The Metaverse Explained

To begin, there’s no universally accepted definition for the term. Some think of it as an enhanced successor to the current version of the internet—a new frontier for online interaction blending the physical and digital worlds through computer-generated avatars. Millennials and early Zoomers may remember the Sims, a series of life simulation video games, launched in 2000, where you could practically build a second life for the digital version of yourself or a character of your dreams. So think virtual birthdays, weddings—an array of digital experiences connected to our real lives and accessible through VR headsets, PCs, game consoles and even phones, only that’s just the surface. Venture capitalist and former Amazon AMZN executive Matthew Ball, in his essay on the topic notes:

…what’s important is to recognize the metaverse isn’t a game, a piece of hardware or an online experience. This is like saying World of Warcraft, the iPhone or Google GOOG is the internet. They are digital worlds, devices, services, websites, etc. The internet is a wide set of protocols, technology, tubes and languages, plus access devices and content and communication experiences atop them. Metaverse will be, too.

According to Ball, what awaits us in the metaverse is an entirely new set of technologies, applications, and, well, financial opportunities. CEO of $28.7 billion videogame company Epic Games, Tim Sweeney, predicts, “over the coming decades, the metaverse has the potential to become a multitrillion-dollar part of the world economy.”

Sweeney has every reason to be bullish. Epic’s Fortnite has evolved from a popular multiplayer game into the preferred social network of an entire generation and has even hosted virtual concerts featuring celebrities like Ariana Grande and Travis Scott.

Brands are also staking a claim in the metaverse. Nike NKE has launched Nikeland, a virtual gaming experience on gaming platform Roblox, where users can dress their digital avatars in the company’s products. In September, Dolce & Gabbana sold the first-ever collection of non-fungible tokens (NFTs) by a fashion brand for about $5.7 million. Five tokens in the collection were accompanied by physical versions of the items, and the other four were digital-only pieces. Eventually, avatars in the universe may be able to fashion these items in various virtual worlds.

But of all corporate forays into the metaverse, the loudest is, undoubtedly, that of Facebook, which in 2021 changed its name to Meta to reflect the company’s ambition beyond social media. The rebranding came amid multiple controversies surrounding the company, but nevertheless indicated that the focus on augmented and virtual reality will define Facebook’s strategy going forward. The tech conglomerate has spent more than $10 billion over the last year and a half developing the metaverse’s infrastructure.

If the world’s biggest companies are pouring billions into building technologies and experiences that promise us an entirely new way of interaction and new wave of innovation, pay attention.

The “Open” Metaverse

Critics say “the metaverse is just a sexy, aspirational name for some kind of virtual or augmented-reality play” of tech magnates, but in the blockchain world, the discussion revolves around bringing down the old guard of the internet—the so-called Walled Gardens of Big Tech, where companies like Google and Facebook own and profit from vast amounts of user data.

“Our goal is to build an open metaverse that can stand against what we call competition that is the Web 2.0 metaverses,” says Sebastien Borget, chief operating officer of the Sandbox, an Ethereum-based platform where players can build and monetize in-game assets and even land. (In November 2021, Republic Realm, a firm that develops real estate in the metaverse, said it paid $4.3 million for the Sandbox land, scoring the biggest virtual real-estate purchase publicized to date).

By virtue of community-based governance, where users can propose and vote on changes to the platform, blockchain platforms like the Sandbox or Decentraland MANA , another category leader, promise a starkly different metaverse, free of dependence on corporate decision-making and data ownership hegemony. In addition, decentralized architecture reduces friction between different ecosystems through various interoperability protocols that allow for transfer of assets, including cryptocurrencies, utility tokens, and NFTs, across chains.

That said, Meta’s user base and resources dwarf that of blockchain-based virtual reality platforms, whose development still heavily relies on traditional venture capital funding, so the issue of metaverse’s centralization could long remain in the grey area. Meanwhile, the future awaiting us seems far more virtual than it did a year ago.

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