With the development of the Extended Reality technology and the popularisation of digital currencies and digital assets including non-fungible tokens (NFT), the concept of Metaverse is gradually known and promoted by gamers and investors. The grant renaming of “Facebook” to “Meta” as well as Microsoft’s $68.7bn acquisition of Activision Blizzard has sparked people’s curiosity about Metaverse’s value and potential. This blog aims to introduce the concept of Metaverse, demonstrate how it functions and explain why it is considered of great value and potential to the future society.
What is Metaverse?
Although considered hard to give a clear and unique definition due to the unlimited ways of application, the metaverse can be deemed as an integrated connection of many 3D virtual worlds (source).
How can Metaverse be accessed?
These worlds can be accessed via different forms, with the virtual reality headset being considered the most classic way of connecting to the Metaverse. The VR headset can ideally allow the visitors to navigate the Metaverse via motion capture, eyeball movements, voice recognition and of course, physical feedback controllers (source). With the facilitation of these technologies, Metaverse immerses the visitors and creates a sense of presence. Beyond that, Metaverse can also be accessed via augmented reality (AR) equipment as well as other digital devices that are commonly used including mobile phones and computers.
- Presence: Beyond the traditional definition of physically “being there”, regarding the virtual environment created by the connected 3D virtual worlds, presence can be defined as the perceived realism of the virtual environment created. It is the level of realism that is individually judged from different aspects such as vraisemblance of scene demonstration or naturalness of the interaction with the virtual worlds (source). A simpler explanation of presence can be “creating a physical sensation of being there” (source).
- Avatar: As an example, the character we control in video games is considered an Avatar, which is the representative of us in the virtual environment under games. Similarly, Avatar in Metaverse is the social representative created by individuals in the virtual world. Many functions and applications of Metaverse rely on Avatars, including movement, garment fitting and one-to-one interactions (source).
- Extended Realities: XR can be referred to as an environment that combines the real and virtual worlds by using computer simulations and physical hardware. There are different types of reality technologies including:
- Virtual Realities: VR is a stimulating environment or experience that immerses people in a 3D artificial reality (source).
- Augmented Realities: AR is the enhancement of the real-world environment or objects using real-time information in various forms including sounds, graphics and texts (source). The key difference between AR and VR is that AR focuses more on the “real world” rather than fully stimulating an artificial environment.
- Mixed Realities: MR is the integration of the digital and real environment which allows people to interact with both digital and physical objects on a real-time basis (source). MR emphasises the interaction of virtual and real objects at the same time via breaking the boundary of the two worlds (source).
Development of the Metaverse
Growth Potential of the Industry
Metaverse is considered one of the most promising industries with a current mark size of around $60bn in 2022. It is expected to grow at a CAGR of more than 50% to around $1607.12bn by the end of 2030 (source). Based on the research by McKinsey, Metaverse is expected to have an economic potential of up to $5 trillion by 2030, with the e-commerce sector being benefited the most by more than $2 trillion (source).
There are almost unlimited potential uses of Metaverse that could be applied to almost all aspects of our daily life. Companies investing in Metaverse also vary in directions. Microsoft’s currently focusing on exploring the virtual office, while Meta pays more attention to areas like education, socialising and entertainment. Following are the five major application fields in which Metaverse are expected to play as a game-changer.
Gaming has derived from the development of Metaverse, many people got to know the concept of Metaverse via games. Currently, there are already many games based on Metaverse that have a considerable amount of DAU, such as Axie Infinity, The Sandbox and Minecraft (source). Metaverse can facilitate the tokenization of game items that enables trading and enhancement of gaming experience with the Extended Reality technologies (source).
With the development of the 5G infrastructure, similar to how video streams and pictures became one of the most popular ways of creating social content, the further increased internet speed allows the revolution of socialising where much richer content and information can be created and shared on a real-time basis (source). Beyond the richness of the content, Metaverse can break the restriction of physical being, enabling virtual face-to-face experience without showing physical appearance by customising Avatar (source). It can help with the improvement of speech freedom and the establishment of privacy-driven culture while at the same time strengthening the connection between people that are not physically together.
The combination of Fitness and Metaverse excites both fitness lovers and people who are interested in Metaverse. One application is fitness gamification which encourages participating in a new generation of fitness integrating music, real-time instructions and immersive visuals (source). Instructors, trainers, influencers and brands can all be connected and engaged at the same time without restriction on physical space (source).
Considered as having the greatest market potential among all the Metaverse’s applications, the possibility of connecting e-commerce and real-life shopping experience excites the market. Metaverse can facilitate retail businesses with the concept of “omnichannel”, which means creating a cohesive shopping experience both online and offline (source). Metaverse can be applied in various forms, for example, people can try virtual room decoration under the MR technology, try jewellery on their Avatars, or feel the size of items compared with real-world objects. It will reshape e-commerce from “click and buy” to “experience and buy” (source). Also, the close connection between Metaverse and NFTs allows brands to launch and sell digital products or host digital events as an extension of their existing business. Luxury brands, including Gucci and Balenciaga, have hosted virtual shows or events and events via Metaverse (source).
Metaverse applied in the education field, often referred to as “eduverse”, can create and provide an immersive learning environment that enables students to have their unique learning pathways (source). Studies done by PwC have shown that the use of VR technology allows employees to learn 4 times faster and be about 2.8 times more confident when applying the soft skills learned than in traditional training (source).
Issues and Concerns
Although many people think highly of Metaverse’s future application and the growth potential of the Metaverse industry chain including both its up-stream and down-stream industries, there are issues that need to be tackled to enable the long-term prosperity of the industry (source1, source2, source3):
- Privacy: Metaverse will hold and transfer a huge amount of personal data on a very frequent basis, both physical and technical protections need to be implemented to ensure the safety of the private data.
- Legal boundaries: It is hard to define what is legal conduct in the virtual world. It needs to be determined to what extent people should obey the real-world legislation and code of ethics.
- Accessibility: The integration of the virtual and real world requires a very fast and stable internet connection. Some of Metaverse’s applications rely heavily on the infrastructure of a new generation of a telecommunication network.
- Anonymity: Individuals, including criminals, can hide their own identities on Metaverse, making it a potential hotbed for crimes such as fraud and illegal trading.
- Antitrust: Although Metaverse seems to be a decentralised environment, many people are concerned that Metaverse platforms run by the leading tech companies are manipulatable and are just masquerading as decentralised.
Disclaimer: The information provided in this blog is strictly for educational purposes, It does not constitute investment, accounting, financial, legal, or tax advice. It has been prepared without taking into account your personal objectives, financial situation or needs. Before acting on any information you should consider the appropriateness of the information having regard to your objectives, financial situation and needs. The views and opinions expressed in this blog are those of the writer and do not necessarily reflect the views or positions of Hatch Quarter Pty Ltd.