Nike’s selling virtual sneakers in the metaverse. Play-to-earn gamers in NFT-based Axie Infinity have bought and sold in-game items nearly 11.5 million times, with $3.81 billion changing hands. E-sports — watching people play video games over livestream — is a $1 billion business that attracts 26.6 million monthly viewers, complete with advertising and branding.
Commerce in virtual worlds isn’t something that’s coming, it’s something that’s here. But it’s a new industry, a global industry, and a very diverse one, and so there’s not a lot of standardization when it comes to transferring value.
Someone’s going to do that, according to André Neves, Chief Technology Officer of Zebedee, a payments infrastructure company focused on game developers and, lately, metaverse builders.
And Bitcoin, he told PYMNTS’ Karen Webster in a recent conversation, is the perfect currency with which to do it.
And it doesn’t have to be something as complex as a video game or metaverse. Right now, he said, “we’re in a virtual world and we can talk and chat and stream 8K video quality, but we’re unable to transact value in this conversation.”
On a global scale, one of the main reasons for this is that each jurisdiction has its own currency and its own laws, Neves adds. “So standardizing a money for the world and for the virtual world, is really important — you really need that medium of exchange with the ability to move value without needing to have some foray into foreign exchange.”
As a digitally native currency — a cryptocurrency — Bitcoin “provides that capability regardless of any geographical or real-world constraint,” Neves said. “So regardless of where in the world you find yourself and where I find myself, we’re able to transact with the same sort of monetary standard. Powering virtual worlds and real worlds with same money is a very powerful thing. And I think we’re just scratching the surface of what it means.”
Play to earn
One of the contradictions of the current virtual world is that as it grows more diverse, it is growing together. Video games are largely immersive, interactive worlds at this point, with the economics shifting — or really, having shifted — to in-game commerce.
The decade-old system of buying and playing a game for free morphed into paying for access to an online community, then free games funded by in-app transactions.
“We’re now migrating to what we like to call, play-to-earn, which allows for this bidirectional flow of value,” Neves said.
That’s where he says another aspect of Bitcoin comes in handy. Each one can be divided into 100 million units called satoshis which are perfect for the nano-transactions that in-game transactions and play-to-earn require, Neves said.
“Right now, the cheapest thing you can do on a credit card transaction is around 60 cents,” he said. “The cheapest app on the app store is around 90 cents, I believe. And once that hits your credit card, it’s actually $1.20 because of fees. Anything below 60 cents is just infeasible in traditional finance. If a gamer is making hundreds of transactions on a daily basis, they can’t be as high as 60 cents.”
Of course, Bitcoin needs a little help on that front, as transactions are currently measured in dollars and tens of dollars rather than the fractions of a penny intended. The help that Zebedee uses is called the Lightning Network, a leading Layer 2 solution. This simply means that it’s stacked on top of Bitcoin to handle the transactions off-chain, and therefore a lot faster and cheaper.
One Zebedee client is taking that another step, offering free games powered by ads. But instead of accepting them, gamers can earn bitcoin for watching them.
“They flipped that model upside down,” Neves said. “The game developer is still earning that ad revenue, but some of that is being given back to the players. They are playing and they’re earning — they’re able to extract that value, so it creates this circular system.”
And the client’s ad returns are up 40% to 80%, Neves said.
A new world
Then there are metaverses — which became the Next Big Thing when Mark Zuckerberg changed Facebook’s name to Meta and announced that the biggest social network was going to become one — are already moving from a place for people to get together and interact socially in a virtual world, to one on which people interact socially and commercially. And that’s despite the fact that metaverses are in their infancy, with the virtual worlds a lot more under construction than up and running.
See more: H&M Denies Plans for Metaverse Store, Ceek Collaboration ‘at This Time’
The same payment dynamic exists, but the key here, Neves said, is a different type of interaction, Neves said. That is interoperability.
“You have big players like Meta/Facebook that will have their own metaverse environment and capabilities,” he told Webster. “But the true metaverse means interconnectivity, interoperability.”
Pointing to the example of Apple and Google App stores, Neves said, “this future metaverse cannot occur if it’s a bunch of gatekeepers running slightly more advanced virtual worlds.”
What’s needed is interoperability, he added. “We need open standards so that any user, game or application developer, or service provider can just tap into it and activate their entire service into the same open standard.”
That, in turn, requires “the payment rails for a lot of these worlds to interconnect with each other, so valued that you may have extracted from one game can be used in another game, but it can also be used down the street on a store in the real world, because it it’s the same sort of money that’s being used.”
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