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Buzzwords come and go in the technology business faster than a high-speed Elon Musk Hyperloop train.
The metaverse is the industry’s latest fascination. While most people are still trying to understand exactly what a metaverse is, major tech players are betting their future on the promise of this new paradigm.
It all started when Facebook founder Mark Zuckerberg renamed his social media company Facebook to Meta back in October 2021. This re-branding marked a shift in focus to the next digital frontier and to expand beyond a centrally controlled social platform that will continue to garner regulatory restrictions.
Then Microsoft shocked the world by announcing its intention to purchase Activision Blizzard for $68.7 billion despite several allegations of workplace misconduct, executive resignations, and a plummeting stock price. Barring any intervention from the FTC, the acquisition is set to make Microsoft the third-largest gaming company (after Tencent and Sony) as it adds blockbuster titles such as Call of Duty, World of Warcraft, and Overwatch to its offerings and gains more than 30 game studios (compared to Sony’s 17). But this acquisition isn’t so much an investment in gaming as it is an investment in the metaverse. Gamers are a foundational element of this future world, and their virtual universe is likely to be the foundation of the metaverse.
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It’s clear many tech companies are now on a path to build a next generation, immersive internet. But who will get there first, and what form will it take?
The metaverse still means different things to different people
Many people are still struggling to comprehend exactly what the metaverse is and what promise it will deliver. On a conceptual level, the metaverse has been positioned as the next generation internet that provides a way for us to make our physical lives seamlessly integrate with our virtual lives, creating real-time immersive experiences. However, given it doesn’t refer to a specific technology, people find it very hard to fully visualize the potential of this future social interaction and internet platform. It’s understandable – imagine talking about today’s Internet in the 1970s; while the foundation was there, it would have been hard to envision the applications and experiences we are accustomed to today.
The metaverse will be a combination of virtual reality (VR) and augmented reality (AR), which will be created as a layer of abstraction above the physical world and interoperate with how we currently live.
What’s certain is that the metaverse will be a new paradigm where our digital and online lives converge. How that will exactly happen is yet to unfold.
Defining the architectural tenets of the metaverse
Jon Radoff, entrepreneur and game designer, has provided one of the best visions of the architectural components and layers of the metaverse. The seven layers he describes — Experience, Discovery, Creator Economy, Spatial Computing, Decentralization, Human Interface, and Infrastructure — create an end-to-end value chain for the metaverse. Experience dematerializes our physical space to unleash a graphical space and social immersion, where content is created not only by people but dynamically from interactions and feeds. Discovery is the mechanism that enables people to find sources of information around new experiences. NFT’s are rudimentary examples of this.
The creator economy contains all the technologies creators will use to create experiences, which will be increasingly live, social, and continuously evolving. Spatial computing enables 3D spaces, integrates data feeds from devices, and recognizes voice and gesture control to expand the traditional boundaries of interactions. Decentralization relies on technology such as blockchain to enable value exchange between entities. Human interface fuses the computer and human body to become an integrated interface for navigating the metaverse. Infrastructure provides the foundational technology layer powered by the Cloud, 5G, AI, next generation mobile, and wearable devices.
Most of the components of this layered architecture are here today, albeit some still in an emerging state of maturity, which means elements of the metaverse may actually be realized sooner than expected.
Content creators fuel the metaverse experience
The metaverse will be fueled by numerous content creators that will construct virtual environments such as concert venues, casinos, theme parks, sports arenas, etc. using digital assets and content.
Social media changed the content creator paradigm as it magnified existing content and enabled more people to become creators with shorter form content, the explosion of video-based content and ubiquitous mobile access. Without creators, the metaverse will be nothing but a tech enabled platform – no different than if Instagram or TikTok didn’t have user generated content.
However, more importantly in the metaverse, these creators will own their audiences allowing them to monetize their content though NFTs. This content will no longer be two dimensional but immersive and interactive. The metaverse will not only cater to broad audiences but will be filled with very niche and unique worlds creating personalized experiences.
The barrier to entry will be significantly lowered as artists will be able to create environments and performances directly without relying on the large distribution companies that control the industry today.
NFTs become the vehicle of distribution
NFTs (non-fungible tokens) are a new class of digital assets, which are unique, cannot be copied, and are associated with specific ownership rights. An NFT is stored in the blockchain and acts as a certificate of ownership around a digital asset such as a video, photo, music file, digital art or any other type of collectible. An NFT can also be a ticket to a concert or sporting event with an embedded, personalized access like a specific time to have a meet and greet with an artist.
There are several NFT marketplaces where consumers can mint, purchase, and sell these digital collectibles. OpenSea is the original NFT marketplace and by far the largest, but over 20 other key NFT marketplaces have now emerged. OpenSea has reported a monthly transaction volume of $3.4 billion, which has fueled rapid growth and interest from the venture community.
The entertainment industry has quickly flocked to providing NFT’s with notable artists such as Weezer, Enimen, Snoop Dog, Mick Jagger, Tom Brady and many others providing private party passes, personalized memorabilia, exclusive event tickets and other priceless experiences.
However, the challenge many of these NFT marketplaces will face is how to deal with privacy and to guarantee the authenticity of the assets being minted. NFTs are supposed to be unique and nearly impossible to replicate, but artists can still create multiple NFTs for the same asset (art, music, etc.) and market and sell them differently. There are also challenges of where to store these large assets, which are currently be managed and stored “off-chain”
NFT’s role in the metaverse will expand by leveraging smart contracts for transactions such as real estate purchases. Decentraland has emerged as the most popular platform for showcasing digital real estate in the metaverse.
NFTs are still in the early phases of stabilization and have some critical shortfalls to overcome, but they will soon move beyond collectibles and will start to represent a more diverse set of financial instruments, such as insurance, stock options, loans, and real estate.
Web 3.0 decentralizes the internet and empowers users
As if the metaverse wasn’t confusing enough, enter Web 3.0. These terms are frequently used interchangeably but represent two very different concepts. In some ways Web 3.0 is more of logical, linear progression of today’s internet, Web 2.0, which was born around 2004 when static websites gave way to more interactive platforms. Web 3.0 aims to create more decentralized, open standards for data, moving away from today’s walled garden ecosystems created by platforms like Facebook, AWS, and Google. So instead of all content being created and controlled by these big platforms, Web 3.0 users will be able to create content in a distributed fashion and ultimately control the monetization of that content.
Web 3.0 will use open platforms that give back control to the end users. Instead of browsing the internet with Chrome, users will use Brave, an open-source Chromium based application that lets you interact with websites, run web apps, and display online content. The major difference with Brave is its aggressive anti-ad approach that strips online ads from websites. Users will navigate social networks not with Facebook but with applications like Steemit, a blockchain based social network that gives users control over their personal information, protects their content, and provides an ownership stake in the platform based on their content contributions.
The metaverse remains a more conceptual vision around a much different paradigm for experiencing the world and interacting online. In the metaverse time continues whether you are there or not. It provides a deeper, more visceral, and creative experience. The metaverse will be built on a variety of technical platforms, many of which will be a result of Web 3.0 technology.
Gaming is the foundational platform
Some elements of the metaverse have been evident for a while, with the gaming industry building foundational components for many years.
Epic Games’ blockbuster platform Fortnite continues to be the leading example of a future metaverse world, despite entering the race somewhat accidently back in 2017. Fortnite’s foundation is as a survival game where 100 players drop onto an island and fight to be the last player standing as a storm closes in. But because it’s designed by many it continues to evolve with both planned and spontaneous events occurring, providing an experience that spans technology platforms and the real world.
Another long-standing example is Roblox, an online platform and storefront founded in 2004, where users assemble to play games. Roblox is not a game itself but rather a gaming environment where gamers are playing online games developed by others within the platform. It’s been highly successful and now has 47 million daily active users and 9.5 million developers that build gaming experiences. Many games have gone viral, like Adopt Me!, a pet simulation game where kids buy and care for animals that has reached over 1.6 million concurrent players.
The real buzz about Roblox has been the ability for developers to monetize their games. Alex Hicks, a 24-year developer, made over a $1 million with his game studio RedManta, which generating more than 1 billion plays.
Minecraft’s paradigm may pave the way for how the metaverse may operate. Minecraft did not seek to create a single community that locks people into a defined reality. Instead, it lets people create their own. Anyone can create a Minecraft world right on their laptop. It’s fully immersive and doesn’t even require sophisticated AR/VR to experience. Minecraft drives creativity as the game doesn’t function unless you create things to survive such as shelter, weapons, etc. by combining common materials found in the world.
Minecraft’s foundational flexibility is also paving the way for other use cases. International nonprofit Reporters Without Borders chose Minecraft as its venue for millions of publicly censored documents, all archived in a massive 12 million-block library built inside the game over the course of three months.
So while tech companies scramble to define and create the new metaverse, the game platforms may get there first.
The music industry pioneered the use of avatars
The live music industry was one of the first to embrace digital avatars.
Travis Scott’s virtual concert inside video game Fortnite back in April 2020 was a groundbreaking concept. He performed on a giant mechanical eagle floating midair amongst a barrage of high-end graphics — clearly an innovative response to a live concert industry that was basically in shutdown due to the pandemic.
In an extreme example, Hatsune Miku, one of Japan’s most beloved pop stars, is actually a hologram who has released over 100,000 songs. Miku was created by Crypton Future Media using Yamaha’s Vocaloid 2 synthesizer technology and by taking vocal samples from actress Saki Fujita. This “Vocaloid” software will continue to gain popularity as more virtual music stars are created for the metaverse.
The metaverse creates a significant opportunity for the music industry. Musical content and live concerts will be streamed, creating new revenue streams. And there will be new merchandising concepts and digital memorabilia in this virtual world. Additionally, the metaverse will connect users across diverse geographical segments, allowing families and friends to experience musical content together in a virtual forum.
Brands are beginning to embrace the metaverse
Several brands are beginning to experiment with the metaverse. Nike launched Nikeland, a virtual world made in partnership with Roblox that integrates sport and play into a unified experience. Real life motions translate to the virtual world to provide movements in a variety of sports and games. Nike is looking to connect with younger generations through a gaming and virtual reality experience.
Hyundai Motors launched a new concept called “metamobility,” which uses robots as conduits between the physical and virtual worlds in an attempt to expand human reach. The goal of metamobility is to allow what humans are seeing in a virtual world (through VR) to actually change the physical world. For example, allowing workers or doctors to navigate a virtual experience while interacting with a robotic avatar that navigates the physical world. You can think about uses cases such as medical surgeries.
Building on its Magic Band concept, Disney filed several patents for a virtual-world simulator that allows the company to create 3D interactive experiences of its theme parks. This will create new ways for consumers to experience the brand and products without having to be there in person. Think about the growth opportunities this provides by bringing the experience to wherever the consumer is.
The fashion industry will use the metaverse to rapidly transition selling apparel in stores and online by creating 3D experiences for interacting with clothing products. The Gucci Garden provides a phenomenal showcase of personalized textures and patterns for each visitor’s avatar to purchase and wear. Wandering through the different rooms, each visitor’s experience is unique, emerging at the end of their journey as one-of-a-kind creations.
Microsoft announced the addition of its Mesh capability into its video collaboration platform, Microsoft Teams, to provide a digital overlay that enables mixed-reality applications. Using “holoportation,” you can project yourself as a realistic avatar that makes it feel like you are there in person. The synergies between the future of these business applications and Microsoft’s recent gaming acquisition, Activision-Blizzard, start to become more obvious.
Baidu launched its first metaverse-related app back in December 2021, Xirang, which allows 100,000 users to join and chat with each other in a three-dimensional VR conference simultaneously.
While many of these applications are experiential, they will begin to provide users a glimpse into how experiences in the metaverse are beginning to take shape.
Metaverse is a catalyst for the future, but not the exact future
We are on a journey to create the next generation of the internet that will have a more decentralized architecture, giving control back to users. And while the current applications and concepts of the metaverse are nascent, the next decade will be the golden era of development of the metaverse. Today’s metaverse is a mood board for the future rather than a final architecture.
When you look back historically at major tech trends, it’s never exactly what you envisioned at the time. Today’s metaverse feels a lot like the early days of the information superhighway, consumer Internet or early days of smartphone: While you know it’s game changing, you’re not exactly sure where it will end up.
Frank Palermo is the executive vice president at Virtusa’s Global Digital Business, where he is responsible for technology practices in UX, mobility, social, cloud, analytics, big data, and IoT.
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