Research item: Feasibility and Potential of a Blockchain-Based VR Marketplace

April 2024

Abstract

This research paper explores the feasibility and potential of a blockchain-based VR marketplace. By examining the current trends in cryptocurrency adoption, the benefits of virtual try-on technology, the market opportunity for VR, the risks and barriers to VR adoption, and the advantages of AR, VR, and 3D technologies in e-commerce, this paper aims to justify the viability of the proposed marketplace. The findings indicate significant growth potential and a range of benefits that support the development of a blockchain-based VR marketplace.

1. Introduction

The rapid advancement of VR, AR, and blockchain technologies has created new opportunities for digital marketplaces. The integration of these technologies promises to revolutionize online shopping by providing immersive and interactive experiences. This research aims to investigate whether a blockchain-based VR marketplace is a viable business idea, focusing on recent trends, market growth, and the potential benefits and challenges associated with these technologies.

This research was conducted as a comprehensive desk study of online information available until June 2024. The analysis was performed meticulously, ensuring the inclusion of the most recent and relevant data. Research questions were elaborated by a multidisciplinary team of professionals specializing in technology, IT, AI, AR, and experts from international development organizations. This collaborative effort aimed to ensure a holistic view of the subject matter, encompassing various perspectives and areas of expertise.

In addition to desk research, the team conducted a series of structured interviews involving 50 participants, nearly half of whom were female. Participants were provided with VR headsets and guided through various virtual experiences. Researchers collected detailed feedback during these sessions, focusing on user experiences, preferences, and potential challenges. This qualitative data offered valuable insights and added depth to the analysis, validating the findings and ensuring a well-rounded perspective. By combining extensive online research with first-hand user feedback, this study aims to present a comprehensive and justified argument for the feasibility and potential of a blockchain-based VR marketplace.

The following sections of the research will be structured according to the key questions of inquiry and will provide a brief overview of the findings per each question.

2. Cryptocurrency Adoption

Research Question: How has the adoption of cryptocurrency evolved in recent years, and what are the key drivers behind this growth?

According to the Crypto Market Sizing Report by Crypto.com, global cryptocurrency ownership increased by 34% in 2023, with significant growth in both Ethereum and Bitcoin users. Ethereum ownership rose by 39%, while Bitcoin users increased by 33%. By 2024, it is estimated that 6.8% of the global population, or over 560 million people, use cryptocurrencies. This surge occurred despite various global macroeconomic challenges, including conflicts in the Middle East and Europe, financial constraints imposed by central banks to combat inflation, and the lingering effects of the pandemic. The number of Bitcoin users grew from 222 million to 296 million between January and December 2023, and Ethereum users increased from 89 million to 124 million during the same period. The crypto market, although highly volatile, is a high-growth market with major companies like Coinbase Global Inc., PayPal Holdings, Inc., and CME Group Inc. making significant technological advancements.

Research Question: What are the demographics of cryptocurrency ownership, and how do these demographics impact the potential user base for a VR marketplace?

Cryptocurrency ownership has a compound annual growth rate (CAGR) of 99%, far exceeding the growth rates of traditional payment methods, which average 8% from 2018 to 2023. This growth rate also surpasses that of several payment giants such as American Express, highlighting the broad and rapidly expanding user base, which is crucial for the success of a blockchain-based VR marketplace.

Research Question: Which major companies are leading the way in cryptocurrency advancements, and how might their innovations influence a blockchain-based VR marketplace?

Major companies such as Coinbase Global Inc., PayPal Holdings, Inc., and CME Group Inc. are at the forefront of technological advancements in the cryptocurrency market. Their innovations are crucial for the stability and growth of the market, which in turn, supports the feasibility of a blockchain-based VR marketplace. However, as the research was ongoing, additional companies like VISA, BlackRock, and other financial entities are observed to gradually incorporate blockchain and cryptocurrency. This is especially influenced by the growing regulation on Bitcoin, including the recently approved ETFs. This is expected to attract even more international actors in this space, as well as ease the path for new cryptocurrency users to enter into official cross-border transactions, including in marketplaces.

3. Virtual Try-On Technology

Research Question: What are the primary benefits of virtual try-on technology for consumers and retailers, and how can it enhance the VR marketplace experience?

Virtual try-on technology allows shoppers to see how garments fit and look before buying, reducing return rates and increasing customer satisfaction and sales. The technology enables realistic mixing and matching of garments, supports both 2D and 3D virtual fitting experiences, and offers personalized avatars and mannequins for a fun and engaging shopping experience. Accurate size recommendations and fit visualization take the guesswork out of online shopping. According to data from ARtillery Intelligence, virtual try-on technology can significantly enhance the VR marketplace experience by providing a more interactive and satisfying shopping environment.

Supplementary information: How Virtual Try-On Technology Works?

Virtual try-on works by using a 3D model of the user or by taking a photo of the user and superimposing the clothes onto them. This allows the user to see how an item of clothing would look on them without having to physically try it on. To support this, 3D product models are created through several methods, including 3D scanning, photogrammetry, and 3D design. Once these models are created, a virtual space is developed where customers can interact with the products. Examples include 3D viewers, augmented reality (AR), and virtual reality (VR). For instance, a 3D viewer allows users to see products from multiple angles, while AR overlays digital imagery onto a user’s view of their immediate surroundings. VR, on the other hand, simulates the physical experience of interacting with a space or an object.

Supplementary information: Benefits of Virtual Try-On

Virtual try-on provides many benefits for both shoppers and retailers. It allows customers to see how an item looks on them without physically trying it on, saving time and hassle, especially for busy shoppers. It helps reduce the number of returns, as customers can make sure they like an item before purchasing it. This can lead to fewer items being returned. Virtual try-on can also help increase sales, as shoppers who are able to see how an item looks on them before purchasing are more likely to buy it. Additionally, it provides a more personalized shopping experience, as customers can see how an item looks on them in their personal environment, making the shopping experience more enjoyable. Overall, virtual try-on provides many benefits for both shoppers and retailers, saving time, reducing returns, increasing sales, and providing a more personalized shopping experience.

Research Question: How do KPIs such as conversion rate and reduced return rates improve with the use of virtual try-on technology?

According to Shopify, virtual try-on technology increases conversion rates, average order value, revenue, and repeat purchases while reducing return rates. It also extends the time shoppers spend on the site. These improvements in key performance indicators highlight the significant benefits of integrating virtual try-on technology into a VR marketplace.

Research Question: What role does AI play in enhancing virtual try-on experiences, and what are the technical requirements for implementing such technology in a VR marketplace?

AI is crucial for creating realistic 3D models of customers, enhancing the accuracy of the virtual try-on experience. Based on advanced computer vision and machine learning algorithms, AI provides the most realistic and trustworthy virtual try-on experience today. The technical requirements include creating 3D product models through methods like 3D scanning, photogrammetry, or 3D design, and developing a virtual space where customers can interact with these products. According to PwC, AI-driven virtual try-on experiences provide the most realistic and trustworthy interactions today.

4. Market Opportunity

Research Question: What is the current state of the VR market, and what are the future projections for its growth?

According to data provided by PwC UK, the increasing adoption of virtual reality in gaming, entertainment, and healthcare, along with the development of more advanced and affordable VR technologies, is driving the growth of the VR market. As of 2020, the VR market was valued at $6.1 billion, with significant growth expected in the coming years. By 2027, the virtual reality gaming market alone is projected to be worth $92.31 billion. These projections indicate a substantial market opportunity for a VR marketplace. The emergence of startups in the VR space is driving innovation and competition in the market, leading to the development of more advanced VR technologies and applications.

Research Question: How do VR user demographics and geographical preferences influence the potential market for a VR marketplace?

VR is most popular among individuals aged 16 to 34, with higher adoption rates in regions like China, India, and Qatar. According to GWI, North America, Europe, and Asia Pacific are the major markets for VR technology. This demographic and geographical data suggest a large and diverse potential user base for a VR marketplace, particularly in regions with high adoption rates. Specifically, 34% of VR users are aged 16 to 24, 35% are aged 25 to 34, 26% are aged 35 to 44, 12% are aged 45 to 54, and 6% are over 55 years old. This age distribution highlights the younger demographic’s significant engagement with VR technology, which is crucial for targeting the right audience in a VR marketplace.

Geographical Coverage of VR

Consumers in China, India, and Qatar are most keen on VR, and the platform seems less of a hit in Australia, Ireland, and Japan, according to GWI. Age plays a role too, with Generation Z (those born in the late 1990s) and young millennials most comfortable in the VR world. Regional analysis shows that North America, with major players like Facebook, Google, and Microsoft, dominates the VR market due to the high adoption rate of VR technology in the gaming and entertainment industries. The United States and Canada are the major contributors to the growth of the VR market in North America.

In Europe, there is a growing demand for VR in the gaming, education, and healthcare industries. The United Kingdom, Germany, and France are the major contributors to the growth of the VR market in Europe. In the Asia Pacific region, significant growth is expected due to the increasing adoption of VR technology in the gaming and entertainment industries, with China, Japan, and South Korea as major contributors.

Latin America is an emerging market for VR technology, with increasing adoption in the gaming and entertainment industries, driven by countries like Brazil and Mexico. The Middle East and Africa region is expected to witness moderate growth in the VR market due to the increasing adoption of VR technology in the gaming, education, and healthcare industries, with the United Arab Emirates and Saudi Arabia as major contributors.

Research Question: What are the key industries adopting VR technology, and what economic impact could a VR marketplace have on these industries?

VR technology is being adopted in various industries, including gaming, education, healthcare, and entertainment. According to a report by Capgemini, nearly 46% of automotive and manufacturing companies believe that VR/AR will become mainstream in their industry within the next three years. PwC UK evaluated the possible impact of AR/VR on global economies, finding that the different uses of virtual and augmented reality will have a significant impact on global GDP. A VR marketplace could significantly influence these industries by providing new avenues for interaction and commerce, enhancing user experiences, and driving economic growth.

5. Risks and Barriers

Research Question: What are the main challenges and barriers to VR adoption, and how can they be mitigated in the context of a VR marketplace?

The main challenges and barriers to VR adoption include a lack of content offerings, user experience issues, business and consumer reluctance, regulation and legal threats, and consumer costs. According to Finances Online, 27% of organizations cite a lack of content offerings as the main barrier, while user experience and business reluctance are also significant factors. Mitigating these barriers requires addressing content creation, improving user experience, educating businesses and consumers about the benefits of VR, navigating regulatory challenges, and managing costs effectively.

Research Question: How significant are issues like motion sickness in VR, and what solutions can be implemented to improve user experience?

Motion sickness is a significant issue, with more than half of VR users experiencing it at least once. According to VR Heaven, 57.8% of users have experienced motion sickness, with women being more prone to it than men. Specifically, 22.6% of women encounter VR sickness regularly compared to 7.2% of men. Solutions to improve user experience include developing more comfortable and user-friendly VR hardware, enhancing software to reduce motion sickness, and providing clear guidelines and support for users.

Research Question: What are the cost and time considerations for implementing 3D e-commerce strategies, and how can they be optimized?

Implementing a 3D e-commerce strategy requires significant investment in developing 3D product models and viewing technologies. Costs can range from $40 to $200 for simple models to over $1,000 for detailed designs. 3D scanning applications, like Shopify’s 3D scanner for iOS, can help keep 3D modeling costs down, and 3D, AR, and VR applications can reduce development expenses and decrease time to launch. Large file sizes of 3D product models can slow down websites, particularly if product files aren’t optimized. Using a compression tool to reduce file size and improve site performance is essential. It’s best to keep product model file sizes below 4K and optimize textiles as JPGs of 2K or less. Some consumers may be unfamiliar with 3D product viewing technologies, which can cause frustration. Addressing this challenge involves selecting or designing user-friendly 3D-viewing interfaces and investing in educational resources, such as demonstration videos.

6. Benefits of AR, VR, and 3D in E-commerce

Research Question: How do AR, VR, and 3D technologies enhance the online shopping experience, and what benefits do they offer to both consumers and retailers?

AR, VR, and 3D technologies provide a more engaging and interactive online shopping experience by allowing consumers to visualize products in detail. This leads to increased engagement, higher conversion rates, and improved customer satisfaction. For retailers, these technologies offer a competitive advantage by enhancing the online shopping experience and reducing return rates. According to Forbes, the use of 3D drives 40% higher conversions than 2D images.

Research Question: What are the economic benefits of using AR, VR, and 3D technologies in e-commerce, particularly in terms of increased conversion rates and reduced return rates?

According to Shopify, AR and VR technologies increase conversion rates and average order value while reducing return rates. US-based furniture giant Overstock.com reported conversion rate boosts of up to 200% when customers used 3D and AR for product visualization. Furnishings retailer Houzz’s reported 11x boost to conversions after their AR rollout. These technologies also offer significant environmental benefits by reducing transportation emissions and packaging waste. This leads to cost savings for retailers and contributes to sustainability efforts.

Research Question: How can AR, VR, and 3D technologies contribute to sustainability efforts and offer customization potential in a VR marketplace?

AR and VR technologies contribute to sustainability efforts by minimizing physical store visits and reducing returns. According to a Deloitte survey, nearly 1 in 3 consumers have stopped purchasing a brand or product due to sustainability concerns. 3D and AR technologies can reduce transportation emissions, representing one of the many environmental benefits of adopting these technologies. Immersive technologies have a big role to play if retailers are to meet consumers’ changing expectations. 3D and AR are one way companies can convince consumers they’re serious about moving to a sustainable future. Additionally, these technologies offer customization potential, allowing customers to personalize products before purchase. 3D product configurators help customers experiment with product customizations, including materials, color, size, or style adjustments, increasing customer confidence. Many brands don’t allow returns on personalized items, so tools that help consumers confirm that a customized product is the right choice can encourage conversions.

7. Conclusion

The findings of this research highlight the significant growth potential and range of benefits associated with a blockchain-based VR marketplace. The increasing adoption of cryptocurrency, the advantages of virtual try-on technology, and the expanding VR market all support the viability of this business idea. Despite challenges such as motion sickness and high inception implementation costs, the benefits of enhanced shopping experiences, reduced return rates, and sustainability make a compelling case for the development of a blockchain-based VR marketplace. Future research should focus on addressing the barriers to VR adoption and exploring innovative applications of these technologies as the modern technologies are in constant and rapid growth and development.

8. References

  • Crypto Market Sizing Report by Crypto.com
  • VR Heaven
  • Finances Online
  • AR Insider
  • Forbes
  • Capgemini
  • PwC UK
  • Statista
  • Deloitte Survey
  • Shopify
  • Overstock.com
  • GWI