The concept of the Metaverse has definitely emerged as a topic of conversation in recent months. Search in Google trends and you will see a huge increase in interest worldwide. This is because certain circumstances have proven favourable for the development of the Metaverse.
First of all, of course, the corona pandemic. People have spent more time online than ever for more than eighteen months. Not only in the realm of gaming, but also in online consultations or other online work environments. We have become increasingly accustomed to conferring, collaborating and socially interacting in the digital space.
Secondly, key individuals in the technology sector have openly stated that they are working on a component of the future Metaverse. For example, Epic games founder Tim Sweeney (Fortnite, Unreal engine) said in the lawsuit against Apple’s app store, “Our aim of Fortnite is to build something like a Metaverse from science fiction.” Jensen Huang, the boss of Nvidia, an American chip manufacturer, told Time Magazine that he wants to create “a virtual world that is a digital double of ours.” Roblox executives also say they are working on developing the Metaverse. These open statements by the world’s largest companies in the field have greatly increased stakeholder and consumer interest.
Thirdly, there is the not insignificant aspect of the continued interest in cryptocurrencies, which we may consider as building blocks for the future digital native economy of the Metaverse. In the corona pandemic, there was plenty of trading in cryptocurrencies, resulting in exploding prices. People have become accustomed to buying and selling cryptocurrencies, thereby laying a foundation for the economy of the Metaverse.
In this context, the great interest in NFT technology as a means to create value in the digital domain should not go unmentioned. NFT is short for ‘Non-Fungible Token’: an irreplaceable property certificate. You can create this certificate digitally and link it to a digital object (such as an image), and you can also link it to a blockchain. This allows you to prove that the digital object is your property.
NFT technology can create value in the digital world and thus provide economic activity. It can create value because you turn a digital object into a unique copy. Then the system of supply and demand starts adding this value. In the first half of 2021, several digital NFT objects changed hands for large amounts of money. So people are getting more and more used to the fact that digital objects can represent value. This is an important step in the creation of the economy of the Metaverse.
Fourthly, there have been improvements in digital infrastructure, both in software and consumer hardware: better sensors, longer battery life, high-resolution screens, better VR glasses, sharper cameras, and so on.
In addition, high bandwidth connections have become increasingly common everywhere, resulting in less lag in internet connections. The latter is important to get a real-time experience. Also on the server/cloud side, there are hardware and software improvements that make it possible, for example, for a hundred people to play a game online without significant lag. Incidentally, there is technology to shape the future Metaverse, in which hundreds – possibly millions! – of people participate in the same synchronous experience.
The fifth factor is the increased interest in avatars: the digital representation of yourself or someone else. This is not to say that an avatar has to look like you. Besides, in the future Metaverse more than one avatar may be an impersonation of you.
The Metaverse has no end. It is an evolving process, just as the current Internet continues to be. However, the beginning of the creation of the Metaverse is already underway. The first projects have already started.
Fortnite is an extremely popular video game developed by the company Epic Games. Players can play this game alone or with friends. You are dropped on an island and have to eliminate your opponents there until the winner is left. Fortnite started in 2017 as a four-player game, but has since grown into a social platform, with its own in-game currency (VBUX) and a huge community.
Besides being a game, Fortnite is also a social environment, where you meet virtual and real friends. Just as teenagers in the pre-internet era spent hours on the phone, young people now talk to their friends on Fortnite about news, boys, girls, school, movies, sports and… Fortnite itself, of course.
There are even live concerts on Fortnite, like rapper Travis Scott’s. So far, 160 million people have seen his concert on YouTube. Furthermore, 12 million people have watched the in-game concert.
Facebook Horizon is a virtual reality online video game with an integrated game creation system, developed for Microsoft Windows and Oculus Quest VR glasses. It is currently in a beta phase accessible by invitation only. More than any other company, Facebook has a lot to lose. Indeed, Metaverse has the potential to become a new social media platform.
Decentraland is a 3D virtual reality platform where you present yourself as an avatar. You can own a piece of land and create buildings in Decentraland. Users can own parts of this virtual world, through the Ethereum blockchain. There are several districts, to which you can teleport yourself. The price of a piece of land varies a great deal. In this sense, it is similar to the physical world. The price difference has to do with the location. So there are different districts with different themes. You can find the most imaginative environments, such as an abode in space, a medieval maze and complete villages, designed by the community itself.
The American company Boson has bought an area worth $700,000 in Decentraland to build a shopping centre there. There is also a casino. Incidentally, real flesh-and-blood people work there (of course in the guise of their avatars) to show newcomers the way. The auction house Sotheby’s, for example, already has a digital branch.
Decentraland has a virtual economy where users can focus on a wide range of economic transactions. They can earn money from the applications they build themselves. The cryptocurrency is MANA, which you can also buy on the crypto exchange. With tools derived from the game, you can also produce all kinds of things.
Roblox is an online platform to create and programme games, which can then be played by other users. You can play for free on Roblox. There are tens of millions of users every day, more than half of whom are under the age of 13. Significantly, many young gamers also buy Robux, the platform’s virtual currency. In the process, they spend hundreds of millions of dollars of real money each year. In the US, Roblox is unprecedentedly popular: it is played by more than half of children under 16.
Other Metaverse initiatives include Cryptovoxels, The Sandbox, Minecraft and Upland.
The term ‘avatar’ has been mentioned several times in this article. The avatar is a virtual alter ego controlled by a user, for example in a video game or online forum. You can own several avatars in the future Metaverse. Your real digital identity may then be represented by a digital crypto wallet or a digital blockchain identity.
The avatar is your digital personification of this identity: an audiovisual digital body representing you. With different avatars, we can show different versions of who we are or who we want to be. An avatar can therefore be a tool to play various roles in various environments, e.g. to experiment with different behaviour or to pretend to be someone else. Your unique crypto-identity can thus be linked by multiple avatars, multiple online personalities, with different roles.
In the ideal Metaverse, you can take your different avatars to different worlds. By the way, not every application in the future Metaverse necessarily requires an avatar. Even the current, traditional Internet can still function just fine without the use of an avatar.
Just as we like to dress up and embellish our physical appearance with clothes, shoes, watches and sunglasses, the same will happen in the digital future Metaverse. Much of the virtual economy will be based on this.
The company Genies is already working on this. The Genies app will also allow you to create your own avatar in the future. For example, you can customise your gender, hair colour and appearance, as well as bring different types of clothing. Fashion house Gucci is collaborating with Genies. For those who are familiar with it: it looks a bit like Snapchat’s bitmoji.
Genies creates custom avatars for celebrities and athletes, who can sell virtual goods to their fans. These celebrities then ‘drop’ digital wearables that you, as a fan, can get or buy. In the closed ecosystem, you, as a user, can buy stuff from celebrities.
Genies also works with celebrities, including Justin Bieber and Cardi B. The company has also used the services of footballer Mesut Özil. His avatar wears digital clothing that was for sale. In a Genies project in 2021, six NFTs (including virtual jerseys and cleats) were sold for a combined $500,000.
Economics of the Metaverse
To me, the economic structure of the Metaverse of the future has associations with the 1980s. The ‘Hot Wheels Color Changers’ toy cars from the toy brand Mattel were in stores at the time. These toy cars changed colour when the temperature changed, for example by placing them in hot or cold water.
Back then as a child, I regularly set aside pocket money to buy these cars. When I look at my son, who is now of a similar age, I see him spending his pocket money on digital wraps (dress-up covers) for his cars in the car game Rocket League. He can talk about this vividly. A great example of how fandom and the associated economics have moved into the digital world.
In the digital world of the Metaverse, the economic traffic concerns digital goods, work done between them and the link to the real economy of physical goods. In the future, fashion store H&M could, for example, not only sell you red pants that you wear in the real world, but also a digital copy of the same red pants that you can then wear online in the evening when you play Fortnite. Provided, for example, that you have reached a certain level of skill in this game.
As consumers, we are getting accustomed to the fact that digital material represents a certain value. Exchanging, buying and selling digital stuff has taken off. In March 2020, the gaming industry had a global turnover of $180 billion. In games like World of Warcraft, League of Legends, Fornite and Roblox, it is the most normal thing in the world to spend digital currency.
The economy of the Metaverse will be fuelled primarily by cryptocurrencies like Bitcoin or Ethereum or in-game tokens representing a certain value, for example Robux, SAND, VBUX or MANA. Traditional currencies such as euros and dollars will also continue to play a role.
The economy of the Metaverse is likely to become similar to the current (online) economic system in important ways. We will produce, exchange, use currencies and invest in this system, and we collect profits (or losses) from it. We produce goods, offer stuff on marketplaces, advertise and hire people. We watch ads to receive products for free or sometimes have to perform an action (like filling in data, levelling up in a game, earning certain tokens) before we get access to certain products, services or worlds. The same will hold true for the Metaverse.
The boss of Epic games (Fortnite), Tim Sweeney, argues that the Metaverse should be based on a solid economic model, otherwise there will be insufficient activity. After all, economic rewards represent an incentive for companies and individuals to work with the Metaverse concept. It should therefore be possible to develop sufficient earning models. In addition, Sweeney states that customers in the Metaverse should feel they are treated fairly. It should be possible to combat fraud.
The Metaverse economy must be ‘anti-fragile’. Tim Sweeney claims that the Metaverse can only be successful when most of the money goes to the creators, the designers and the creatives. This will therefore not be the case if the company that made the platform picks up most of the profits (like Apple, Facebook, Google). A solid foundation of this open economic structure of the Metaverse relies on two developments: DeFi and NFT technology.
DeFi: decentralised finance
DeFi is an abbreviation for ‘decentralised finance’. It is a movement that is active in the world of cryptocurrencies and focuses on decentralising financial products. At this point, money is (still) managed by banks, but the enthusiasts of the DeFi movement want consumers to take control of the financial infrastructure. Through DeFi, you decide what happens to your money and investments, obviously with cryptocurrencies as the basis.
The abbreviation stands for Non-Fungible Token: a non-replaceable property certificate. It can be linked to digital objects, such as artwork, videos, images and even tweets. Blockchain technology guarantees the ownership and uniqueness of the NFT object.
An NFT can represent ‘in-game items’ such as weapons, vehicles, characters and more. But also virtual clothing for your avatar, for example. NFTs are especially interesting because the digital goods you buy in the Metaverse can be taken to other worlds via decentralised blockchain technology (although this will still take a long time to develop). NFTs, blockchain technology, open-source software and DeFi will lay the foundation for an open economic structure of the Metaverse of the future.
In the digital world, we have a certain appearance. The need for personal expression/vanity will lead to a vibrant economy in the field of virtual fashion. Virtual fashion refers to clothing worn in the digital world, including by avatars. These fashion items are the exclusive property of the owner. A classic example are the ‘skins’ in Fortnite, for which young people will regularly open their wallets to obtain them. For the younger generation of gamers, their virtual appearance may be just as important as their appearance in the physical world, as they spend a particularly large number of hours online.
Fashion brand Gucci is very aware of this. Hence, it collaborates with online gaming platform Roblox. In that virtual world, there is now a Gucci collection of handbags, sunglasses or hats. Companies want to connect with the younger generation and, in turn, young people want to express their personality in the virtual world. They do this by wearing leading brands. Just like in the physical world. Roblox has its own marketplace where items can be traded. It was there that the Gucci Dionysus bag was resold for more than $4,100 in Robux money some time ago – that is more than the price of a real Gucci Dionysus bag in the physical world.
After this description of all manner of existing concepts and new developments, it may seem that the Metaverse is coming soon, and that we are at the tipping point to this new world. However, this is not the case. Before the Metaverse will become a reality, there are still barriers to be overcome
Today’s Internet must be made ready for the transportation of large amounts of data that can be moved around the world in real time, without delay. The amount of computing power and cloud storage required for this is unprecedented.
Beyond the technical challenges, there is also the issue of a substantial financial investment to build and perfect it. The follow-up question is: who is going to pay for all this? And more importantly: what will investors and lenders get back from the user of the Metaverse in the long run? Money? Data? In other words, how will our privacy be guaranteed in the Metaverse?
Interoperability of data and identity is also extremely important for the economic structure of the Metaverse. After all, if you are going to produce, make, build and invest in something in one world, you want to benefit from it in the other world, the real one. Then you don’t want it to be fixed to a limited place. Your products, work and investments should not be locked in by a large American or Chinese company. Case in point: users of the Oculus VR headset who voluntarily linked their Facebook account to their Oculus account cannot delete their Facebook profile without losing access to the games they purchased. Talk about lock-in…
The interaction between humans and this future virtual world deserves all our attention. We already live in a world where many people prefer to live their lives very much online. We are glued to our phones, laptops and smart TVs because, for many people, it is more pleasant to be in the digital world than in the erratic, unpredictable, physical world.
How, then, is it possible to prevent the virtual simulation from becoming the primary living environment for a large part of society? A scenario where the virtual world of the Metaverse becomes a place of refuge to escape from current unpleasant living conditions, emotions or tensions? Where this world becomes very accessible, enabling people to escape from daily worries, and where people all too easily disconnect from the shared physical reality? Where people literally no longer feel connected to our shared world? This is one of the many issues that must be tackled in the coming years.
Future of the Metaverse
What does the future of the Metaverse look like? There are currently more questions than answers. And to clear up another misunderstanding: the existing current Internet will certainly not disappear with the arrival of the Metaverse. For some applications, you use the traditional Internet, while for others you log in to the Metaverse. Just as you currently prefer to do some activities on your smartphone rather than on your laptop or vice versa, in the future you will prefer to do them on the two-dimensional flat Internet rather than in the three-dimensional Metaverse.
Many of today’s activities we will also engage in the Metaverse, of course. But there are also new opportunities: for example, attending sports tournaments in a Virtual Reality arena. Being able to open a store in a virtual mall for both digital and real clothing. Being able to skydive from the top of the world’s tallest buildings.
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Completely new professions will emerge. Many people will make money creating content and providing products to other users. They make their money as designers of virtual clothing such as skins and wraps. Maybe you will be able to hire other people to be your avatar for a new world. Or have a virtual real estate agent assess whether the purchase you have in mind in Decentraland is worth the investment. Just as you now have financial advisors who have focused on cryptocurrencies, some brokers will choose to specialise in the virtual Metaverse. Homes may be decorated by a Metaverse interior designer.
Art consultants will specialise in digital art and NFTs to assess for their clients what are valuable investments and what are not. Professional gamers and esports players will be the celebrities of the future and will hire personal trainers who specialise in exercising in the digital world.
Skilled gamers, for a fee, will help inexperienced users to ‘level up’ in their favourite game. So that, for example, they can claim certain tokens, items of clothing or access privileges. These professional level boosters will be paid in regular money, cryptocurrencies or special tokens. Given the international nature of the Metaverse, it will not matter where these ‘level boosters’ are located.
New job opportunities will arise in the service sector. You can already see in Decentraland that flesh-and-blood people are hired as avatars to show visitors the way in the digital virtual casino. People all over the world will earn their money by screening the Metaverse for inappropriate or violent content.
It is very important that the Metaverse will not develop like the Internet did in the past. Universities, research laboratories, and military organisations at the time were committed to creating an open and public network that was accessible to everyone on a low and equal basis. The goal was to serve society. Few saw the commercial potential at the time. How different it could be with the Metaverse. Here, the initiative lies primarily with commercial companies: Roblox, Epic games, Microsoft, NVIDIA and Facebook.
‘This Metaverse is going to be far more pervasive and powerful than anything else. If one central company gains control of this, they will become more powerful than any government and be a god on Earth.’ – Tim Sweeney (2016)
Try looking through the lens of these types of companies, and imagine what would have happened if they had been at the cradle of the Internet. The Internet would then have become merely a channel for commercial sales, an overabundance of ads, the harvesting of user data, and the exclusion of healthy competition.
So for the Metaverse of the future, we will need to use open standards and open-source technology. There should be (decentralised) systems where all digital applications are well coordinated, can be integrated with each other, are device independent and can run on different types of hardware and software.
We will need systems that create a Metaverse ecosystem in which individual contributions benefit the whole and put pressure on commercial (paid) products and services. It is essential to have open software that enables interoperability: to switch providers, integrate third-party software, and move data and digital goods autonomously throughout the Metaverse. User data that can be managed by the users without a lock-in by commercial companies.
There are untold barriers that will still need to be overcome to perfect an open, transparent and inclusive Metaverse. And achieving industry-wide consensus on the above barriers and pitfalls will be difficult. After all, many companies are already working on their own standards.
As far as I am concerned, the most important question should be: what do we want the ideal Metaverse of the future to look like? What do we actually want? What purpose should it serve? What are the opportunities? What is the added value? What are the challenges? What could be unexpected consequences? Why might this still fail? Why should this fail? What rules should politicians formulate?
In the coming years, we will have to focus on the above questions and challenges from multiple angles. After all, the Metaverse is being built as we speak, and now is the time to design it to our liking.
Do you have any questions, comments, additions or ideas regarding this article? Please let me know!
With warm regards, Jarno
I would like to thank the following people
– Reading and feedback: Rutger van Zuidam (Odyssey)
– Editing: Gert Gritter
– Visuals: Annelien Pol