Unraveling The Emergence Of The Metaverse

The possibility of creating virtual worlds where our digital versions can exist and thrive was once a thing of science fiction. Today, we have a growing number of platforms and companies looking to establish the possibilities of experiencing a limitless digital experience through the implementation of virtual worlds whether decentrally or centrally. In most cases, the term used to describe these virtual worlds is “metaverse.” The whole idea is to provide an escape to users such that they can be a part of a digital utopia where anything and everything is possible. 

However, as hyped as everyone is about this emerging trend, there is so much that we still do not know much about this phenomenon. And so, it has become necessary to explore the concept of a metaverse and how it could change our everyday lives. Also important to note are the growing concerns over the ongoing push for metaverses as well as the roles of cryptocurrency and NFT. 

What Is The Metaverse?

The word “metaverse” first appeared in science fiction novels depicting a dystopian world where the only escape are interoperable virtual worlds beaming with opportunities. The goal is to create a digital realm that holds as much importance as the real world such that participants are willing to invest not only their time but also their resources. In essence, the whole concept revolves around promoting a virtual economy anchored by various elements including a game, a social network, or fashion. Think of it as an ecosystem that promotes highly immersive features that let users own assets in the virtual space just as they would in the real world. 

In some cases, the ownership of items in the metaverse could have implications in the real world. In other words, depending on the design of the metaverse, purchasing an item on the metaverse could give you ownership rights over a real-world asset tied to it. All in all, the goal is to keep users invested in the metaverse by offering economic value in one way or the other. 

Although the idea of a metaverse has been around for a while, it was the introduction of NFT that led to the recent explosion of metaverse-based offerings. We could argue that the ideal metaverse would combine elements of virtual reality, NFT, and the internet to ensure that the visual design and economy of the digital realm in question comes to life. Note that such offerings already exist in the crypto space. 

Prime examples of virtual worlds focused on bringing about the metaverse are Decentraland and The Sandbox, a gaming ecosystem that enables a user-focused economy where all in-game assets can be owned outrightly by players. While these two pioneers have established a working template for creating virtual worlds, there is no saying if subsequent products will retain this design wildly considered as a more consumer-centric model. The alternative model utilizes a more streamlined design deal for companies that want to retain the right to distribute and own in-game items. 

However, before we go into the rudimentary of these two major architectures, it is important to identify the core characteristics of a metaverse. 

What Are The Features That Define The Metaverse?

Notably, the metaverse is fast becoming a buzzword. Therefore, it is understandable that companies have begun to throw the term around to build enough hype surrounding the launch of their new or existing products. This is similar to how “blockchain” was used as a marketing ploy in 2018. There were cases where companies took up blockchain-infused names, even though they had no business doing so. It is important to note that a similar trend has begun to emerge. So the question is: Are there factors to look out for when researching the validity of platforms claiming to be building blocks of the metaverse? Below are some of them:

Avatars

Those that have watched the movie “Ready Player One” will agree that avatars are crucial components of the metaverse. Users ought to be allowed to create digital representations of themselves to make the whole experience as immersive as possible. The enablement of unique identities and characters in a virtual world will likely make it worthwhile to spend time and resources in the metaverse. There is more at stake when the user feels that they are indeed part of something huge and the best way to encourage such sentiment is to allow them to create their digital twin. 

Digital Interaction 

Another way virtual worlds can encourage participation is to enable digital interactions. Note that this involves two main interactive systems. The first is that the ecosystem must define how users interact with other users. On the other hand, there should also be a template for interacting with the in-world assets or items. The platforms that get these two things right are bound to generate some level of success. Hence if you are looking out for pointers on how to spot the sustainability of metaverse-based offerings, you should check out the framework governing users’ interaction with the metaverse itself and in-world assets. 

Digital Economy 

There is no real reason for creating a metaverse if it does not revolve around an economy. Hence, it is critical for such offerings to create an economy that allows users to generate value by contributing positively to the ecosystem. Whether users are rewarded or paid to create or interact with content, the metaverse should generate economic value for everyone involved. This is why marketplaces are considered integral components of the metaverse. The metaverse needs to provide the tools and strategies to generate value. 

The Scope Of The Virtual World 

One of the things that make the concept of metaverse so appealing is the endless possibilities that it promises. The metaverse embodies a limitless realm that can evolve beyond the imagination of its creators. Take The Sandbox for instance. This platform allows users to keep creating new locations and games within the ecosystem. With this type of framework, it is clear that The Sandbox will continue to grow in size as long as users continue to contribute to the ecosystem. As such, the metaverse can grow infinitely, which is why a lot of companies have begun to identify with this possibility. Just this month, Facebook has undergone a major business rebranding all in the hopes of establishing itself at the forefront of the metaverse’s conversation.

The Common Frameworks For The Metaverse 

As mentioned earlier, different strategies can be used to create and operate in the metaverse. Note that the framework at play determines how users would interact with both the platform and its operator. The frameworks are:

The Decentralized Model

As its name implies, decentralized metaverse-based offerings do not need to implement a central authority to govern the day-to-day activities within the ecosystem. Here, the users are given leeway as to how they decide to interact with in-world items. In other words, they offer users the right to own assets outrightly. As such, when you buy an in-game asset, you will outrightly own them. With this system, it becomes possible to sell in-world items. 

For this to work, these offerings must exist on the blockchain. Such ecosystems require a distributed network so that the platform is impervious to security risks associated with centralized systems. Examples of platforms utilizing this framework are Decentraland and The Sandbox. What you will notice about these two platforms is that they incorporate non-fungible tokens as the digital asset standard for their in-world assets. From our previous discussion on non-fungible tokens, it is clear that ownership rights and rarity are two key benefits of implementing an NFT-based economy. 

Before the advent of NFT token standards, it was almost impossible to claim outright ownership of digital assets nor was it straightforward to establish the uniqueness and rarity of a digital item. However, all these changed thanks to the immutability and decentralized nature of blockchain technology.

Advantages Of A Decentralized Metaverse

Full Autonomy 

The first thing that you need to know about the decentralized framework is that the users get to self custody their assets. This design decision provides users with full autonomy over their assets. Whether the digital item was purchased, created, or earned, the owner has the right to store it in a private wallet or sell it to other users. The mere fact that the decentralized system preserves the autonomy of participants is perhaps the most compelling attribute of this array of virtual worlds. 

Decentralized Governance 

Another thing that sets the decentralized model apart is its governance model. One of the perks that users enjoy is that they get voting rights when it comes to the running of the platform in question. The goal is to remove all the elements of a bureaucratic system and replace it with a community-focused architecture that tries as much as possible to democratize the decision-making process involved in the day-to-day running of virtual worlds. In other words, this ecosystem may need to issue governance tokens that will determine the voting power of each user interested in having a say regarding the future of the metaverse. Although not many decentralized offerings have implemented this functionality, ensuring that there is no concentration of power will always be one of the core principles of a decentralized metaverse. 

Distributed Infrastructure 

From what we have learned so far about blockchain technology, there is a level of assuredness that distributed networks have over centralized infrastructures. The first is that there is no single point of failure since everyone connected to the network operates as a server. It also helps that the database system is distributed. Hence, an entity can’t infringe on the security and privacy of users’ data. Since no single entity is tasked with the responsibility of custodying users’ data, the possibility of being a victim of data privacy abuse is very low.

Non-Fungibility And Ownership Rights

Apart from the distributed resources that blockchain relies on, it also depends on sophisticated encryption technology to ensure that data stored on it are immutable. And so, there is no altering the identifiers that showcase the uniqueness of each digital item launched on the metaverse. You will agree that tokenizing digital assets as non-fungible tokens showcases the authenticity of such items. Hence, when the metaverse incorporates NFTs, as decentralized virtual worlds usually do, it goes to show that each in-world item does exist. 

More importantly, the decentralized metaverse promotes a transparent ecosystem where the ownership of digital assets is uncontestable. Anyone can verify the owner of an NFT on the blockchains. This added feature ultimately reduces the occurrence of fraud. 

The Disadvantage Of The Decentralized Metaverses

Clunky Governance System 

Recall that the ultimate goal is for users to collectively govern the project. While this governance system has its perks, it also has some peculiar drawbacks. The most notable however is the somewhat complex decision-making process that decentralized networks utilize. Before a decision can be reached, a significant number of governance token holders must reach a consensus. It is worth mentioning that this model is not ideal for situations where decisions have to be made urgently. This is true for scenarios where there has been an attack or when urgent action needs to be taken to stop an attack or quickly fix an unforeseen malfunction of critical infrastructures. Understandably, waiting for participants to vote in such scenarios reduces the capability of the metaverse to react swiftly when necessary. 

Lack Of Regulations Or Standards 

When decentralization is at the core of a product, it becomes a lot more difficult for regulators to define a suitable regulatory framework to protect everyone involved. This has been the recurring theme as regards regulation in the crypto world and it is now extended to the emerging NFT-based metaverse. Note that the metaverse is a new concept. Therefore, it may take a while before regulators fully grasp the rudimentary and set up ideal regulators to protect users. It becomes even more technical when blockchain and decentralization are involved. And so, it is safe to say that regulation will soon emerge as a major talking point, especially in cases where governance is decentralized. Hence, this may discourage investors and participants that would rather get involved with regulated offerings. 

The Centralized Framework 

One thing we have learned in the past few months is that established brands are not shying away from dipping their proverbial toes into the virtual world. This is exemplified by Facebook’s decision to go all out to rebrand its business around the metaverse. And if history is any indication, these companies would likely opt for a more centralized system where they retain a level of control over the day-to-day running of their virtual space. More specifically, they will take up the role of a central authority and very much have the final say on issues relating to governance. 

Here, it is not a must that the platform incorporates blockchain technology. They may settle for a traditional framework or opt to implement a hybrid system that combines conventional and blockchain technology. Whichever model is used to create a centralized metaverse, one thing remains constant: The service provider or creator has the final say over core operations. As you must have noticed, this is in contrast to the system found on decentralized frameworks. Like their decentralized counterparts, centralized virtual worlds also have their strengths and downsides. 

The Advantages Of The Centralized Framework

Compliance

The most compelling argument for the centralized model is the fact it offers the template required to comply with market standards and regulations. Since there is an entity governing this virtual world, there is always a way to hold those in charge accountable, especially when their actions or inactions could put users at risk. Also, it becomes easier to impose Know Your Customer (KYC) procedures and carry out anti-money laundering checks on users. 

Centralized Governance 

Although the centralized model of governance has its many flaws, the one thing it has over the decentralized method is that it is a lot faster to make decisions during emergencies. Since power is concentrated at the top, there is no need to consult the entire network of users before deciding on issues that require urgent actions.  

Compatibility And Usability 

Centralized platforms usually offer more in terms of user experience. This is because they are compatible with established systems including popular payment solutions, conventional tools, and much more. Also, they almost always implement simple designs and processes to ensure that users that are not technically inclined can still use their products. Unfortunately, the same can not be said of crypto and blockchain-based products which often come with convoluted processes.

The Disadvantages Of Centralized Metaverses 

Lack Of Outright Ownership

There is no guarantee that the new breeds of centralized virtual worlds would allow users to own in-world assets outrightly. History has shown that centralized systems strive to keep some level of control over their platforms, most especially when there is an economy built around it. So, we expect that centralized platforms will set up systems that will allow them to influence the economy of their virtual world in one way or the other. This is unlike what we are used to in the crypto scene where developers tend to transfer power back to the community. 

Single Point Of Failure 

Much like everything that relies on a conventional system, there are bound to be concerns raised about the susceptibility of the centralized metaverse to a single point of failure. We recently witnessed how devastating such issues could be when Facebook went down for hours leaving millions of users stranded. 

Data Privacy Abuse And Censorship

What we have discovered over time is that centralized social media networks tend to handle users’ private data in a lackadaisical manner. Then there is the propensity of centralized platforms to restrict users or censor their activities. In other words, the centralized metaverse might continue this cycle of infringements if the same approach to data privacy is maintained. 

What Are Experts Saying About This Emerging Trend?

Understandably, the hype surrounding metaverses has sparked lots of conversation both in the crypto community and in mainstream media. I believe that most commentators seem to agree that the metaverse hype is not a fluke. For one, Johnny Lyu, CEO of KuCoin, wrote on Cointelegraph that the metaverse movement creates a massive investment opportunity for investors:

“For early-stage investments, the best options are going to be in the crypto space. Gaming, hardware and content creation companies are going to be launching initial coin offering (ICO) and initial DEX offering (IDO) token sales, meaning that investors can get on board long before these companies go public. When we consider the total addressable size of this market — and include the core growth segments such as creators, hardware, advertising and eCommerce — it could be worth more than $1 trillion. When we also consider how essential the internet as it currently is to everyday life, that’s what the Metaverse could become in a lot less time. As an investment opportunity, metaverse companies, especially ones at the ICO and IDO stage are unparalleled in their upward potential, provided that you pick wisely, of course. We are witnessing and playing a part of something exciting. The internet and the way we experience reality will never be the same again with numerous upsides from the accelerated expansion of metaverses and virtual realities.”

In a similar vein, Eli Tan wrote on the appeal of the metaverse, why they are important and how they could impact the future of the internet. The article reads:

“Even if the metaverse fails to reach the epic vision many have in store for it, it could fundamentally change the way we interact with the digital world. A collective virtual experience could bring new opportunities to creators, gamers and artists in the same way non-fungible tokens (NFT) have, not just reshaping the creator economy, but inventing it anew. The virtual world of the metaverse could become its own trillion-dollar industry. A go-to for entertainment, commerce and for some, even a place of work. The metaverse is not being described as an extension of the internet but a successor. And it’s being built using blockchains and decentralized applications.”

Apart from the potential investment opportunities embedded in the metaverse, there is also the possibility of escaping the limits of the real world. Holly Atkinson explained this possibility in an article published on Coindesk. In the article, Atkinson wrote that the metaverse presents an opportunity to double down on the unlimited nature of the virtual space to create experiences that are far more compelling than anything we have ever witnessed before. Atkinson wrote:

“In today’s metaverse, people are represented by digital avatars that roam in virtual worlds such as Roblox or Decentraland, a decentralized 3D virtual reality platform. However, there is a disconnect between the user’s real self and the digital representation.From a brand perspective, this gives companies the opportunity to offer their goods within two mediums: the physical world and the virtual world, where avatars can be outfitted in the latest digital sneakers, hoodies and handbags. Indeed, this new space offers an arena where users can become both virtual and external brand ambassadors. It is shortsighted, however, to see the metaverse as simply a digitized version of the real world where brands will emulate existing shopping conventions and bricks-and-mortar stores. What is so special about the metaverse is that it will allow companies to break from convention and create a world that is totally unbounded by the existing limitations of physical space.”

Atkinson added that the metaverse had the potential of improving how brands retail their products and services to customers. Now more than ever, brands have what it takes to push for more creative and imaginative campaigns in the virtual space that transcends what we are used to in the real world:

“Brands will be able to create experiences that couldn’t occur in the real world, fueled by imagination and creativity. No longer will the physical store be the focal point of sales – there will be opportunities for the real world and virtual worlds to interlink, creating a whole new experiential dimension for businesses and consumers alike. This could take the form of integrated digital and physical quests that will allow customers to search for branded items in the metaverse, while completing tasks that will also take them to in-world shopping destinations to complete actions or collect their winnings.”

However, all this boils down to the type of system at play. Will the activities on the virtual space have any real impact in the real world or is a total disconnect between the two realms? To answer this question, it is critical to revisit the importance of incorporating a decentralized framework for metaverse-based platforms. Recall that virtual worlds that support NFTs provide a lot more value to users. There is nothing as immersive as outrightly owning assets purchased, earned, or created on virtual platforms. 

Atkinson best explained the pivotal role NFTs will play in the emerging metaverse when he wrote:

“Offering non-fungible tokens (NFTs), digital certificates of ownership that have seen a massive rise in popularity this year, will be essential for businesses looking to make waves and create a brand identity in the metaverse. Players in the metaverse gain social capital through ownership of items whose value is verified and whose rarity is known. Brands will need to offer players who wish to buy a pair of limited edition digital sneakers, for instance, the certificate of authenticity that proves that they own this digital asset. Not all brands selling in the metaverse offer NFTs. In the instance of the Gucci handbag that sold for more than $4,000, the buyer only owns the item on Roblox, not via an NFT, which means if Roblox disappears in 50 years, so does the item. In order for the concept of ownership to have meaning and longevity in the metaverse, NFTs will be key.”

Another important deciding factor is the possibility of empowering users with the tools to create new content, new NFTs, and even new games on the metaverse. As Atkinson puts it, the inclusion of users in the evolution of the metaverse is a recipe for success:

“Part of the draw of the metaverse is that users have a hand in its creation. It is a decentralized space where users can create and explore however they want. This is the case in many existing gaming platforms, including Roblox, where users of the platform build games through a developer toolkit. From a brand perspective, the decentralized nature of metaverse commerce provides an opportunity for brands to sell to players without the help of intermediaries like Amazon who capture significant portions of the profits and technology. It offers a space where smaller sellers will be able to reclaim the attention of their customers, while maintaining control of their profits and exposure. A future where the virtual economy has as much value as its real-world counterpart is coming. Over the next decade, technology will develop so much that the physical and digital world will become indistinguishably integrated. As brands pivot to align themselves with this new future, it is essential that they redress their focus to create user-driven immersive experiences that place ownership, creativity and inclusivity at the heart of their missions.”

However, as noted earlier in this article, the centralized framework for creating and running virtual worlds does have its perks. The most notable advantage that centralized virtual ecosystems will have over their decentralized counterparts is their usability. Furthermore, they have access to some of the most popular brands. Hence, convenience will come to the fore as a deciding factor. While some users will very much favor the decentralized model, others will settle for convenience over functionality. 

Interestingly, Jeff Wilser echoed this sentiment recently when he said that the allure of a centralized metaverse will be too compelling to ignore:

“While a blockchain metaverse might win every argument on the principles – empowering players, decentralizing the tech, actual ownership of digital assets– in practice, for the average user, how does that stack up to the easy lure of flying through the air or clashing lightsabers with Darth Vader? The tech behemoths have seemingly every advantage: bottomless resources, easy access to brands (Avengers metaverse?) and, in the case of Facebook, a built-in user base of 2.8 billion. Blockchain is still the underdog… Just look at the internet. For decades, most of us have chosen – whether we knew it or not – the sugary speed and convenience of big tech centralization. Even if it cost our privacy or agency, we enjoyed our stored passwords, auto log-ins and using Google, Apple, Facebook et al. to make our digital lives smoother. We preferred a centralized Darth Vader to the decentralized maze. Time will tell if we choose differently in the metaverse.”

Speaking of big tech centralization and how it can impact the formative years of the metaverse, there is a growing concern that this emerging trend will only give tech magnates another avenue to retain their positions at the top of the food chain. In line with this train of thought, Ian Bogost argued that the metaverse is an ambitious attempt by tech companies to further enrich themselves at the expense of the consumer:

“The technical feasibility of such an outcome is slight, but don’t let that bother you. More important is the ambition it represents for tycoons who have already captured so much of the global population’s attention: Even as a hypothetical, a metaverse solves all the problems of physics, business, politics, and everything else. In the metaverse, every home can have a dishwasher. Soft goods such as clothing and art (and receipts for JPEGs) can be manufactured at no cost and exchanged for nothing, save the transaction fees charged by your metaverse provider. A metaverse also assumes complete interoperability. It offers a path toward total consolidation, where one entity sells you entertainment, social connection, trousers, antifreeze, and everything in between. If realized, the metaverse would become the ultimate company town, a megascale Amazon that rolls up raw materials, supply chains, manufacturing, distribution, and use and all its related discourse into one single service. It is the black hole of consumption.”

Regardless of this reservation, Janine Yorio and Julia Schwartz of Republic Realm, a metaverse/NFT innovation, and investment platform, believe that the explosion of metaverse-based offerings will give birth to a new industry that is ripe for the taking. In an article co-written by Yorio and Schwartz, they explained that the advent of the metaverse creates opportunities for early adopters to emerge as the metaverse experts of tomorrow:

“It is at this point when an industry is taking shape — like primordial ooze — that opportunities are greatest, and not just for economic gain but also for personal brand building. When you join a company at the earliest stages in a new industry, you become not only a company co-founder but also an industry pioneer. Those early employees lay the foundation for the entire industry, shape its trajectory and set the ethos and ground rules. Around the Metaverse, a new generation of leaders will emerge. It’s an exciting time to consider becoming one of them. Metaverse jobs will span between everything from blockchain and gaming programmers to animators, designers, marketers and even accountants, recruiters and lawyers.”