In 2003, Linden Lab launched the world's first virtual social platform, Second Life, where users can socialize, shop, and even engage in real-life activities such as "marriage and childbirth." The virtual bank can realize two-way exchange between the platform currency Linden Doll

(Report Producer/Author: Guotai Junan Securities, Chen Xiao)

1.1. Before XR devices become popular, quasi-metaverse applications take the lead

metaverse The development can be divided into four stages. It is currently in the quasi-metaverse stage with PC and mobile terminals as interfaces. In a narrow sense, the Metaverse is a next-generation Internet ecosystem built around the three major technologies of XR, AI, and blockchain. Among them, XR technology (VR/AR/MR/ brain-computer interface , etc.) is the key to achieving immersion. Technology, XR equipment is a necessary equipment to integrate the virtual business world with the real world.

According to the research results of Tsinghua University Professor Shenyang’s team, the development of the metaverse can be divided into four stages according to the degree of evolution of interactive devices. The first is the quasi-metaverse stage on the screens of PCs and mobile devices, and the second is when XR devices become popular devices. The third is the metaverse stage of development in the near future where brain-computer interface technology has matured and human-computer integration has deepened. The fourth is the far future metaverse stage where digital immortality has entered the cloud. At present, we are still in the quasi-metaverse stage. Existing applications with open world attributes can be classified as quasi-metaverse applications.

Before XR devices are widely popularized, the first experience of the metaverse may be mainly quasi-metaverse applications. It took nearly 10 years for smartphones to grow from germination to full popularization. During this process, applications such as communication and social networking, games, e-commerce, payment, and long videos gradually migrated from PC to mobile, as well as the sharing economy, short videos, etc. Emerging applications are born directly on the mobile side.

Based on this, we believe that there are two paths to the metaverse stage of development. One is to develop quasi-metaverse applications on PC and mobile terminals, and develop corresponding versions when XR devices such as VR/AR penetrate to a certain level; It is to directly develop VR/AR applications; the former is more open and the economic system is more complete but the immersion is limited, while the latter is more immersive but the openness is limited by computing power. According to RoadtoVR data, the number of VR headsets connected to the mainstream game platform Steam reached 3 million units in March 2021, and VR game users accounted for 2.4%. Given that VR/AR devices are still in the early stages of penetration and content development is difficult, we It is believed that the first experience of the Metaverse will be dominated by quasi-Metaverse applications on PC and mobile terminals, and the prosperity and development of VR/AR content will rely on the support of equipment manufacturers and platforms.

The virtual management world is the pioneer of quasi-metaverse applications. The virtual business world refers to a platform where users socialize, play, create, and trade in virtual identities. The platform contains a variety of scenes, which can be quasi-realistic scenes such as shopping malls, communities, schools, etc., or imaginative and surreal scenes. According to different economic systems, the virtual business world can be divided into blockchain projects and non-blockchain projects. The former can realize the assetization of virtual goods and have stronger investment and transaction attributes. Representative projects such as The Sand Box and Decentraland, and the latter are social projects. It is more flexible and creative, but virtual goods cannot be resold in the secondary market, representing projects such as Zepeto, Minecraft, and Roblox.

1.2. Development process: continuous improvement of gameplay, sophistication, economy and governance system

Second Life, which was born in 2003, is the first phenomenal virtual management world. In 2003, Linden Lab launched the world's first virtual social platform, Second Life, where users can socialize, shop, and even engage in real-life activities such as "marriage and childbirth." The virtual bank can realize two-way exchange between the platform currency Linden Dollar and the U.S. dollar. With its high degree of freedom and virtual economic system, Second Life has become a smash-hit phenomenon-level application, attracting well-known media such as the BBC and Reuters to publish content on the platform. Important governments and enterprises such as IBM and the Swedish Embassy have also established virtual center. However, as Second Life prospered and developed, a large number of problems arose, such as some users engaging in illegal activities on the platform, the copyright of virtual goods being difficult to effectively protect, severe inflation within the platform, etc. In addition, the user interface was extremely complex, leading to the loss of old users. , the growth of new users was slow, and eventually gave way to the accelerating rise of social platforms such as Facebook and Twitter.The follow-up project of

highlights the differentiated advantages and uses blockchain technology to solve the problems left by Second Life. Roblox and Minecraft were launched in 2006 and 2009 respectively. The two projects weakened the reality-like social attributes of Second Life and enhanced the gameplay. Users create game content or architectural scenes to monetize rather than trade virtual goods. Zepeto, which was born in 2018, has a high level of picture sophistication and has attracted a large number of young female users through fashionable avatar dressing up and social scenes.

Decentraland and The Sandbox will be officially launched in 2020 and 2021 respectively. Both projects are built on the Ethereum network. Users can use ERC20 tokens MANA and SAND to purchase virtual land and other NFTs in the project. The uniqueness and scarcity of NFT This effectively solves the copyright problem of virtual goods in Second Life. Different from the centralized management of Second Life, the operations of Decentraland and The Sandbox are completed by the decentralized autonomous organization DAO. The joint governance of a large number of currency holders makes the development of the project more transparent and stable. In May 2021, Zepeto joined hands with The Sandbox to jointly launch NFT, aiming to achieve cross-platform access to the same NFT. It is the first cross-border attempt between different virtual business worlds.

The virtual business world has attracted more than 850 million users (without deduplication), and the users are mainly young people. Judging from the number of registered users, Second Life has achieved 19 million registered users in 6 years, Minecraft has achieved over 638 million registered users in 12 years, and Zepeto has achieved over 200 million registered users in 3 years. The virtual business world is accelerating to attract users. participate. Judging from the number of active users, Roblox achieved 47.3 million DAU in 2021Q3, and Minecraft achieved over 140 million MAU in April 2021, which has reached a high level of activity. Judging from the number of creators, the number of creators with an income of more than US$30,000 in Roblox reached 8 million in 2021Q1, and the number of active creators on Zepeto reached 1.5 million in November 2021. As various projects continue to improve the creator incentive mechanism, more users are expected Join the ranks of UGC creation. Judging from user portraits, Roblox, Minecraft, and Zepeto are all dominated by young people. Decentraland and The Sandbox are still popular projects in a small area due to their encrypted token threshold, and the number of users is not as many as the above four virtual business worlds.

DAO realizes the autonomy of the virtual business world, allowing it to develop in the direction that members collectively desire. DAO (Decentralized Autonomous Organization) refers to a crypto-native group that votes on the blockchain and automatically executes the results. It has been applied to the community governance of blockchain projects such as Decentraland and The Sandbox. Compared with other centralized organizational methods (i.e. traditional company structures) in the virtual business world,

DAO has in common that 1) they are all aimed at achieving a certain goal, and 2) both individuals and the whole can receive incentives after achieving the goal. The difference between the two is that 1) DAO has no clear hierarchy, any token holder can propose a vote, and the decision-making power is in the hands of the collective rather than a few people; 2) DAO has transparent information and no high entry barriers, so A fierce competition mechanism will be formed to screen out the most capable members; 3) Based on smart contracts, the proposal process will be automatically executed after DAO token holders vote, thereby achieving community autonomy. Based on the above characteristics, DAO makes large-scale cross-border collaboration possible and effectively solves the contradiction caused by the conflict between the centralized governance of traditional platforms and the free and open concept of the Metaverse.

2. Case review: Social UGC ecology has a commonality, each has its own positioning

2.1. Second Life: the originator of the virtual management world, creating a reality-like second life

Second Life and MMORPG games of the same period both have openness and social attributes, but the former's UGC gameplay Give users a higher degree of freedom.At the same time that Second Life was launched, popular MMORPG games such as World of Warcraft and The Sims were already on the market. However, the difference is that MMORPG games have a specific world view. In-game scenes and props are preset by the platform. Users need to Complete designated tasks; while Second Life only presets the initial interface and basic tools for building scenes, putting the right to create content in the hands of users. Therefore, multiple themes and multiple world views can appear on the same platform, including stores, banks, residences, etc. Quasi-realistic scenes such as entertainment venues, media publishing platforms, and business centers are emerging one after another, where users can conduct quasi-realistic activities such as shopping, socializing, investing, working, running for elections, and even "marriage and childbirth."

As the real society gradually "migrates" to the virtual business world, the number of users and the transaction volume of virtual residences have achieved explosive growth. As well-known institutions gradually settle in Second Life, users can "live" in the Sheraton Hotel , watch Reuters' virtual press conference, purchase Dell virtual computers, Adidas virtual clothing, Toyota virtual cars, By receiving information that was previously presented in two-dimensional form in a realistic three-dimensional space, the interaction between users and users, and users and enterprises continues to deepen. According to Ultimate Second Life Documentary, between 2005 and 2009, the number of Second Life registered users increased from 100,000 to 19 million, and the annual virtual residential transaction volume increased from US$22 million to US$500 million. Both the user ecosystem and the economic system have prospered. .

The virtual business world can make up for the shortcomings of reality, but it also amplifies the weaknesses of human nature and leads to legal disputes. For users with physical disabilities, Second Life gives them the right to move freely and create freely in the virtual management world. Parkinson's patients can also gain a second life. However, for users who "break away from reality and turn to virtuality", the virtual business world is not only a safe haven from reality, but also a breeding ground for legal and moral issues. For example, the "copyright" of virtual goods is recognized by the platform but not protected by law. Second Life Frequent "copyright" plagiarism in China has resulted in the platform receiving multiple legal lawsuits from reality. Activities such as violence and gambling that are controlled in reality are not effectively restrained in the virtual business world, resulting in Second Life accumulating a large number of legal and ethical issues. . With the accelerated rise of social platforms such as Facebook and Twitter, Second Life faced the dilemma of losing old users and slow growth of new users, and eventually faded out of the public eye.

2.2. Roblox: Pioneer of online creative game platform, it has formed an active UGC ecosystem.

Roblox is the world's largest multiplayer online creative game platform, with rapid expansion of users and revenue. Roblox was launched in 2006. It is the first game UGC platform positioned as "tools + community", providing technical tools for creators to freely produce content, and a platform for players to conduct games and social activities. As of 21Q3, it has attracted 47.3 million DAU. Become the world's largest multiplayer online creative game platform. Different from the real-life social features of Second Life, Roblox puts more emphasis on the creation of game content and the educational significance of developing intelligence. Therefore, Roblox users are mainly teenagers. However, as the age structure gradually breaks up, the proportion of users over 13 years old gradually increases. Increased from 40.5% in 19Q1 to 50.3% in 21Q3.

By lowering the threshold for creation and increasing support, Roblox has formed an active creator ecosystem. Roblox Studio is a technology toolset for creators that provides 8 million free materials and free servers to reduce the cost of entry for creators. In order to encourage more users to participate in creation, Roblox has also continued to increase support. The proportion of creators' share of total revenue has gradually increased from 14.1% in 18Q1 to 20.4% in 21Q3. As of the end of 2020, there were 8 million active creators, including 1.25 million Having earned Robux (the in-platform currency of Roblox), 1,250 people have cashed out more than $10,000. (Report source: Future Think Tank)

2.3. Minecraft: Reproduce the charm of architecture and industry, and gain a high sense of accomplishment from it

Minecraft attracts a large number of young users with its creativity and communication.Minecraft was born in 2009. Different from Roblox's multiplayer online free creation gameplay, Minecraft has a main gameplay - survival, that is, players need to achieve survival goals by fighting against hostile creatures, farming for production, mining ores, and building houses. Since Minecraft has no other restrictions other than the fixed gameplay, players have explored a variety of branch gameplays in the process of advancing the main line. Building magnificent buildings and using redstone circuits and to create automated systems have become a highlight of Minecraft. The sense of accomplishment brought by creation drives players to spontaneously share their experiences. According to data released by Octoly in August 2016, the cumulative views of Minecraft-related content on the Youtube platform reached 35.3 billion times, ranking first among similar videos. High-frequency dissemination is Minecraft has brought a large number of new users, and as of April 2021, the number of MAU has exceeded 140 million.

Minecraft launched the Creator Program to enrich the UGC ecosystem, and its openness continues to increase. Based on the single-player/multiplayer survival mode, Minecraft has gradually launched online, network, rental server, home and other gameplay modes, and launched a creator program. It has now attracted more than 10,000 independent developers, covering strategy, competition, leisure , RPG and other game categories, the degree of openness continues to increase.

2.4. Zepeto: With outstanding sociability and fashion sense, it has become a new marketing and promotion front.

Zepeto started as an avatar APP and once set off the "face pinching" trend in China. Zepeto was born in 2018. It is an avatar APP launched by Naver, a leading Internet company in South Korea. Users can create avatars according to personal preferences and purchase virtual clothes to dress them up. After completing the avatar DIY, users can choose the background and posture to "take pictures". The "photography" and sharing functions provided by Zepeto have quickly spread among acquaintances' social circles. The number of downloads of the Chinese version of the APP has surged since its launch in January 2019. , became a phenomenal application at that time. However, because the social scene is relatively limited and the gameplay is single, Zepeto’s popularity in China only lasted a few months.

The expansion of social scenarios has enabled Zepeto to evolve into a virtual business world, with the number of global users exceeding 200 million. Starting from version 2.6 in 2019, Zepeto added the "Theme Park" function to broaden the social scene with strangers. Since then, the "Theme Park" map has been continuously expanded to form today's "World" column. In order to promote content production, Zepeto launched Zepeto in 2020 Studio encourages users to create virtual products and maps. Driven by the social function of strangers and the UGC ecology, Zepeto has evolved from the original "face-changing game" to a virtual business world. It has now attracted more than 200 million users and more than 1.5 million creators worldwide. Since Zepeto has a strong K-Pop cultural flavor, the popular areas are still dominated by South Korea and K-Pop culture exporting countries. Its popularity in the Chinese market is rising with the popularity of the Metaverse.

's strong sociability makes Zepeto a new scene for celebrities to interact with the public, attracting leading entertainment companies to invest in it. Since 2020, Zepeto has actively cooperated with entertainment companies and their artists. Well-known idol groups such as Blackpink, BTS BTS, Twice, ITZY, etc. have all carried out activities in Zepeto. For example, Blackpink’s virtual sale event held in Zepeto attracted more than 150 people. Thousands of people participated, and the virtual image MVIce Cream jointly released by both parties has been viewed more than 120 million times on Youtube. The good interactive effect has attracted large amounts of financing for Zepeto's parent company Naver Z. Among the investors are YG Entertainment (representing groups Blackpink, iKON, etc.), JYP (representing groups Twice, ITZY, etc.), HYBE (representing groups BTS, etc.) ) and other leading entertainment companies.

’s large scale of young users and strong sense of fashion make Zepeto a new frontier for brand marketing. Since the original version, fashion dressing has always been an important element of Zepeto, and the application has therefore attracted a large number of young female users. According to the latest data disclosed by Naver Z, 70% of all users are women between the ages of 13-24. Because user portraits highly overlap with the target customer groups of many fashion brands, Zepeto has attracted more than 60 well-known brands and IPs, becoming a new frontier for brand marketing and IP promotion.

2.5. Decentraland: pioneering application of blockchain to achieve community autonomy

Decentraland is the first virtual business world based on blockchain technology to realize the assetization of virtual commodities. Decentraland started fundraising in 2017 and was officially opened in February 2020. It is the first virtual business world built on the Ethereum network. Decentraland consists of a total of about 90,000 virtual lands (LAND). Each land area is 10x10 square meters and is marked by coordinates (x, y). About 1/3 of the land is used for overall community planning, and the remaining 2/3 Players can trade with the ERC20 token MANA. In addition to land, clothing and names can also be freely traded among users. Since Decentraland does not rely on centralized servers and all virtual goods are NFTs, users have permanent and effective ownership of the virtual goods they purchase.

Decentraland is also one of the first blockchain projects to adopt DAO to achieve community autonomy. Any user holding MANA or LAND can participate in Decentraland's community governance through DAO, and make proposals or vote on contract updates, land auctions, banned names, development fee allocation and other matters, and then the proposal process will be automatically executed according to the smart contract. DAO members can obtain MANA incentives in the process of operating the community. For example, users must pay MANA equivalent to US$500 to DAO before the clothing NFT minted by themselves enters the market (taking into account that MANA appreciates quickly, DAO will pay the fee from 500 MANA adjusted to $500), after receiving the fee, DAO will take part of it as an incentive, and the remaining part will be used for community development.

NFT art exhibition and blockchain game center are the most popular scenes in Decentraland. Decentraland's decentralized architecture makes it naturally suitable for displaying NFT artworks. Users can click to view the details of the NFT artworks on display (such as the creator, content description, historical auction amount, time, bidders, etc.), and for some of the NFT artworks currently on sale Artworks can also be directed to trading platforms such as OpenSea and Rarible. Therefore, display scenarios such as museums, auction houses, and galleries are currently the most common scenarios in Decentraland. Another highly popular scenario is the blockchain game center. “Play-to-earn” games such as Axie InfinityICE Poker have established game centers in Decentraland and set up interactive mechanisms to allow users to understand the game.

Similar to real land, virtual land can also be divided into "core business districts" and "ordinary residential areas". According to the planning plan published by the Decentraland development team on Reddit, the purple areas on the map are themed neighborhoods such as Vegas City and Fashion Street, which are relatively concentrated and some plots are available for trading; squares (green areas) and roads (light gray areas) ) is a public area that is not for sale, evenly distributed around Genesis City; LAND (dark gray and black areas) is an area where users can build their own scenes and trade freely on the primary and secondary markets.

The price of virtual land may be related to the expected traffic growth rate and user purchase intention in the region, which carries high risks. According to NonFungible statistics, the top ten land parcels in Decentraland by transaction volume so far are all adjacent to theme blocks or plazas. Among them, 116 parcels of land on Fashion Street were sold for US$2.41 million, constituting the largest transaction in Decentraland. Based on this, we believe that people’s expectations for the overall user growth rate of the community, the user growth rate of the area where the land parcel is located, and the user’s ability and willingness to pay are the key factors that affect the expected value of virtual land. Taking Second Life as a lesson, the influx of traffic needs to be supported by sufficient content supply and good community governance, and virtual land cannot meet the actual living needs of users. Therefore, virtual land transactions have higher risks. If users stay on the consensus of Decentraland When "real estate speculation" ignores social, entertainment, and creative values, it will be difficult to maintain traffic stickiness, and a large amount of virtual land bubbles will accumulate. Promoting the vigorous development of the content ecosystem and maintaining a healthy community atmosphere require the efforts of DAOs.

As the attention of the Metaverse increases, the transaction volume of Decentraland token MANA and virtual land have increased significantly.On October 29, Facebook announced at Connect 2021 that it would change its name to Meta and launch a series of product plans. Since then, the attention of the Metaverse has increased rapidly, and people’s expectations for the development of Decentraland have also become optimistic. Under this consensus, the encryption tokens issued by Decentraland MANA has appreciated nearly three times, and virtual land transaction volume and value have also increased significantly. According to NonFungible statistics, Decentraland’s cumulative transaction volume so far has reached US$100 million, with an average transaction volume of nearly US$800 per transaction. Virtual business worlds such as

Decentraland also make it possible to reproduce history and culture. The Dragon City theme block in Decentraland was designed by Fantasy Lab and has a strong traditional Chinese culture. The Cangjie Pavilion in the block displays classic calligraphy and painting works from the Tang, Song, Yuan, Ming and Qing dynasties in my country. The artist Yi Xian will also be there This releases its first NFT ink painting work Wuji Island. In addition, Fantasy Lab and the Institute of Network Society of the China Academy of Art released the "Disappeared Villages and Culture" project. It has initially restored the urban style of Beibei in the early 20th century and will "reconstruct" more than 10 villages that no longer exist in the next 2-3 years. villages or cultures, promoting historical culture to be presented in a more vivid form and enhancing its interactivity.

2.6. The Sandbox: A mobile game transformation blockchain project, favored by brands and capital

The Sandbox has a huge mobile game user base and is more game-friendly than Decentraland. The Sandbox is another virtual management world based on the Ethereum network. Its development team launched the 2D sandbox mobile game in 2012 and accumulated rich game operation experience in 9 years. So far, the cumulative downloads of the mobile game have been Breaking through 40 million, laying a user base for its Ethereum version. Similar to Decentraland, The Sandbox has issued its own ERC20 token SAND. Users can use SAND to trade virtual land (LAND) and other NFT commodities, and achieve community autonomy through DAO. However, the difference is that The Sandbox places more emphasis on the games of the community itself. sex, and currently has a number of MMORPG and adventure games online.

"Play-to-Earn" mechanism encourages users to play and create games, and Alpha activities activate the community ecology. The Sandbox integrates the "Play-to-Earn" mechanism. Users can not only monetize through transactions, create NFT goods, and rent LAND, but also earn NFT equipment or SAND as a player during the game. As a game creator ( Must hold LAND) to earn shares and increase the value of virtual land by attracting traffic. From November 29th to December 20th, The Sandbox will launch an Alpha event consisting of 18 games. Users can obtain passes to participate in the event through draws or daily social competitions, and can earn up to 1,000 in the process of exploring Alpha games. With SAND and 3 limited NFT rewards, The Sandbox is expected to attract more traffic and activate the community ecology through such activities.

The Sandbox has attracted more than 60 brand institutions to settle in, and its IP attributes are stronger than Decentraland. In July 2021, Harvey, Director of The Sandbox China, said at the "NFT Ecological Promotion Month" event that The Sandbox has established cooperative relationships with more than 60 teams, including major game manufacturers such as Atari, and popular areas such as Axie InfinityMy Crypto Heros. Blockchain game team, well-known animation IPs such as Care Bears, The Smurfs, and Shaun the Sheep, well-known drama IPs such as The Walking Dead Hell's Kitchen, and well-known brands such as Adidas. The above-mentioned teams will create a series of games in The Sandbox based on their respective well-known IPs. For example, Atari will create a new version of RollerCoaster Tycoon on its virtual land, and Shaun the Sheep’s Moss Bottom Farm will also be reproduced. The extremely strong IP Attributes and brand effects make virtual land adjacent to brand institutions scarce.

Relying on stronger gameplay and IP attributes, The Sandbox achieved 2.5 times the transaction volume of Decentraland. Since its official opening in March 2021, Animoca Brands, the parent company of The Sandbox team, has been favored by capital. In July, it received US$50 million in financing from well-known institutions such as Bluepool Capital and Coinbase, and in November it received US$93 million in investment led by SoftBank. Thousands of dollars in financing.Relying on stronger gameplay and IP attributes, The Sandbox has also received a large number of user recognitions. According to NonFungible statistics, the cumulative transaction volume of The Sandbox so far exceeds 250 million US dollars, which is about 2.5 times that of Decentraland, with an average of nearly 2,000 US dollars per transaction. The turnover is also much higher than the latter. (Report source: Future Think Tank)

3. Investment analysis

The virtual business world is the application leader in the quasi-metaverse stage. It is recommended to pay attention to potential investment opportunities. Before XR devices are widely popularized, we are still in the quasi-metaverse stage with PC and mobile terminals as interfaces. The first experience of the metaverse may be based on highly open quasi-metaverse applications. As an application pioneer at this stage, the virtual business world can satisfy users' social needs and creative desires, thus forming an emotional complement to their real life and even creating economic value. Looking back at the world of virtual management through the ages, the first-generation application Second Life was a hit, but ended due to poor community governance and complex operation interfaces; subsequent applications continued to explore development paths and highlight differentiated advantages, such as Roblox which emphasized the creation of UGC game content. , Minecraft emphasizes the charm of architecture and industry, Zepeto highlights the sense of fashion and social theme scenes, and the blockchain projects Decentraland and The Sandbox solve the virtual product copyright issues and community governance issues existing in Second Life by introducing NFT and DAO. Judging from the number of registered users, Second Life has achieved 19 million registered users in 6 years, Minecraft has achieved over 638 million registered users in 12 years, and Zepeto has achieved over 200 million registered users in 3 years. The virtual business world is accelerating to attract users. participate.

(This article is for reference only and does not represent any investment advice on our part. If you need to use relevant information, please refer to the original text of the report.)

Selected report source: [Future Think Tank]. Future Think Tank - Official website