Metaverse Highlights: Week of September 19, 2022

We highlight the major announcement of the crypto world this week: The Ethereum (ETH) merge - moving ETH from proof of work to proof of stake - went incredibly smoothly. This transition can change the wider cryptoverse - potentially moving Ethereum from the giant everyone is competing with to the good giant, the de-facto default blockchain. Also, messages about the future of web3 and the need for identity and cybersecurity were prevalent in the news.

On the NFT front, the Starbucks NFT loyalty program raises questions about the role that web3 will play in reshaping loyalty programs. Is the blockchain just overkill for loyalty programs, or is it an indirect way to bring more users to web3 as a side effect? Starbucks will be a fascinating case study.

Lastly, SWIFT, the messaging system financial institutions use to convey instructions on tens of millions of transactions each day, is testing out blockchain. If SWIFT adopts the blockchain for its transactions, it will be a point of no return for adopting blockchain worldwide for financial transactions.

Coindesk:
The Ethereum Merge Opens a New Era for the Second-Biggest Blockchain

• The massive overhaul of Ethereum known as the Merge has finally happened, moving the digital machinery at the core of the second-largest cryptocurrency by market value to a vastly more energy-efficient system after years of development and delay.
• It was no small feat swapping out one way of running a blockchain, known as proof-of-work, for another, called proof-of-stake. “The metaphor that I use is this idea of switching out an engine from a running car,” said Justin Drake, a researcher at the non-profit Ethereum Foundation who spoke to CoinDesk before the Merge happened.
• The payoff is potentially gigantic. Ethereum should now consume 99.9% or so less energy. It's like Finland has suddenly shut off its power grid, according to one estimate.
• Ethereum’s developers say the upgrade will make the network – which houses a $60 billion ecosystem of cryptocurrency exchanges, lending companies, non-fungible token (NFT) marketplaces and other apps – more secure and scalable, too.

Technology Review:
Identity Protection Is Key To Metaverse Innovation

• The critical metaverse infrastructure is not yet built:
  • It is impossible to carry your shopping bags from store to store.
  • There is not yet common cybersecurity protocols - - the technologies equivalent to the “https” of today’s internet.
• The threat of social engineering will be prevalent in a 3D environment.
• First movers in the space are in a unique position to anticipate security gaps and build in safeguards from the get-go.
• It is critical to get the right people at the table - - e.g. startups should have a security
  person.

Fast Company:
What Will The Metaverse Actually Look Like? Here Are Six Components

• In its current form, Web3 is segmented and experimental, consisting of siloed experiences on unique blockchain networks that cannot easily interact with one another. But, given the inevitability of an ultimately interconnected digital future, brands and creators would be wise to develop a “metaverse strategy” for how to onboard their users into their unique “verse” and keep them engaged in the battle for user attention.
• The metaverse of the future will most likely be fully interoperable, enabling users to easily move their virtual selves and assets with them across borders into various worlds. 
• In the future, the Web3 metaverse should adopt seamless ease-of-use and intuitive navigation alongside the cross-chain interoperability that makes movement across different blockchain networks possible and, ideally, hassle-free.  

Decrypt:
$70M Art Collection at MoMA To Be Sold, Proceeds Could Fund NFT Buys

• The William S. Paley Foundation will auction off at least $70 million in art masterpieces this fall to expand the digital footprint of the Museum of Modern Art (MoMA) in New York and possibly acquire the museum’s first NFTs.
• Proceeds from the sale will be used to expand the museum’s digital presence. MoMA may launch its own streaming channel, host virtual exhibits and video chats with creators, or collaborate with universities and course providers to offer online courses. More significantly, for crypto fans, MoMA may also purchase its first NFTs. 
• Lowry said the museum has a dedicated team keeping tabs on the digital-art landscape to look for potential artist collaborators or purchases.
• “We’re conscious of the fact that we lend an imprimatur when we acquire pieces,” he said of NFTs in the interview, “but that doesn’t mean we should avoid the domain.”

CoinDesk:
JPMorgan: China’s Metaverse-Related Economy Could Reach $4T

• The Metaverse will have “profound implications” for China and will affect gaming, advertising and e-commerce, JPMorgan said in a research report last week.
• The digital world will offer an improved user experience across various internet business models, and this could lead to increased user penetration and average revenue per user (ARPU), the report said. The bank’s bullish scenario suggests that the metaverse could triple China’s online-gaming market to $131 billion from $44 billion.
• The digital world could “help internet companies tap into business services and potentially double the internet time spent,” analysts led by Daniel Chen wrote. They estimated a TAM of $27 billion in China for business services and software in the metaverse.

World Economic Forum Report:
Decentralized Autonomous Organizations: Beyond Hype

• Worldwide, entrepreneurs are harnessing the power of distributed ledger technology to a new form of coordination, decentralized autonomous organizations (DAOs), to deploy resources, coordinate activities and make decisions communally. By empowering members to propose, vote on and effect changes to an entity, DAOs enable communities to work collectively towards achieving shared goals, often without top-down, hierarchical management.
• DAOs have the potential to realize gains in transparency, accountability and more relative to traditional organizational structures, including corporations. 
• Yet practical challenges of governance, cybersecurity and power concentration, combined with regulatory uncertainty and fragmentation, could lead to further hacks, privacy issues and inequality.

Bloomberg: SWIFT Financial-Messaging System Pilots Blockchain Project

• SWIFT, the messaging system used by financial institutions globally to convey instructions on tens of millions of transactions each day, is testing out blockchain.
• The Society for Worldwide Interbank Financial Telecommunication, or SWIFT for short, is piloting a project with fintech company Symbiont Inc., according to a post seen by Bloomberg. The collaboration, which includes Citigroup Inc., Vanguard and Northern Trust, is aimed at driving “efficiencies in communicating significant corporate events,” like dividend payments and mergers, SWIFT said in its post.
• With the latest pilot project, SWIFT will automate corporate action workflow using Symbiont’s technology platform called Assembly, it said in the post. SWIFT will use the platform’s smart contracts and blockchain capabilities to “create a network effect that leverages our 11,000 plus institutions connected to SWIFT globally,” it said.

Gizmodo:
Starbucks Explains How Its NFT Program Works

• This week, the coffee giant unveiled Starbucks Odyssey which essentially merges the company’s current rewards system with a blockchain-based NFT platform. 
• Currently, Starbucks rewards members earn stars when they make purchases, which can then be redeemed for a free coffee or similar item. Odyssey takes that straightforward rewards pitch and turns it on its head. Now caffeine addicts can instead earn and purchase digital collectibles as part of a Starbucks metaverse! The program, which opened up a waitlist today, will reportedly run on Polygon’s proof-of-stake blockchain network.
• “Starbucks has always served as the Third Place, a place between home and work where you feel the warmth of connection over coffee, community, and belonging,” Starbucks Executive Vice President and Chief Marketing Officer Brady Brewer said in a statement. “The Starbucks Odyssey experience will extend the Third Place connection to the digital world.”

ArtNet News: The Boom and the Bust: How NFTs Went The Way of Beanie Babies

• Since the beginning of this year, monthly transaction volume on OpenSea, the most popular NFT marketplace, has fallen by 90 percent. In August, the monthly transaction volume on OpenSea was $500 million, compared to $4.8 billion in January, according to the Dune Analytics dashboard. 
• The biggest indication that the hype was dissipating came in July when OpenSea announced it was laying off 20 percent of its staff. (They didn’t say how many people that was in total, but following the event, OpenSea had only 230 employees left.)  
• Another noticeable sign that the NFT markets have cooled is that the floor price for popular NFT projects is falling. The minimum anyone is willing to bid for a Bored Ape Yacht Club NFT is currently 78 ETH ($117,000), according to CoinGecko. At its height this year, on April 30, the floor price for a BAYC NFT was 153 ETH ($530,000).

Cointelegraph:
The Metaverse Is The Future – But Are Current Platforms Failing Users?

• Earlier this year, JPMorgan estimated that the metaverse could be an exceedingly lucrative opportunity that delivers $1 trillion in yearly revenues. Immersive concerts once held in major cities could take place in the comfort of a fan's home, without a gig ever selling out. Stunning virtual offices could propel working from home to the next level. And we're already seeing how top sportswear brands are making a fortune by selling rare digital sneakers.
• For such lofty predictions to become a reality, metaverse worlds need to factor into the day-to-day lives of the consumers they're meant to serve — and deliver the "wow factor." They have to provide an engaging experience that makes going online feel dynamic and alive. This will create a loop that fuels growth. Greater user numbers will encourage more businesses to build in the space, and in turn, their arrival will attract even more users.

Washington Post:
VR Developers Accuse Facebook of Withholding The Keys To Metaverse Success

• RJ White, 29, knows how difficult it can be to persuade Meta to put a game onto its virtual reality headset. He first applied in 2019 with a multiplayer shooting game called “Animov” but was informed through a form email that the game wasn’t a good fit. “All the power in the industry — at least at the moment — definitely feels like it’s in the hands of that one company,” he said. “If you can’t get that one company to let your game onto their headset, then you are going to have a rough time in the business.”
• Meta, which as Facebook grew to dominate social media in part by buying up-and-coming rivals, appears to be repeating that strategy in virtual reality. The sheer size of Meta’s investment — and its increasingly aggressive moves to consolidate control of the virtual reality developer ecosystem — has, so far, given Meta virtually unchecked power in the nascent market to determine which software makers have a shot at economic success and which might stay in obscurity.

Upcoming Industry Events:

• Economist Impact Event: Economic Opportunities in the Virtual World, September 27