Welcome to the Metaverse
All you need to know about the next frontier of reality
The metaverse has rapidly become the buzzword in tech, with corporate giants like Facebook (now Meta), Tencent and Microsoft getting heavily involved.
With well over $10 billion in venture funding going toward the concept in 2021 alone, and numerous high-profile bets by Big Tech players, the Metaverse now has the financial means to reach the masses. However, those in the industry say this is just the start and much more capital is poised to flow toward startups working to bring truly interactive virtual worlds to life. Exciting times ahead!
But what is the metaverse? And when will it actually become a VReality?
Introducing the Metaverse
In his 1992 science fiction novel Snow Crash, Neal Stephenson coined the term metaverse as a successor to the Internet, constituting his vision of how a virtual reality–based Internet might evolve in the near future. Today, three decades later, the metaverse is moving closer and closer to his vision.
Similarly to Neal Stephenson’s ideas of the future, the metaverse is, broadly speaking, viewed by many as the next phase of the internet, where online experiences will combine to form an immersive virtual experience. It is an accumulation of many of the technologies that have been developing in the last two decades, slowly forming a bridge between the digital and the physical. Combining virtual reality, augmented reality, AI, spatial computing, creator economies, design tools and many more technological innovations into the creation of virtual worlds with their own and shared economies and communities.
If you ask me, that seems like quite a lot to wrap your head around. Then again, if you asked someone to explain the internet in the 1990’s, you’d likely get an answer that is nowhere close to the internet we currently use.
The Metaverse today
This same challenge is facing the Metaverse today. We can’t have an all-encompassing definition ready of the Metaverse in the same way we couldn’t with the internet during its phase of nascency; it’s the organic and unpredictable nature of technological evolution that enables such large scale disruption.
No one company can have, or be, the Metaverse — they can only be a game or virtual world within it (referred to as a ‘verse’). Instead, the Metaverse is the (economic) structure that connects them (thus the term “meta”). Here’s an easy way to differentiate the two: Is it possible to transfer value from one ‘Metaverse’ to another? If not, you’re dealing with a closed system.
From these developments, we can expect two versions of the Metaverse to emerge; a permissioned, closed one — made, owned, and controlled by Big Tech, and the permissionless, open one — built on Web3 and crypto. Web3 can be seen as an internet mutually owned by builders and users, coordinated by tokens and incentive structures. It is incumbent on all of us, as pioneers and active participants in this endeavor, to remember that we can indeed build a better Web, a Metaverse for our children to grow up in. We can reclaim control of our personal data without sacrificing the internet’s unique features. The technology is available. The next step is to embrace it.
The centralized Metaverse
Many people are surprised to learn that the centralized metaverse has existed since the dawn of the Internet. We decided to build the internet on a single user interface, HTML, and construct everything else around it. Email clients, social media platforms, news aggregators, and so on.
What if, instead of using HTML to create email clients and social media sites, we used blockchain?
It turns out that having an immutable ledger as your foundation makes a lot more sense, as it means that users maintain complete ownership of their assets.
This highlights the primary distinction between a centralized and a decentralized/open metaverse: the lack of self-ownership of your own assets.
The fundamental problem with centralized virtual worlds is that they are run by a single person or entity. This means that a single individual or group can seize total control of the metaverse and define its rules. Because of the centralized management structure, malevolent actors may gain access to these worlds or databases and exploit them in ways that were never intended. As we’ve seen with the business model of web2 giants such as Facebook, Google and Amazon, giving a single for-profit entity the personal information of all its users can turn quite exploitative and even dystopian.
Aside from a lack of self-ownership, centralized metaverses have another significant issue: censorship. Centralized owners can censor content or remove it altogether if they choose to do so. This indicates that not only freedom of speech is limited, but also a general freedom of expression.
Similarly to how China has been using its centralized social media platforms to remove undesired residents over the past few years, centralized corporations have the capacity to exclude people from their world entirely.
Now, let’s take a look at the contestants of the centralized metaverse today, starting with Facebook, or as it is now named, ‘Meta’.
Meta
Last October, Facebook announced to change its name from ‘Facebook Inc.’ to ‘Meta Platforms Inc.’ or, in short, ‘Meta’. Facebook was not only a social media platform but was also the primary holding firm behind the products Facebook, Messenger, WhatsApp, Instagram, Oculus, and others.
Mark Zuckerberg, Facebook’s co-founder and CEO, envisioned a different and broader future. In particular, he referred to the “metaverse” as the future of the firm.
You might be questioning what would happen with your data in Mark’s Meta.
And you won’t be wrong, since Facebook has a terrible reputation when it comes to users’ data privacy. From poor data management to shady data-sharing and monetization, Facebook has been found involved in many malpractices.
A set of patents recently issued to Meta demonstrate how Facebook intends to capture biometric data such as body positions and pupil movement. A “magnetic sensor system” worn around the torso, for example, and a picture analyser that can replicate skin textures are examples of patented technology.
These technologies would not only make virtual experiences more realistic, but also help the company sell products to users. Meta has stated that commerce, not hardware, is the primary source of revenue for the metaverse. Clearly, this type of targeted advertising would raise plenty of ethical and regulatory concerns.
Tencent
Tencent already has lots of software and platform expertise as the leading video game distributor in China, along with its large ownership stakes across many major game studios. These include Epic Games and Roblox, owners of the Unreal engine and Roblox Studio game engines, respectively.
Last January, Chinese media reported that media giant Tencent would be acquiring Black Shark. Started in 2017 and funded by Chinese phone maker Xiaomi, Black Shark currently makes gaming-oriented mobile phones and accessories. However, according to the report, Black Shark will be changing its business model to invest in AR/VR headsets after Tencent’s purchase.
When you combine Tencent’s expertise in gaming, social networking, cloud infrastructure, artificial intelligence, streaming videos, and digital payments, you can see how it would perhaps be the best positioned company to tackle the metaverse.
Roblox
If you aren’t familiar with Roblox, you probably are older than 16 or you don’t have children. Half of all Americans under age 16 played Roblox in 2020, and the company’s user base continues to grow at a torrid pace.
Part of what keeps kids coming back to Roblox is that it’s not just a single game. Developers add new games each month to the platform thanks to its easy to use game development engine. Creators have incentives to build more content for the platform since they earn money if their games become hits. Roblox offers 25% of a game’s earnings through its Developer Exchange Program.
As you can see, this system already has a somewhat decentralized structure. Taking into account their size too, it makes them a big contender for the metaverse. The Roblox platform currently has more than 40 million games, 9.5 million developers and, as of the third quarter, 47.3 million average daily active users.
The social aspect of Roblox is also a huge competitive advantage for the company, as children want to play the games that they create with their friends. Roblox players can connect with other users and socialize, while some games require effective communication, teamwork, and problem-solving skills in order to make progress.
The open Metaverse
The open, permissionless metaverse is a digital world where individuals, rather than corporations, define the rules and mold their narrative through unrestricted exploration and world-building. This is the most important distinction between a virtual world and a game and what could be argued as the key factor in conceptualizing virtual worlds. The user experience should be one of autonomy and free will, while remaining a participant of the rules that have been established in the digital civilization he or she is in.
One of the tools that enable the autonomy of users in the metaverse are NFTs, which are cryptographic tokens that can serve as certificates of ownership of a digital item. As these tokens could be the digital key to your virtual land, house, art and/or access to an exclusive community, they are crucial pieces of infrastructure to the metaverse.
The range of what can be done with a piece of land is similar to what you’d find in the actual world. The only restriction is your imagination and technical possibilities. Already, there are business models emerging in the Metaverse from renting out space for events to creating passive revenue streams through advertising. Also, it is possible to sell the land, as well as everything you’ve constructed on it, as an NFT on any of the NFT marketplace platforms (just as you might with the real-world property you own).
Besides these creative and financial utilities, NFTs also offer inhabitants of the metaverse a digital identity. It is a way to differentiate yourself from others while roaming the digital realms.
Those that inhabit the metaverse have the ability to explore the environment independently from one another, yet, just as in the real world, only have as much power as they have been able to maintain through participation in the localized economy. The utility of these communities is built by collectively aggregating time, value and resources. Culture is the thread that binds a society together, and the Metaverse is no exception: a world is empty until it is inhabited. In the same way that towns and countries have their own distinct customs, virtual worlds build their own organic culture.
Let’s have a look at some of the current big players in the decentralized metaverse space.
Decentraland
Decentraland (MANA) is a metaverse platform based on the Ethereum blockchain that allows users to create, experience, and monetise content and apps. Users acquire plots of land in this virtual environment, which they may then navigate, build on, and monetize.
Decentraland was founded in 2017 as a result of a $24 million initial coin offering (ICO). The virtual world was released to the public in February 2020 after a closed beta period in 2019. Users have since built a variety of interactive experiences on their LAND parcels, including interactive games, sprawling 3D scenes, and a number of other interactive activities.
Some big companies are stepping into their world already. Samsung has a virtual store in Decentraland, first unveiled at the Consumer Electronics Show (CES) in Las Vegas in January 2022. In February 2022, the electronics giant hosted a showcase of their new Galaxy S22 at a Decentraland store named 837X at CES, as it live streamed the event via its website and its Facebook, Twitch, and TikTok channels.
Sandbox
Similar to Decentraland, Sandbox (SAND) is a community-driven and user-generated platform on the Ethereum blockchain that enables users to create and contribute to the metaverse, allowing creators to monetize gaming experiences and digital assets on the blockchain.
Founded in 2011, they have been around for a while already, while only recently jumping onto the blockchain/crypto space. Their goal is to bring the platform to mobile devices before the end of 2022. In addition, they’re also planning to launch the platform on consoles like Xbox and Playstation. Moreover, they want to have 5,000 games on the platform available by the end of 2023. Furthermore, Sandbox wants to create in-game jobs that allow people to work as they would in the real world.
Having partnered with brands like Adidas, Opera, Binance, rapper Snoop Dogg and gaming brand Atari, they are well on their way to become one of the biggest players in the metaverse world.
Bloktopia
Bloktopia is a metaverse backed by and built on Polygon. In Bloktopia, a decentralized virtual reality skyscraper made up of 21 levels (as recognition to 21 million Bitcoin) acts as a central hub for users to have access to crypto information and immersive content in one place.
The so-called Bloktopians can educate themselves in the basics or more advanced crypto learnings, earn revenue by owning virtual real estate, play games, build networks and more. Moreover, advertisers and sponsors can monetize the platform’s user base through a dedicated NFT mechanism. By providing a VR experience for the crypto community, users can engage in an immersive environment according to Bloktopia’s four core pillars: learn, earn, play and create.
Some big VC names are supporting Bloktopia. Animoca Brands, one of the largest crypto VC funds, is its lead investor and was joined by funds like AU21 Capital, Magnus Capital, Polygon and Avalanche.
What remains to be seen for these and other metaverses, is how structure and governance evolve as these virtual worlds scale: What rules are needed to maintain order in these worlds, while not going at the expense of creativity? How do you build a healthy and thriving metaverse culture?
With time, these rules will most likely be shaped by Decentralized Autonomous Organizations (DAO’s). These are internet-native organizations collectively owned and managed by their members. They have built-in treasuries that are only accessible with the approval of their members. Decisions are made via proposals the group votes on during a specified period. While the concept matures and the legal gray area they operate in is cleared, more and more organizations may adopt a DAO model to help govern some of their activities.
When will the Metaverse be real?
As we can see, there are a lot of promising projects in the works to make the metaverse become a reality. However, there will need to be investments in many more areas to build out the metaverse.
Some of the categories poised for investment for the metaverse are hardware, networking, computing power, virtual platforms, payments and content and assets.
What will also be interesting to see is how we improve those persistent real time connections and high-bandwidth, low-latency experiences. Right now we’re pretty much in the ‘crawl phase’ of universal scaled virtual experiences for an unlimited number of users.
Investor Matthew Ball, co-founder of Ball Metaverse Research Partners, wrote in an essay that “at a foundational level, the technology simply does not yet exist for there to be hundreds, let alone millions of people participating in a shared synchronous experience.”
This means that we are early — very early. The metaverse and the economy around it is an emerging sector that is currently more of a concept than a reality. However, big steps (and big investments) are being made, showing huge signs of potential and interest for the future.
Conclusion
If you hear about the Metaverse and think to yourself: “Why would I want to spend my time in the Metaverse instead of real life?”, you might be missing the point. This is a paradigm shift, happening whether you like it (or even care) or not. The amount of time Generation-Z and younger spend on digital platforms is undeniable, and it’s on the rise. As the world is becoming increasingly digital, the key question here is, who will own and who will govern it?
This could be a decentralized, ‘real’ metaverse based on Web3 technologies like blockchains and the sovereignty of the user and the illusionary dystopic one by Big Tech that simply extends everything that is broken about The Web — more immersive, but also more intrusive, and most importantly without digital property rights.
When faced with the reality of a permissionless and borderless meta economy, I’m more concerned that regulators will choose to support Big Tech regardless of how dystopic it becomes out of a desire to maintain control. CBDCs (Central Bank Digital Currencies) will most likely be used instead of actual crypto. Compliant, with fantastic UX and hardware, and highly tailored through Surveillance Capitalism, it’s immensely appealing to the average internet user. As a result, it is the web3 builders’ responsibility to improve its polar opposite, the Open Metaverse. And fast.
Ultimately, it is the users who decide which version of the Metaverse they want to participate in. While the centralized version will likely be rolled out faster with a smoother experience, the business models of the companies behind them won’t be able to put their users first as the web3 version can. In the Open Metaverse, users will be able to earn, own and govern their virtual realms, with the lion’s share of revenues actually ending up in the wallets of the inhabitants. The corporate metaverse won’t and can’t accommodate this at the same level.
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