In this note, I often write about faraway places – most of which I have visited. COVID has deprived me and many others the chance to add to my list of ‘rare places’ but it may well have enabled a new land called ‘the Metaverse’. The Metaverse is something – socially and economically – that we will hear a lot more about in the future, and one that many people will struggle to comprehend. A sure sign of its arrival is that the likes of Facebook and Microsoft are pouring billions into the building out of this virtual reality universe.
To start with, I confess I have little direct experience of the Metaverse, so I write about it somewhat uneasily, but like bitcoin some five or so years ago, it is popping up on the radar in numerous blogs and newsletters and there is a sense that the metaverse itself is becoming better organised and notably, developing its own economy.
As I see it, the rise of the Metaverse is the product of technological (blockchain, virtual reality) changes as well as social ones – most of which I have found bizarre but that more oddly have been sanctioned by the social side-effects of the coronavirus crisis. They include online funerals, the virtual work phenomenon and contactless dating (there is a section on this in Chen Quifan and Kai-Fu Lee’s forthcoming book ‘AI2041’).
The Metaverse then, to have a go at defining it, is where people enjoy digital experiences (driven by augmented and virtual reality) that are real to them in the sense that they involve activity, interaction and emotion, and that are increasingly anchored by infrastructure like the digital economy, digital identities and decentralised forms of organisation.
To clarify this a bit, some examples of the Metaverse or ‘mirror world’ are online video game Fortnite, virtual reality design tools for architects, social media tools like SnapChat’s Lens Studio, augmented reality tools that superimpose an interactive virtual world on a real one like a street map (on a car windshield for instance) that has pop ups signs customised for the user, and of course the growing ‘esports’ and virtual sports industry.
To give a sense of the amplitude of the MetaVerse, in China 10% of the population (i.e. more than 100 million people) use the online game (or mobile multiplayer battle arena!) Honor of Kings on a daily basis.
So, the Metaverse is catching on. It might be cruel, careless and complacent of me to portray it as one where unhappy people in windowless rooms leap to the MetaVerse where they are happy, fulfilled and rich. I am perhaps only revealing how old fashioned I am – most of the things I like reading, travelling, running and the odd drink, are real rather than virtual experiences. For instance, a virtual marathon is nothing like a real one.
Beyond my own crude view of the MetaVerse, its growth will highlight a number of new trends and sources of friction between the real and virtual worlds. This is often the case when new eco-systems grow, let alone new universes or ‘shared-worlds’. One area of contention is identity.
In the real world our identities are largely set by factors like birth, geography, culture and education, and are largely known to the extent that they are captured by passports and id systems and by our interactions with other humans. In the MetaVerse, one can construct a new identity, which is free of geography and social ties (theoretically a more egalitarian setting), and potentially very different to the user’s real-world identity.
One lesson we learn from social media is that people behave differently online to in the real world and are often badly behaved given the cloak of a twitter handle. The MetaVerse is likely no exception, and apart from scoring systems and digital contracts on blockchain, is hard to police.
This also opens the intriguing question that, if the Metaverse does grow in terms of enjoying hundreds of millions of active participants, who governs or polices the MetaVerse?. The idealist’s answer is that it is uniquely organised through decentralised contracts and relationships, and that various avatars have their own codes of value. They may also be established by the programmers of online games and engineers at Facebook, betraying the reality that the organisation of the MetaVerse reflects the nature of those who build it.
A backlash against aspects of the MetaVerse has already begun. This is partly because in some countries – notably Japan where 40% of millennials reportedly are virgins – the use of social media and prevalence of fantasy based augmented reality, diminishes socialisation. In China, there is a backlash against the overuse of video gaming, screens and social media by the young, to the extent that last Thursday the share prices of ‘metaverse infrastructure’ providers Bilibili Inc. and Kuaishou fell by about 8%. It is an interesting, and open question as to whether the desire by the Chinese authorities to control the internet more tightly, pushes Chinese people towards the MetaVerse or limits their access to it.
One area where the MetaVerse is indubitably on the rise is the economy. NFT’s (non-fungible token) are a component of the MetaVerse (Sotheby’s announced on Thursday that two ‘Bored Ape’ nft’S sold for USD 24.4mn), and we might say that the main commodity of the Metaverse is Ethereum which effectively fuels the construct of many of the elements that make up the MetaVerse.
The Metaverse economy – where people for example buy real estate in virtual reality games or sponsor avatars – will, if futurologists are to be believed – be a big thing. Predictably we will see MetaVerse investment funds and maybe even specialist corporate finance boutiques for Metaverse assets.
What is not yet clear is the extent to which the growth and inflation of MetaVerse assets is a function of the record levels of liquidity in the global financial system – I suspect that this is the case, and the real tests of the MetaVerse may come when, and if, the Federal Reserve raises interest rates.
Have a great week ahead,