The Metaverse is not a new idea. In the early 2000s, a platform called “Second Life” (still going strong today) offered similar activities and transactions. It had a sizable economic activity with its own currency tokens and a GDP close to USD 500 million. Though similar, the Metaverse of today has a diverse set of technologies at play, namely Virtual Reality(VR), Augmented Reality (AR), Mixed Reality, and blockchain technology, which is the game changer. The Tech Stack for the Metaverse is the coming together of independently evolving technologies, such as AR/VR, Blockchain, Geospatial mapping, etc. The Metaverse will now have its own currency, which would be in the crypto format. Content creators in the Metaverse will provide immersive experiences, where NFT commerce would enable users to buy and sell content used in the Metaverse. Finally, the Metaverse is an ecosystem, and most of the decision-making will be done via Decentralized Autonomous Organization (DAO).

You have realized there will be multiple Metaverses, and no one entity will have the technology to build all the components. With multiple Metaverses, there is a need for interoperability.  The Metaverse is about experiencing Web 3.0 in a rich manner. It means the users own their assets, control them, decide how to use them, and whom to share them with. This principle would mean that the user is able to move from one Metaverse to the other with ease while taking their digital assets along with them. There probably will be an omniverse – bridge, which will enable the smooth transition from one Metaverse to the other.

A key point to note is that the Metaverse is more than just a Mixed Reality experience. Though virtual, the Metaverse includes real applications of commerce, which impacts the financial world: Metanomics.

Commerce in the Metaverse/Metanomics

Commerce in the Metaverse will be completely transformed. Brands will be exposed to an entirely new channel, with customer engagement moving to the next level with a uniquely immersive experience. The new generation consumers, currently Gen Z and the quickly following Gen Alpha, are digital natives and will naturally evolve into the Metaverse. These generations’ demand for experience will be driven by immersive experience technologies. In the Metaverse, personal digital goods will be sold to the customers’ digital representation, which would mean brands will need to engage with avatars. It is a paradigm shift.

The Metaverse is yet another distribution channel with distinct attributes, which in comparison with the physical world, will see a drastic shift in both customer experience and services offered. Just as in the real world, the Metaverse will have its own land, and enterprises will have their premises on this land. In the Metaverse, a land parcel is a digital asset. Enterprises will acquire their own premises on this land, either leased or owned. Financial institutions having their presence in the Metaverse will facilitate commerce in the Metaverse. An innovative thinking approach would be required to design experiences and services. For example, financial institutions could offer mortgage services to help acquire land. How should they secure this loan? Would having the land NFT in its custody suffice? How to deal with volatility in the crypto space? Lending products will need to be customized for specific needs. While lending, borrowers’ risk assessment and collection mechanisms are necessary services.  For example, in lending, KYC is the first process. How will KYC be done in the Metaverse?

Commerce in the Metaverse could start with facilitation payments to buy products native to the Metaverse or other financial services, such as lending to buy assets like land or game skins in the Metaverse.

In the physical world, we buy insurance for things of tangible value, though there are examples of intangible items. As in the case of the physical world, the Metaverse, too, will need various forms of insurance to protect against loss. One would pay premiums to protect against loss or damage to digital goods. Some examples include cryptocurrencies, NFTs, and in-game assets. Insurance would be needed against theft, natural disasters, loss/damage/value depletion due to the smart contract code, and various other Metaverse-specific risk covers.

What does it involve?

The Metaverse is a confluence of a set of innovative technologies, techniques, and concepts. While the solution landscape is evolving, its characterization is enabled by blockchain, distributed ledgers, tokens, and tokenization, NFTs and marketplaces, Mixed Reality, decentralized identity, cryptocurrencies, crypto tokens and utility tokens, stablecoins, DAOs, smart contracts, IoT, and many other evolving technologies. Content creators can create specific Metaverse content, which can be sold and bought in NFT and curated marketplaces.

IT services organizations with capabilities in blockchain, distributed ledgers, experience design, and Mixed Reality on multiple platforms are well placed to onboard customers into the Metaverse to engage with other customers.

Simply digitizing the existing process may not be enough. It could be counterproductive. A variety of solutions can be built in this evolving space. In our discussions with BFSIclients, many have shown the desire to be present and operate in the Metaverse and use more Metaverse-native products and services.

At Mphasis, We bring the ‘T’ back into IT. We lead the change through hyper-personalized experiences and drive customer-centric transformation to help you #StayAhead. We accelerate the next paradigm of Innovation. #EngineeringIsInOurDNAhttps://t.co/qPYamJhR4j pic.twitter.com/MC2CpVwzGv

— Mphasis (@Mphasis) August 10, 2021

What does it mean for enterprises?

Let us review some of the transformational solutions that are better suited to the Metaverse and the Web 3.0 space.

Reimagining Loyalty programs

Digital natives, namely Gen-Zs and Gen-Alphas, are the primary user bases in the Metaverse. Consequently, digital assets will play a crucial role in engaging with this new generation of users. Loyalty programs in their current state are not ready for the Metaverse. While today one can exchange, though with constrained access, loyalty points with goods and services in the real world, one cannot use them to buy an NFT or any digital assets in the Metaverse.  It reduces the utility of the points for the new-age consumers.

Traditionally, loyalty points are static, which means their value does not change over time, and most loyalty points expire after a while. These challenges further reduce the utility of points, making them unattractive to the new-age consumer. The system needs to be transformed.

We are trying to solve this problem by transforming the loyalty point system. The transformed model enables customers to use the Metaverse-specific cryptocurrencies or stablecoins as loyalty points.  Customers get to spend the cryptocurrencies received as loyalty points in their preferred Metaverses.

NFTs can be used to segregate customers based on crypto loyalty holdings for differentiated digital and physical services, for e.g., concert tickets, or the option to buy game skins. NFTs when linked to the bank’s Metaverse presence can enable digital services, such as movie premieres or crypto financial services, such as crypto lending. It opens the bank to provide new financial services.

Asset Tokenization

Metaverse commerce will be driven by tokens. It includes fungible and NFTs (non-fungible tokens). In the earlier example, we saw loyalty points are being tokenized. Consumers are willing to spend USD 2400 for a pair of virtual sneakers. These decisions are driven by close association with the brand. Having a good understanding of how NFT works for a brand’s digital portfolio is important. NFTs, bring consumers closer to the brand. Enterprises can use it to create unique experiences and drive engagement with owners of the token.

An efficient and scalable token infrastructure is necessary for brands and enterprises. The lifecycle of the tokens will typically consist of minting, issuing, transferring, and in some cases burning. A well-architected platform for asset tokenization would be an essential system.

Another piece of infrastructure is the token wallet. As customers acquire and transact with tokens, they would need a way to manage their assets easily and safely. A digital wallet with the right user experience is a critical component of the token ecosystem. Typically, wallets are either custodied or self-custodied and brands can decide the mode. Each has its own pros and cons and associated risk, both reputational as well as financial. Hence, decisions should take into consideration all risks. In either model, it is crucial that the wallets are safe, secure, and easy to use.

User-centric Identity in the Metaverse 

Trust is crucial to the functioning of every interaction in the Metaverse. The current centralized model of enforcing trust by using account-based identity is not an approach that works for the Metaverse. Account-based identity has its drawbacks. Identity data is not portable. Centralized databases are giant honey pots. Remembering and managing multiple identities is a challenge.

Blockchain has the potential to change this nature of trust without compromising on privacy. Self-sovereign identity (SSI) is emerging as an approach to providing individual control over the digital identity. Zero-knowledge proof (ZKP) cryptography has made SSI compelling.

A user wanting access to a Metaverse will present a credential issued by a trusted source such as a government authority. By using ZKP, platforms will be able to confirm whether a user is a real person or not. In scenarios that require ensuing the avatar is a human, it can adopt cryptographically secured biometric data as proof of human.

Authored By:

Biju Mathew, Vice President Industry Solutions Group

Agnelo Marques, VP & Head Blockchain CoE, at Mphasis

Mphasis applies next-generation technology to help enterprises transform businesses globally. Customer centricity is foundational to Mphasis and is reflected in the Mphasis’ Front2Back™ Transformation approach. Front2Back™ uses the exponential power of cloud and cognitive to provide hyper-personalized (C=X2C²_TM=1) digital experience to clients and their end customers. Mphasis’ Service Transformation approach helps ‘shrink the core’ through the application of digital technologies across legacy environments within an enterprise, enabling businesses to stay ahead in a changing world. Mphasis’ core reference architectures and tools, speed and innovation with domain expertise and specialization are key to building strong relationships with marquee clients. Know more: https://www.mphasis.com/home.html