The buzzword is the metaverse, which evokes the images of the virtual reality worlds of the future, online concerts, and costly non-fungible assets (NFTs). To investors though, the hype can be two sided and it is hard to see long term value and short term speculation. In a world full of volatile companies, Somnia (SOMI) has a fantastic, yet commonly misperceived, investment thesis. Not merely another virtual world one can purchase land in, but a bet on the very infrastructure on which the decentralized metaverse will run.
In order to see the long-term value proposition of $SOMI, one needs to see more, examining the aspect of a foundational layer and the usefulness of its token, strategic positioning in the market, and underlying risks.
The main Value Proposition: A Bet on Infrastructure.
The games, social spaces, and art galleries are the majority of metaverse projects, which are the applications of an imagined digital universe in the future. Somnia, on the other hand is developing the operating system, as well as the network. Consider it in the following way: an investment in a metaverse game is similar to an investment in a particular application such as Google Docs, whereas an investment in Somnia is similar to an investment in the network and the protocols that enable various applications to communicate with one another.
The basic issue that is solved by Somnia is the disintegration of the existing metaverse. The virtual worlds of today are walled gardens and your digital properties and self are commonly confined to one platform. The aim of Somnia is to eliminate these silos through the delivery of the fundamental framework of actual interoperability. This includes:
A Built-to-Order Blockchain: The Somnia Chain is not a universal-purpose blockchain. It is designed to do high-frequency, low-cost metaverse transactions. This is a very important component of infrastructure, given the fact that it makes real time interactions possible in a smooth way which would have otherwise not been possible on other networks.
Modular, Open Standards: Somnia offers the means and protocols by which various developers can create their own unique worlds and experiences which may still interact with the larger network. This produces a strong network effect; the larger the number of projects connected to Somnia, the greater the ecosystem is.
This infrastructure-first model places SOMI not as a competitor to all of the virtual worlds, but as a collaborator to all of them. It is a scaled investment that takes advantage of the growth of the decentralized metaverse in general, not any particular games or social hubs.
Utility of the $SOMI Token: The Fuel of the Ecosystem.
A token having precise and fundamental utility forms a strong investment thesis. To the case of SOMI, the token is not only a governance instrument or a speculative instrument, but it is the blood of the whole network. It has a direct connection with the development and activity of the Somnia ecosystem.
Network Fees and Gas All transactions in the Somnia Chain, including transferring digital land and communicating with a smart contract, cost gas in SOMI. The need to pay these fees by the token will follow as an increasing number of developers and users continue to develop on the network.
Governance: token holders of SOMI have a direct input when it comes to how the project will be developed in the future. They are able to vote on important proposals, protocol modification, and in the distribution of treasury funds. This decentralized form of governance is a way of aligning the community interests to the long-term health of the project.
Staking and Security: The token may be staked to make the network secure and to verify transactions. This process has the effect of encouraging long-term holding as well as the elimination of tokens in the market, which could cause an upward pressure in the market.
Creator Economy: The native currency of the whole ecosystem is the SOMI token. It is the currency of all in-chain transactions, such as purchase and sale of virtual land, digital assets and services. The creation economy on Somnia is booming, and so is the demand of SOMI.
The tokenomics will establish a self-feeding cycle: the activity on the network will increase the demand on the token, which will then enhance the growth of the ecosystem, attracting more activity.
Market Positioning and Competitive Advantage.
Somnia is in a much better position in a market that is flooded with other projects in the metaverse. Where other competitors such as The Sandbox or Decentraland are concentrating on establishing their own, solitary, and vast virtual worlds, Somnia is creating the network that potentially links them all. This gives its business model less competition and more enablement.
A "Lattice" vs. Plot: The lattice or framework, which links all the plots, is being constructed by Somnia instead of selling one piece of land. This is because it is able to capture value which is not only of the virtual space it is in but also the whole metaverse ecosystem.
Barriers to Entry: Somnia has technology barriers to entry, which are a bespoke, optimized blockchain and an integrated SDK, which has significant barriers to entry of potential competitors. It would be a colossal task to build a replica of this technical stack, which would give Somnia a first-mover advantage.
Network Effect: The value of a network grows exponentially with addition of participants. A strong network effect can be a strong feature of its investment thesis in the case of Somnia. The value proposition increases more when new entrants are willing to join its platform as more developers, creators, and brands are building around it.
Risks and Considerations
The risks will also need to be considered in a balanced investment thesis. Adoption is the major risk to Somnia. Unless other metaverse projects and developers implement its protocols, it will not be able to have its network effect critical mass adopted. This is a big problem facing any new blockchain protocol.
Other risks include:
Implementation Risk: The team should be able to fulfill its ambitious technical roadmap. Any serious delays or failure might kill investor confidence.
Competition: The model that Somnia offers is unique but it has indirect competition with the well-funded, strong actors in the web3 arena that can also seek to develop similar interoperability layers.
Market Volatility: SOMI like any other crypto asset is highly vulnerable to the volatility of the overall market. The decline in the crypto or metaverse industry would have a far-reaching effect on its value that it would be irrespective of the fundamentals behind it.