- Summary:
- CoinShares has released a report analyzing the performance of the metaverse over the past year. We give you snippets of the key findings.
CoinShares has released a report detailing the use, growth trends and prospects of the Metaverse sector. The report is titled “CoinShares Metaverse Sector Report,” and it expresses cautious optimism about what the sector could become. The report claims that the metaverse is currently in a state of disillusion due to waning interest or a failure to deliver on promises.
According to the assessment, core technology producers could be shaken out or collapse in the future. It adds that the success of the cryptocurrency sector is highly tied to the development of the metaverse. Furthermore, blockchain technology, according to CoinShares, is an S-curve technology. When it comes to the metaverse, investors aren’t sure what they’re getting themselves into or how they’ll benefit. Without compelling use-cases, it is difficult to get people to use it.
Regulatory framework, equipment and interoperability bottlenecks
According to CoinShares, the metaverse’s expansion is hampered by limited interoperability, regulatory constraints, and the expensive cost of necessary equipment. According to the findings, bridges are essential to interoperability because they prevent monopolization. Chains follow distinct consensus rules, move at different speeds, and have different architecture.
This leads to composability between the decentralized applications, but not between networks, as the vast majority of blockchains operate in isolation from one another. In turn, this results in poor user experiences due to the fragmentation of liquidity and the high transaction fees. The report also highlights the security weaknesses in bridges, giving Ronin and Wormhole hacks as examples. Bridge hacks have led to losses amounting to hundreds of millions of dollars, further triggering user fears.
According to the CoinShares report, regulators lag behind technological advancements in the metaverse and the broader crypto community. It claims that authorities often have to play catch-up in order to ensure the safety of their citizens.
Also, CoinShares cites the requirement for high-end equipment as another impediment to the growth of the metaverse. These pieces of equipment enable users to experience the immersive nature of the metaverse through Virtual Reality (VR), Augmented Reality (AR), and Extended Reality (XR). They are, however, somewhat pricey. Nonetheless, the paper adds that large distribution channels and economies of scale could result in low-cost items and a larger market to sell to.
The metaverse’s prospects are looking up
Even though many people are unfamiliar with Metaverse-based companies, they are growing in popularity. Consequently, funding rounds have grown in size and the total amount of capital invested as well as the nominal value has increased. There has been a 20% CAGR growth rate in the number of Metaverse companies since 2001, according to the report.
Also, in 2021, the industry grew by 293% year-over-year, as its popularity has skyrocketed. This is most likely owing to the heightened expectations surrounding the potential benefits and rewards that the metaverse holds.
Metaverse growth is regionally inclined
According to the findings of the CoinShares analysis, the metaverse is likely to be fractured along geographical lines. For instance, North America is home to half of the metaverse’s entrepreneurs. The Asia-Pacific region comes in second at 31%, while the EU region is third, at 14%. In addition, there are more opportunities for North American enterprises to raise funds regularly. Compared to the Asia-Pacific region, there are 50% more fundraising rounds in this region.
According to CoinShares, the region that invests the most in start-ups that develop and offer Metaverse experiences is most likely to dictate the rules of the sector. This could lead to the domination of the metaverse by certain regions. The report concludes that the metaverse operates on emerging technologies, which may look more like trends or speculation at first glance. However, this could change when the global relevance of the metaverse becomes clearer.