Alternative Investments In the Metaverse

While primary focus is on consumer aspects of the metaverse, it's equally important to explore the investment opportunities that come along with it

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The term 'metaverse' has exploded in popularity over the last year. In fact, mentions of the keyword increased by over 135 per cent in Q4 2021. While the concept of a metaverse is intriguing in itself, it quickly went mainstream after Facebook rebranded to Meta.

Mohamed Hassan from Pixabay

Since then, other major players in the tech industry have followed suit. Companies such as Microsoft and Google have invested billions in metaverse-related technology. And, as expected, there is talk about how the metaverse will change people's daily lives as the Internet did late last century.

While mainstream media primarily focus on the consumer aspects of the metaverse, it's equally important to explore the investment opportunities that come along with it. New terms such as digital real estate, non-fungible tokens (NFTs), and cryptocurrency are often used in conjunction with the metaverse, but what exactly do they imply?

Investment ideas in the metaverse

The metaverse is still young and may not achieve its full potential until later this decade. But this potential has created a wealth of investment opportunities as startups and tech giants rush to develop their own virtual worlds and networks.

This also raises the question of which is correct, 'the metaverse' or 'the metaverses'.

With numerous groups inventing their own virtual world, it's yet to be seen whether it will culminate into a massive universe of interconnected virtual worlds controlled by a single company like Meta. Or, will the metaverse consist of a wide array of individual projects and contributions, powered by the decentralisation seen in Web3 and blockchain technology.

Most are betting on the latter, which means digital assets such as cryptocurrencies and NFTs will be huge investments in the metaverse.

One of the biggest investments in the metaverse involves buying land. This virtual real estate can be purchased and owned through the use of digital assets such as NFTs. This opens the door to an interesting discussion; are NFTs a new asset class?

NFTs: Digital art or a new asset class

Like the metaverse, NFTs have exploded in the past year. They have attracted diverse opinions, some for, and many against.

Those against NFTs don't understand the hype around them. They're just digital pieces of art that can be copied and downloaded with a couple of clicks.

But proponents see so much more. Those who understand the blockchain recognize that NFTs speak to an innate human desire.

"We all want to have that spark or something that shows that we are different and unique. And then there are rarities in some of these [NFTs]… If you're a collector, you want to collect those things that nobody else has."

These are the words of Anas Bhurtun, CEO and co-founder of Arts DAO. He argues that NFTs boomed because they are rare.

Anas Bhurtun, CEO and co-founder of Arts DAO

People have always wanted what others don't have. And since there can only be one of a particular NFT, these tokens speak to the individual's desire to be different, to show that they are unique.

How does that link to investing in the metaverse? In some ways, NFTs are more than just art; they bridge art with other assets and are becoming digital assets by themselves.

With NFTs, you see something you wouldn't see in the traditional art space. This is why they are one of the best investments in the metaverse.

Bhurtun sees the maturation of the NFT. It's becoming "more like some kind of asset class, which means that it's financialized. Effectively the people who are holding these NFTs are sort of like investors".

Enzo Villani, the founder and CEO of Alpha Sigma Capital, had the following to say about NFTs as digital assets:

"You would see borrowing against it. All digital assets will have someone who will lend against it, who will actually kind of collateralize that asset. That's what we're getting to. And these are assets that couldn't be collateralized in the past. You own NFTs...but they have value, and then you can borrow against them. That's very interesting."

Echoing these sentiments is Nassim, an executive at a venture capital company (VC). He says, "There's a lot of conversations around how to merge DeFi and NFTs and a lot of different products around how to collateralize a loan with your NFT and borrow against it. And I find this fascinating."

Others have expressed reservations about labelling NFTs as a new class of assets. Omar Itum, MD at Arca, sees NFTs as a wrapper.

"It's simply a wrapper, a smart contract that allows for immediate transactions. It's transparent and creates liquidity on otherwise illiquid asset classes. An NFT that's based on real estate isn't an asset class in and of its own right, because the underlying asset is real estate."

However, he sees NFTs as "the future of fundraising, for startups and even beyond startups".

DAOs and the metaverse

Decentralised Autonomous Organisations (DAOs) will be highly influential in the metaverse ecosystem. They make it easy for communities to get involved with Web3 and the blockchain, both of which are a big part of the metaverse.

Investors can look at DAOs as another avenue to get into NFTs and the metaverse. These organizations will also be helpful for wealth management in the metaverse.

Serge Kassardijan, the CEO of the software company Stay Tuned, is a great admirer of DAOs. He says, "When I look at DAOs purchasing and selling NFT's. Both from like the way things can move on and off chain and the people, voting structure, the decision making; all this stuff is a perfect match."

Keeping up with Arts DAO

Arts DAO was founded by Bhurtun and Danosch Zahedi. Bhurtun is a former corporate/M&A lawyer who has dedicated his career to building crypto, Web3, and digital content expertise.

Zahedi is a serial entrepreneur who has founded several companies in and out of the crypto space. The two founders also co-host the Crypto Sheikhs podcast, the leading crypto and NFT podcast in the UAE.

Arts DAO is a community DAO, home to the largest Web3 community in the Middle East. The founders plan to transform it into a collectors DAO with the launch of the Ethernal Gates NFT collection between the 4 and 5 of June 2022.

The collection consists of 2,000 NFTs created by the award-winning artist Kristel Bechara.

These NFTs will grant holders an allocation in the DAO and access to Arts DAO social events in real life. Arts DAO will also collect NFTs on their behalf by investing in a portfolio of blue-chip NFTs, seed Web3 founders, and investing into other DAOs/NFTs. The goal is to increase the overall value of the treasury and make a healthy return for all its members.

Note: Investment in cryptocurrency and crypto assets is subject to financial risk and readers should do their own due diligence. Entrepreneur Media does not endorse any such investment.