Metaverse is the New Black

Metaverse is the New Black

"Metaverse" is a word that is becoming more popular in the business world. From Mark Zuckerberg (Facebook) to Satya Nadella (Microsoft), company executives are using the M-word as the magic word to describe their vision. As reported by The Verge in July 2021, "Facebook would strive to build a maximalist, interconnected set of experiences straight out of sci-fi — a world known as the metaverse".

What counts as a Metaverse?

When I first heard the word "Metaverse", I wonder how it is different from "virtual reality" - if it is different from VR at all. Among its many definitions, one of the most interesting ones is "the kind of thing billionaires talk about to earn headlines" (The Conversation), which has some elements of truth in it.

There is a consensus that "Metaverse" comes from a 1992 dystopian novel called Snow Crash by Neal Stephenson, a sci-fi writer. In the book, humans interact in a 3D virtual space as avatars. Since then, one of the most famous definitions comes from venture capitalist Matthew Ball, whose 2020 article describes metaverse as "a manifestation of actual reality, but one based in a virtual (often theme park-like) world, such those portrayed in Ready Player One and The Matrix." In it, he also proposes 7 core attributes of the metaverse:

  1. Be persistent (continues indefinitely);
  2. Be synchronous and live;
  3. Be without any cap to concurrent users, while also providing each user with an individual sense of “presence”;
  4. Be a fully functioning economy;
  5. Be an experience that spans both the digital and physical worlds, private and public networks/experiences, and open and closed platforms;
  6. Offer unprecedented interoperability of data, digital items/assets, content, and so on across each of these experiences
  7. Be populated by “content” and “experiences” created and operated by an incredibly wide range of contributors.

We can see that not all virtual realities have all (or most) of the 7 attributes above, and hence not all VRs are metaverses. In other words, metaverses are a subset of VRs, but not vice versa.

In the same article, Matthew gave a nice analogy to thinking about VR vs. metaverse: "VR is a way to experience a virtual world or space. Sense of presence in a digital world doesn’t make a Metaverse. It is like saying you have a thriving city because you can see and walk around it."

Why is the Metaverse trendy today?

The Metaverse is not a new concept, but its rise to fame is fairly recent. As the New York Times puts it: "Crypto people say they’re building it. Gamers might already be living in it. The art world is cashing in on it. Web veterans are trying to save it." Unfortunately, "[t]he biggest ideas in tech often lurch into the lexicon before they are truly coherent."

Coindesk wrote that "the virtual world of the metaverse could become its own trillion-dollar industry." There is money to be made, not just for companies, but also for users. The idea to profit based on VR is hardly new - gaming companies have been around for decades - what is new is the buzzword "Metaverse" for companies to signal a bolder ambition to build a virtual world that is good enough to compete with the real one (if not "replace" it by taking up a bigger share of people's time spent in it).

In the crypto world, decentralized applications and NFTs are catalysts for Metaverse to grow. Take blockchain games like Decentraland or The Sandbox, both of which have integrated cryptocurrencies into the game, making it a functioning economy. Metaverse is a cool word in and of itself, and so is blockchain or crypto. Bundle these together, and you are the coolest kid in town.

Although Mark Zuckerberg talked about building a Metaverse, it is not exactly clear what the end product (or the interim outputs) will look like. As the Financial Times wrote: "on the analyst call, Zuckerberg described a space where people could hang out, send work messages, play games and even go dancing together. He also made clear he was intent on monetising the opportunity of virtual worlds. Advertising would 'probably be a meaningful part of the metaverse', as would commerce, he said, describing a space where people would buy digital clothes and goods to bring with their avatars as they 'teleport from one experience to another'."

Zuckerberg did concede that competition is one of the reasons that pushed him to focus on the Metaverse. He said: "One of the reasons why we’re investing so much in augmented and virtual reality is mobile phones kind of came around at the same time as Facebook, so we didn’t really get to play a big role in shaping the development of those platforms." (The Verge) He is certainly not the only executive that has his eyes set on the Metaverse.

Today, we have many building blocks of a fully functioning Metaverse, e.g., e-commerce, virtual games, virtual currencies (including cryptocurrencies), digital media (e.g., music) and more. The challenge of building a successful Metaverse prototype is bringing everything under one roof to create a virtual kingdom. This virtual kingdom will aim to satisfy all of your needs that don't require physical interactions, e.g., virtual learning, meetings, shopping, gaming and more.

Another challenge is how to make the Metaverse a safe place. In the physical world, there is law and order. Who will be the one maintaining order in a virtual land? In a metaverse built by Facebook, is the company going to also play the role of legislator and police? Or will the governance be decentralized and shouldered by the community? One of the interesting experiments to watch is Shapeshift's decision to transit from a traditional company to a fully decentralized one, with governance 100% placed in the hands of the project's cryptocurrency holders. It is a bold move to test whether a fully decentralized model could sustain the operations of a project, and could be a viable option for Metaverses.

For now, the Metaverse vision promises to be open. Today, you don't need to verify your identity to join Facebook - in other words, there is on entry barrier and anyone is welcome. Unlike countries with borders and immigration rules, Metaverses seem to be open to anyone joining and leaving at their will. This creates both opportunities for more vibrant exchange of users (and information), as well as risks of an unstable user base to sustain growth. Not to mention that when the switching cost is close to zero, the users will not have an incentive to invest too much in the Metaverse they are in. If they are dissatisfied, they could simply move to another one. As an analogy, some people blame the prevalence of dating apps for shorter-lived relationships: whenever there is an argument, it is easy to find a way out by looking for other options.

The word "meta" means "beyond" - it is to be seen whether the Metaverse could really transcend our understanding of the world we live in. Before that, the Metaverse needs to first prove that it is capable of delivering most of what we are used to in the physical world today.