The Metaverse – redefining our reality?

– Joel Skipper, D2 Legal Technology

It’s all well and good hearing that the metaverse is the next big thing, but just what is it? Rather than viewing the metaverse as some abstract land, it’s best to see it as the next evolution of the internet and how we will use it. In short, the metaverse is the internet in 3D.[1] Essentially, the purpose of the metaverse is to blur the lines between the digital and physical world through the adoption of augmented and virtual reality.

The platform is made up of four building blocks. First, the space which is to be a shared virtual world with multiple layers that people can access via the internet. Second, the interface itself, which utilises augmented and virtual reality through headsets (and once technology catches up, potentially mobile devices as well). Through this technology, the user is transported from the physical world into the digital. Third, the monetary infrastructure which looks to in-game tokens and cryptocurrencies allowing for digital payment methods. This is a vastly growing ecosphere and one that will play a fundamental roll in the metaverse.  Fourth, the ‘compute’ which refers to the enablement and supply of computing power.  That is to say, the compute is the software which brings objects into 3D.

The applications are near limitless.  If you’ve ever read Ernest Cline’s Ready Player One, or watched the Steven Spielberg adaptation thereof, you know what we mean. It paints a brilliant illustration.

Use cases of the metaverse include, but are not limited to:

–           Virtual advertising

–           Education

–           Healthcare

–           Social commerce

–           Digital events and concerts

–           Tourism

–           Public services

Microsoft has already begun its venture into the space through its ‘HoloLens’, which is the headset Microsoft designed to be used in the healthcare industry as a means of reducing costs and enabling face to face patient interaction – a feature which was particularly helpful during the pandemic.[2] Headsets also allow people to play sports, such as tennis against each other from anywhere in the world.[3]

The Investment Opportunity

The crypto space is one that is rapidly being adopted, to the extent that it is now comparable to the growth seen in the early days of the internet, from the 1990s, to early 2000s. Imagine, if you will, looking at Google’s stock in 2004, back when their IPO offered shares at $85, and fast forward five years and that same stock is worth $230. Ten years later it’s $573 per share. Now it trades at over $2000. Google’s expansion came alongside the growth of the internet: as more and more people adopted the technology, more and more users moved to Google. It is an incredibly fast-growing space, from 413 million users in the year 2000, to over 4.9 billion today.

Compare that to the metaverse. The metaverse represents an evolutionary, rather than revolutionary, step of the internet. The metaverse ecosystem encompasses various areas that are seeing massive growth with users increasing at a rate of over 100% a year.[4]  The metaverse has also been predicted to build an economy worth $8 to $13 trillion by 2030.[5] Of course, all of this depends on mass adoption which requires the requisite technology to be implemented.

The growing exposure of the metaverse makes its further expansion a near guarantee. But don’t just take our word for it, Epic Games has raised over $1bn in private capital funding to accelerate its building work in the area, and of course Microsoft has also spent near $70bn in its acquisition of Activision Blizzard.[6] Finally, Facebook, in October 2018, changed its name to Meta, making a statement of their intention to expand into the space. These tech giants are at the tip of the spear in developing the tools to build the metaverse.[7]

The Platform

So just how will this platform operate?  To understand this, one needs to understand ‘Web2’, a well-trusted and frequently used platform which would create a ‘closed’ metaverse.  Web2 is what the likes of Facebook, Google, Amazon and the like operate on. It allows for the operation of cookies and password sharing – the little things that make the internet experience that bit smoother.  But a key feature of Web2 is that these companies act as a central point for data to flow.

Evolving from this, Web3 represents the next iteration of the internet which moves away from these central data points.  The platform is built on the principle of decentralisation; it’s community owned and governed, interoperable and ensures privacy by design. This is important, and especially from a privacy standpoint. VR and AR technology has an ability to collate a great amount of data to an intrusive extent. For example, the VR technology may observe things like hunger cues and use that information to trigger food advertisements. In a Web2 metaverse, based primarily on privacy by policy, monetisation of data is far more likely to follow the same patterns of Web2 we see today, but on a platform that can allow for far more invasive methods.

Web3, on the other hand, would be decentralised. This means that there isn’t the same ability to monetise data. Web3 is blockchain-based, peer-to-peer and has sign-in wallet utilisation with decentralised storage. In simple terms, your data goes from A to B within a decentralised system.  In a centralised system, like in Web2, data moves from A to C who can store and monetise said data and then send it back out to B.

Challenges

Regulation: Governments need to develop the regulatory structure to tackle the challenges that the metaverse will pose.

Points of focus will be regulating:

  • Harmful and illegal content
  • User privacy
  • Ownership
  • Competition and Antitrust

 Accessibility, Scale and Technological Shortcomings

There are a few issues that stand out.  Web3 is still in its infancy and thus lacks the required size and capabilities to build the metaverse. Currently 6.64bn people have access to a smartphone.[8] With such widespread adoption of the devices, it is likely mobile phones will be a gateway into the metaverse, although improvements need to be made before this can happen.  For example, widespread access to 5G is required to have the requisite speed needed to operate on the system. But with such vast numbers of people operating on a smartphone and adoption being a key consideration to stimulate cashflow, the portable device will more than likely have a role to play in the metaverse.

Additionally, latency is very low.  ‘Latency’ is the time it takes data to travel from point A to point B and back.  For the metaverse to provide a realistic experience, speeds need to increase from their current 170 milliseconds (ms) to 133ms for the average user, and 83ms for more demanding programs.[9]

Further, investments need to be made into hardware, networking, processing power and data to reach the capacity levels required to operate in the metaverse. Experts in the field, such as Raja Koduri mentioned that there needs to be a 1000x increase in computation efficiency from today’s state.[10]

The Takeaway

The metaverse has a variety of uses that are becoming more realistic and within reach as time goes on. However, there are still shortcomings and decisions that need to be made to allow the metaverse to come into fruition.  Many of these decisions will impact the development of the platform and our experience of it – or, dare I say, shape up what is reality.

 

[1] Deloitte, What is the Metaverse, 2022 https://www2.deloitte.com/uk/en/pages/consulting/articles/what-is-the-metaverse.html?gclid=CjwKCAjw7cGUBhA9EiwArBAvos5G6OR8dpiNR9imV3hKTbL7A4_RzB8CKHFixCxHtHDegnLZZ_6I_xoC42IQAvD_BwE
[2] Microsoft, Enhance Patient Treatment, 2022, https://www.microsoft.com/en-us/hololens/industry-healthcare
[3] The University of Edinburgh Business School, The Power of Virtual Reality, https://www.business-school.ed.ac.uk/alumni/aluminate/features/the-power-of-vr
[4] Mail & Guardian, Crypto in 2022: From crypto adoption outpacing the internet, to which sectors are worth watching out for, and everything in between, 25 Jan 2022, https://mg.co.za/special-reports/2022-01-25-crypto-in-2022-from-crypto-adoption-outpacing-the-internet-to-which-sectors-are-worth-watching-out-for-and-everything-in-between/#:~:text=Cryptocurrency%20users%20are%20growing%20at,1%2Dbillion%20users%20by%202024
[5] Citi GPS, Metaverse and Money: Decrypting the Future, March 2022, pg. 4
[6] Microsoft New Center, Microsoft to acquire Activision Blizzard to bring the joy and community of gaming to everyone, across every device, Jan 18 2022, https://news.microsoft.com/2022/01/18/microsoft-to-acquire-activision-blizzard-to-bring-the-joy-and-community-of-gaming-to-everyone-across-every-device/
[7] Other noteworthy companies include: Pixelynx, Crucible, Mythical, Hadean, Nvidia and Manticore
[8] Ash Turner, How many Smartphones are in the World?https://www.bankmycell.com/blog/how-many-phones-are-in-the-world#:~:text=How%20Many%20People%20Have%20Smartphones%20In%20The%20World%3F&text=According%20to%20Statista%2C%20the%20current,world’s%20population%20owns%20a%20smartphone.
[9] Supra 5, Sri Iyer, CEO and Founder of game performance, pg. 65
[10] Supra 5, pg. 69
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