Crypto Collapse: Death Star for Metaverses?
Just when we were getting used to the idea that the metaversesyes, theres more than one, actually nearly a dozen and countingare The Next Big Thing, a lightning bolt of reality hit these emerging virtual worlds and fried them.
The domino-like collapse of cryptocurrency in the wake of the biggest Ponzi swan dive since Bernie MadoffSam Bankman-Frieds I dont know where the money went Houdini act at FTXhas wiped out the value of the non-fungible tokens (NFTs) that were the primary currency used to buy space (a.k.a. land) and virtual toys on the most successful metaverse platforms like Decentraland, Sandbox and something called Bored Apes.
Blockchain-generated NFTs have lost 97% of their value in the crypto collapseand the other 3% is on life support.
To put this in real termseven though were talking about a virtual yacht floating in a virtual world, purchased by someone who wants to serve virtual caviar to their buddies while they all wear VR headsets in different zip codesanyone who bought a yacht from Decentraland when the platforms MANA tokens peaked last year at $5.90 each will be lucky to get a dime for each of the hundreds of thousands of tokens they purchased to get the deed for the virtual boat.
Exhibit A: a virtual boat purchased by pop star Justin Bieber last year from the Bored Ape Yacht Club for $1.3M now is worth an estimated $69K.
As an NYU School of Professional Studies blog that tracks metaverse developments noted in a post last week, the NFT economy has essentially collapsed on itself.
The magnitude of FTXs bankruptcy will have long-lasting consequences on the general publics trust in cryptocurrencies, NFTs and the metaverse, the NYU blog said.
NY Times columnist Paul Krugman has called for regulators to rein in crypto enterprises, pronto. In his column last week, the Nobel Prize-winning economist said the collapse of crypto exchanges calls into question the validity of crypto and crypto-derivatives as instruments for alternative financial transactions in any context.
Recent events have made clear the need to regulate crypto, but it also seems likely that the industry couldnt survive regulation, Krugman said.
This much is certain: you wont be hearing anyone in the CRE community hyperventilating about a land rush on a metaverse anytime soon, for the same reason that you wont ever see MLB umpires wearing FTX patches on their shirts at the World Series again.
(At least not until Meta unveils the Horizon platform that is consuming most of Mark Zuckerbergs fortunequick question: does anyone really want to live in a world designed by Mark Zuckerberg?or Apple surprises us with a great leap forward in a platform that definitely wont be called a metaverse.)
But even though its blockchain-generated coins and tokens have joined bundled sub-prime mortgages in the dustbin of speculative financial instruments, the VR patient still has a pulseprimarily in event- and entertainment-oriented applications that can be game-ified as immersive experienceslike Decentralands FashionWeek virtual runway, which engaged several major retail brands, and its global star-studded MusicDistrict concerts.
The rich folks apparently still want their own private virtual toys, including virtual villas and yachts, which, according to NYUs blog, theyre still scooping upalbeit at heavy discounts.
VR technology will continue to advance, powered not just by the Manhattan-project ambitions of the tech giants, but by dozens of startups that have assembled A-teams of experienced game designers as well as CGI magicians from special-effects wizards like Marvel.
Someone eventually will come up with a business model that doesnt involve encrypted fake money.
But the smart moneymeaning, in this case, the crispy paper Franklins signed by Janet Yellen that mainstream corporations spend to grow their brand equitymost likely will migrate, as CEOs awaken from their FOMO nightmares and cancel their plans to hire a Chief Metaverse Officer, to a bridge technology thats ready for prime time in the physical world: augmented reality.
Heres the good news: AR is a technology already being widely embraced in the CRE world for virtual property tours as an extension of digital-twin proptech. It may soon be coming to an enhanced flex office near you, expanding the definition of hybrid work and amenities.
AR is ready for the world we already inhabit, with technology we can already use for numerous applications without hiring James Cameron as our CMO or buying tokens generated by a 24/7 data center designed to mine our wallets.