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What is the metaverse really all about? And is it worth the hype? Here’s what you need to know.
The metaverse is one of the biggest buzzwords in blockchain and has been touted as having the ability to usher in a new era of digital connectivity and shared virtual reality (VR) and augmented reality (AR) experiences. Tech and non-tech companies alike are pumping billions of dollars into the space even though it is still a long way from mainstream adoption.
What is the metaverse really all about? And is it worth the hype? Here’s what you need to know.
In October 2021, social media giant, Facebook announced that it would be rebranding to Meta with a view to “bringing the metaverse to life”. Despite the increased publicity generated about the metaverse since the announcement, the meaning of the term itself hasn’t necessarily gotten any clearer.
So what exactly is the metaverse?
It is a term that describes a hypothetical future version of the Internet where immersive virtual reality and mixed reality worlds combine to facilitate real time interactions and experiences.
Admittedly, this definition might not necessarily make the metaverse easier to understand. But hopefully, it gives enough to give you a general idea of the concept.
Basically, the metaverse is an upgrade to how we communicate with one another by allowing us to converse, work, shop, learn, and even play through a unified virtual experience. It’s essentially a massive network of interactive, blockchain-based virtual worlds where users are represented by custom avatars and move freely between these worlds for work, play, and everything in between.
Think of how you access the Internet now – open a browser, type in the website URL or do a web search, land on the website, and then browse through based on the site’s navigation system. Now try to imagine each website as a standalone 3D world that you can access and interact with using virtual and augmented reality tools like VR headsets, controllers, and haptic gloves.
Let’s say you want to buy something on Amazon. In the metaverse, instead of an eCommerce website, you would be browsing a virtual store where you can interact with the items for sale and check out information about them just as you would if you were shopping in a physical store. When you’re done shopping, you “exit the store” (close the tab) and visit any other virtual world (website) that you want.
Right now, there are dozens of disconnected virtual worlds that will eventually become the metaverse. This means that these virtual worlds have their own avatars, access, currency, and interactions.
The most popular current virtual world platforms include Decentraland, Roblox, HyperVerse, Sandbox, NFT Worlds, Cryptovoxels, and Somnium Space.
Only when these worlds are truly interconnected whereby your avatar can move freely between worlds and interact with them without complications that we can achieve a true metaverse.
As you may have imagined, this will not likely happen anytime soon. Still, it’s worth highlighting the value that these pioneers bring into the space.
There is a wide range of services being proposed by metaverse companies. These include everything from virtual currency exchange platforms to social VR applications. Some of the more popular services include:
There are a few key trends that are currently driving innovation in the metaverse startup space.
The first is the development of new platforms and technologies that make it easier to create and deploy virtual worlds. This includes platforms like Unity and Unreal Engine, which allow developers to create high-quality visuals with ease.
Additionally, there has been a rise in the use of blockchain technology to create decentralized virtual worlds. This allows for more secure transactions and gives users more control over their data.
Finally, we are seeing a trend towards the development of social VR applications. These are applications that allow users to interact with each other in virtual reality, often for gaming or entertainment purposes. Some popular examples include Rec Room, AltspaceVR, and High Fidelity.
There are a number of major brand names that are already making their mark in the metaverse either with direct capital investments into the space or through filed patents and trademarks.
Here are some of the most popular examples by industry:
Behemoths in the tech space, including Meta, Apple, Microsoft, and Google have been quick to stake a claim in the metaverse with huge capital investments. For example, in January 2022, Microsoft announced its acquisition of gaming giant, Activision Blizzard for nearly $70 billion as part of the company’s plan to “provide building blocks for the metaverse.”
Nvidia, Epic Games (developers of Fortnite), and Roblox Corporation are among the leading brands in the gaming industry already making great strides in the metaverse. Who can forget the April 2020 Fortnite Astronomical event that featured a live concert with a massive hologram of rapper Travis Scott? The concert was attended by over 27 million participants.
It shouldn’t come as a surprise that many retail brands are chasing success in the metaverse. Virtual products are needed in the virtual world too, after all. To that end, US pharmacy chain CVS recently unveiled plans to trademark its products in the metaverse, as well as file a patent for downloadable virtual goods.
In fashion, sportswear giant Nike has already stamped its presence in the metaverse with a highly immersive and interactive world known as Nikeland. Since its launch in November 2021, the platform has recorded nearly 7 million visitors from all over the world.
Other fashion brands investing in the metaverse include L'Oréal, Ralph Lauren, Tommy Hilfiger, and Dolce & Gabbana.
This one is tricky because it’s incredibly challenging to find a practical way to translate food and other everyday necessities into the virtual world. That hasn’t stopped fast-food restaurants like McDonald’s and Wingstop from having a go at it.
McDonald’s approach is to create a system where users can purchase virtual food in the metaverse and the physical version will be delivered to them in the real world. On the other hand, Wingstop intends to supply users in the virtual world with special tokens that grant them discounts for real-world purchases.
In February 2022, JPMorgan Chase became the first major investment bank to open a branch in the metaverse . This branch is located in the Metajuku Shopping Center, a 16,000 square foot shopping district in the Decentraland metaverse. Known as Onyx by JPMorgan, the bank branch features a luminous portrait of CEO Jamie Dimon, a live tiger, and a spiral staircase in the lounge.
That’s right, even governments are keen on getting a piece of the action that is the metaverse. In February 2022, South Korea’s Ministry of ICT, Science, and Future Planning released an official statement confirming its full-fledged support for the creation of an extended virtual world (metaverse) ecosystem. This is expected to expand the virtual industrial growth of the country.
A growing number of celebrities have also begun to create avatar versions of themselves, including Justin Bieber, Lady Gaga, and Leonardo DiCaprio. As the metaverse continues to grow in popularity, we expect to see even more major brands and celebrities entering this space.
This is difficult to quantify as the metaverse is still in its early stages and there is no centralized exchange where all transactions take place.
What we do know is that the figures are in the billions. A recent report by global consulting firm McKinsey & Company shows that in the first five months of 2022, over $120 billion has been invested in the metaverse. This is more than double the total amount invested in the space in 2021, which was estimated at $57 billion.
Additionally, according to a report by Goldman Sachs, the metaverse market might be worth $8 trillion.
So far, most of the investment has been in assets such as avatar data, NFTs, and virtual currencies. This is because these asset types offer the most potential for return on investment. However, as the metaverse matures, expect to see more investment in other asset classes such as property and art.
One of the biggest factors driving the growth and viability of the metaverse is the ability to fully own virtual assets and experiences thanks to the blockchain.
Some of the most popular assets in the metaverse include:
The metaverse is a collection of interconnected virtual worlds so it makes sense that one of its biggest selling assets is virtual real estate. The demand for virtual land is on the rise with some plots selling for millions of dollars. At the time of writing this, the highest amount spent on virtual real estate is $4.3 million by Republic Realms in The Sandbox.
Decentraland and Axie Infinity have also recorded million-dollar virtual land sales in their respective metaverse-worlds.
Another type of asset in the metaverse is NFTs. These are unique digital assets issued on the blockchain that cannot be replicated or interchanged, hence the name. They are often used to represent ownership of virtual property, avatars, art, or collectibles.
NFTs typically derive their value from their rarity level, as well as the current hype around their projects, which heavily influences demand. At the moment, the most expensive NFT sold is the Everydays: The First 5000 Days by Beeple, which was purchased at auction in February 2021 for a whopping $69.3 million.
Virtual currencies are digital assets that can be used to purchase goods and services within the metaverse. These coins help facilitate transactions within each world and can be ‘Hodled’ as well to benefit from upward market movements.
Whether in physical or virtual form, assets represent value and are therefore subject to certain risks. These include:
This is one of the biggest challenges facing the entire blockchain ecosystem. Metaverse worlds run on regular IT hardware and software, making them susceptible to IT-based attacks. Recently, many large platforms like Roblox and Axie Infinity have experienced at least one form of hacking, with tons of user data and virtual assets worth millions being stolen.
One of the most recent events was the hack on Neopets, a popular metaverse game platform.
Phishing scams are a huge cause for concern among metaverse asset owners and investors. And rightly so, considering the occurrences of such scams have been on the rise lately.
In March 2022, Axie Infinity's Ronin bridge was hacked resulting in a loss of over $600 million. As the details of the hack came to light over the weeks that followed, it became clear that a phishing scam was the foundation of the attack. The hackers had duped a senior engineer at the company with a fake job offer via Linkedin. The victim had clicked on what they thought to be an acceptance letter in PDF format. It turned out that this action also resulted in downloading the spyware that was used to infiltrate Ronin’s systems.
Values of crypto coins and tokens are always subject to market volatility. This risk is further deepened by the fact the metaverse is still in its infancy stage so wild price changes are not uncommon.
These are risks that do not fit neatly into any of the other categories discussed above. For example, because metaverse worlds and their applications are relatively new, there’s no standard regulatory body overseeing their affairs.
Also, risks associated with power failure and poor Internet connectivity can result in huge financial losses for both users and creators within the metaverse ecosystem.
The metaverse is a rapidly growing collection of virtual worlds all offering richer, more immersive interactive experiences. It has been hyped up as a game-changing innovation and if recent developments are anything to go by, we can safely assume that it is on the right track.
However, with billions of dollars being pumped into the space, there are huge risks that must be taken into account. By understanding these risks, you can make informed decisions about how to protect your assets and maximize your chances for success in the metaverse.