The key insight for us is that the digital identity market is still in its infancy — but will grow exponentially over the next years.
We forecast the digital identity space may generate more than $600bn by 2030.
And the more our lives shift into the digital realm, the more important it becomes to find answers to some of the core questions of digital identity that guide this report:
What should our digital identities look like in the future and why? What do web3-native companies and established brands do? What happens in terms of M&A activity in the space?
Leading-edge companies are laying the foundations of the digital identity infrastructure and creating a landscape that is divided into various core pillars:
A retrospective report made in collaboration with Blockstories
Our key takeaway is: 2022 has been a wild year for crypto and web3!
The space is bleeding, but innovators are still building behind the scenes more actively and closer together than ever before.
The fast-paced nature of crypto and web3 can make it difficult to stay on top of all the developments and events, and it can easily become overwhelming. To help you navigate this, we’ve structured the report as follows:
- Charts and Expert Insights: The Web3 year in numbers
- Timeline: A timeline of the most important events
- Trends: 10 trends that shaped web3
- Content Highlights: The top 10 podcasts & essays of the year
- Outlook: The 5 most exciting fields for 2023
The more time we have spent researching and exploring the sports metaverse space, the clearer our conclusion became: sport as an industry is at an inflection point in terms of commercialisation and fan engagement. The intersection with web3 and NFTs is set to benefit disproportionately from this trend and be the catalyst for future growth.
We forecast the sports metaverse space may generate more than $80bn by 2030.
Sport has entered the entertainment sector and is managed by sophisticated organisations and institutions. To unlock their full potential, they face the following challenges:
A drastic and fast-paced evolution in consumption pattern
An increasingly demanding and harder-to-engage fan base
A technological landscape that is impossible to keep track with
By addressing these core issues, web3 founders and projects have made a name for themselves and created a vibrant landscape, which we have divided in several segments:
Over the past few years, the blockchain gaming industry has been quietly laying the foundations of what will turn out to be one of the most exciting and compelling segments of web3. Its emergence proposes to not only provide solutions to many of the pitfalls commonplace in the behemoth web2 gaming industry, but build upon the gaming experience in a richer and more meaningful way for all stakeholders. The enhancement is rooted in foundational blockchain technologies that enable new paradigms in gaming such as true asset ownership, verifiable social reputation aggregation, and the vitalization of micro-economies. In turn, blockchain technology empowers a complexity and depth of experience within and around the core game that can foster much more interesting gaming outcomes than before. While the blockchain gaming industry has found a few smaller successes and thereby its initial foothold, we’ve yet to see a game fully capitalize on this core technology in a sustainable and enjoyable way that fully propels the space into the mainstream.
The key insight for us is that the digital identity market is still in its infancy — but will grow exponentially over the next years.
We forecast the digital identity space may generate more than $600bn by 2030.
And the more our lives shift into the digital realm, the more important it becomes to find answers to some of the core questions of digital identity that guide this report:
What should our digital identities look like in the future and why? What do web3-native companies and established brands do? What happens in terms of M&A activity in the space?
Leading-edge companies are laying the foundations of the digital identity infrastructure and creating a landscape that is divided into various core pillars:
A retrospective report made in collaboration with Blockstories
Our key takeaway is: 2022 has been a wild year for crypto and web3!
The space is bleeding, but innovators are still building behind the scenes more actively and closer together than ever before.
The fast-paced nature of crypto and web3 can make it difficult to stay on top of all the developments and events, and it can easily become overwhelming. To help you navigate this, we’ve structured the report as follows:
- Charts and Expert Insights: The Web3 year in numbers
- Timeline: A timeline of the most important events
- Trends: 10 trends that shaped web3
- Content Highlights: The top 10 podcasts & essays of the year
- Outlook: The 5 most exciting fields for 2023
The more time we have spent researching and exploring the sports metaverse space, the clearer our conclusion became: sport as an industry is at an inflection point in terms of commercialisation and fan engagement. The intersection with web3 and NFTs is set to benefit disproportionately from this trend and be the catalyst for future growth.
We forecast the sports metaverse space may generate more than $80bn by 2030.
Sport has entered the entertainment sector and is managed by sophisticated organisations and institutions. To unlock their full potential, they face the following challenges:
A drastic and fast-paced evolution in consumption pattern
An increasingly demanding and harder-to-engage fan base
A technological landscape that is impossible to keep track with
By addressing these core issues, web3 founders and projects have made a name for themselves and created a vibrant landscape, which we have divided in several segments:
This research report helped us learn two things about the blockchain gaming industry. First, blockchain technology has incredibly meaningful implications for the broader gaming industry. And second, although we’re early, the fundamental pieces of a sweeping transformation are beginning to fall neatly into place. Learning from historical pitfalls, this report suggests that we first must see a refocusing of industry priorities towards building fun and sustainable games that can attract gamers on their own. Off the back of these games can we then build out the rich micro-economies and the broader range of enriched experiences for stakeholders. We believe the emergence of novel game models is a testament to the blockchain gaming industry’s understanding of this realignment; coupled with the rate of development and inflow of resources, it appears primed to achieve its big goals.
The Metaverse is a highly anticipated $5 trillion market, with brands like Facebook and Microsoft entering the space and web3 builders innovating on individual pieces of the puzzle. While user numbers have not met expectations and enthusiasm has waned, the potential of the Metaverse remains an exciting prospect for the future.
The substantial decrease in NFT volumes and prices in the bear market have emphasized the need for real-world use cases of the technology. Competition among top NFT marketplaces has intensified with lower fees and new zero-fee marketplace Blur surpassing OpenSea in 24-hour trade volume. Despite this, OpenSea maintains its dominant position in terms of unique users.
The total value locked in DeFi protocols has decreased significantly this year due to a variety of factors, including the Terra Luna Crash and worsening macro. Currently, there is $42 billion worth of funds remaining, a small fraction of the >$300 billion peak TVL seen in November 2021. DeFi has established itself as the most innovative space in crypto, building much of the industry’s cornerstone infrastructure in recent years, leaving the market eagerly awaiting further innovation.
DeFi hackers had a successful year in stealing over $2 billion from multiple protocols (e.g., $325m from Wormhole, and $625m from Ronin), particularly through vulnerabilities in bridges which are essential for the ecosystem’s development but are still in the early stages of development.
Layer 2 (L2) networks such as Arbitrum and Optimism have gained a significant share of the market and now handle about 50% of transactions by transferring them away from the Ethereum blockchain. While the impact of L2 networks on the Ethereum ecosystem in the short- to medium-term is unclear, their success is bringing stability to Ethereum.
Despite the downturn in the cryptocurrency market, M&A activity remains strong and is shifting to distressed verticals. Exchanges are the most active acquirers, and well-capitalized crypto companies are taking a more aggressive approach to M&A. Non-crypto companies are also entering the market through acquisitions, particularly in the NFT and blockchain gaming sectors.
The metaverse itself is a huge opportunity for the world to add a new layer of human interaction to society. For sports specifically, it could create access points and virtual experiences for new audiences. This is not mutually exclusive with the joy of physical interaction of sports, but rather an extension that will allow for more inclusion across the industry. E-Sports is the best showcase for this: following the increased demand in purely digital competitions, especially among the younger generations, the sector has experienced enormous growth. And while the sport is happening entirely online, fans still enjoy gathering in real-world stadiums and see their favourite teams play on the ground.
More generally, sport consumption has dramatically evolved over the last decades and turned a fairly static industry into a rocket ship of technological innovation. Today, certain teams and athletes have more presence in people’s daily lives than leading politicians. While the best ways to engage with communities are ever-evolving, the sport community has proven to be a fast adopter, increasingly integrating new elements such as NFTs and web3 apps.
Fan engagement is the holy grail in sports. How to engage fans in the future and how to use the latest technological advancements to take the interactions to the next level remain the key questions. Especially as attention spans and the hesitance to pay for sports content are decreasing among younger generations. We are currently experiencing a phase of phenomenal experiments, from the participation of fans in live events to decentralised ownership of entire clubs, and it will be exciting to see which one of these changes the world of sport forever.
The metaverse is being touted as one of the biggest opportunities in tech. And while definitions are still evolving, it’s clear that a new kind of digital identity is needed to navigate it seamlessly.
We have seen the move from physical, over online to metaverse identity, which in the ideal state should allow you to share only the information you want.
In the expression of one’s digital identity in virtual space, avatars play an important role today. While many companies focus on the virtual representation of one’s real-world features with human-like avatars, other innovators are moving towards borderless avatars that open up creative freedom to enable new perspectives on self-expression, diversity, and interaction possibilities.
Where activity will center remains to be seen and will largely be determined by the individual interests of market participants, especially the big tech players and emerging web3 native companies.
Verticals that enable digital identity come to the forefront. First and foremost, digital fashion offers a way to enable self-expression in the digital space on a granular level. Market-leading established brands are starting to recognize the value and are investing heavily in the space, while innovation-leading start-ups are creating the fundamental concepts behind it.
Besides working on the visual expression side, many smart minds are trying to solve the trust gap in digital identities. For this, the concept of cryptographic credentials seems to offer the first promising practical concept to combine safety, security, and privacy controls.
Two main aspects are driving M&A activity in the space: (i) large players in established industries are trying to get involved by acquiring smart teams and internalizing their technologies, and at the same time, (ii) the first wave of consolidation emerges as network effects and economies of scale become more apparent and large players expand their offering horizontally by acquiring adjacent businesses or vertically by integrating parts of the value chain.
The Metaverse is a highly anticipated $5 trillion market, with brands like Facebook and Microsoft entering the space and web3 builders innovating on individual pieces of the puzzle. While user numbers have not met expectations and enthusiasm has waned, the potential of the Metaverse remains an exciting prospect for the future.
The substantial decrease in NFT volumes and prices in the bear market have emphasized the need for real-world use cases of the technology. Competition among top NFT marketplaces has intensified with lower fees and new zero-fee marketplace Blur surpassing OpenSea in 24-hour trade volume. Despite this, OpenSea maintains its dominant position in terms of unique users.
The total value locked in DeFi protocols has decreased significantly this year due to a variety of factors, including the Terra Luna Crash and worsening macro. Currently, there is $42 billion worth of funds remaining, a small fraction of the >$300 billion peak TVL seen in November 2021. DeFi has established itself as the most innovative space in crypto, building much of the industry’s cornerstone infrastructure in recent years, leaving the market eagerly awaiting further innovation.
DeFi hackers had a successful year in stealing over $2 billion from multiple protocols (e.g., $325m from Wormhole, and $625m from Ronin), particularly through vulnerabilities in bridges which are essential for the ecosystem’s development but are still in the early stages of development.
Layer 2 (L2) networks such as Arbitrum and Optimism have gained a significant share of the market and now handle about 50% of transactions by transferring them away from the Ethereum blockchain. While the impact of L2 networks on the Ethereum ecosystem in the short- to medium-term is unclear, their success is bringing stability to Ethereum.
Despite the downturn in the cryptocurrency market, M&A activity remains strong and is shifting to distressed verticals. Exchanges are the most active acquirers, and well-capitalized crypto companies are taking a more aggressive approach to M&A. Non-crypto companies are also entering the market through acquisitions, particularly in the NFT and blockchain gaming sectors.
The metaverse itself is a huge opportunity for the world to add a new layer of human interaction to society. For sports specifically, it could create access points and virtual experiences for new audiences. This is not mutually exclusive with the joy of physical interaction of sports, but rather an extension that will allow for more inclusion across the industry. E-Sports is the best showcase for this: following the increased demand in purely digital competitions, especially among the younger generations, the sector has experienced enormous growth. And while the sport is happening entirely online, fans still enjoy gathering in real-world stadiums and see their favourite teams play on the ground.
More generally, sport consumption has dramatically evolved over the last decades and turned a fairly static industry into a rocket ship of technological innovation. Today, certain teams and athletes have more presence in people’s daily lives than leading politicians. While the best ways to engage with communities are ever-evolving, the sport community has proven to be a fast adopter, increasingly integrating new elements such as NFTs and web3 apps.
Fan engagement is the holy grail in sports. How to engage fans in the future and how to use the latest technological advancements to take the interactions to the next level remain the key questions. Especially as attention spans and the hesitance to pay for sports content are decreasing among younger generations. We are currently experiencing a phase of phenomenal experiments, from the participation of fans in live events to decentralised ownership of entire clubs, and it will be exciting to see which one of these changes the world of sport forever.
The metaverse is being touted as one of the biggest opportunities in tech. And while definitions are still evolving, it’s clear that a new kind of digital identity is needed to navigate it seamlessly.
We have seen the move from physical, over online to metaverse identity, which in the ideal state should allow you to share only the information you want.
In the expression of one’s digital identity in virtual space, avatars play an important role today. While many companies focus on the virtual representation of one’s real-world features with human-like avatars, other innovators are moving towards borderless avatars that open up creative freedom to enable new perspectives on self-expression, diversity, and interaction possibilities.
Where activity will center remains to be seen and will largely be determined by the individual interests of market participants, especially the big tech players and emerging web3 native companies.
Verticals that enable digital identity come to the forefront. First and foremost, digital fashion offers a way to enable self-expression in the digital space on a granular level. Market-leading established brands are starting to recognize the value and are investing heavily in the space, while innovation-leading start-ups are creating the fundamental concepts behind it.
Besides working on the visual expression side, many smart minds are trying to solve the trust gap in digital identities. For this, the concept of cryptographic credentials seems to offer the first promising practical concept to combine safety, security, and privacy controls.
Two main aspects are driving M&A activity in the space: (i) large players in established industries are trying to get involved by acquiring smart teams and internalizing their technologies, and at the same time, (ii) the first wave of consolidation emerges as network effects and economies of scale become more apparent and large players expand their offering horizontally by acquiring adjacent businesses or vertically by integrating parts of the value chain.
The overall NFT market is growing at a significant pace resulting in large overall transaction volumes and an ever-increasing number of individual NFT buyers, while still relatively small. Another characteristic is its truly global set-up with a dispersion of activity around the globe.
Within these segments, we see varying degrees of maturity.
Marketplaces typically develop early maturity as they are solving core customer needs and their growth is fueled by strong network effects (like in web2). In web3 these dynamics have led them to be one of the most advanced verticals to date.
Similarly, with more and more data being produced, storage has been one of the major topics for Big Tech over the last decades so people have started to focus on solutions rather early. In the specific case of NFTs, storage of NFT metadata has not yet reached the appropriate level of importance in the space with many philosophical questions about where data should be stored remaining to be discussed.
When it comes to NFT data and analytics, there is a mix of established crypto data analytics providers and more specialized NFT players in the market — while more and more data points and tools become available, we have not met a single person active in the space who feels satisfied with the tool kit currently available.
Another nascent sub-vertical is the use of NFTs as financial assets, as utility beyond collecting and displaying is still limited. We have started to see a lot of engagement around the implementation of basic financial services (e.g. lending, fractionalization) in the NFT context and expect a lot more activity at the intersection of Decentralised Finance (‘DeFi’) and NFTs going forward.
Not so prevalent yet, but moving closer to an extended reality we believe people are also going to ask “What role do NFTs play in the metaverse?” and it will be important to have a sophisticated view of how ‘the metaverse’ will evolve. While it is hard to foresee exactly what form it will take, we strongly believe NFTs will play an integral role in that transition and there are a couple of infrastructure pillars we think are universally applicable.
“Innovation at the infrastructure level of emerging technologies has created the biggest opportunities in the past, and we believe we are in the earlyinnings of anew innovationcycle. While challenges in the space are more apparent than ever today, we expect use cases leveraging NFTs to continue evolving that greatly facilitate interactions between creators and consumers — and adoption will scale in lockstep with the maturity level of the underlying technological infrastructure, the user experience layer as well as the regulatory framework.”— Xiao-Xiao J. Zhu, Blockchain Lead KKR
