Author: Alice@Foresight Ventures
TL;DR
Avatars can create the feeling of being transported to the metaverse, provide an enhanced sense of agency, and satisfy the need to feel connected to others. We believe avatars will be the most valuable assets in the metaverse.
Yet the largest games and virtual worlds are closed economies, where the avatars are not interoperable with one another.
There are three aspects to consider when building an avatar for mass adoption :
Technology — determine the liveness and quality of avatar, identity, and community.
Identity — adds to the interoperability and social value of avatar
Community — consensus is the key to driving mass adoption
3D virtual identity is on the rise due to 1. growth of on-chain data and 2. proliferation of AIGC. People will counterbalance this with a need for interoperable avatar identities that ensure human-to-human interactions.
Intro: Fantasy for the Metaverse
Humans have never stopped the quest for the future of the metaverse. The TV series West world is one of the most classic artworks of all. Westworld is a fictional, technologically advanced Wild-West-themed amusement park populated by virtual human “hosts”, which caters to high-paying guests who may indulge their wildest fantasies: You can join bounty hunters to catch criminals or follow a group of gangsters to rob the train; you can enter Westworld to experience the free American country life in the day, and when the night falls you will be transported to Golden Age to experience Luxembourg in the 1940s.
The Rise of Avatar Economy
What attracts us the most in these fantasy stories are the virtual avatars- Everyone gets a virtual reflection of themselves and NPC avatars that make the game more vivid and exciting. As crypto VC, we believe virtual avatars will be one of the most valuable assets in the metaverse.
The word avatar originates from Sanskrit, meaning “descent” or “lapse.” It’s often used in Hinduism to refer to the incarnations of Vishnu. It is popularized in its cyber sense by Neal Stephenson in his 1992 science-fiction novel Snow Crash. Avatars are virtual representations of users in the metaverse, a collective virtual shared space. They allow users to interact with each other and the environment as if they were there in person.
Avatar is a junction point between tradition and reality. It has already many use cases in the real business world, both in web2 and web3. The global avatar market size is expected to reach USD 527.58 Billion in 2030 and register a revenue CAGR of 46.4% (Emergen Research). Here are the main uses cases for avatars:
a. Reduce Workforce
Avatar can be used to replace service roles in live streaming and customer support. The key is to generate content with low cost and high efficiency. On the one hand, enterprises save on wages, on the other, Avatar can do live stream 7 * 24 hours without worrying about making any mistakes.
b. Upgrade Experience
We can use an avatar to upgrade the customer experience. From text — voice- images-short video-holographic VR, customers are always pursuing richer sensory experiences. Imagine that in the future, by communicating with your favorite avatar, they can help you with fitness plans, financial management, and psychological counseling. The ultimate form of avatar should be a general assistant like Siri, which can not only handle all kinds of daily tasks, they can even be your friend or even lover.
c. Virtual Idols
According to a Tencent report, 48% of Genz said they have favorite avatars, while 17.2% of them regard avatars as their idols. Using an avatar as the spokesperson will also help brands to save marketing costs while preventing the risk of being involved in celebrities’ future scandals. For the brands, the idea of creating their IP is gaining increased traction and this business model has been tested out by many companies like O’loreal, LVMH
d. Self-Representation
Avatar is the key for users to enter the metaverse. It shows personality, belief, and social prestige. According to a report, the Gaming Skins market is reached $50 billion in 2022 (Benzinga).
Lately, there has been a growing number of articles discussing the Avatar-self, a concept in the philosophy of mind that refers to the self as the aware, conscious, and internally coherent presence within an Avatar or image. Some interesting findings include:
Players are more likely to become emotionally attached to a personalized avatar. This emotional attachment can lead to increased game playing time and a willingness to pay for in-game items. (Harvard Business Review)
It shapes human interaction and sympathy. People are likely to feel sympathetic to other races if they use their avatars. (Game for Health Journal, Belinda Gutierrez)
The use of avatars can increase productivity by 10–15% (World Bank); avatars can help organizations achieve a 20–30% reduction in communication costs (McKinsey & Company)
The Metaverse we have and the Problem
Interoperability has long been a key guiding principle of the Metaverse. Yet today, the largest games and virtual worlds are closed economies that are not interoperable with one another. From Fortnite to Minecraft to League of Legends, most games do not allow players to trade or carry their digital assets outside a centrally defined space.
We believe the next generation of games and virtual worlds will be built with interoperability as a core tenet. Rather than hold players inside walled gardens, the virtual worlds that comprise the open Metaverse will empower players to own their identity and take their digital assets wherever they go. These open economies will be larger and more durable than any closed economy game that we’ve seen yet, with players deeply invested in their assets and driving innovation as co-creators / co-owners of the world around them.
How to build a successful avatar in Web3?
Assume we are building an avatar from scratch, there are three fundamental things we should consider:
Technology
Decentralized Identity
Community
Let’s break down the discussion one by one
a. Technology
The production of a 3D avatar consists of four parts: image generation, motion capture, rendering, and interaction.
Image Generation
Modeling is the most important part of image generation.
3D modeling technology currently includes two main categories — static modeling and dynamic modeling.
The mainstream is static modeling, in which the rapid development of camera array scanning reconstruction, it currently can achieve millisecond high-speed photo scanning (high-performance camera array accuracy can reach sub-millimeter level)
Compared with static reconstruction, dynamic light field reconstruction not only can reconstruct the geometric model of the person but also obtain dynamic data of the person model at one time, which leads to its key development direction or digital human modeling. Microsoft, Google, Intel, Facebook, Tsinghua University, SenseTime Technology, and Huawei have all actively conducted related research on this topic.
Motion Capture
When the modeling is completed, we need a series of bindings and drivers to make the lifeless model move. Bone and muscle binding determines the naturalness and fluency of the model’s subsequent body movements and facial expressions.
Currently, there are two mainstream approaches: i.e. 1. skeletal binding and 2. hybrid deformation binding.
And the driven technology is divided into two parts: i.e. 1. Real-person-driven technology 2. AI-driven technology. Driven techniques consist of manual adjustment of keyframes, prefabricated actions, motion capture, intelligent compositing, etc.
Rendering
The next step is to generate animation by rendering.
Rendering refers to the process of computing the visual picture of the model under the action of viewpoint, light, motion trajectory, and other factors.
There are two main types of rendering: offline and real-time.
Offline rendering is mainly used in film and television, and its representative software is Maya, 3DMax, etc.
Real-time rendering refers to the computer calculating the picture while displaying its output, mainly used in games and other aspects, representative engines are Unreal Engine (Unreal), Unity Engine, etc.
With hardware development and algorithm breakthroughs, the rendering speed, effect realism, and screen resolution have been greatly improved, and in the real-time rendering of virtual characters, it has been possible to achieve falseness.
Interaction
If deeper interaction with humans is expected, TTS, NPL (Natural Language Processing), and synthetic voice technology can be used. The recently hot ChatGPT is a good demonstration of supervised learning as well as reinforcement learning
In terms of presentation, most avatars are presented in the form of pictures, videos, live-streaming, etc., in the future VR devices/holographic projections, are expected to provide us with richer props. In addition, the proliferation of metaverse, 3A games, and online tools (zoom meeting, google meet, vrchat) have also greatly enriched the utility of avatars.
b. Decentralised Identity
An interoperable decentralized identity adds social value to the avatar.
Interoperable 3D Identity
Think of Avatar not only as a gaming asset that you can carry around to the metaverse, but as a universal passport that shows your personality, achievement, and social reputation, and players could easily associate their SBT to this avatar that builds up even more value to it. Interoperable identity will be the key to mass adoption.
Onboarding more users
Having a metaverse universal avatar may become the first stop for the average user to enter the web3 experience in the future. Developing Sims-like games to guide newbies to use Defi, NFT, and Gamfi without obscure on-chain transactions will potentially facilitate web3 to go mainstream.
c. Community & Marketing
From an operational point of view, the success of avatar projects should be mostly attributed to marketing and community support. Here are some good examples:
Hatsune Miku
As the world’s first virtual singer-songwriter, Hatsune is a typical community-created idol, a symbol of UGC culture which is now worth more than 10 billion Yen. The character itself does not produce any content, and all her personality, songs, and movements are the co-creation artwork of community creators.
HALO nft
HALO NFT, presented in high-definition 3D avatars, is created by the HALO label with the Decentralized 3D Artist Community. Despite recent market turbulence, its initial sale has reached 1930 eth in total volume, 1.55eth floor price, and 3% listed.
The decentralized artist community behind the project blends an eclectic and multicultural mix of 3D artists from India, Russia, Jordan, and France… The project team has experience working with film production companies such as Disney, newspapers, video game developers, sculptors, digital art, and other NFT projects.
Yexi Lv
A new virtual idol named Liu Yexi debuted on Douyin, the Chinese version of TikTok, the figure defined as a “virtual beauty vlogger” by its creators has earned more than 2.8 million followers on her debut video. Liu is considered to be one of the highest-quality virtual characters available online in recent years since the video looks almost photorealistic.
Her team has precisely positioned her as a marvel-style cyberpunk heroine in the metaverse. The video containing both Chinese traditional cultural elements and science-fiction elements stunned Chinese netizens. Also, the team is adept at creating interactions with fans, including cosmetic challenges and post-credit scenes, building up continuous tractions in social media.
In all, through strong community and marketing strategies, we can identify the early supporters that can help enrich the creative content and boost consensus, and subsequently build up the ecosystem associated with the avatar.
Industry Mapping
Based on the above analysis, we believe the Avatar industry can be breakdown into three layers:
Infrastructure (3D Modeling software, Game engine)
Platform (Motion capture equipment, AI solution provider)
Application(Avatar companies)
The first two are relatively mature with years of development, the bottleneck that really prevents avatar from mass adoption yet lies in the application layer.
What we lack before building up a universal avatar IP is market consensus, innovative gameplay, and real-world use cases, which are exactly the areas that the web3 community is very good at.
Here’s a summary of the good avatar projects in web3:
a. Ready-Player-Me
RPM makes it fast and easy to create great-looking 3D avatars. Players can create a personalized avatar by simply uploading a selfie (try it out on their website) and exporting their avatar immediately to any partner experience. The avatars are fully customizable and players love sharing their unique creations across TikTok, Twitter, and Discord.
This system runs across desktop, web, and mobile, and is available to developers through a robust SDK and API.
Long-term, RPM is building the interoperable identity protocol for the open Metaverse — enabling players and developers alike to take their identity and assets with them to any 3D experience.
Team Intro
Ready player Me is incubated by Wolf 3D, the company that has built 3D scanning technology for 8 years in businesses like airports, museums, and conferences. Over the years, they aggregated a proprietary database of 20,000+ face scans captured with the company’s own hardware-based 3D scanners.
Tokenomics
There is currently no plan to issue tokens, and its business model is expected to be SaaS.
Project Update
Fundraising: Ready Player Me has raised a total of $72.6M in funding over 7 rounds. Their latest funding was raised on Aug 23, 2022, from a Series B round led by A16z.
Integration: Over 3,000 apps across both web2 and web3 already integrate RPM, including VRChat, Spatial, Somnium Space, IGG, Pixelynx, RTFKT, and many more.
b. Lifeform
Lifeform’s core technologies include the following:
Hyper-realistic 3D avatar creation tools built with UE5. Users can create more than 10 billion avatar combinations.
SDK: Lifeform also provides developers with a corresponding SDK, providing DApp with various functions.
Avatar ID. The core of Lifeform Avatar is an NFT that can be connected to the wallet, serving as a 3D virtual identity for users to enter different metaverses.
How does avatar ID work: Generate avatar — Live to earn in Lifeform ecosystem-generate on-chain behavioral data — claim Poaps and SBTs
Users can also log in with accounts or emails, and use 3D virtual identities in Google Meet, Zoom, Discord, Tiktok, and other apps.
Team Intro
The founder Brian Hirsh is a multi-time entrepreneur who once created a Saas company; it is also worth mentioning that the 3D modeler has participated in the modeling of multiple characters in Marvel movies.
Tokenomics
Lifeform has clear plans for tokenomics and ecosystem development. The token has a hard cap of 1 billion, which is mainly divided into two parts: points and tokens. Tokens can be used to generate avatars, stake liquidity, and more. Points are mainly used for sub-projects within the ecosystem and can be obtained through token staking.
Project Update
Lifeform is invested by Binance labs, and it is also one of the star projects of Korea Blockchain Week. They recently launched a joint airdrop with Binance released a joint airdrop event (click here to participate), avatar NFT owner reached 130k+
2. The Lifeform incubation team successfully launched HALO NFT in May, and the response has been great. Halo NFT holders will be able to use their characters in the Lifeform ecosystem.
Ecosystem:
Lifeform will release their first Live-to-earn game
Attract game partners to develop more games, creating an interoperable gaming metaverse.
Integration with metaverses: e.g. Lifeform SDK has successfully connected to Burger Cities, users can easily bind Avatar with a wallet address, and log in to Burger Metaverse with Lifeform Avatar.
c. Genies
Digital avatar startup Genies is known for partnerships with celebrities such as Justin Bieber, Migos, and Cardi B.
(Genies 3D celebrity avatars -Cardi B, Rhianna, Justin Bieber)
Not only does this app provide a user interface to create avatars, but they have also teamed up with different brands to offer digital assets. Users of this app can customize their avatars with accessories and sell them as NFTs.
(Genies platform showcasing a fashion collection designed by creator Ian Charms.)
Tokenomics
Genies is more of a web2.5 project where people can buy and trade digital assets with fiat and credit card. There’s no clear plan for issuing tokens in the near future. Mainly the team profits from the 5% transaction fees for its NFT marketplace.
Project Update
On April 12, 2022, Genies raised a $150 million Series C round led by Silver Lake
Genies partnered with Universal Music Group and Warner Music Group and launched its own NFT marketplace, The Warehouse, to produce Avatar and digital wearable NFT products for its artists.
Genies will release a new line of virtual eco-DIY tools that users can use to DIY their closet \ and change the color, pattern, and texture of any item. DIY is available for both creations made from scratch in Genies Studio and other creator items purchased from Warehouse.
AIGC & Metaverse
One success factor for avatar economy is the interesting gameplay associated with that character. To that end, Ai-generated content can be largely adapted to the metaverse to present more colorful gameplay.
We may be interacting with AIGC in our daily lives. This can include things like chatbots, automated response systems, and even some forms of content generation for NPCs. The value of AI-generated content will vary depending on the application and how well it is executed. Some use cases include:
a. AI can be used to create images & 3D avatars & NFT
Lensa: users only need to upload 10 to 20 pictures with clear faces, and dozens of AI avatars with 10+ unique styles can be automatically generated based on Stable Diffusion models. These avatars are rich in types, such as sci-fi, animation oil painting, etc. In the future, we may be able to generate 3D avatars or NFTs in the same way.
b. AI can be used to create non-player characters (NPCs)
Red Dead Redemption: NPCs who travel between towns as tourists on horseback or in a carriage with a certain purpose are driven by AI.
c. AI can be used to create and manage the environment (physics, lighting, and weather)
Microsoft Flight Simulator: in this game, Microsoft partnered with blackshark.ai and trained an AI to create the entire planet Earth (all 197 million square miles).
In general, AI-generated content has the potential to be very valuable as it can save time and money while still providing high-quality content. However, there are also many people who believe that AI-generated content will never be able to replace human artwork because it lacks the creativity and emotional connection that only humans can create.
In terms of the related projects, most of it is still at a very early stage(even at the conception), still there are some interesting projects that are trying to build AIGC products in web3:
Future Outlook
Living in the Metaverse
With the development of VR/AR/AI infrastructure, We believe that in the future, humans will spend more time truly experiencing living in interoperable metaverses, and the player avatar is very likely to be the most important asset.
From direct-to-consumer(D2C) to direct-to-avatar(D2A)
Avatars could help brands to better connect with digital natives and Generation Z consumers, who are often more comfortable interacting with digital avatars than with real-life people. This shift in focus from traditional marketing methods to Avatar-based marketing may provide better engagement with potential customers, as well as provide a more immersive experience that can lead to improved conversion rates. Examples: Gucci, Nike, LVHM.
AI & Humans coexist in the metaverse
The proliferation of virtual beings and the growth of the metaverse will have a profound impact on humanity. As we become more and more comfortable interacting with virtual entities, the line between humans and machines will become increasingly blurred. It may take some time for us to get used to living and interacting with AI on a regular basis, but there are already examples of this happening in the real world.
In the game world of Second Life, for example, there are entire communities made up of players who have created avatars that look and act like real people. There are also a growing number of businesses that are using AI-powered chatbots to talk to customers.
The proliferation of closed networks with known members and personal relationships
Low-level interactions (i.e. interactions that require low levels of social and emotional intelligence) will be outsourced to AI. The number of people who interact with AI systems, and the number of interactions with AI systems, will rise sharply. People will counterbalance this with a need for personal relationships and safe spaces that ensure human-to-human interactions.
3D interoperable DID is the next wave of innovation
The value of 3D visual identities will rise. Although the competition in this space is fierce, we believe that only the teams that can gain mass adaption are those who are good at building ecosystems and communities. The value of a 3D avatar should span far beyond its fancy appearance, but has real utility and market consensus.
Reference
https://metaverseinsider.tech/2022/07/16/metaverse-avatars/#What_Is_A_Metaverse_Avatar
https://hbr.org/2006/06/avatar-based-marketing
https://mastersofmedia.hum.uva.nl/blog/2021/10/29/real-money-on-virtual-items-a-visual-analysis-of-fortnite-skins/
https://hbr.org/2006/06/avatar-based-marketing
https://www.ncbi.nlm.nih.gov/pmc/articles/PMC4559151/
https://a16z.com/2022/11/17/the-generative-ai-revolution-in-games/
https://medium.com/nico-s-ideas/an-avatar-and-a-digital-identity-may-be-the-first-step-towards-being-immortal-d2bd8a22cd2
https://virtualworlds.substack.com/p/the-future-is-now-the-ai-gaming-revolution?sd=pf
About Foresight Ventures
Foresight Ventures is dedicated to backing the disruptive innovation of blockchain for the next few decades. We manage multiple funds: a VC fund, an actively-managed secondary fund, a multi-strategy FOF, and a private market secondary fund, with AUM exceeding $400 million. Foresight Ventures adheres to the belief of “Unique, Independent, Aggressive, Long-Term mindset” and provides extensive support for portfolio companies within a growing ecosystem. Our team is composed of veterans from top financial and technology companies like Sequoia Capital, CICC, Google, Bitmain, and many others.
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