What is the Metaverse and why is it about to change everything?
New episodes of the ‘Welcome to the Metaverse’ podcast every Tuesday, discussing the latest projects and opportunities in the Metaverse : https://linktr.ee/metaversepod
The Metaverse is a series of virtual worlds, which exist online and bring together the internet, crypto, art, social media, e-commerce, gaming and more. You can visit these worlds from your computer or on mobile as an avatar and many of these worlds have their own functioning economies and are big business.
The most famous examples are self-contained games e.g. ROBLOX (which has 200 million users and is worth $40 billion) or Fortnite (which has made over $2 billion from in game purchases alone). However whilst these examples might be primarily used by ‘kids or gamers’ (who btw usually lead the way), what comes next is where it gets really interesting.
If you are a brand, creator, artist or designer of any sort, understanding the Metaverse is crucial for getting ahead of what is coming.
If you think about how we live our lives today, we spend a lot of time digitally, using the internet — we chat to friends on Whatsapp, arrange meetings on email, talk on Zoom, show our lives on Instagram, shop online etc — a big part of our life is already in a digital world of sorts.
If you’re a millennial, that is all pretty obvious but you’ll also remember a time before the internet; the Nokia 3210 that wasn’t a smartphone, only having 5 channels on the tv, no streaming services, only being able to go to the shops to buy clothes etc.
If you’re Gen Z though, you’ve grown up in a very different world. You’re completely internet native, you barely know a world without it. In fact the biggest brands for kids now, alongside legacy titans like Disney, are Roblox, Fortnite and Minecraft as we’ve mentioned.
Let’s briefly look at Roblox, because it provides some good evidence of what happens next in the bigger picture (and later outside of just ‘gaming’).
What is Roblox? Roblox is a game where you make an avatar and visit different virtual worlds. You can meet up with your friends and also build things, so users create their own mini games within the virtual world and play them together. You can also customise and buy merch for your avatar using Robux — the in-game currency, which you buy with pounds or dollars.
This is the really interesting bit — some popular Youtubers are now designing digital in-game t-shirts and then selling them for fans to buy, for their avatars to wear in the game. So the next generation are socialising with their friends in this virtual world, which has its own fully functioning mini economy. This all starts to make sitting and scrolling on Instagram look a bit boring.
But there’s more…
The problem with a virtual world like Roblox is that the company behind it (Roblox Corporation) own and run the whole ecosystem. If one day, they decided to discontinue the game, all your achievements, in-game wearables and purchases would become useless.
What if there were virtual worlds and digital marketplaces, that no single company owned or controlled but rather it was owned by the users, publicly for all to see and accessible to everyone 24/7 globally. Well it turns out there are…
Let’s quickly talk about bitcoin and the technology that underpins it; blockchain. You don’t need to have a deep understanding of the tech (skip past if it’s confusing) but it is relevant when talking about the Metaverse too.
In particular, there are 3 key aspects about it that are most relevant here.
1) Bitcoin is a digital asset that has a finite, limited supply. It was programmed to only ever have 21 million coins in existence and no more can ever be created — this is important.
2) Bitcoin is built on a network that is distributed and maintained all over the world, so there’s not one single point of failure, which is part of it’s strength. (Similar to the the internet)
3) Every Bitcoin transaction that has ever happened is stored, in order and publicly, on the blockchain. If you want to, you can view the entire transaction history yourself online.
Why is that important? Well let’s apply those ideas to these virtual worlds.
In particular, one virtual world which was started by 2 developers and then handed over to the users, called Decentraland.
(Stay with me here)
Much like bitcoin has a limited supply, the original developers of Decentraland, used the same underlying technology and created a limited supply of land in this virtual world. So people who understood this, bought up the limited supply of digital land parcels early.
The virtual land that was closest to the area where you first enter the world, sold for higher prices — and people started building virtual buildings on that land using the tools in the world. Now some of those virtual land parcels have sold for millions of dollars — essentially as a bet on virtual real estate in the virtual world.
Imagine having a billboard for your company in a virtual district where every user who enters the world walks past and sees it. Interesting…
What’s even more mad is that Decentraland (the virtual world now owned entirely by it’s users) has its own fully functioning casino. You can attend as an avatar and play at the tables using the native cryptocurrency of the world (MANA). The owners of the virtual casino are now hiring real world people to work there as their avatar, to welcome new users and get paid for being avatar croupiers in the virtual world.
This virtual world is beginning to create real world jobs.
MINDBLOWING
Well why do we care? Isn’t this just a weird internet thing for nerdy people?
No and here’s why.
Let’s pause and talk about NFT’s quickly.
You’ve probably read various news stories about ‘NFT’s’ or non-fungible tokens, most famously, digital artist ‘Beeple’ who sold essentially a jpeg image for $69 million.
Briefly, what are NFT’s and why would someone pay so much money for a digital file?
The easiest way to understand this is to think about a traditional valuable art piece, e.g. The Mona Lisa. Why is this valuable?
The main reasons are because we know it was painted by one of the most famous artists ever Leonardo da Vinci. The Mona Lisa is also rare, there is only one ever created and that original is in The Louvre in Paris. It is not the actual materials that make the art piece valuable (i.e. a fabric canvas, with some paint and pigment on) but rather the story behind it, the proof of authenticity and proof of scarcity.
Up until recently, this has been very hard to replicate in the digital realm, mainly because it’s very easy to simply copy a digital file and either claim it as your own or prove that the one you have is the original.
Blockchain technology changed this. Because now a digital asset can be minted on the blockchain, permanently and publicly forever, it is now possible to prove the authenticity and scarcity of the work. If Leonardo da Vinci today created a one-off digital art piece, we could prove that HE created it and that it is the only one in existence. It can also be traded and the ownership is recorded digitally forever.
Many people struggle to accept that digital or ‘virtual’ things that you can’t physically hold can have value, but we are living in a world where they already do. I can’t, for example, ‘hold’ a website but I can make one and it can have immense value. I can’t hold a ‘Zoom’ but it enables valuable digital conversations. In fact the most valuable businesses in the world are Facebook, Amazon, Google andNetflix — all completely digital products.
In virtual worlds such as Decentraland, original rare NFT artwork is now being displayed in purpose built virtual galleries that users can view.
It however get’s a lot more interesting still…
NFT’s don’t just have to be digital images, they can essentially be any digital asset at all, including a ‘wearable’ — e.g. a 3D digital trainer that your avatar can wear in the world. This in fact is already happening. ATARI (the legacy gaming brand) recently created a series of limited edition wearable sneakers (for your avatar) and released them as a drop to purchase online. They sold out in minutes for prices in the thousands.
But why? Well for very similar reasons that people buy brands and limited edition things in the physical world, for status and social proof. Why, most likely, would you prefer Nike trainers instead of an equally practical unbranded pair? Why is a blue verification tick on twitter and instagram and 1000’s of followers sought after online? Social proof.
Many of the same rules apply in the digital world, except that crucially, the creative possibilities in the digital world are much greater because you’re not bound by the same physical laws, you can build anything.
Some forward thinking brands are beginning to do this, mostly notably Gucci who have already released branded digital wearables, some of which unlock matching physical counterparts too. Imagine too a popular music artist, releasing a rare range of digital wearables (e.g. a tour hoody) for the first 100 fans who buy tickets to the world tour. There are almost zero distribution costs but a global market able to purchase instantly in the Metaverse.
Not only this but NFT’s are programmable, meaning you can install royalty rights. If that digital wearable or album art gets traded, the artist can program a 10% royalty of every sale thereafter. The opportunities are endless and vast.
The final piece of the Metaverse is the accelerating adoption of VR and AR, virtual and augmented reality.
If you’ve ever put on an Oculus headset, you’ll instantly have a moment where you realise, you can create anything and exist in any space. You can catch up with friends in a virtual world where you can fly around or watch sport sat in the front row of the stadium.
The instant response to that is that it’s never going to replace experiences in the REAL world, which is true and I don’t think people would ever want it to, but it is definitely going to make a huge impact. Experiences in VR are a million times better than scrolling through instagram all evening and how much time do we all spend doing that?
Similarly VR enables experiences that just aren’t possible in the physical world. Imagine being able to pay to sit next to David Beckham and chat whilst you watch England play football in the front row at Wembley. This could never happen in the physical world but could happen conveniently through VR.
It’s also worth thinking about what the critics said when mobile phones came out; “They’ll never replace real conversations, we won’t all be texting each other.” When cars got invented, people thought going that fast would kill you and it’ll never catch on.
We are right at the beginning of another fundamental shift in how humans communicate and interact online and with each other. We are no doubt early but the foundations are being built.
In fact, Epic games (the creators of Fortnite — the most successful game of all time) just raised $1 Billion to create their own Metaverse, with $200 million donated by Sony.
The Metaverse is coming.
If you enjoyed this article, weekly episodes of the podcast ‘Welcome to the Metaverse’ are released every Tuesday. I take a deep dive into some of the most exciting projects in the space and discuss how best to capitalise on them.
You can listen to the latest episodes here : https://linktr.ee/metaversepod
