The JP Morgan whitepaper is the first serious and incisive study on the metaverse– especially on virtual business opportunities. Let’s find out the salient features
The recently released whitepaper on the state of the metaverse, by US banking major JP Morgan Chase & Co is creating many waves. Co-authored by Christine Moy, Morgan’s Global Head of Liink, Crypto & the Metaverse, and AditGadgil, Head of the bank’s E-commerce and Technology as well as Media & Telecommunications divisions, it has been hailed as the first serious and incisive study on the metaverse overall – and specifically on business opportunities in that virtual world. In mid-February this year, JP Morgan had already earned the credit for being the first banking operator to open a branch in the metaverse. Its Onyx virtual lounge on Decentraland is part of the bank’s first step towards a long-term metaverse gameplan. And this planforms the general basis for the whitepaper.
Titled “Opportunities in the metaverse”, the whitepaper carries an elaborate subtitle that aptly summarises the objectives of the document – “How businesses can explore the metaverse and navigate the hype vs. reality”. According to JP Morgan, there is a lot of hype around the metaverse, and the paper intends to help clients cut through the noise by highlighting the current reality, possible opportunities, and areas of improvement. It is a strategic whitepaper, and anyone even remotely interested in the metaverse will be illuminated by it to a great extent.
Let us take a bird’s eye view of what this paper is all about.
The paper starts with some revealing figures on online consumer behaviour:
- Every year, $54 billion is spent on virtual goods
- Approximately 60 billion messages are sent daily on Roblox
- GDP for Second Life was about $650M in 2021 with nearly $80M USD paid to creators
- Non-fungible tokens (NFTs) currently have a market cap of $41 billion
- 200 strategic metaverse partnerships to date with The Sandbox, including Warner Music Group to launch a music-themed virtual world
Predicting that the metaverse is about to impact every sector in the coming years, with estimated annual market revenue of over $1 trillion, the paper succinctly mentions:
‘Business leaders and boardrooms around the world are now asking themselves, “What is my metaverse strategy? What am I supposed to be doing in the metaverse? What is the metaverse anyway?”’
Those are the precise questions that the whitepaper seeks to answer.
Defining the metaverse
Next, the paper defines the metaverse as “a seamless convergence of our physical and digital lives, creating a unified, virtual community where we can work, play, relax, transact and socialize.”It admits that still being in early evolutionary stages, there is no singular, all-encompassing definition yet. But it is generally agreed that the metaverse is going to be an immersive, three-dimensional layer to the web, creating more authentic and natural experiences from anywhere – democratizing access to key goods, services, and experiences – all based on the decentralised Web 3.0 technology.
Briefly explaining the key differences between the Web 2.0 and Web 3.0 approaches, the report moves on to explain why it was inevitable for the metaverse to take shape now. It clarifies that we are now looking at a convergence of emerging technologies, like Augmented and Virtual Reality (AR/VR), blockchain enabled digital currencies and NFTs, and immense economic opportunities whereby digital goods and services are no longer captive to a singular gaming platform or brand. The pandemic, too, has accelerated the digitization process in all spheres of our lives. This combination of technological, social and economic drivers has triggered the metaverse.
The concept of Metanomics
The paper attempts to define the economics of the metaverse, and calls it “metanomics”. It is not a new term or concept, dating back to 2007 when a Cornell professor, Rob Bloomfield, hosted a course on the subject in Second Life. However, a key difference today is the ownership economy, driven by the advent of Web 3.0. The paper points out that as decentralised finance (DeFi), and collateral management comes into play, decentralised autonomous organisations (DAO) will become more relevant rather than traditional finance companies. The growth of the ownership economy is the key here. According to the authors, this growth is partly because of megabrands buying up space on the metaverse so that they can create virtual stores and other immersive experiences. In June 2021, one land package in Decentralandalone was sold for $913,000!
Work and business opportunities
The paper categorically states that supply and demand dynamics are driving more people into the meta-economy, and this will lead to new skills and new opportunities being generated. To develop consumables for the virtual world a vast pool of creative talent and extensive opportunities for the creator economy must be at play. This, in turn, makes collaboration between traditional industries and new-age start-ups a necessity – a perfect example of which is Nike’s acquisition of virtual shoe designerRTFKT. Such mergers and takeovers form an interesting bridge between digital and physical merchandise and is building an ecosystem of avatars, spaces, and digital products, in addition to wearables.
Business-to-business enterprises will find growth opportunities too. Access to the marketplace from emerging and frontier economies will be immensely enhanced. From a corporate perspective, there are opportunities to massively scale. Educational opportunities will also expand, with cutting-edge technology turning low-cost every day.
Beware of the hype
The paper is clear that not everything is still a reality, and we must understand the weak points that needs to be fixed to develop a secure and effective metaverse.
“Despite much excitement about the possibilities of the metaverse, in order to enable its full potential for engagement, community building, self-expression, and commerce, key areas need to be further developed and matured. We see these as new opportunities for teams, projects, DAOs, businesses, technology providers, and financial institutions to flourish and collaborate together in vibrant ecosystems that address the following areas:
- Commercial infrastructure
- Privacy and identity
- Workforce of the future
- Regulation, tax, accounting and social infrastructure”
Formulate your strategy
The paper charts out a few pointers for entrepreneurs interested in joining the metaverse bandwagon:
- Learn about the many different interpretations, and various angles to it
- Assess if there are relevant opportunities for your business.
- Create consumer engagement through new channels, services, experiences, digital goods and assets. Start small, move fast, test, and learn.
- Connect with a new generation and tap into alternative talent pools by building a network of metaverse ecosystem participants.
- Establish your business out there and position yourself to capture the tech-forward sub-communities.
JP Morgan clarifies their own stand towards the close of the paper. As a leading banker and the first to venture on metaverse grounds, they claim to strive for perpetual innovation and better ways to organize financial transactions and payments in the decentralized web. Their focus for the metaverse would be on the following three verticals:
- Industrializing game platform providers with bank-grade products and digital assets platform access
- Enabling game and content creators to more easily commercialize their creations
- Scaling the metaverse industry worldwide across multiple currencies and payment methods
The authors admit that “…it is difficult to base a business strategy on such a dynamic space, characterized by explosive growth and the continuous innovation of new entrants. However, the costs and risks of engaging early and consistently in order to build internal intellectual property… are relatively low. The asymmetrical risk of being left behind is worth the incremental investment needed to get started and to explore this new digital landscape for yourself.”
But it is clear from the report that for that to happen, the metaverse still has a long way to go – especially in terms of overall user experience, the performance of avatars, and commercial infrastructure.
Content Acknowledgement: Opportunities in the metaverse: How businesses can explore the metaverse and navigate the hype vs. reality; JPMorgan Chase & Co.; 2022
Access the full JPM whitepaper at:https://www.jpmorgan.com/content/dam/jpm/treasury-services/documents/opportunities-in-the-metaverse.pdf