A new reality
The metaverse is a burgeoning ecosystem of virtual environments where users can interact, work, trade, and play in immersive 3D spaces. This new digital reality merges multiple aspects of online life including social media, gaming, virtual reality (VR), augmented reality (AR), and digital economies.
It represents a collective virtual space created by the convergence of virtually enhanced physical and digital reality. And it promises to change how we interact with the online world and each other.
Components of the metaverse include online gaming, augmented and virtual reality (VR), cryptocurrencies, and social and digital media. Touted as the internet's next evolution, the metaverse represents a new phase of interconnected virtual experience.
In the metaverse, 3D visualisation software replicates real-world experiences for users, blending the physical world with virtual worlds. VR and AR technologies are fundamental to the space, allowing users to immerse themselves in digital environments or overlay digital information onto the physical world.
How does the metaverse work?
A collective virtual shared space, the metaverse has been created by converging virtually enhanced physical and digital reality. It is where physical and virtual realities meet. It's an evolution of the internet, offering immersive experiences through technologies such as VR, AR, and blockchain.
Technologies that make up the metaverse include the infrastructure that hosts its digital 'worlds', the software that drives the creation of these worlds, and the hardware users require to access them. Both physical and digital technologies are required to interact with the metaverse.
The metaverse has its own digital economy where people make, sell, and purchase goods. This economy encompasses various sectors, including virtual real estate, digital goods and services, entertainment, and online marketplaces, all operating within the confines of virtual worlds or platforms that comprise the metaverse.
For example, the multimedia platform Second Life allows users to construct an avatar of themselves and interact with other users and the content they create within an online world. Similarly, online games occur in virtual worlds where players can buy and sell goods and partake in virtual experiences.
Proponents believe many everyday experiences could eventually take place inside the metaverse. Activities such as shopping, business meetings, and educational experiences could all occur in 3D virtual spaces that include all the sensory elements of reality, providing an extended reality.
Advocates believe the metaverse could become a digital version of the real world, incorporating capabilities that humans cannot perform in real life.
Origins and evolution of the metaverse
To understand the evolution of the metaverse, we need to look back at the development of the internet. Initially, the internet comprised static, one-way pages that we passively observed.
Today, we interact with the internet, actively participating via social media and the like. With the arrival of the metaverse, a whole new level of experience will become available. We could be dating, shopping, and working in virtual spaces using technology such as VR headsets.
You must enter the metaverse via computers and other technological devices to participate. Big tech icons, including Microsoft Corporation (NASDAQ: MSFT) and Meta Platforms Inc (NASDAQ: META), along with many other companies, are building the infrastructure that makes up the metaverse and the technologies that will allow us to enter it.
Meta believes so strongly in the future of the metaverse that it changed its company name from Facebook to Meta in 2021. CEO Mark Zuckerberg claims we'll be able to teleport as a hologram to the office, a concert with friends, or our parent's living rooms instantaneously and without a commute.
Reality Labs, the division of Meta that works on virtual reality and metaverse products, is developing technologies required for augmented reality glasses and virtual reality headsets. These include optics and displays, computer vision, audio, graphics, haptic interaction, full body tracking, perception science, and true telepresence.
New experiences that differ from how we think of computers and phones today will be created, offering a new phase of interconnected virtual experiences.
Workspace revolution
The metaverse has the potential to revolutionise the workplace. Microsoft co-founder Bill Gates predicts that most virtual meetings will move to the metaverse in two to three years.1 Both Meta and Microsoft have recently unveiled visions for this.
Microsoft Teams' new 'Mesh for Teams' features mixed reality capabilities that allow people in different physical locations to join collaborative holographic experiences. Accessible via VR headsets, mobiles, tablets, and PCs, users can personalise 3D avatars and interact in a virtual environment.
According to Gates: "We're approaching a threshold where the technology begins to truly replicate the experience of being together in the office."
Significant events are already being hosted in the 3D virtual worlds of the metaverse.
Artist Travis Scott performed a virtual concert in Fortnite, an online game. Real-world brands are starting to participate in the metaverse. Selfridges has announced plans to sell non-fungible tokens (NFTs) in-store.
Brands such as Estee Lauder, Tommy Hilfiger, and Dolce & Gabbana participated in Decentraland's metaverse Fashion Week, showing collections of looks sold as NFTs. Buyers can utilise the looks to customise their digital avatars. Brands such as Gucci, Nike, Burberry, and Adidas have all announced plans to offer digital versions of their looks for use in the metaverse.
How will the metaverse impact global markets?
The metaverse represents a $1 trillion revenue opportunity2, according to Forbes. Significant revenue opportunities exist for virtual and augmented reality, software and game developers, social networks, user-generated content, and live events.
Cryptocurrencies such as Bitcoin (CRYPTO: BTC) and Ethereum (CRYPTO: ETH) are the money of the metaverse. They have already evolved from fringe interest to near-mainstream adoption.
Blockchain technology powers currency and titles in the metaverse. Ownership is denominated in NFTs, digital ownership certificates embedded on the blockchain.
NFTs can denote ownership of everything from art to property, whether digital or physical. Significant markets already exist for virtual real estate on various metaverse platforms such as Decentraland and Sandbox.
An expanding world
Digital asset investors are far from niche. In 2021, according to Forbes, the value of traded NFTs was estimated to have surpassed $24 billion. Virtual assets that exist only in the digital space are becoming essential to the metaverse experience.
The metaverse is developing into an increasingly vast and rich environment, encompassing infrastructure, gateways, customers, and service providers. Forecasters predict it will give rise to virtual societies that transact in a decentralised manner.
Payment providers are rapidly developing cryptocurrency propositions to maximise positioning in the metaverse. The car industry will look to leverage augmented reality in automobiles, blending it with existing technologies to improve the driving experience in both real and virtual worlds.
The metaverse is also expected to allow for the sharing of educational resources on a global scale, providing an immersive study experience and unlocking new learning possibilities.
How do you invest in the metaverse?
Investing in one or more companies focused on the metaverse is the easiest way.
Investment banking group Jefferies Financial Group Inc (NYSE: JEF) recommends that investors focus first on hardware providers, software providers, and then companies operating within the metaverse3.
Traditional technology companies are well-positioned to benefit from increased demand for processors, cloud services, and computing chips. These include Nvidia Corporation, Intel Corporation, Cisco Systems Inc, and Apple Inc.
VR headsets such as Meta's Oculus Quest 2 will be in high demand, with the value of augmented and virtual reality products forecast to hit US$36 billion by 20254, according to IDC. A VR headset is required to enter Horizon World, Meta's virtual reality social universe.
Meta is not the only tech industry leader leaning into the metaverse. Alphabet Inc is reported to be entering the augmented reality space, as is Snap Inc, the company behind Snapchat.
Gaming companies such as Electronic Arts Inc and Roblox Corp are also expected to be big players in the virtual and augmented reality space. Epic Games, owned by Tencent Holdings Ltd, is the company behind Fortnite, a popular online video game.
If you don't want to pick individual companies, investors can gain exposure to the metaverse through exchange-traded funds (ETFs). Examples include the SPDR S&P Software & Services ETF, which tracks the S&P Software & Services Select Industry Index.
Another option is the Global X FinTech ETF, which holds companies in the emerging financial technology sector, such as Block Inc.
The Vanguard Information Technology Index Fund ETF includes companies that serve the electronics and computer industries or manufacture products based on the latest applied science. Its top holdings include Apple, Microsoft, and Nvidia.
The pros and cons of operating within the metaverse
The metaverse offers new opportunities for communication, interaction, commerce, and the lived experience. But, new opportunities do not come without potential pitfalls.
Much about the shape and form of the metaverse has yet to be determined. While many are eager to capitalise on the potential advantages of a seamless virtual world, differing visions and underlying technologies may drive advancement in different directions.
In simple terms, the metaverse is a vast virtual space powered by blockchain, NFTs, and virtual and augmented reality technologies. These combine to offer immersive experiences in virtual worlds.
But, participation relies on internet connectivity and the use of advanced tools. This acts as a barrier to entry and excludes people from participating. For those who do access the metaverse, privacy and security concerns will arise about the use of the data generated by digital participants.
As the difference between real and virtual becomes increasingly blurred, the metaverse will begin to influence how people interact with the real world.
Frequently Asked Questions
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Entering the metaverse involves a combination of hardware, software, and digital assets. Depending on your interests and the level of immersion you desire, you might need specific hardware, such as a VR headset. For lighter engagement, a computer or a smartphone can access many metaverse platforms through web browsers or specific apps.
Different platforms cater to various aspects of the metaverse. Social and gaming platforms allow you to interact with other users in a virtual space. Meetings and conferences are conducted on professional and educational platforms. Using cryptocurrency, other platforms allow users to buy, sell, or develop virtual land and assets.
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The concept of 'owning the metaverse' is complex because the metaverse isn't a single entity, space, or platform controlled by one organisation or individual. Instead, it's a collective term for many interconnected virtual worlds, platforms, and digital spaces.
Many companies and organisations develop and maintain their own metaverse platforms or virtual worlds. Ownership extends to the users and creators in areas of the metaverse built on decentralised technologies like blockchain. Through non-fungible tokens (NFTs) and digital assets, individuals can own virtual land, items, or creations within these spaces.
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Yes, a growing number of individuals and organisations across various sectors actively use the metaverse. The purposes for which it's used vary widely, encompassing entertainment, social interaction, education, business, and more.
The gaming industry is at the forefront of the metaverse, hosting millions of users in expansive virtual worlds. Virtual real estate has become a new asset class, with individuals and companies buying, selling, and developing virtual land. These investments are speculative but reflect the growing interest in the economic potential of the metaverse.
