The Banking Executive Magazine - September Issue 2022

Virtual Economy • Earning opportunities for users: Virtual economies are becoming increasingly popular because they create earning opportunities for their users. Users are able to inter- act in new ways, create value and earn real money on these plat- forms. • User engagement and platform growth: Platforms which are able to gamify their interactions have higher rates of engagement and user retention. Applications with virtual economies can experience a high growth because their users actively spread the word and encourage more people to join. • Collaborative Interactions: Some platforms allow third party advertisers and business service providers to participate in their en- vironments. Businesses and service providers in virtual environments often develop collaborative rather than adversarial relationships with users. Virtual economies suit certain busi- ness types more than others. Blockchain companies, gaming com- panies and platform-based busi- nesses stand to gain the most from a well- designed virtual economy. Blockchain Companies Blockchain platforms are decentral- ized peer to peer networks. Blockchain companies offer a plat- form where users can interact with one another, exchange value and collaborate. Cryptocurrencies are built using of blockchain technology, and units of cryptocurrency can be exchanged automatically when cer- tain conditions are met in a smart contract. Complex blockchain plat- forms create virtual economies where scarce digital assets can be created, utilized and traded by users. Several different categories of users can exist depending on the functions and complexity of the blockchain platform. Blockchain platforms with an intelligently designed environ- ment will enable every user type to gain some value by being a part of their environment. Gaming Companies Multiplayer online games inevitably create huge virtual economies. Per- sistently open online worlds are con- tinuously evolving with thousands of regular players creating and ex- changing value with one another. Users can interact, collaborate, or- ganize themselves and compete with each other on a large scale. Games already have virtual economies that enable players to create in-game as- sets and objects and then trade them with each other, sometimes for real money. Platform Companies Many types of platforms exist. Social media platforms include Instagram and Facebook. Platform companies are a lot more rigid in their interactions compared to blockchain and gaming compa- nies. However, interactions between users on microwork and sharing plat- forms are becoming more game-like to maintain motivation and user en- gagement. A lot of value may be cre- ated by allowing users to develop new functions and interactions. En- abling virtual economies to develop around more traditional platforms could increase interaction and en- able growth. VIRTUAL ECONOMIES AND THE RISE OF THE METAVERSE Huge amounts of money are being poured into the metaverse, an alter- native world where you can work, play and meet people without ever leaving your home. Non-fungible token NFT, is a virtual economy technology that can be used in many different ways. It is one of the building blocks of Web 3.0 (decentralized, blockchain-based in- ternet), as a way to empower content creation and monetization, record and transfer ownership, and to create new investment assets. In the metaverse, NFT can play a piv- otal role in building a viable econ- omy: from Play-to-earn gaming in virtual or augmented reality, invest- ment opportunities like trading real estate and digital items in virtual spaces, innovative e-commerce serv- ices, and many other possibilities for the future metaverse market dynam- ics. The most important purposes of im- plementing NFT in the metaverse are: • Proof of identity and authenticity • Interoperability • Building the infrastructure for UGC (User-generated content) • DeFi (decentralized finance) • GameFi (game finance) FUTURE OUTLOOK AND PROSPECT OF VIRTUAL ECONOMIES Digital capital is becoming the main source of economic growth. Without virtual and digital components, it is already impossible to think of the economy today. At the same time, the boundaries of these concepts are blurred and a hybrid world will de- velop further, where the virtual, dig- ital and real economies will deeply determine each other. There is a two- side movement: 1) virtualization and digitalization of the material economy 2) materialization of the virtual economy The reality of the virtual and digital economy manifests itself when the final consumers of economic goods (digital and material goods and serv- ices) are either people or organiza- tions. The metaverse economy offers the potential of a wide range of revenue streams, with some estimates predict- ing it could become an $800 billion- dollar market in just two years and that it could contribute $3 trillion dollars to the global economy in the next decade. the BANKING EXECUTIVE 16 ISSUE 165 SEPTEMBER 2022