Cryptocurrency tycoons are entrusting their digital wealth in the metaverse to ‘gamefi’ services by technology firms

·4-min read

Blockchain gaming giant Animoca Brands is betting that its new joint venture with start-up Hex Trust will usher in a milestone for the metaverse.

It is looking to provide services to a new legion of affluent players who are hatching big plans for virtual property empires worth millions of dollars.

The parent of The Sandbox, a blockchain gaming platform which is building an open metaverse for users to create their own virtual world and potentially profit from it, hopes digital wallets will help it expand its community to a billion users – a massive leap from the roughly half a million today.

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The unicorn, valued at US$5 billion in its funding round this month, has been working with Hong Kong-based Hex Trust since November to design virtual asset wallets and custodial services for high-net-worth individuals.

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As tycoons from New World Development’s chief executive Adrian Cheng Chi-kong to the American rapper Snoop Dogg plough money into the open metaverse, so more first-time cryptocurrency asset owners have been taking the plunge too. They are taking advantage of the growing stock of in-game assets such as virtual pavilions, or VIP concert tickets minted in the form of non-fungible tokens (NFTs).

But this also means more of their wealth could be at stake in the metaverse – an online world created by the convergence of physical, augmented and virtual reality – as they snap up hugely expensive virtual land plots at a time when cryptocurrency-related crimes reached an all-time high of US$14 billion last year, according to Chainalysis data.

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“Most people who own digital assets through NFTs today are new to the cryptocurrency scene as they started investing just one year ago,” said Yat Siu, chairman and co-founder of Animoca Brands. “A custodial platform would help them get on board, as many are not comfortable holding them in their own cryptocurrency-wallets.”

Anomica Brands’ portfolio of games includes Axie Infinity, a vastly popular blockchain-based game in which players have reportedly been able to reap a daily income of US$200. They could earn even more by trading in-game assets such as the digital monster-pet called Axie.

The “play-to-earn” model of NFT games has reportedly helped some Filipino children pay their school fees and others to plug an income gap caused by Covid-19. It also showed how blockchain technology – through marrying NFTs, cryptocurrencies and the virtual world of the metaverse – has enabled gamers to cash in on their digital assets. It has also opened up an opportunity for tech firms to provide financial services on top of these assets.

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“A metaverse that promises to give each participant independent ownership cannot exist without cryptocurrencies, otherwise it would become less interesting, as that would become the equivalent of a centralised metaverse like what Facebook is trying to create,” said Alessio Quaglini, chief executive of Hex Trust.

Platforms such as The Sandbox have now created demand for financial services from blockchain gamers, who profit through “play-to-earn”, also known as “gamefi”, he said.

Hex Trust, which holds a trust or service company provider licence in Hong Kong, will design a digital wallet for users of The Sandbox that will enable them to transfer their NFTs across different blockchains. NFTs are blockchain based digital items whose designs are unique and therefore non-fungible.

As a regulated cryptocurrency-custodial service provider, Hex Trust needs to comply with strict operational requirements and obtain security certifications imposed by regulators, Quaglini said. The firm can also help with succession planning of digital assets, so that if the original holder of NFTs passes away or ceases to have access to the assets, it can help with their transition to the next of kin.

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With a digital wallet, holders are then able to make or receive payment for NFTs built on the metaverse, exchange the NFT for other cryptocurrencies, lend it out, or borrow money against their NFTs.

Thanks to the blockchain, ownership of digital assets and data by each individual is now possible, as it unleashes rights that have long been controlled by the world’s big tech groups, said Siu.

“All financial innovations start with the private, decentralised ownership of our assets. You cannot build value on assets you do not already own, and that’s the true value of the metaverse,” said Siu.

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