The metaverse: Exploring the future of virtual worlds

The metaverse is a hotly-debated topic in the tech industry, with CEOs like Mark Zuckerberg and Satya Nadella name-dropping it many times. However, many are still unsure what the buzzword means.

The term “metaverse” became widely known when Facebook rebranded itself as Meta in October 2021. At the time, it announced plans to invest $10 billion in the “metaverse.” Other tech giants, such as Google, Microsoft, Nvidia and Qualcomm, are also investing billions of dollars in it.

Tech advocates argued that the lack of definition might be because the metaverse is still under development. It is too new to define what the term means — just like the internet back in the 1970s.

Defining the metaverse

When companies talk about the metaverse, they refer to a broad range of technologies, including virtual reality (VR) and augmented reality (AR). VR is characterized by persistent virtual worlds that continue to exist even when you are not playing, while AR combines aspects of the digital and physical worlds.

Mathew Ball, a venture capitalist and investor who has written about the potential and structures of the metaverse, tried to simplify the concept.

“The metaverse is a 3D version of the Internet and computing at large,” said Ball. “If we think of [a] mobile [phone] as placing a computer in our pocket and the internet being available at all times, think of the metaverse as always being within a computer and inside the internet.”

Some experts maintain that the metaverse is the next iteration of the internet. In the metaverse, people can interact with each other and experience life in ways that are not possible in the physical world. It can also be beneficial for education, entertainment and even work.

For some others, the metaverse, in the truest sense of the term, doesn’t actually exist yet. This is because other essential parts of the metaverse aside from VR headsets and AR glasses, such as sufficient bandwidth or interoperability standards, have yet to be available.

“It’s not real at this stage, and won’t become real until people have a single location they can go to to get into a virtual world they could live in,” said Ibrahim Baggili, cybersecurity expert and founding director of the Connecticut Institute of Technology at the University of New Haven.

The metaverse is more than just a video game — but the gaming industry has already adopted its most basic form. In Fortnite, for example, players have avatars that interact with each other. They can also earn virtual currency to customize their avatars.

According to Vice, the simulation game Second Life is the closest existing iteration to the metaverse. In the game, users can create avatars that can shop, eat, shower and do other activities in a virtual world.

This is the #metaverse… A live rave happening right now in @decentraland for the upcoming @LightbulbmanNFT release by #BjarneMelgaard. Music from @feedelity @prins_thomas @mightbetwins #NFTdrop #rave #virtualevent #NFTCommunity pic.twitter.com/aC4WYRbgH9

— Alex Moss (@alexmoss) January 20, 2022

Exploring virtual worlds

Tech Target describes the metaverse as a network of virtual worlds built on various kinds of 3D technology, real-time collaboration software and blockchain-based decentralized finance tools. It is still largely unbuilt, so how the interoperability among the virtual worlds will pan out is unclear.

At the 2022 MIT Platform Strategy Summit, Lauren Lubetsky, a senior manager at Bain & Company, outlined three possible scenarios for how the metaverse will operate.

In one scenario, the metaverse would remain a niche application used for entertainment and gaming. Another possible outcome is large, competing ecosystems with limited interoperability would control the metaverse.

Lastly, the most optimistic scenario is that the metaverse would be a dynamic, open and interoperable space, just like the internet but in 3D.

There is no single entry point to access the metaverse on the market. Baggili said it is currently organized in a way that is similar to the Apple App Store or Google Play Store.

People who can afford VR headsets and want to use them will be able to move between virtual worlds created by different companies. Another option is to access them through tablets, smartphones or PCs. Although the technique might take away from the immersive aspect, it can be an alternative to testing the waters.

However, tech companies still need to figure out how to connect their platforms. They also need to agree on a set of standards for its operation.

Facebook CEO Mark Zuckerberg explains his “Metaverse” virtual world concept, which he says is about “connecting with people.” pic.twitter.com/24YZk5ag5J

— The Recount (@therecount) October 28, 2021

Metaverse’s economic outlook

Leading global management consulting firm McKinsey & Company predicted that the metaverse economy could reach $5 trillion by 2030. The firm says e-commerce will likely be the dominant engine, followed by gaming, entertainment, education and marketing.

Bloomberg Intelligence analysts Rebecca Sin and Matthew Kanterman forecast that metaverse-related exchange-traded funds (ETFs) could reach $80 billion in assets under management by 2024. It would generate annual fees of $600 million, as ETFs capture a slice of the $800 billion market for 3D virtual social worlds.

Pure Metaverse ETFs gathered $247 million in inflows from the beginning of the year to February 7, 24 percent higher than last year. This figure is despite a median year-to-date return of minus 15 percent across all ETFs with metaverse.

The two analysts predicted that metaverse ETFs could grow in popularity in the coming years. This could lead to an increase in assets under management as investors seek exposure to this emerging market.

These high-value projections push many to believe it can play a major role in growing the digital economy, where users can create, buy and sell goods. Some companies have implemented this method, although mainly for fashion, art or other entertainment.

Per the Financial Times, the economy of the metaverse itself depends on the authentication of multiple digital properties. This can include a metaverse home, car, farm, clothing or anything else.

Its economy will rely on non-fungible tokens (NFTs), which can record digital ownership on the blockchain. These NFTs enable the authentication process of possessions, property and even identity.

The real value of the metaverse is when it is used in ways that enhance the value of lives beyond money, says Baggili. For example, buying virtual countries could be an investment opportunity for making a quick buck, but it doesn’t grant the buyer a real country. The feeling of owning a virtual piece of land, however, could be satisfactory.