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In this investment thesis, we explore the emergence of Artificial Intelligence (AI), GameFi and Metaverse.

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Artificial Intelligence: A New Agent in the Crypto Market

The rise of artificial intelligence (AI), significantly propelled by the popularity of ChatGPT, marked a turning point in the perception and utility of AI technologies. ChatGPT emerged as a paradigm-shifting application, demonstrating to both industry veterans and retail users the potential of AI agents in enhancing search strategies and information retrieval processes. This breakthrough highlighted AI’s capability to deliver structured and precise information access, changing the landscape of digital interaction and data management.

In the realm of cryptocurrency, the integration of AI presents a synergistic opportunity. The open-source nature of the crypto world, coupled with its efficient mechanisms for incentivizing value-adding contributions, makes it an ideal playground for AI applications.

The culture of incentivization aligns perfectly with the potential roles AI can play in optimizing and enhancing various aspects of the crypto industry. This could range from improving security protocols and bug detection to optimizing trading strategies and enhancing user engagement through personalized content and interactions.

At Metazero, our attention has been particularly drawn to applications like Fetch.AI, which exemplify the versatile utility of AI agents in crypto beyond mere search functionalities. These AI agents have shown their capability to serve as dynamic tools for business analytics, optimization of machine learning models, and notably, as valuable commodities in their own right. This latter aspect is crucial for crypto projects aiming to generate cohesive revenue streams, especially critical in surviving downturn market cycles.

Looking ahead, we foresee AI agents becoming increasingly integrated into various crypto-related applications. Their potential applications range from automated trading strategies and social trading to the development of custom virtual assistants. Metazero is committed to closely monitoring the evolution of AI agents within the crypto space. We aim to work collaboratively with our portfolio companies, supporting them in augmenting their products and services with AI capabilities.

GameFi & Metaverse: The Great Comeback

The GameFi and on-chain metaverse sectors experienced significant challenges during the 2020-2021 cycle, despite initial high expectations and promises from various developers and studios. The envisioned mass adoption of blockchain-based AAA games faced substantial hurdles.

The token issuance strategies employed by GameFi and Metaverse projects during the last cycle, which often lacked a base of loyal gamers or meaningful utilities within the player ecosystem, contributed significantly to their challenges. This approach led to ecosystems that were, in essence, empty vessels. Tokens were issued without providing players or speculators with compelling reasons to utilize or purchase them for economic gain, resulting in a lack of engagement and value within these platforms.

The high costs associated with participating in player roles in these games posed another significant barrier. These costs were largely attributed to the limited scalability solutions available at the time, making it financially unrealistic for many potential players to engage with these platforms.

Despite these challenges, Metazero recognizes the untapped potential and the possibility of a great comeback for the GameFi and Metaverse sectors. We believe that with the advancement of scalability solutions and a more balanced approach towards economic models within these games, there is a substantial opportunity for renewed growth and broader adoption.

The period from 2021 to 2022 marked a turning point in the NFT market. NFTs began to generate more intrinsic value than their mere association with DAOs or as profile pictures. Innovations led by entities like Yuga Labs, Berachain, and Pudgy Penguins saw NFTs being merged with DeFi functionalities. This evolution transformed NFTs from being solely valuable as art pieces to becoming foundational assets that grant rights or ownership in products or communities built by founding teams or DAOs. Consequently, NFTs have become gateways to broader product ecosystems, offering significant advantages for GameFi and Metaverse projects in the current cycle.

Looking ahead, we anticipate that GameFi and Metaverse developers will increasingly leverage NFTs across a broader spectrum of standards. This integration aims to incentivize user engagement, build social reputation, and harness value from communal network effects. When combined with native tokens and governance tokens, these strategies are poised to drive a robust rebound in the GameFi and Metaverse sectors.

At Metazero, we are committed to actively engaging with our previously invested portfolio to adapt to the evolving market narratives. Our strategy includes making key investments in new, category-defining players and solution providers that enhance the on-chain gaming experience.

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