MetaPortal Token Categories
Defining the App Layer of the Metaverse
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NFTfi allows borrowers to put up assets for a loan and lenders to make offers in exchange for interest. The NFT is held in escrow so lenders know for sure that they will either get their money back with interest, or receive the NFT in exchange.
It’s been over 8 months since we launched the Metaverse Index, MVI, in April 2021. Since then, the space continued to evolve rapidly and so did the narrative around the Metaverse itself. Facebook’s name change kicked the global awareness of the Metaverse into an entirely new gear. For many, this was the first time things really clicked.
It became obvious that we are accelerating into an immersive digital world - the Metaverse - that, unlike web2, will give everyone true digital ownership thanks to blockchain technology and the NFT token standard. We wanted to reflect on the critical importance of these technologies in our objective for MVI.
“MVI is designed to capture the trend of entertainment, social activity and business moving to take place in virtual economies, powered by NFTs and blockchain technology.”
We’ve done well so far at capturing this theme, but this is crypto.
“Here we must run as fast as we can, just to stay in place. And if you wish to go anywhere you must run twice as fast as that.”
MVI Methodology Update
This brings us to the methodology for MVI. So far, we’ve made a small adjustment to our inclusion criteria, increasing the circulating market cap requirement from $30m to $50m. We’ve also had to take a much more conservative stance on liquidity thresholds for new additions given the realities of on-chain rebalancing. But today, we wanted to revisit a different part of our methodology, namely the use of CoinGecko categories to screen for token inclusions.
As some of you know, one of our inclusion criteria is the following:
The protocol must be in one of the following token categories on Coingecko: Non Fungible Tokens, Entertainment, Virtual Reality, Augmented Reality and Music. More categories will be added in the future as the market matures.
This worked well during the first 6 months of MVI’s existence, allowing us to effectively screen the entire investment universe for tokens that could fit our mandate. However, at this point, with $50 million in assets under management, relying on someone else’s categorisation is a risk. It leaves us too exposed to ad-hoc changes, something that becomes even more consequential as we scale to $100m AUM and beyond. We have limited visibility into how CoinGecko’s categories are assigned and the amount of thought and due diligence that goes into that process.
As such, we thought it’s about time for us to develop our own categories that will be used for token inclusions going forward. Here we go.
Media and Entertainment
These categories are linked to our vision of the metaverse as an emergent blending of digital and physical realities. We have put quite a bit of thought into defining them, and while there are some grey areas and ambiguities here, such is the nature of working in a space that moves at the speed of light. Without further ado, let’s dig in. We try to provide additional notes on our thinking both because we believe some of the conversations we had are interesting in their own right, and also to help you understand the definitions a bit better.
Gaming - gaming is most commonly represented by video games, whether on PC, mobile or console. Taking this a step further, gaming is defined by structured play, designed to guide users towards an objective (location, score, solution). There is always an end to a game, whether in campaign or multiplayer. This may be decided by kills, resources or some other score.
Virtual World - contrary to the more defined environment of a game, in a virtual world play is the objective. A virtual world reveals itself when the primary aim of being there is exploration. Rules of the world may differ depending on the location or activity you are in at the time. A virtual world can contain games but does not exist for players to achieve a specific objective beyond play itself.
We have struggled to make a distinction between gaming and virtual worlds for quite some time. After all, we play in virtual worlds, don’t we? But there’s, in our opinion, a crucial difference between gaming and playing that we tried to capture in the definitions above. Namely that gaming is structured and objective-based while playing is free, unstructured and has no rules. We think of gaming as a finite game, while playing is more akin to an infinite game.
Marketplace - marketplaces are designed to facilitate the trading of NFTs. The assets must use an NFT token standard (721, 1155, 998 etc). Beyond that, the marketplace may be open to any and all NFTs, or be subject to a level of curation, where only selected assets may be listed.
Collectibles - projects falling under this category aim to leverage intellectual property, their own or licensed, to create NFTs that will be valuable to collectors. While they might use a marketplace to ensure the items can be traded, the primary goal is to utilise desirable IP to consistently create digital collectibles and powerful digital experiences.
To add a bit of colour on Collectibles, most of these projects will likely have a marketplace. We can use Terra Virtua or Ethernity Chain as examples. And while the marketplace is their business model, what they produce is, effectively, collectible items based on valuable intellectual property. Furthermore, these projects are vertically integrated, if you will. Unlike true marketplaces, they own the entire process from IP to design to sale.
Media and Entertainment - some of the segments that fall under the Media and Entertainment umbrella are movies, television, music, publishing, radio, and advertising. This list is not all-inclusive. The web3 versions of these businesses are powered by NFT technologies and are focused on a fair distribution of ownership between users, creators and platforms.
Extended Reality - protocols in this category fuse augmented reality (AR), mixed reality (MR) or virtual reality (VR), with crypto-native technologies and concepts like blockchain, NFTs and smart contracts.
Artificial intelligence - protocols in this category merge artificial intelligence or machine learning, with crypto-native technologies and concepts like blockchain, NFTs and smart contracts.
NFTfinance - any project that allows you to unlock the financial value of your NFT. This can be through lending or borrowing, tokenisation, fractionalisation or pooling.
Platform - platforms provide structures or tooling that are used as a base upon which other applications, processes or technologies are developed, using the same technical framework. Examples specific to the metaverse would include blockchains that are optimised for gaming/NFTs or projects that offer tools to help develop any of the categories above.
The Curious Case of Social Tokens
Now, we are certainly aware of social tokens and their place in the Metaverse. How could we not, Raoul Pal calls them 'the next big thing' for crypto. Despite that, we don’t think that individual social tokens fall under the mandate we have laid out for the Metaverse Index.
Social tokens are a “category of digital assets backed by the reputation of an individual, brand or community.” They mostly fall into four distinct categories:
The problem we have with including social tokens into MVI is that there will likely be millions of them. It would be like picking individual NFTs for the index. Further, we really struggle to draw a line between community social tokens and, say, most other tokens. Don’t most tokens represent a community and are likely to go up or down in price based on what that community does? And with Forefront Social Token Index hitting the Index Coop’s forum, we feel that they are much better stewards of social token exposure.
We are pretty excited about defining our own categories and evolving the methodology for MVI. We hope we have done a decent job sharing our thinking on the necessity of this change and providing colour for the definitions themselves. This is an important step for us as Methodologists and MetaPortal as we aim to improve the transparency and credibility of what constitutes an MVI inclusion. We are in conversations with Coingecko to implement these category definitions more broadly and see them set a standard for Metaverse projects.
As always, we will continue to run as fast as we can, just to stay in place. Welcome to the Metaverse.