Author: Dr. Liew

Metaverse in Agriculture- A Case Study on Durian Orchard

Metaverse is the newest buzzword not only in the gaming space but has proliferated into other industries. Large organizations are investing crazy amount of money into metaverse to create new applications on top of their current products and services.

One of the potential applications of metaverse is in the agriculture sector. Various technologies have long been employed in the agriculture sector to improve efficiency, reduce cost , increase yield via automation, AI, big data analytics and more.

One area which could see the implementation of Metaverse in agriculture is the use of AR/VR technologies in creating farming simulation for training of the workers. In fact, there is a big farm simulator called Pure Farming developed for PlayStation VR and Sony is investing in it. In addition, farm simulators for mobile phones are being developed.

On the other hand, the use of VR/AR technologies can help farms to save cost and increase yield via virtual crop management tools such as disease and pest control, soil quality survey, fertilizers administration , plants growth monitoring, harvesting and more. To implement the solution. sensors can be installed in the farm which are used to scan the crops. An agronomist needs only to use a VR headset, a tablet or a smartphone to retrieve information about the weather, temperature, plant health, fertilizer needs, and the time for harvesting.

In our case study, we will focus on durian, a tropical fruit that can be found in the Southeast Asian countries like Malaysia, Indonesia, Thailand and the Philippines. According to Wikipedia, durian is named as the “king of fruits”. The durian is distinctive for its large size, strong odour, and thorn-covered rind. Musang King  is the most popular durian breed in Malaysia, named by the Chinese as “Mao Shan Wang” (猫山王), is the priciest of all durians. Musang King is known for its bright yellow flesh and is like a more an enhanced version of the D24.

Grafted durian trees usually start to bear fruits around 4 to 6 years after planting ; while seedlings usually take from 7 to 10 years but could be as long as 13 to 21 years, therefore it is a common practice to use vegetative propagation. The cost of planting durian saplings can be calculated from the size of the orchard and cost per sapling. Assuming we have a 200-acre land , cost per sapling is RM30 and the number of trees can be planted per acre is RM60, the initial cost (excluding the overhead cost) is 200x60x30=RM360,000. However, if we include the cost of buying the land, overhead cost like fertilizers, labour cost and more, the total cost would be millions.

Therefore, the orchard owner must look for various sources of funding. Conventional sources include from own pocket, relatives and friends, loan from financial institutions like banks and so forth. However, with the invention of decentralized finance(DeFi), orchard owners could raise fund via DeFi as a new source of funding without the need of intermediaries, it seems like a perfect solution. In addition, blockchain solutions like NFT and Metaverse as well as other advanced technologies could be adopted to better manage the durian orchard and produce better yield. Let us delve deeper into how these advanced technologies can really help the durian industry.

The proposed model is to create a durian metaverse that not only helps to raise funds but to better manage the durian orchard and produce much higher yield than conventional durian orchards. To begin with, we will create an NFT for each sapling which represent the real durian sapling as a digital twin. The NFTs can be created using the popular Ethereum blockchain or other popular layer 1 or layer 2 blockchains such as Polygon, Solana, Cardano and more. Each durian NFT will feature a smart contract that contains data like the ID of the sapling, price, terms and conditions for profit distribution, transferring of ownership, buying and selling, etc. The next step is to create a Metaverse that hosts an NFT marketplace for buying and selling of the durian NFTs. Prices of the NFTs should be much more than the actual saplings because NFT owners will enjoy the future benefits like profit from the sale of durians after harvesting, get to eat the durians for free and more. Besides that, an NFT can also be created for each fruit which can be sold to buyers via prebooking.

Building a Metaverse platform that houses an NFT marketplace, and a virtual orchard will provide an immersive experience for tree owners and visitors to engage in durian NFTs trading. In addition, the virtual orchard will be a digital twin of the real orchard where visitors and owners get to visit the orchard from the comfort of their homes. Besides that, tree owners will be able to monitor the growth of durian trees and check other data such as fertilizers administration, expected flowering and fruition time, expected number of fruits can be harvested during a season and more. Visitors who wish to buy the durians in advance could prebook the durians by purchasing the fruit NFT and use it to redeem the durian fruits after harvesting. Wholesale buyers can prebook the fruits of a whole tree and get special discounts via a special kind of NFT. Moreover, orchard owner can also create virtual tour of the orchard. Users who purchase the NFT ticket for the virtual tour will be entitled to visit the real orchard and savour the durians at no extra cost, maybe even entitled to stay at the homestay at the orchard for a special rate.

The Metaverse durian orchard will have a global reach where investors and buyers are not only from Malaysia but from all over globe, thereby enlarging the durian market immensely. Foreigners will be able to prebook the durians by purchasing the NFTs and get to enjoy the durians when they visit Malaysia in a future date, this is good for promoting tourism in Malaysia. On top of that, investors who wish to purchase the trees and hope to obtain a good return in the future can do so at the comfort of their homes from any part of the world and at any time, just one click away!

Metaverse

When you woke up in the morning on 29th Oct 2021, you must be surprised to notice that Facebook has changed its logo into an infinite loop ∞, and its name to meta, thus announcing its official entry into the Metaverse. Instantly the stock markets reacted with a bang as metaverse related stocks Roblox, Nvidia and Unity spiked significantly. Compared to the stock market, the crypto market reacted even more dramatically. The blockchain metaverse pioneer Decentraland governance coin MANA rose from $1 to about $4, i.e., 400% gain within four days. Another metaverse coin SAND (The governance coin of the SandBox) from $0.9 to 2.6, about 290% gain in the same period. In addition, GALA and MBOX also spiked significantly.

In recent months, the term metaverse has sort of become the newest buzzword in the crypto and gaming space, and startups venturing into Metaverse are mushrooming around the Globe. These startups were able to attract investments from angel investors and VCs. The biggest news this year was the direct listing of Roblox on the New York Stock Exchange which the company’s stock closed at $69.50 per share, giving the company a market cap of $38.26 billion. Another sensational story was Epic Games, the company that built Unreal Engine and the popular metaverse game Fortnite has just completed a 1 billion round of funding to support the long-term vision for the metaverse. 

However, the most mind blogging news was the announcement by Mark Zuckerber that he wants to transform Facebook into a metaverse social media platform , even changing its name. In fact, when you woke up on 29th Oct 2021 , you will notice that Facebook has changed its logo into an infinite loop, signaling its entry into the Metavese. With Facebook going insanely big on Metaverse, and everyone so closely tied to Facebook, what will be the impacts on our personal life socially , economically and perhaps psychologically? We will no longer interacting in a 2D world but a VR, AR and XR mixed reality parallel world where you can meet your friends face to face, representing by your Avatars. However, things can turn ugly if you are not careful, friends you hate may suddenly appear and say hello to you, and he may just stab you from the back, though only your Avatar…

Metaverse is a term that first appeared in science fiction. The prefix “meta” means beyond, and “verse” means universe. The term was coined in Neal Stephenson’s 1992 science fiction novel Snow Crash, where humans, as avatars, interact with each other and software agents, in a 3D virtual space that uses the metaphor of the real world(Wikipedia). Fast forward to 2011, Novelist Ernest Cline authored a famous science fiction, Ready Player One, which hits theaters in March courtesy of Steven Spielberg. While the story is set in the strife-torn meatspace of 2045, most of its action unfolds in a vast network of artificial worlds called the OASIS, an earlier version of metaverse.

The recent popular Netflix short series “The Billion Dollar Code” that was based on the true story also tell us that the early concept of Metaverse has indeed started to materialized in the 1990’s. Although the Virtual Reality technology was called Terravision invented by a group of artists and computer nerds in Germany, it is indeed the 3D virtual map that allows you fly and zoom in to any part of the world in real time. It was alleged that Google stole the technology to create Google Earth though the case Art+Com vs Google of patent infringement was rejected by a US court.

Metaverse would not have been possible without the invention of the Internet, in particular the World Wide Web that allows global citizens to access and share multimedia contents around the globe. On the 6th of August 1991, Tim Berners-Lee posted the very first public invitation for collaboration on the World Wide Web, the beginning of the connected world where people are connected and access information and enjoy multimedia entertainment, even monetize from it. It was also the era of the browser war involving Netscape, Mozilla Firefox, Microsoft Internet Explorer, Safari and more. Without a browser you could not access the web. Eventually IE won the war but lost to Chrome in the 21st century.

The early world wide web was just providing multimedia content, non-interactive and did not allow any tom dick and harry to create a website, you must be a little bit tech savvy to use the HTML code to create a webpage. This era is generally known as Web 1.0. Besides, the computer processors were much less powerful than even today’s mobile phone , coupled with slow Internet speed using the dial-up modem, accessing the web was a painful experience. It is no wonder Terravision encountered a lot of issues due to the limitation of the hardware and Internet bandwidth. Despite the limitations, many dotcom companies were formed trying to monetize from the web, even some early online business platforms were developed to facilitate online commerce, which later known as e-commerce. Some famous examples were eBay and Amazon.com. Internet Giants Google , Facebook and Alibaba were not even born yet.

Entered the 21st century, many dotcom companies and startups went bust as a result of the dotcom bubble happened at the end of the 20th century, leaving a few giants like Amazon.com and the struggling Yahoo! to carry the torch. However, the Internet infrastructure has become more robust with the invention of faster modem, router and other hardware and much more powerful computers and laptops. In addition, connecting to the Internet has become seamless as WiFi replaced the old dial up modem. Besides that, touch screen mobile phones were becoming ubiquitous , making mobile web possible. Now people can stay online 24/7. It is also the emergence of search engine giant Google followed by the social media giant Facebook. Users are not only able to access the information, they can create and publish contents easily via social media and interact with other users. The interactive web is hence known as web 2.0.

Early 21st century also saw the emergence of  massively multiplayer online role-playing game (MMORPG) . It is a video game that combines aspects of a role-playing video game and a massively multiplayer online game. This type of game allows players to immerse themselves in a virtual world so it can be considered a precursor of Metaverse game. MMORPGs are stark different from single-player or small multi-player online RPGs by the number of players able to interact together, and by the game’s persistent virtual world which continues to exist and evolve even while the player is offline and exit the game.

Since many massively multiplayer online games share features with the Metaverse but provide access only to non-persistent instances that are shared by up to several dozen players, the concept of multiverse virtual games has been used to distinguish them from the Metaverse.

In the NFT space, it refers to shared virtual worlds where land, buildings, avatars and even names can be bought and sold using cryptocurrency. In these environments, people can wander around, play games, visit buildings, buy goods and services, and attend events, exactly like the real world. Let us examine some popular Metaverse NFT platforms. Metaverse has gained increasing popularity due to combination of NFT, DeFi and GameFi that form the in backbone of the Metaverse ecosystem.

To learn more about metaverse, please come back in my blog to check on updates on my current book publication date, the title is “Metaverse Made Easy: A Beginner’s Guide to the Metaverse: Everything you need to know about Metaverse, NFT and GameFi “

References

What is NFT?

If you have been following the crypto trends in the past one or two years, you will know that Decentralized Finance has grown exponentially in 2020 where many DeFi platforms were deployed. However, enter the year 2021, the DeFi growth has somehow slowed and seems to have been overtaken by another emerging trend, the NFT industry.

The NFT craze started when Jack Dorsey, Twitter’s founder, and CEO, auctioned his first-ever tweet(on March 21, 2006) as a nonfungible token (NFT) and was bought using ETH for $2.9 million. Since then many NFTs were successfully sold for astronomical dollar values, like the artwork named “Everydays: the First 5000 Days.” by the artist Beeper which was sold for $69 million!

So why do people are crazy about NFTs and willing to spend so much money on them? What is NFT after all? According to Wikipedia, a  non-fungible token (NFT) is a unit of data stored on a distributed digital ledger, aka blockchain, that certifies a digital asset to be unique and therefore not interchangeable. In contrast, a fungible token is a kind of digital asset that is not unique and therefore interchangeable. An NFT represents real-world objects like art, music, in-game items, videos, real estate, and more. They are bought and sold online, frequently with cryptocurrency, and they are usually encoded with blockchain technology.

The following table illustrates the differences between NFT and fungible tokens.

Fungible TokensNon-fungible Tokens
Interchangeable
A fungible token can be exchanged with any other fungible token of the same type. It is like exchanging a dollar bill with another dollar bill and the value is still the same.		Non-Interchangeable
A non-fungible token cannot be exchanged with another non-fungible token of the same type. It is like your passport or ID, they cannot be exchanged.
Uniform
Each fungible token is identical to all other fungible tokens of the same type. For example, your one-dollar bill is the same as John’s one dollar bill.		Unique
Each token is unique and different from all other tokens of the same type. For example, your bank account is not the same as John’s bank account
Divisible
A fungible token can be divided into smaller units and the total value is still the same. For example, you can divide a dollar bill into two 50 cents or five 20 cents and the total value is still the same.		Non-divisible
The non-fungible token cannot be divided into smaller units. The basic unit is one token and one token only. For example, your driving license.
ERC-20 Standard
The Ethereum Standard is used for issuance tokens to be used as cryptocurrencies.		ERC-721 Standard
The Ethereum Standard is used for the issuance of unique, non-fungible tokens. The most well-known case is CryptoKitties, which is a virtual collectibles marketplace where each kitty is unique.

NFT has several properties that help to improve processes and things. First, it can prove and authenticate the ownership of an asset or information, making it suitable for fraud and counterfeit prevention. Therefore, it can be used in the KYC procedure, issuing academic degrees and other educational certificates. Besides that, it can be used in areas that need authentication and proof of ownership and information, such as art, collectibles, badges, voting & elections, loyalty programs, in-game items, copyright, supply chain tracking, medical data, software licenses, warranties, real assets and more. Next, NFT is easily transferable and tradeable by capitalizing the blockchain network, without the need of intermediaries, all you need is a crypto wallet like MetaMask.

The history of NFTs began with the emergence of colored coins on the Bitcoin network(Opensea, n.d.). Rare Pepes, illustrations of the Pepe the Frog character built on the Bitcoin counterparty system, were among the first NFT projects. Some of them actually sold on eBay, and a set of Rare Pepes later sold in a live auction in New York. However the colored coins NFT projects did not gain traction in the mainstream.

Cryptopunk was the first Ethereum based NFT project which created 10,000 unique collectible punks with proof of ownership stored on the Ethereum blockchain. This is the project inspired that the modern CryptoArt movement. It was an inspiration for the Ethereum ERC-721 standard that powers most digital art and collectibles. No two punks are alike, and each one of them can be officially owned by a single person on the Ethereum blockchain. Originally, they could be claimed for free by anybody with an Ethereum wallet, but all 10,000 were quickly claimed. Now they must be purchased from someone on the Ethereum marketplace contract where you can buy, bid on, and offer punks for sale. To learn more, check out the website: https://www.larvalabs.com/cryptopunks

Though Cryptopunk was the first Ethereum based NFT, the first NFT project that made an inroad into the mainstream was the Ethereum based CryptoKitties. Launched in 2017, CryptoKitties featured a primitive on-chain game that allowed users to breed digital cats together to produce new cats of varying rarity. The first-generation cats were auctioned off and new cats could also be sold on a secondary market. At the height of the craze, sales of CryptoKitties nearly touched 5,000 ETH in volume, with Founder Cat #18 selling for 253 ETH ($110,000 at the time of sale). These high prices drew more users into the NFT gold rush.

Today, a couple of NFT platforms have been developed to help users create and mint NFT digital assets, the biggest one being Opensea. It claimed that it is the world’s first and largest NFT marketplace that lets users discover, collect and sell extraordinary NFTs.

References

Real Estate Tokenization

Real estate has always been considered a safe investment compared to the stock market. However, it is also more expensive and illiquid. Though real estate is the largest asset class with a global value of $228 trillion, many retail investors are precluded from investing in this asset class, particularly commercial real estate. Barriers to entry include large upfront investment, very low short-term liquidity, management costs, among others. Therefore, how to make investing in real estate more affordable and accessible to retail investors has become an urgent matter.

In recent decades, a process known as securitization of real assets has reduced the frictions and costs associated with accessing real estate exposure for such retail investors. Among financial instruments that provide indirect investment via securitization of real assets, the most common are public and private real estate investment trust (REIT), real estate investment fund, Real Estate Exchange Traded Funds (ETFs), and real estate crowdfunding. Though investors can already buy and sell real estate investment trusts (REIT), but these often have high minimum investments and represent a large portfolio of companies rather than a single property or new development.

To work around the issues, a new form of securitization known as tokenization of real estate has emerged and is gaining popularity. Tokenization helps asset or fund owners raise capital more efficiently, and gives investors unprecedented access to private real estate investments, transparency, and liquidity.

Tokenization is a way to securitize real assets by dividing them into shares that can be sold to investors. It involves representing ownership of an interest in real estate with virtual tokens that exist on a blockchain which is known as security tokens. These tokens are created using blockchain technology, and once created can be traded on digital exchanges or Alternative Trading Systems (ATS).

An actual tokenization use case happened in Paris recently. The property is known as AnnA Villa, which is valued at € 6.5 million. The Villa became the first-ever property in France that was sold via a blockchain transaction. The transaction took place in three steps. First, the ownership of the building was transferred to a joint-stock company called “SAPEB AnnA.” Next, the ownership of the company was divided into 10 Ethereum-powered tokens which were distributed among the new owners. In the final step, each of these tokens was then further broken down into 100,000 units, meaning each token has a face value of € 6.50. Therefore, you can invest as little € 6.50 in the villa.

Another good use case is Fracproperty in Australia. They have obtained Australian financial services  licence(ASFL) to implement real estate fractionalization. Now at STO stage and currently airdropping their tokens. The tokens will allow you to enjoy fractional rental income and capital gain. You can sign up with this invitation link below to receive 10 FRAC token via the airdrop.

Sign Up to Receive Free FRAC token

Advantages of Tokenization

The main advantage of real estate tokenization is improved liquidity. Liquidity means the ease with which an asset can be bought or sold as the cost of entry will be reduced. Tokenization allows a real asset to be subdivided into smaller units and sold as security tokens to potential investors. For example, a 5000 sqft property that costs $1,000,000 can be divided into 100,000 tokens, and each token sold at $10, a price much more affordable to retail investors.

In addition, tokenization will widen the market reach by creating a global investment pool that can extend the real estate market to buyers and sellers from around the globe. Anyone with sufficient capital and an internet connection can easily participate in buying and selling real estate located anywhere in the world.

Other advantages include the following:

  • Transparency: Blockchain is a public distributed ledger so every transaction of the security tokens can be tracked and accessible to anyone.
  • Security: Blockchain is a distributed ledger that is encrypted using advanced cryptography. Every transaction is encrypted into a hash which is not hackable.
  • Immutable: Once a transaction has been submitted to the blockchain and subsequently confirmed, the data cannot be altered. This means no one can falsify the transactions and hence frauds can be prevented.
  • Improved Operational Efficiency: Smart contracts can automate processes such as compliance checks, investor whitelisting, and post-issuance matters including dividend distribution, thereby reducing cost and settlement time.

Implementation

Implementation of a real estate tokenization project involves the following matters that must be dealt with:

  • White Paper-we need to prepare a whitepaper to describe the tokenonomics, the business model, the technological requirements, legal compliance, and more.
  • Type of Tokenization- We need to decide what interest to tokenize, the real asset itself, the equity of a real estate, a mortgage of the property, or others.
  • Asset Information-Type of asset, whether residential or commercial, the property owner, location of the property, etc.
  • Tokenization Ratio-Whether to tokenize part or entire property
  • Smart Contract-The smart contract must address the questions like the total supply of tokens, the amount of tokens to be distributed to holders, do the holders receive dividends, and so forth. Besides that, you must decide the token standard, usually, we adopt ERC20. In addition, the smart contract must be audited by a certified auditing firm.
  • Securities Regulation-Real estate tokens are securities therefore must be registered with regulatory bodies like SEC.
  • Tax-The earnings from the tokens may be subjected to taxes such as property gain tax etc, must engage tax experts to work out the tax structure and strategy.
  • KYC/AML– Real estate token issuers must comply with AML and KYC laws and regulations. 

Tokenization Process

Basically, real estate tokenization involves the following steps:

  1. Asset Identification—identification of the real estate asset, whether it is commercial or residential, and its location. Besides that, it may involve the acquisition, financing, and appraisal of its value.
  2. Smart Contract Generation—Taking compliance with securities laws into consideration in the creation of the smart contract;
  3. Token Creation—determination of the total supply and type of tokens.
  4. Marketing and Distribution—advertising of the offering, confirmation of investor accreditation and listing of tokens on the exchange through a security token offering (STO); and
  5. Post-Listing Support—ongoing support for investors and distributing dividends or other rights to payment.

Example Real Estate Tokenization: Aspen Coin


A good example of a real estate tokenization project is Aspen Coin. A real estate asset management and advisory firm by the name of Elevated Returns LLC issued a token that represents ownership of Aspen Digital Inc, a Maryland corporation formed with the sole purpose of owning the St. Regis Aspen Resort. Tokenization was handled by the token issuer platform known as Securitize (digital security issuance platform). In addition, Templum, a registered broker-dealer and alternative trading system managed the primary distribution, and Computershare (shareholder services) provided custodianship. Marketing was also supported by Indiegogo, a crowdfunding platform. The project successfully raised $18 million.

The tokenized securities were exempt from registration via Regulation D, and therefore were offered and sold only to accredited investors by means of a private placement memorandum. The minimum investment was set at $10,000. Besides that, dividends are to be distributed on-chain to the token holder wallet using Ether. Secondary trading
is provided by Templum to whitelisted investors, and whitelisting is also provided by Templum.

References

Blockchain-Based Tokenization of Commercial Real Estate

Automatic Market Maker

Automatic market maker(AMM) is one of the key components of the decentralized exchange(DEX) platform. Traditional exchanges and centralized digital exchanges rely on the order book to facilitate trading between buyers and sellers. In contrast, DEX employs an AMM algorithm that allows automated trading using a mathematical formula that determines the price of the tokens in a liquidity pool. In fact, AMM is a smart contract that is embedded in the liquidity pool of a decentralized exchange ecosystem.

Different DeFi protocols use different formulas in their AMM algorithms. Uniswap uses the formula x*y=k, where x is the amount of token X and y is the amount of token Y in the liquidity pool, and k is a constant. The equation implies that x and y will move inversely proportional to each other on a hyperbolic curve.

Let us examine the following example:

Assuming Uniswap has a pool comprising the ETH/USDT pair. Let say at a particular time the pool has 10000 ETH and the price of ETH was 1500 USDT, hence the total value of ETH was 15,000,000 USDT. As the ratio is 50:50, the total amount of USDT should be 15,000,000.

Based on the formula x*y=k, k=10000*15,000,000=150,000,000,000

Next, assuming now the amount of ETH has reduced to 8000, using the above equation;

the amount of USDT should increase to 150,000,000,000/000=18,750,000

Uniswap is the first truly decentralized AMM as it allows anyone to create a liquidity pool. Besides that, it allows anyone to provide liquidity to an existing pool

Another popular DEX that employs AMM is Kyber Swap. However, it is not truly decentralized as it does not allow anyone to create a liquidity pool or provide liquidity to a pool. Kyber swap liquidity pools are deployed by professional market makers.

Other popular DEX that employed AMM are Balancer, Curve, Sushiswap and more.