What is the metaverse?
Billions of dollars are flowing into metaverse tech, but fundamental questions remain
From Facebook’s name change to virtual real-estate selling for real-world sums, the “metaverse” has become one of the moment’s defining buzzwords and crypto storylines. As projects focused on the metaverse are busy raising billions of dollars in venture funding, it’s worth taking a few minutes to drill down on some basic questions. What parts of the metaverse are connected to crypto? Are we all saying the same thing when we use the word, or are there many competing visions? Let’s take a closer look.
Every company seemingly wants a piece of the metaverse, a market some analysts expect to be worth more than $800 billion. Why? As Coinbase CEO Brian Armstrong describes it: “The earliest version of the internet, Web1, was about accessing static web pages. Web2 is about interactive, social experiences within closed ecosystems. And Web3 will be about digital ownership within an open, decentralized environment. The Metaverse is the distant evolution of Web3.”
But what is the metaverse, exactly? Depends on who you ask. The word “metaverse” comes from sci-fi pioneer Neal Stephenson’s 1992 cyberpunk novel Snow Crash, and most people seem to agree that the metaverse will one day evolve into an all-encompassing, persistent virtual world like the one that Ready Player One imagines. For now, it’s a catchall term for technologies that point in that direction, including everything from people in Venezuela making a living playing Axie Infinity, to virtual fashion shows in Decentraland, to legacy brands like Nike pursuing virtual goods.
There are many competing visions for how we’ll get there, and not all of them are connected to the crypto ecosystem. The hugely popular digital sandbox Roblox, for example, has attracted the likes of Nike and Paris Hilton to build virtual experiences on the platform. But Roblox lacks interoperability, meaning players can’t use their characters or items in other virtual worlds. Blockchain-powered virtual-world platforms like Sandbox and Decentraland (which have also attracted big brands like Adidas and Samsung) are aiming for an open metaverse in which NFTs, digital real estate, and virtual identities flow seamlessly across virtual worlds and markets without the need for intermediaries.
Microsoft’s $70 billion acquisition of “Call of Duty” maker Activision is being called a metaverse bet by the company’s leaders. Walmart is planning a metaverse foray, featuring its own cryptocurrency and NFTs. And major fashion brands like Ralph Lauren and Gucci have signaled that virtual clothes for digital avatars is going to be a major area of growth for them. Even the NBA is experimenting in the metaverse, with games being available to watch in virtual reality via Meta’s Oculus Quest 2 headset.
Gaming is widely seen as a major driver of metaverse adoption. Globally, the video game market was worth more than $180 billion in 2021. Web3 cypto games like the Pokemon-ish Axie Infinity feature playable NFT characters, bespoke markets for buying and selling in-game goods and real estate, and novel cryptocurrencies — all of which make them strong test beds for future metaverse applications.
Blockchain gaming firm Animoca Brands recently raised more than $350 million at a valuation of $5 billion to advance its mission of building an open metaverse that brings digital property rights to users via blockchain technology and NFTs. Nvidia, a leading gaming chip maker, just unveiled Omniverse — a.k.a the “metaverse for engineers” — which is a collaboration platform that allows engineers and designers to seamlessly work together on projects in virtual worlds.
The smart-contract compatible Solana blockchain is emerging as a favorite for metaverse developers. The Metaplex Foundation, which is aiming to expand the use cases of Solana NFTs, just raised $46 million from investors including Michael Jordan. Meanwhile, Solana Ventures, the strategic investment arm of Solana Labs, recently announced a $150 million fund aimed at funding blockchain-based gaming.
Why it matters… As we hurtle toward “Ready Player One”-style virtual lives, many questions remain — from technological obstacles (including the need to build foundational infrastructure) to basic questions around whether the metaverse will be built on open, interoperable Web3 protocols or consist of a series of “walled garden”-style closed ecosystems. Amid all the buzz — and the inflow of venture funds — it’s important to remember that these are very early days, particularly for the metaverse’s more experimental and open neighborhoods. Decentraland, for example, recently sold a plot of virtual land for a record $2.4 million — but tallied just 1,300 unique users in the past 30 days.
