James is the Managing Director of Hype, the Web3 super agency.
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You’d be hard-pressed to name buzzwords more ubiquitous than “Web3” and “the metaverse” in 2022. You’d also struggle to find one mentioned without the other.
Web3 and the metaverse have been conflated and bundled together in virtually every way—in marketing lingo, in advertising and in news coverage. Although inaccurate, it doesn’t take much to see why the two are often conflated. They’re both new technologies with nebulous definitions, both are frequently slated as the future of the internet and both are massive hits with venture capitalists.
Yet, paradoxically, where the link between the two appears the weakest is where it counts the most—the technology. Indeed, Matthew Ball, author of The Metaverse: And How It Will Revolutionize Everything, the de facto metaverse bible, noted in July that although Web3 might play an important part in realizing the metaverse’s potential, there is nothing binding the two together. They’re fundamentally two different technologies that can (and often do) function independently of each other.
Crunching The Numbers
The data also tells us as much. Take Decentraland, for example. In October, the Web3 metaverse platform attracted swaths of ridicule after CoinDesk reported only 38 “daily active” users wandered its virtual land in the span of 24 hours—a woefully low amount of traction for an ecosystem then valued at an eye-watering $1.3 billion.
By comparison, Roblox, a Web 2.0 metaverse competitor valued at around $25 billion, had 57.8 million daily active users in September 2022.
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Of course, there’s a catch here. The 38 daily active user metric recorded by DappRadar and reported by CoinDesk refers to Decentraland’s on-chain activity; these are actions by users who actually interacted with the platform’s smart contract. In addition to on-chain activity, which is recorded on the blockchain, Decentraland lets users explore its metaverse off-chain (or without interacting with the blockchain). In other words, the active user metric in question solely covers people who visited Decentraland’s metaverse and tapped into its Web3 layer—not the total number of visitors to the virtual world.
Decentraland was quick to dispute the numbers. In a tweet, the organization claimed it had raked in 56,697 monthly active users (MAUs), with a total of 1,074 users interacting with its smart contracts.
In setting the record straight, though, Decentraland inadvertently brought attention to how underutilized its Web3 layer is: Only about 1.9% of its monthly active users recorded on-chain activity.
Things weren’t that different with The Sandbox—another Web3 metaverse alternative—either. CoinDesk also noted that The Sandbox had 522 “active users” in the same time frame that Decentraland’s 38 were recorded. Although The Sandbox refrained from revealing its total monthly on-chain activity, it did share that it drew 39,000 daily active users and 201,000 monthly active users in a subsequent tweet.
Assuming the 522 metric accurately represents its average daily on-chain activity, that still means only about 1.3% of its users interact with its Web3 functions. So even in the case of platforms seeking to marry Web3 and the metaverse—technologically speaking—the two don’t seem to be all that closely intertwined. Or so the numbers suggest.
Meanwhile, standard metaverse platforms continue to dominate the charts. A recent metaverse report by Deloitte shows that—with 56,000 and 200,000 MAUs respectively—Decentraland and The Sandbox are light years behind competitors like Zepeto, Fortnite and Roblox, logging 20 million, 80 million and 202 million MAUs respectively. Ironically, Horizon Worlds—part of Meta’s multibillion-dollar metaverse investment—sits level with The Sandbox at 200,000 MAUs.
Beyond The Numbers
But numbers only tell one side of the story. When Adweek (paywall) asked us about our thoughts on advertising in the metaverse, we told them that Decentraland and The Sandbox aren’t the right platforms for brands seeking to reach as many people as possible.
That’s still true. The part that didn’t make it into the piece, though, is that there still might be value for brands to explore these platforms. If brands are targeting a specific audience—one that’s familiar with NFTs, digital assets and collectibles—they might find more success in the smaller but devoted communities that Decentraland and The Sandbox have cultivated.
Netflix, for instance, went in that direction with its recent promotion for The Gray Man starring Ryan Gosling. So did Gucci with its Vault Land NFT-enabled metaverse experience.
The Bigger Picture
The fact that few of Decentraland’s and The Sandbox’s active users record on-chain activity doesn’t ultimately undermine the platforms’ reasons for integrating Web3 into the metaverse. Unlike Roblox and Horizon Worlds, which rely on a closed ecosystem, Decentraland and The Sandbox apparently hope to set the standards for an open, interoperable metaverse that grants users and creators the ability to freely move their data, collectibles and other assets from one platform to another.
Web3 is the layer that makes this vision possible. It ensures that trust and interoperability are built into the DNA of the metaverse. It’s a guarantee against monopolistic practices that enable platform operators to impose unreasonable fees and sales cuts—like Meta’s planned 47.5% tax on virtual asset sales.
By opting for the path less traveled, Decentraland and The Sandbox are helping to pave a better future for the internet and the metaverse for all of us. That’s an admirable undertaking. Whether we’ll see this vision come to fruition remains to be seen.
For all of its lofty ambitions, Web3 still has many roadblocks to overcome, including sluggish performance and poor user experience. “We have to be realistic that it’s a long term plan,” said Robby Yung, CEO of the metaverse investment firm and game publisher Animoca Brands, recently. “We’re building the 3D internet, this is going to take 10 years or more, probably.”
But if it can solve these shortcomings, Web3 can prove to be integral to unlocking the metaverse’s full potential—even if the two can exist without each other.
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Author: James Ross, Forbes Councils Member
