So, What’s MetaVerse?

When Facebook changed its name to “Meta Platforms” in October 2021,[1] the word ‘metaverse’ moved from the domain of techno geeks to the mainstream. There is no single definition of the metaverse, which is a portmanteau word combining ‘meta’ meaning ‘beyond/after’ in Greek, and ‘universe’. It is a hypothesized iteration of the internet. The most common description of the metaverse is a virtual-reality space or an alternative economy or world in which users can interact with other users within a persistent computer-generated environment. Users are most often represented by avatars: a digital icon or figure representing a particular person. The metaverse can be accessed using a collection of technologies, for example, computers or smartphones, but more typically via augmented or virtual reality glasses. For technologists to have a preliminary glimpse into what a metaverse might look like, experts suggest watching Steven Spielberg’s movie Ready Player One[2]

One of the most advanced companies on this front is Meta Platforms. Its Virtual Labs division offers virtual reality headsets (Oculus Quest), which from 2022 will also include early-stage mixed reality with face & eye-tracking technology. The firm also offers development tools (SparkAR) that enable creators to build new virtual experiences. An interesting use case is represented by the SuperNatural app, part of its Virtual Labs division, which is an immersive, virtual reality fitness service for the Oculus Quest. The app offers new workouts daily that transport the user to the most stunning destinations in the world while working out with real fitness coaches.

There are seven layers needed to build the Metaverse ecosystem. These include the backbone infrastructure and tools required, spanning connectivity, computing, and the user interface and virtual environment. The 3D environment and geospatial mapping form the Extended Reality fabric, representing the combination of mixed, augmented, and virtual reality. Most of the required technologies to create this ecosystem already exist, while others are still work-in-progress. On top of these, many services will evolve to build out the content (the creator economy), market it (commerce), and make it discoverable (search). The final expression of the metaverse will be through experiences, encompassing games, social interactions, shopping, education, and live events like sports and concerts.

At this point in time, we only have very limited examples of “tentative” metaverses. The best example would be the video games universe, epitomized by the free-to-play game Fortnite or the user-generated platform Roblox. Both of these demonstrate some of the aforementioned characteristics: they go beyond just playing games, by incorporating aspects such as virtual concerts or shopping for digital assets. In these cashless virtual environments, blockchain technology and cryptocurrency could play a key role. The blockchain technology supporting non-fungible tokens (NFTs or digital tokens that represent ownership of assets) could also create an interesting ecosystem for digital content creation and monetization. For example, these could confer the right to use artworks or own creatures created in the metaverse, opening the door to a new virtual economy. In this realm, human creativity has virtually no limits.

The goal with the metaverse is to build an immersive experience that becomes the successor of the mobile internet. Whether it is to meet, work, play, learn, or shop, metaverses will be about consuming content in real-time through virtual experiences; they represent the shift from a place to share experiences, to a place of shared experiences.

Digital history has evolved from what our children would refer to as the Digital Stone Age (pre-internet) to the World Wide Web (access to content Whatever Whenever Wherever), followed by the internet of services, as improving IT platforms unleashed e-commerce and interactivity as well as productivity to drive innovation. The next step stemmed from the rapid proliferation of smartphones, which gave birth to the hyper-connected society and the virus-like spread of social media. Currently, the technology is not just in our pockets, but all around us, thanks to the vast choices of connected devices powered with sensors and connectivity (the Internet of Things).

The Internet has moved from humans talking to humans, to humans talking (or at least trying) to talking to machines and thus to machines talking to machines. This evolution is radically changing human relationships. Sometimes, the technology does not just augment our skills, but substitutes us, when algorithms can perform specific tasks with unrelenting precision. With the advent of the metaverse, we are about to enter another phase, where virtual interactions will once again take center stage.

As the technological foundations are still evolving, no agreed standards for inter-operability across the multiple metaverses have been set. This is in our view a critical point, as consumers expect to seamlessly move and share virtual assets and experiences across various platforms, and developers expect to freely choose the relevant cross-platform tools. Looking ahead, we anticipate that many large-scale platforms will need to adjust their business models to operate within an inter-operable metaverse. Privacy and data security will also be crucial, given the large quantity of potentially sensitive personal information involved. Other concerns revolve around mental health if virtual worlds lead users to shy away from real-world responsibilities and interactions.

Creator tools and workflow advancements are critical to metaverse content creation. We can envisage a world where it is as easy to build content in the metaverse as it is to set up an e-commerce site today. The debate around closed versus open platforms is often mentioned as the key blocking obstacle here, creating a tug-of-a-war situation. Walled gardens (i.e.: closed platforms) typically solve some of these content creation issues because they are willing to offer everything to their users. By contrast, assembling all the necessary tools in an entirely open ecosystem is difficult, at least in the early stages of development. We note that today’s legacy players could have a head start in building the necessary tools and equipment.[3]

We believe the main investable areas will ultimately be across the companies supplying the key building blocks and tools to support the metaverse infrastructure. These building blocks and tools are currently leveraged for other purposes, including digitalization, cloud computing, artificial intelligence (AI), and video games graphics, which somewhat dilutes the thematic exposure purity. The initial basic experiences will gradually get more sophisticated, but in the meantime, this phase will be characterized by heavy investments and little profits, as the lack of interoperability and standards will hamper wider adoption among potential users. We believe the metaverse vision and its economic benefits will not be realized as fast as many hope, creating the risk of disillusion with subsequent risks of drawdowns.

In the medium-term (2025 onwards) the key metaverse building blocks should be mature enough to start creating more specific/dedicated investable business opportunities, especially in the experiences segment. Considering the still uncertain timing and following a standard S-curve adoption, we could see incremental opportunities materialize at this later stage.

Red Sky Alliance is a Cyber Threat Analysis and Intelligence Service organization and offers proactive solutions to protect your networks. For questions, comments, or assistance, please contact the office directly at 1-844-492-7225, or feedback@wapacklabs.com

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