CHAPTER 6

Blockchain Case Studies

Blockchain technology has a wide range of applications and, as a result, offers benefits in numerous industries (Figure 6.1). Let’s look at how blockchain can improve various industries and sectors, including finance, cybersecurity, shipping, and even the metaverse.

Blockchain in Finance

Blockchain technology will eventually completely change financial services as we know them today, bringing about greater efficiency and transparency. One area where blockchain will undoubtedly change things significantly is capital markets.

All those involved in capital markets will benefit from blockchain solutions, including issuers, fund managers, investors, and regulators. Let’s look at some of the benefits the different categories of market participants will enjoy.

Issuers

Blockchain will make it easier, faster, and cheaper for issuers to access capital, thanks to programmable digital securities and assets. They will be able to issue new securities in a few minutes, and the associated rights and obligations will be encoded and automated.

Thus, issuers and those who facilitate new issues will be able to accelerate the speed at which they obtain funding, resulting in cheaper and faster growth, along with increased profitability.

Since issuers will be able to program the terms and conditions into the assets they are issuing, these assets will be far more flexible and customizable. Blockchain will also increase transparency and efficiency because investors will be able to access real-time updates via a single interface.

Figure 6.1 Applications of blockchain

Another advantage of blockchain is that issuers will be able to fractionalize each asset. Breaking the asset down into units that are more affordable and easier to transfer means that issuers will be able to enjoy a more diverse investor base and greater liquidity.

The lower barrier to entry also means that smaller issuers will have more opportunities. Furthermore, current issuers will also be able to profit because they’ll access new markets and new types of securities.

Fund Managers

At its core, blockchain makes it possible for people to trade assets while ensuring the transaction is registered on a verifiable ledger. In other words, systemic risks and those of defaulting are reduced significantly because funds are more quickly and transparently settled and cleared.

As the transactions will be processed faster, fund managers will have more available capital instead of having it tied up in various transactions. They will, therefore, be able to use and allocate said capital more efficiently.

Funds will also benefit from reduced costs as their operations become more efficient due to simplifying various processes and functions such as accounting, administration, fund servicing, and allocations.

Furthermore, we will likely see a wide range of new financial instruments and products based on blockchain technology. Thus, funds will be able to further diversify their portfolios with novel assets.

Even though many more financial products will be on the market, their structure will be simpler because they will feature specific programmed standards.

Additionally, the ability to issue digital assets and split existing assets into multiple units will provide funds with a broad investor base. This is especially beneficial as younger investors are more likely to invest in digital assets.

Investors

Investors will benefit significantly from blockchain technology because it will provide a level of flexibility no investor has ever seen before. Issuers will be able to issue new securities faster and at a lower cost, which means they’ll be able to customize new instruments to the needs and desires of each investor.

As issuers will be able to create investment vehicles that match investors’ risk appetite, time horizon, and desire for return, the relationship between investor and issuer will change significantly and become far stronger, creating a bond that hasn’t been seen before.

Investors want to make as much money as possible with as little risk as possible. A large contributor to risk is limited liquidity. However, the new financial instruments and digital assets will be programmable and, therefore, carry a lower transaction cost, which will increase their potential liquidity and enable investors to manage their risk better. In conjunction with better connectivity and higher efficiency in capital markets, investors will benefit from a higher degree of liquidity and a lower cost of capital.

The blockchain ledger will also provide investors with better insights into the quality of an asset, making it easier for them to do their due diligence and reducing investment risk.

Regulators

Regulators are often stuck between a rock and a hard place. They’re either criticized for getting too involved in capital markets or not acting quickly enough to prevent disasters, as was the case with the 2008 Global Financial Crash.

With blockchain, though, regulatory organizations and agencies will automate a wide range of functions, including compliance and auditing. In addition, since multiple institutions will use the same network to monitor the asset life cycle and their portfolios, regulators will spend more time analyzing and predicting risk instead of trying to figure out the systems each company uses and how they represent their transactions.

Blockchain will also make it possible to minimize any friction that currently arises in labor and time-intensive processes regulators must deal with, thereby streamlining these regulatory and legal processes. Overhead costs will also drop as a result, and it might even be possible to prevent certain types of systemic risk.

A Quick Look at How Blockchain Can Be Used in Capital Markets

Let’s look at some use cases of blockchain technology in capital markets.

Issuance

Issuance is the process of creating securities or other investment instruments that are sold to investors to raise capital. Some of the ways blockchains can help include:

• Creating digital representations of existing assets and completely new digital assets.

• Customizing and streamlining securitization of securities and financial instruments.

• Enabling new business models like decentralized crowdfunding to raise capital more efficiently.

Sales and Trading

Sales and trading are essential functions of investment banks and refer to purchasing and selling various financial instruments, including securities. Blockchain makes it easier to bring digital securities to market by employing various mechanisms, including:

• Bilateral negotiations

• Centralized exchanges

• Decentralized exchanges

• Matching algorithms

• Auctions

Blockchain offers a wide range of new opportunities, including creating new digital financial instruments tailored to investor needs.

Collateral Management

The current processes used for collateral management are highly inefficient and slow due to the need for manual reconciliation and the physical delivery of the financial instruments. This limits the ability to react to quickly changing market conditions.

There’s also the problem of siloed information, making it virtually impossible to get a high-level overview of collateral assets.

Blockchain streamlines collateral management processes by digitizing the holdings and registering them in a single and optimized location. Furthermore, smart contracts can improve precision by automating margin calls while invoking preset rules for every relationship.

Exchanges

Blockchain can streamline exchange operations for a wide range of the functions they perform. This technology will help reduce trading fees while also ensuring quicker clearing and settlement, leading to lower overheads and improved processes.

The transparent ledger can also help exchanges when it comes to verifying data and access rights. Furthermore, it could even act as a robust warning system regarding trading activity.

Clearing and Settlement

Clearing refers to updating accounts and preparing to transfer securities and money, while settlement refers to actually completing the exchange.

Entities can program smart contracts to match transfers and payments via off-chain cash payments, stablecoins, or cryptocurrencies. In terms of settlement, a variety of models can be used for matching that consider the market’s liquidity needs as well as risk tolerance. Such models include deferred settlement, atomic settlement, and deferred net settlement.

Blockchain Applications in Supply Chains

Supply chains have become increasingly complex and, in many cases, global, which means that their management involves various demanding processes. Moreover, all these processes need to be perfectly orchestrated and synchronized as they involve numerous actors and have many moving parts.

As a result, the connections required to distribute goods and services have evolved from a chain to resemble a web. The problem is that when these processes grow to include multiple stages and a wide range of agents spanning numerous countries, transparency tends to decline. As more people become part of the process, complexity increases, as do the challenges.

Blockchain technology can benefit all the main parts that an active supply chain consists of, namely:

• Development sourcing

• Production logistics

• Information systems management

• Coordination

Supply chain management also includes other essential fields, such as logistics, shipping, freight, trucking, and other cargo transport forms. And blockchain can benefit any area where systems need to be streamlined in multiple ways.

Companies can significantly improve overly complex and sluggish supply chains, thanks to blockchain. The end-to-end decentralized processes offered by blockchain-based supply chain solutions have led to industries changing the way they do business.

Massive companies such as IBM have become aware of what blockchain can do for managing supply chains and, as a result, have already started work on solutions to help.

In some cases, the technology has already been implemented. As a result, experts feel that blockchain stands a good chance of becoming a “universal operating system” for supply chain management, a bit like Windows or iOS for PCs and Macs, respectively.

Blockchain could streamline such tasks as:

• Registering the quantity of assets and their transfer as they move between the different points in the supply chain.

• Tracking all trade-related documents, including purchase and change orders, receipts, and shipment notifications.

• Assigning or validating the properties or certifications of various products, such as establishing whether food is fair trade or organic.

• Associating serial numbers, digital tags, bar codes, and the like to physical goods.

• Providing suppliers and vendors with all the information they need regarding manufacturing processes, assembly, delivery, and product maintenance.

Thanks to blockchain, companies involved in the supply chain will enjoy benefits such as:

• Improved transparency as the product’s journey throughout the supply chain will be documented every step of the way, thereby revealing the real origin. This will help improve trust and reduce the current bias that supply chains suffer from.

• Increased scalability because it is possible to have almost any number of users accessing the network from an unlimited number of touchpoints.

• Improved security, thanks to a shared ledger that cannot be modified unilaterally and features codified rules, which could result in the reduction or elimination of process and system audits.

Introducing TradeLens From Maersk and IBM

Maersk and IBM teamed up and created TradeLens, which is a blockchain-based shipping solution (“TradeLens | Digitizing Global Supply Chains” n.d.). The goal is to improve the efficiency and security of global trade while encouraging innovation in the industry by bringing parties together to support sharing of information and improving transparency.

As of this writing, the two companies had already announced that 94 organizations were actively involved or had agreed to participate in the open-standard platform. Thus, the TradeLens platform already included many participants, including port and terminal operators, global container carriers, customs authorities, cargo owners, and more.

Relying on IBM blockchain technology, TradeLens helps improve collaboration between multiple trading partners by ensuring everyone has access to a single, shared view of a particular transaction without giving away private and confidential information.

As a result, shippers, shipping companies, freight forwarders, port and terminal operators, inland transport firms, and customs authorities can improve the efficiency of their interactions because they have access to shipping data and documents in real time, including sensor and IoT information.

Thanks to smart contracts, TradeLens makes it possible for the different parties involved in international trade to collaborate easily and effectively.

The platform also comes with a trade document module named ClearWay. This module allows the collaboration of importers/exporters, customs brokers, customs authorities, other government agencies, and NGOs in various processes and information sharing. As expected with blockchain, all these collaborations are supported by a secure audit trail that can’t be challenged.

The TradeLens platform will reduce obstacles impeding global trade while also making international supply chains more efficient. It will make a containerized shipping trade platform available, which means that the whole supply chain environment will be connected.

Supported by blockchain technology and developed on an open technology stack, the platform will deal with issues such as lack of visibility and documentation problems.

Essentially, it ensures that all the parties involved in a global shipping transaction will be able to see the entire supply chain from start to finish and easily and securely access data pertinent to these transactions in real time.

It will also improve efficiencies, thanks to the digitization and automation of paperwork. End users will be able to securely submit, stamp, and approve documents beyond organizational and national borders.

Blockchain in KYC, Notarization, and Certificates

Blockchain and distributed ledger technology will also eliminate the likelihood of fraudulent activity or errors regarding the authenticity of legal documentation and its content. Certificates and other legal documents can be issued and verified on a public or private ledger, providing a verifiable trail.

Currently, most industries verify this information manually via paper documents. Unfortunately, this is a time-intensive and resource-heavy process.

So, how would this work with blockchain?

First, the signature or fingerprint of the document would have to be issued on the blockchain. This would mean converting the records into a digital file, such as a pdf that one could also attach metadata to.

Subsequently, the digital document’s data would be used, and special algorithms would be applied to create a unique signature. Hash functions (special mathematical functions) are usually used to derive these signatures. They act as a unique identifier, akin to a bar or QR code, but only applicable to that document.

The signature is then registered on the blockchain by connecting the signature to an action or transaction on the ledger.

Of course, if one takes advantage of decentralized storage systems like IPFS, the complete certificate can be uploaded, providing another layer of authentication.

Next, the content can be verified using blockchain technology.

This means determining the document’s unique signature via the algorithm the issuer used to create the signature. Then, one would use the issuer’s application to search for the signature on the blockchain. If the two signatures match, the certificate is valid.

DNV: A Case Study

Many companies are attempting to create solutions that will automate issuing and verifying paper documents (“DNV.Com—When Trust Matters” n.d.). DNV relies on a blockchain-based solution that relies on QR code technology to issue and validate supply-chain certificates.

With DNV, the certificates are stored on a private or permissioned blockchain network. This means that only DNV (the issuers) can create new certificates or change the data. They can also take advantage of the technology’s other benefits, such as decentralization, encryption, and authentication.

While only DNV can update the data, everyone has access to the blockchain to verify and authenticate certificates.

How Does It Work?

When the company issues a certificate, they digitize the data, and each certificate is assigned a digital identity. As such, all certificates are traceable and have been tagged, with the original stored safely on the nodes that make up the blockchain.

In parallel, the data the certificate contains is managed in the company’s production system. The end result is an immutable transaction that is secure and transparent. This makes it easy to discover fraud because the blockchain will quickly show if any certificates are outdated or forgeries.

To check authenticity, all certificates feature embedded QR codes that can be scanned by any device that has a QR scanner. A search is conducted on the blockchain, and the certificate details will be shown. Thus, anyone can check the claims of a company and the validity of the certificate.

DNV also has a public certificate checker that can be used to check the validity of a certificate.

Hanseaticsoft: Another Case Study

Hanseaticsoft is a consortium that is developing a seafarer certification system based on blockchain technology (“Cloud Fleet Manager by Hanseaticsoft” n.d.). The goal is to streamline and speed up various processes encumbered by current certificate management systems that are all paper-based, the absence of safety document verification, and no access to validate the training and safety certification of seafarers.

All the aforementioned can cause many problems for ship operators, regulatory and port authorities, and crew management agencies in securing and insuring crew members.

The consortium has brought together a wide array of stakeholders who support or rely on crew certification, including shipping companies such as Maersk, Heidmar, and PTC Holdings Crop.

Other tech enablers with certification expertise are also involved, such as providers of maritime platforms like Navozyme and C-LOG.

The project will focus on demonstrating the effectiveness of using a digital certification and endorsement process that will rely on a digital repository to store and authenticate verified documentation and training logs and an approval system.

Essentially, the system would allow individual seafarers to manage certificates when they are originally issued. It will also make it easier for maritime administrations to manage cross-jurisdiction renewal and endorsement. At the same time, crew management firms will be better able to keep track of seafarers to crew vessels. Finally, ship owners will be able to access an overview of their crew, along with their certifications and endorsements.

Blockchain in Shipping

While we discussed how blockchain could improve supply chains earlier, let’s look more closely at how it can help the shipping industry.

IoT and Blockchain in the Shipping Industry

IoT refers to everyday objects that can connect to each other and beyond using the Internet, which allows them to send and receive data. For example, think of a smart refrigerator that can connect to the Internet and order groceries you are low on.

IoT is quite prevalent in shipping because companies deploy sensors on ships, cargo, and containers to track their status for a variety of data processing purposes such as optimizing fuel consumption, improving craft and cargo data management, improving predictive maintenance, reducing emissions, and much more.

Adding blockchain to the IoT mix provides a verifiable, permanent, and secure way of recording the data these smart devices process. The blockchain guarantees that all the data in the ledger has been verified by the network’s peers and fulfilled all the necessary conditions.

The quality of the data is essential when it comes to data analytics. As the saying goes, garbage in, garbage out, regardless of how advanced and sophisticated the algorithms to analyze the data are.

A blockchain-based network of these interconnected devices will be able to interact with the world around them and make decisions without the need for human involvement, which will increase efficiency, lower costs, and, as a result, improve overheads.

Digitizing Paper-Based Processes

Despite being in the so-called digital age, shipping transactions still involve ridiculous amounts of paperwork, from sales contracts and charter party agreements to bills of lading and letter of credit. The list is endless.

While all this paperwork is a necessary evil, the problem is that it results in cumbersome operations because many of the stakeholders involved rely on the generation, authorization, and distribution of a large volume of paper documents. All these documents must be passed along a chain of numerous parties, with each having to take some form of action, such as initiation of payment, collection and delivery of cargo, and so on.

With blockchain technology, all these paper-based operations could be eliminated. All the actors involved in the transaction could rely on blockchain and smart contract technology to remain in contact, carry out physical transactions, store and share encrypted information, carry out their contractual obligations, issue and receive instructions, and make secure payments.

Traceability of Valuable Items

Combining blockchain and tagging technology means that products can be tracked throughout the supply chain, from their origin to their final destination. Not only will this increase consumer trust, but it will also make it easier to achieve law and standard compliance.

Some would argue that tracing products throughout their journey is one of the most powerful and logical applications of blockchain technology.

With blockchain, there is only truth. Everyone has access to immutable records that track items from creation to distribution, which can be extremely beneficial for high-value products such as electronics, designer goods, pharmaceuticals, and more.

Reducing and Authenticating Counterfeit Products

Blockchain’s transparency will streamline processes in the shipping world by allowing companies to monitor cargo capacity in real time, thereby addressing potential supply chain bottlenecks before they occur.

However, it’s also a technology that might help with the problem of counterfeiting, which is becoming more and more prevalent. Not only does counterfeiting cost companies billions of dollars every year, but it also damages their brands.

Blockchain will make it much harder for counterfeit goods to enter the supply chain by allowing the traceability of goods from their origin to the end user.

Raising Capital Through Tokenization

Tokenization can be used to finance shipping companies, providing the industry with a greater level of liquidity. However, it should be noted that tokenization in the shipping industry will require an effective regulatory and legal framework in the country where it will launch.

A Look at Some Blockchain Applications in the Shipping and Logistics Sector

In this section, we’ll take a quick look at some of the applications that have been or are being developed for the shipping and logistics industry.

ShipChain

ShipChain with the associated SHIP token is a project that intends to create a completely integrated system from one end of the supply chain to the other. Therefore, it will cover everything from the moment the cargo leaves the manufacturer to when it reaches the customer. It is supported by transparent blockchain contracts and is federated in trustless.

At first, this product will mainly focus on container ships and will attempt to develop:

• End-to-end tracking and tracing to replace the current poor systems.

• Rewards for transporting efficiently to improve responsibility.

• Increased transparency by enabling direct contact between charterers and carriers.

• Better visibility as all documentation will be available on the blockchain network.

CargoX

CargoX, with the associated COX token, intends to be an independent supplier of blockchain-based bills of lading (B/Ls). These B/Ls will completely change the face of international trade and shipping because, rather than waiting for days or weeks for the B/L to go through the banks to get to the receiver, everyone will be able to access them using a specific cryptographic key.

It will also help reduce fraud, improve safety, lower costs, and increase reliability.

IMMLA

IMMLA, with the associated IML token, is an Ethereum-based logistics app focused on multimodal transportation. The goal is to allow carriers and cargo owners to interact directly at every stage of the multimodal transport chain.

Essentially, IMMLA will act as a freight manager using the entire carriage chain. As you might expect, cargo owners will be able to benefit from multimodal transport that’s far more efficient and cost-effective, thanks to this platform.

iXledger

iXledger and its associated IXT token is not a dedicated shipping app. Instead, it’s the first blockchain-supported marketplace to trade and manage insurance products, including marine insurance.

With this marketplace, shipping companies will have a lot more options not only in terms of insurance but also quicker access to the policies they need. IXT tokens will be the currency used to cover the cost of both the insurance services and transaction fees on the platform.

Shipowner.io

Shipowner.io, with the associated SHIP token, intends to be the first blockchain-supported platform that will provide the shipping industry with options to finance assets. The goal is to break up the current consolidation of financiers by giving shipping companies access to a greater pool of potential investors.

The SHIP token will provide access to the platform, and people will be able to invest as little as a few dollars in a ship, though it will all be done transparently. In essence, it is a form of crowdfunding for ships.

Fr8

Fr8, with its associated Fr8 token, uses smart contracts to enable carriers and shippers the easy coordination of freight. This marketplace aims to reduce the level of inefficiency in the freight market, namely the fact that demand seems to exceed supply, yet there are a lot of empty trucks traveling the roads.

The Fr8 platform also claims that it makes tracking easier and more efficient. It can also provide proof of delivery that’s recorded in a block-chain network and can’t be altered and offer settlement services, thereby reducing the carrier’s credit risk.

Blockchain in Cybersecurity

Probably the most well-known blockchain-based application globally, the Bitcoin network is made up of thousands (if not tens of thousands) of computers known as nodes. Individuals or groups operate these computers across the world. This decentralized network based on blockchain is immutable, meaning that the data transactions cannot be reversed.

Blockchain’s decentralization makes it perfect for cybersecurity. It ensures the integrity of the data, automates the storage, and offers complete transparency. So let’s explore how blockchain can help with cybersecurity.

Cybersecurity: A Snapshot of Now and the Future

Every day, the amount of data we generate increases by leaps and bounds. As technology progresses and becomes more sophisticated, especially in terms of security, bad actors are coming up with new approaches and robust technology to carry out their nefarious activities.

This has led to some frightening cybersecurity statistics. For example, 95 percent of data breaches are the result of human error. In the first six months of 2020 alone, over 35 billion records were exposed by data breaches. Of these, 45 percent were the result of hacking, 22 percent of phishing, while 17 percent were caused by malware (IBM 2021).

Overall, cybercrime caused damages of approximately $6 trillion in 2021, with ransomware alone costing businesses more than $75 billion per year.

Clearly, the situation is escalating and will continue to get worse. As 5G networks expand, download speeds will spike, which will only give hackers more opportunities to discover security problems. The ability to download faster will also result in even greater cybercrimes.

The increased appetite for IoT on a commercial level means that companies are developing all sorts of applications, including devices for smart homes. Unfortunately, this means that bad actors can take advantage of inefficient security features, where blockchain technology can help.

Furthermore, people are turning to an increasing number of social media platforms to connect with others worldwide. The passwords used to protect these accounts are often weak, which means hackers can access the huge quantity of metadata generated by social media activity.

Blockchain technology can help by developing standard security protocols because it’s more effective than end-to-end encryption. It can also boost private messaging security by creating a unified API framework that will allow people to communicate across various messenger apps.

With less-than-stellar security features, edge devices, such as smart switches, have allowed hackers to get into smart homes and other systems. Blockchain technology can secure both individual devices and overall systems by ensuring their administration is decentralized.

Decentralizing things like Domain Name System (DNS) entries means that blockchain can be used to avert Distributed Denial of Service (DDoS) attacks.

The problem is that if we keep centralizing stored data, the risk of exposure increases because all it takes is one vulnerability that a hacker can exploit.

Conversely, taking a decentralized approach via blockchain technology will make it unfeasible for bad actors to penetrate data storage systems.

Blockchain technology can also be used to validate and verify activities such as patching, installations, and updating firmware. It can also protect against unauthorized access of data during transit through encryption.

Blockchain and File Sharing

Decentralized file sharing represents a file storage method that employs multiple network nodes instead of a single central server.

The centralized approach to file sharing is problematic because the Internet has grown into a massive and complicated web of files and information that connect via the Hypertext Transfer Protocol (HTTP). The increase in Internet traffic means that the amount of data now being transmitted is colossal, and the currently used protocol is not dealing with it well.

For example, every time you visit your favorite news site and load a page, your computer uses HTTP to get the content from a centralized server. However, if the server needs to send over a massive file, it could use up a lot of bandwidth.

Furthermore, if the server goes offline for whatever reason, the website might be there, but some things could be missing. It also makes it easier to censor information when all the data is stored in a central location.

One solution that has appeared is decentralized file sharing. One example of this approach that you might be familiar with is torrenting, which is a way to distribute very large files via the Internet without using HTTP.

However, the existing solutions aren’t perfect because volunteers generally operate the nodes. In other words, they do it for free and when they can. And they can stop operating the note whenever they like, meaning that there is little guarantee there will be sufficient nodes to host all these files.

Blockchain technology could help create a robust file-sharing network where people have a reason to keep their node active because they’ll be rewarded for it. Implementing a reward scheme that offers tokens will ensure that the network has sufficient nodes to keep running.

How Does It Work?

When you get your files from a centralized server, you are using a client–server model. In other words, you are the client, and you ask for what you want by typing in the URL, which points to an IP address based on where the server is that’s storing the data. The server then uses HTTP to deliver what you asked for.

Conversely, with a decentralized file-sharing system, you’ll be using a peer-to-peer (P2P) sharing system. In this case, files aren’t stored just on one server. Instead, they are stored on multiple nodes in the network. In addition, each file or file fragment has a unique cryptographic hash, which means that all versions of the file are tracked across the network.

When the user asks for the data in question, the network will locate the nodes that have the files with that unique hash and then deliver the files.

What Are the Advantages of Decentralized File Sharing?

With blockchain, the files are distributed across multiple computers. When combined with hash addresses, the content will always be available, but it is unchangeable. In other words, even if one computer drops out of the equation, it won’t interrupt service because the other nodes will take over and deliver a duplicate of the file.

When you access data from a centralized server via HTTP, the service tends to be a bit slower. Conversely, far less bandwidth will be used with the decentralized approach because the files are distributed across multiple channels.

With blockchain, censorship is also far less likely. Normally, a government can demand that the Internet service providers in a country block access to a service or website by refusing access to that particular IP address. However, when the data of a website is stored on multiple nodes across a network, one cannot block it.

Blockchain and the Metaverse

The metaverse is coming. Some say it will be here in 10 years; others believe it will be far sooner. And blockchain will be able to significantly improve many of the associated projects.

But what is the metaverse?

Essentially, the metaverse is a virtual environment consisting of different worlds allowing you to access a variety of apps and services. These would be individual spaces based on application and use case.

What’s interesting to note is that many people don’t think the metaverse has a future. However, its quick progress proves that these opinions might not be warranted. New projects are springing up every day and connecting with one another to create bridges between all the aspects of people’s online lives.

However, blockchain will be crucial to the continued successful development of the metaverse. But how?

Well, at the moment, most of the projects being developed for the metaverse are essentially games that provide the 3D view of this new virtual ecosystem. However, we’ll need many more components to truly build a robust environment that will work as intended.

Blockchain (or crypto) will help expand on functionalities, thereby assisting the metaverse in becoming everything it can be. Here are some ways that can happen:

Proof of Ownership

With blockchain, providing proof that you own assets in the metaverse will no longer be a problem. You can have a crypto wallet, and the associated private keys can prove that you own specific assets or activities. Therefore, a crypto project in the metaverse could have a strong and very secure methodology of proving ownership and verifying your digital identity.

Value Transfer

Another critical aspect to making the metaverse successful is the ability to conduct a value transfer. In other words, if you want to sell something, you have to be able to transfer the “object” and receive payment, which also represents a transfer.

So, people will need a safe and trusted way to transfer value. For example, crypto is a safer alternative than a multiplayer game’s currency on the blockchain. Therefore, crypto could be a good currency for people who want to spend a long time in the metaverse.

Interoperability

A key aspect when it comes to the feasibility of projects in the metaverse is interoperability, which blockchain can facilitate. This technology can ensure that the metaverse’s different worlds and spaces are compatible with each other and work seamlessly.

For example, projects such as Polkadot and Avalanche allow you to develop custom blockchain networks that can work with each other.

Governance

The metaverse is meant to be a virtual representation of the real world, which means we will need rules. However, thanks to blockchain, we can have fair and transparent governance in the metaverse, which is not something we see in the real world.

Establishing Uniqueness of Collectible Items

Another essential aspect of metaverse projects is digital collection. For an item to be collectible, it must be unique and original, which means you must prove that the asset you own meets these criteria. Blockchain technology makes it easy to provide proof via NFTs, which means completely unique assets can be created.

Furthermore, blockchain technology can be used to create digital representations of physical assets to, once again, provide proof of ownership, originality, and uniqueness.

Examples of Metaverse Projects

Let’s take a quick look at some metaverse projects.

Decentraland

Decentraland can be called a 3D universe where players can build up plots of digital real estate. They can participate in a whole range of activities, including hosting events, engaging in other social endeavors, and creating content.

This simple 2D game has become a highly popular project, with NFTs valued in the hundreds of thousands of dollars.

Bloktopia

Another interesting project is Bloktopia, which is essentially a virtual reality game where one joins an environment that mimics a skyscraper. With 21 floors representing the maximum Bitcoin supply, the project means to provide people with a place to socialize, work, hold events, and engage in a variety of other activities in the metaverse.

Blockchain enables four main functionalities in Bloktopia: earning, creating, playing, and learning. It has its own native token (BLOK). Bloktopia also allows advertising via Adblok and facilitates real estate via Reblok. Users can also create their games or play games other users have created.

Sandbox

The Sandbox is a blockchain game that allows people to discover a virtual world. It includes NFTs, environments created by users, and all sorts of other content.

This project has grown into a complex environment that relies on Ether and its native token (SAND) to run the game’s economy.

Players have the option of creating a digital avatar and identity to which they can connect a crypto wallet to manage their SAND tokens, NFTs, and other assets. Players can also create virtual items and games.

NFT Projects

Bored Ape Yacht Club

Bored Ape Yacht Club is a collection of NFTs made up of cartoon apes created by an algorithm that used 170 different traits, from expressions to clothing to added items. There are 10,000 of these cartoon apes in the collection. It is a project built on the Ethereum blockchain, so Ether is used to purchase Bored Ape NFTs.

Bored Ape Yacht Club is owned by Yuga labs and launched in 2021. Buying and owning a Bored Ape NFT gives you intellectual property rights over the image. In other words, you become the owner of the original cartoon ape artwork. This ownership is recorded on the blockchain. Ownership of a Bored Ape NFT means you also become a member of a private online club.

Sales since its launch are in excess of U.S. $1 billion. In fact, Bored Ape Yacht Club is an NFT project that has set new standards, becoming the highest priced NFTs on the market and leading the NFT sales charts for much of the first quarter of 2022.

The average purchase price of a Bored Ape NFT is hundreds of thousands of dollars, with many of them owned by celebrities. Snoop Dogg, Eminem, Paris Hilton, Serena Williams, and Jimmy Fallon are among the Bored Ape NFT celebrity owners. The company Adidas also owns a Bored Ape NFT.

The price for a Bored Ape NFT varies, often depending on how rare it is. For example, there are only 26 Bored Ape NFTs where the cartoon ape is depicted with a slice of pizza hanging out of its mouth.

It hasn’t all been smooth sailing for the Bored Ape Yacht Club, though. The designs have come in for criticism in some quarters, and it has suffered cyberattacks, including a hack on its Discord chat channel.

Despite the challenges, all 10,000 Bored Ape NFTs sold out. They are now traded on OpenSea, the NFT marketplace.

The success of the Bored Ape Yacht is often put down to the fact that owners of Bored Ape NFTs can use the image however they want, including to make money or as a digital identity. The high price tags for Bored Ape NFTs also make them a status symbol, increasing their appeal.

Cryptopunks

Cryptopunks is an NFT project that is similar to the Bored Ape Yacht Club, as it is also a collection of NFTs built on the Ethereum blockchain. It predates Bored Ape, however, as it was launched in 2017. It was launched by Larva Labs, but Cryptopunks is now owned by Yuga Labs, the people behind Bored Ape Yacht Club.

The concept of Cryptopunks is based on the punk scene in London, with further inspiration taken from music from artists like Daft Punk. There are 10,000 Cryptopunks in the collection, about two-thirds of which are male and the rest female. Like Bored Ape NFTs, Cryptopunks NFTs were created by an algorithm. Those Cryptopunks with the rarest character traits are typically the most valuable. There are different character types, as well, with the rarest usually claiming the biggest price tags.

Cryptopunks is widely recognized as having sparked widespread interest in NFTs, although the original Cryptopunks NFTs were essentially given away for free. Today, they are most commonly traded on the NFT marketplace OpenSea. They don’t sell for as much as Bored Ape NFTs, but they are still in a six-figure price range.

Total sales of Cryptopunks NFTs are now over U.S. $2 billion, with some being sold at mainstream auction houses like Christies.

There are a few reasons why Cryptopunks NFTs have been popular and continue to be sought after. The fact that they are one of the oldest NFT projects is a key consideration. They were also the first to use algorithmically created images, and approach now copied by many other NFT projects, including Bored Ape Yacht Club.

The fact that each Cryptopunks NFT is unique is also a factor in their popularity. Like Bored Ape NFTs, they are used online as digital identities. When Yuga Labs acquired the Cryptopunks intellectual property, it granted all Cryptopunks owners full commercial rights over their NFTs.