; the advertisement depicts virtual and immersive artwork of the Ariya in several UK locations, accessible for viewers through web, mobile and VR (virtual reality). The artworks also feature a QR code that directs viewers to Nissan’s metaspace.
• On July 26, 2022, Kanye West (through YEEZY GAP) announced a collaboration with Balenciaga to create a virtual game experience with avatars wearing stylish digital pieces, with several customization features for users.
• On July 27, 2022, PepsiCo announced a partnership with blockchain firm Security Matters to track recycling using the Ethereum blockchain, by improving sorting and packing processes and identifying waste.
• On August 1, 2022, Burberry announced a partnership with esports platform Gen.G. The collaboration will launch a four-part educational content series that aims to highlight inclusivity for women in the gaming world.
• On August 2, 2022, Gucci announced that it will begin accepting ApeCoin cryptocurrencies, associated with Yuga Labs’ popular Bored Ape Yacht Club NFT collection, at select US stores.
• On August 3, 2022, tequila brand Patrón launched a cocktail-themed virtual quest in partnership with Decentraland. Available for a limited time in the first two weekends of August, participants could view virtual experiences, claim exclusive collectibles and win a trip to Mexico for two.
• On August 8, 2022, the largest discount store in the UAE, Day to Day, announced it that it will begin accepting Bitcoin payments.
• On August 8, 2022, the Aston Martin Formula 1 Team reached an agreement with the Crypto.com payment gateway to begin accepting crypto payments in its online store.

Technology and Access

• On July 8, 2022, a global study of metaverse users (conducted by media company Momentum Worldwide in partnership with American Association of Advertising Agencies) revealed that 80% of users feel more included in the metaverse than in the real world.
• On July 13, 2022, Snapchat announced that it would begin experimenting with strategies for creators to display their NFT creations, which could be overlaid onto real-world locations, through filters. In the long term, Snapchat may choose to display these NFTs anywhere for customers who own the company’s AR spectacles.
• On July 13, 2022, The High Court of England and Wales allowed the founder of an online gambling company to file a lawsuit through an NFT drop. The ruling will allow the founder to serve documents to anonymous people only identified by their crypto wallets; this is a significant move for reducing hacks and breaches.
• On July 15, 2022, Shanghai outlined a plan for crucial metaverse-related technologies that need to be developed in order to grow a $52 billion metaverse cluster by 2025, establishing 10 innovative companies to work in the space.
• On July 18, 2022, popular creator Art Blocks NFTs saw a 311% sales surge following a popular collection drop, with sales volume totaling nearly $20 million.
• On July 19, 2022, Google announced that it will give a public demonstration of its AR glasses, which will be equipped with microphones and cameras. The demonstration is an opportunity for Google to test its translation glasses, which translate language in real time (an important step for real-time metaverse communication).
• On July 19, 2022, virtual world and blockchain payments firm Zebedee announced that it had raised $35 million from investors, including Japan-based gaming leader Square Enix to develop its in-game Bitcoin-based payments system and add partnerships.
• On July 25, 2022, in a big step for metaverse interoperability, Animoca Brands launched a decentralized autonomous organization (DAO), Open Metaverse Alliance (OMA3) for an interoperable metaverse. Members include some of the biggest Web 3.0 players, such as Cryptovoxels, Dapper Labs, Decentraland, Meta, The Sandbox, Splinterlands, Star Atlas, Super World and more.
• On July 28, 2022, notable Ethereum competitor Solana opened a retail store in New York City, featuring collections of digital artwork and opportunities to buy Solana-based merchandise and apparel, learn about Solana’s metaverse and Web 3.0 projects, and purchase a Web 3.0 smartphone.
• On July 29, 2022, consulting services firm Deloitte released a global survey of 2,000 retailers which revealed that 75% of respondents plan to accept some form of cryptocurrency within the next two years.
• On August 2, 2022, Decentraland launched the first ever metaverse ATM. Working in partnership with the Transak payment gateway, the ATM will allow users to easily purchase and exchange MANA, its in-game currency.
• On August 8, 2022, Meta, which began testing NFTs on Instagram in May 2022, expanded NFT access to creators in over 100 countries, allowing them to showcase their collectibles and more easily create businesses for themselves. 

Brand and Retail NFT Collections

Brands and retailers of all sizes are minting NFT collections and experimenting with strategies to maximize their utility. Although many brands are not yet seeing millions in sales, experimenting with strategies has proven to help them establish footing in a space that is difficult to navigate; additionally, generating exposure and reaching new customers is all but guaranteed.

• For more about NFTs read our separate report, Building Blocks of the Metaverse: NFTs. 

Recent NFT Collection Drops

• On July 11, 2022, audio electronics manufacturer Bose announced a partnership with Warner Bros’ UK division, Warner Music, to create Stickmen Toys—5,000 free-to-mint audio-visual NFTs meant to improve loyalty and trust of digital assets.
• On July 13, 2022, fragrance brand Byredo partnered with NIKE’s RTFKT to create wearable “auras,” a collection of 26 digital and physical scents. Each customizable perfume will be launched as an NFT.
• On July 13, 2022, candy brand Laffy Taffy announced that it will retire 15 of its “original jokes” and turn them into exclusive NFTs in partnership with digital wallet infrastructure provider Bitski.
• On July 14, 2022, motorcycle manufacturer Ducati announced a partnership with Web 3.0 fintech company Ripple, which has previously partnered with Lotus, to create its first collection of NFTs to connect with its community and enhance brand recognition.
• On July 14, 2022, e-commerce platform Flipkart announced that it will allow purchasers of the Nothing Phone 1 in India to receive an exclusive NFT from its mobile shopping application on either iOS or Android.
• On July 15, 2022, Kia announced it would release a commercial in the US which allows viewers to scan a QR code to claim one of 10,100 unique Ethereum NFTs which can be collected and traded online.
• On July 26, 2022, Napa Valley-based wine NFT club Cuvée Collective launched the first wine NFT collection, partnering with Napa brands Massican and Arcudi. The Cuvée Collective has partnered with 25 notable wine brands as well as the Flow blockchain to mint its collections.
• On July 26, 2022, sporting goods manufacturer Rawlings, which provides Major League Baseball (MLB) with much of its equipment, launched an NFT collection of over 400 digital assets with varying levels of rarity to showcase unique baseball gloves.
• On July 27, 2022, Coca-Cola launched an NFT collection in celebration of Friendship Day. The NFT gives owners exclusive access to future perks. The NFTs, powered by the Polygon blockchain, were airdropped to users on July 30.
• On July 28, 2022, chocolate brand Cadbury announced that it will tokenize a series of children’s drawings for sale, inviting kids to begin drawing, with proceeds going to the Save the Children charity.
• On July 28, 2022, tequila brand Jose Cuervo, which runs a metaverse distillery in Decentraland, filed trademark applications including for NFTs, digital asset marketplaces, virtual restaurants and themed bars, drinks and apparel, and virtual distilleries—indicating its further push into Web 3.0.
• On July 28, 2022, the city of Miami announced that it will mint a collection of 5,000 exclusive Ethereum-based NFTs in partnership with MasterCard, TIME Magazine and Salesforce, which recently launched an NFT infrastructure program. The collection will celebrate creations from 56 artists in the Miami area.
• On August 8, 2022, Copenhagen-based fashion label ROTATE announced the launch of its very first NFT collection of digital clothing, of which many pieces have been featured in Snapchat’s AR catalog.
• On August 8, 2022, Starbucks revealed a plan to launch a series of branded NFT collections to improve customer loyalty. Ownership of the NFT brings exclusive community access, perks and rewards.
• On August 8, 2022, jewelry designer Tiffany & Co.’s collection of 250 NFT-inspired pendants, highly exclusive and modeled after “CryptoPunk” avatars, sold out at $50,000 each, generating $12.5 million in sales.
• On August 8, 2022, Samsung launched an NFT campaign in Korea, partnering with several local companies to give New Galaxy NFTs to customers who pre-order Samsung’s Galaxy Z Fold 4 and Flip 4. 

The Ethereum Merge

Blockchain Consensus Mechanisms

One of the blockchain’s largest hurdles to adoption has been its sustainability—mining uses significant amounts of energy (more than entire countries), and network congestion can slow transaction speeds and drive up gas fees (transaction costs), diminishing the blockchain’s benefits of unlocking global trade. 

Generally, a blockchain’s efficiency will depend on when it was released and which consensus mechanism (method of validating transactions) it uses. Blockchains released earlier, such as Bitcoin and Ethereum, dominate total blockchain transaction volume; however, newly released blockchains such as Solana are more efficient. 

We present popular consensus mechanisms Figure 1. 

Figure 1. Blockchain Consensus Mechanisms

Consensus Mechanism	Description	Blockchain
Proof of Work (PoW)	In PoW—the most secure, but least efficient mechanism—computers are in competition with one another, aiming to solve complex puzzles, receiving cryptocurrency as rewards. When one of these problems is solved, a new block for transactions is created.	Bitcoin, Litecoin, Ethereum (before merge)
Proof of Stake (PoS)	PoS selects validators for transactions based on how many currency tokens they hold, the “stake amount.” This system, though more efficient because blocks are not mined, features only 10–20 validators per new block, a somewhat centralized mechanism prone to potential collaboration.	Ethereum (after merge), Solana, Cardano, Avalanche
Proof of History (PoH)	PoH takes the output of a hash for a transaction and uses it as an input for the next hash and transaction, creating a long chain of hashed transactions that prove exactly when a transaction took place and eliminating the need for a time stamp (whereas in other blockchains, validators (nodes) must be constantly communicating). Blocks that hold transactions in Solana are produced within “slots” or time intervals. Through PoS, a node is chosen to be the leader of a slot (slot #1), and each following node is responsible for continuing a count for passage of time with the next slot.	Solana

Source: Coresight Research The Upcoming Merge

Ethereum’s long-awaited switch from PoW to PoS, a more efficient method, is reportedly set to take place in September 2022, with Mainnet Ethereum merging with Beacon Chain. Although PoW is still more secure, as Ethereum’s current Mainnet has never been hacked, Ethereum’s large network will use a modified version of PoS: rather than featuring only 10–20 validators that are in competition with one another, the Ethereum 2.0 network, which will launch in 2023, already has over 300,000 (and counting), meaning control is sufficiently decentralized and the network will still be relatively safe from attacks.  

As a result of hype from news surrounding the upcoming merge, Ethereum’s price has nearly doubled from $1,038 from mid-July (at crypto’s suspected bottom price) to $1,894 in early August (see Figure 2). 

Figure 2. Ethereum Price (USD) [caption id="attachment_153898" align="aligncenter" width="700"] Source: Yahoo Finance[/caption]   Blocks in PoS are not mined; participants (nodes) are selected based on stake amount to create a new block, and the rest of the participants validate the block and its transactions. After enough validations, a block is added to the chain and rewards are distributed to participants (there are also penalties for failed validations, called slashing). This mechanism will reduce Ethereum’s energy usage by 99.95% and is 2,000X more efficient than PoW, according to the Ethereum Foundation. This is a significant development for virtual economies, as Ethereum is the basis of most large metaverse projects and crypto tokens, and dominates NFT transaction volume. The Beacon Chain is a sidechain running parallel to Ethereum on a PoS protocol. It was established in December 2020, and has over 300,000 active validators. The Beacon Chain’s role will change over time, but it largely exists to coordinate the network of stakers. The Ethereum and Beacon networks will continue as a single PoS network after the merge. Although a majority vote of nodes in the original Mainnet was needed to agree to the merge, many participants and PoW loyalists are unhappy. Notably, the founder of crypto token TRON, Justin Sun, has recently emerged as a prominent supporter of a proposed hard fork of Ethereum. Essentially, a fork occurs when enough participants of a blockchain are in disagreement with a validation or mechanism decision that the blockchain divides into two separates chains, independent of one another. If this does occur, the original Ethereum Mainnet running on the more secure PoW system may still exist in the future. Shards and Layer 2 Rollup Technologies Sharding, which will be possible after the merge, refers to the process of improving blockchain scalability by spreading activity and data storage over several different parts, known as “shards”, improving speed and minimizing transaction fees. The Beacon Chain will also serve to maintain the shard network. While sharding has been difficult to implement, Layer 2 Rollups have picked up the slack to scale Ethereum. Rollups, such as Arbitrum and Optimism, serve a similar function to sharding; they bundle transactions and process them off-chain and are more secure than other scaling solutions such as sidechains, which do not make use of the Mainnet’s security and are often more centralized and prone to hacks. In the near future, when sharding does become available on Ethereum, Layer 2 Rollup technologies become even more efficient and inexpensive. Implications for Retailers and Businesses Ethereum is the basis for many metaverse economies and digital asset and NFT trade; it has the highest transaction volume. Switching mechanism to improve the entire chain’s scalability, efficiency and speed, without sacrificing much of its security (though, this is to be seen), is a necessary step to largescale blockchain adoption. For brands and retailers, NFT collections will be free to flourish and many unique strategies tied to their technologies will emerge.

What We Think

NFT collections have been fairly popular for their ability to drive innovation, attract a new and digitally savvy base of customers, generate exposure and build a community of customers. Although underlying technologies are somewhat volatile, not a single retail NFT has failed, and brands and retailers that are beginning to adopt the technology to generate sales and stand out from competition are best positioned to benefit from doing business in virtual economies. Ethereum has long been criticized for its sustainability issues, despite the blockchain’s security, immutability and speed. Its upcoming merge will solve most of its sustainability concerns, and, without sacrificing its security, will eliminate the need for Layer 2 solutions that may employ unsafe sidechains. As Ethereum is the blockchain with the highest transaction and NFT volume, this merge will have a large impact on virtual economy business and takes the world a step closer to a fluid metaverse economy.