What is the Metaverse, and how does it work?

What does the Metaverse mean?

Unless you’ve been living under a rock these past few months, you have probably come across the word ‘Metaverse’ being bandied about and used to describe the next iteration of the digital and virtual era. But what exactly is it?  

First, a bit of back story. The term ‘Metaverse’ was first coined by writer Neal Stephenson in 1992 in his science fiction novel ‘Snow Crash’. In the book, people use digital avatars to discover the online world as a way of escaping a dystopian reality.

The idea of the Metaverse was further explored by Ernest Cline in his 2011 book ‘Ready Player One’. The book was made into a film by director Steven Spielberg in 2018. 

Simply put, a metaverse blurs the line between real and virtual life. It is a virtual world or space that you can enter, ‘live’ and participate in using virtual and augmented reality headsets or glasses. It can include aspects of social media, online gaming, and cryptocurrencies to allow users to interact. 

What is it? 

The Metaverse combines two concepts that have been around for several years – virtual reality and a digital second life.  

Interest in it really took off after Facebook CEO Mark Zuckerberg revealed that Facebook would be changing its name to Meta at the Connect conference, which was streamed virtually on October 28, 2021. He also said that he would be spending at least $10 billion on the Metaverse.

But more on Zuckerberg’s Metaverse later in this blog. 

If you strip it down to the essentials, the Metaverse has kind of been around for few years at least now.  

A predecessor to the Metaverse was Second Life, an online virtual social platform launched in 2003 (and which has a strong following by diehard fans even today). Here, people could create avatars to socialise with others. Users can also buy and sell virtual items, including clothes and property, to each other.  

Is it here yet? 

If you own a non-fungible token (NFT), virtual-reality headset or cryptocurrency, you are already part of the broad metaversal experience.  

In platforms like Sandbox, Decentraland, Roblox, and even online games such as Fortnite and Minecraft, users and players can use customisable digital representations of themselves to interact with other avatars.

Users have the ability to create and build items, including property. They can also accumulate virtual currencies which allow people to purchase items which can be used by their avatar.  

Decentraland includes a crypto-enabled marketplace, digital wallets, and a governance system. Digital assets, such as land, are stored as NFTs on the Ethereum Blockchain. A number of real-life businesses are getting into the action by building virtual offices and headquarters in Decentraland.

Sandbox is also a Ethereum-based Blockchain-based gaming metaverse virtual world. It allows users to create and trade NFTs in-game.

Roblox is an online platform and storefront where people can create games and play games made by other developers. In Roblox, players can purchase the Robux virtual/digital (not crypto) currency to buy in-game upgrades or accessories for their avatar. 

When Microsoft decided to buy game developer Activision Blizzard for $68.7 billion in early 2022, it cited the Metaverse as one of the reasons for the acquisition, saying that the deal would provide “building blocks for the Metaverse.” Activision Blizzard is well known for making online games that have a metaverse component. 

Facebook Metaverse 

Facebook defines the Metaverse as “a set of virtual spaces where you can create and explore with other people who aren’t in the same physical space as you.” What exactly does this mean? 

Zuckerberg called the Metaverse “the next chapter for the internet. In the Metaverse, you’ll be able to do almost anything you can imagine – get together with friends and family, work, learn, play, shop, create – as well as completely new experiences that don’t really fit how we think about computers or phones today… in this future, you will be able to teleport instantly as a hologram to be at the office without a commute, at a concert with friends, or in your parents’ living room to catch up.” 

What would you need to enter the Metaverse? Well, you would most likely need to wear Virtual Reality (VR) headsets or Augmented Reality (AR) glasses. Lifelike holograms could also be beamed into the real world from projection systems. 

“When you play a game with your friends, you’ll feel like you’re right there together in a different world, not just on your computer by yourself,” Zuckerberg said, “And when you’re in a meeting in the metaverse, it will feel like you’re right in the room together making eye contact, having a shared sense of space, and not just looking at a grid of faces on a screen.” 

New economic systems, based on cryptocurrencies and NFTs, would let people buy and sell goods and services in the Metaverse. And NFTs are booming. Recently, the UK Treasury even asked the Royal Mint to create a non-fungible token to be issued in summer 2022.

You can watch the full Metaverse video shown during Connect 2021 here. 

Metaverse Crypto 

As we have seen, Decentraland is an online decentralised platform which uses Blockchain technology to allow its users to make transactions. Digital assets, such as land, are stored as NFTs on the Ethereum Blockchain.

Decentraland’s currency is MANA, a token with a limited supply. Every time someone makes a purchase, the platform burns a percentage of its MANA supply. Ownership of land is tracked via the Ethereum Blockchain. Users are required to hold their MANA tokens in an Ethereum wallet.  

The Sandbox platform enables online users to benefit from its ‘play-to-earn’ model. This allows gamers to win SAND tokens for reaching various milestones.

Those tokens can be used to make purchases within the gaming environment. They can also be offloaded to a crypto exchange to be converted into other digital or fiat currencies. The Sandbox was among the top performing cryptocurrencies in 2021.  

According to global head of thematic investment strategy at Bank of America, Haim Israel, the Metaverse is a huge opportunity for blockchain tech and crypto. He says that this will lead to the widespread adoption of digital currencies.

Horizon Worlds Metaverse app

Meanwhile, Meta is planning to bring its Horizon Worlds social Metaverse platform (currently accessible only through VR) to the web, Meta CTO Andrew ‘Boz’ Bosworth recently said in a tweet.

In a video, Meta CEO Mark Zuckerberg said the tech giant will allow a “handful of creators” to sell digital goods and experiences within Meta’s virtual reality platform in preparation for a wider launch.

However, the company would take a 25% cut of the percentage left after any platform fees out of all in-world purchases. In many cases this will leave creators with just over half of the sale price. For instance, that means that for goods sold in Horizon Worlds on a Quest VR device, Meta will take 47.5% of each transaction.

When will the Metaverse arrive? 

Metaverse technology as outlined by Zuckerberg is years away from being realised. He has said that he believes the Metaverse will be fully available by the end of the decade – an optimistic estimate given the recent shenanigans. The existing infrastructure and tech are already impressive. However, they will need to evolve further to support the Metaverse industry that experts foresee. 

In an interview with Forbes in November 2021, deVere CEO and founder Nigel Green said that Facebook will hire a reported 10,000 people in the European Union to develop Zuckerberg’s Metaverse on its Horizon World’s platform. “Facebook’s announcement once again underscores that the Metaverse is not being seen by those-in-the-know as an ‘extension’ of the internet but as its successor,” Green said.

Fast forward through a year of underwhelming action and disappointment, the main story on every front page is Meta’s largest layoff in its 18-year history (11,000 employees).

But where did it all go wrong? 

During the pandemic Meta, like other social media platforms, received a great financial boost as everyone was spending the majority of time indoors. From here, Zuckerberg made a bold claim that the pandemic would fundamentally accelerate society further into the technological takeover. He was wrong.

The situation for Meta is this. Zuckerberg spent $15bn to try and push momentum in the metaverse coming out of the pandemic coming off the back of the lockdown boost.

However, as many predicted, the pandemic made people realise what they had been taking for granted, and social media revenue suffered as a result of this.

Additionally, as deVere CEO Nigel Green says, ‘you can pay an influencer half the price to advertise to a greater, more engaged audience than it costs to advertise through traditional technological means.’

These factors, along with soaring costs, have left Zuckerburg with no choice but to go ahead and layoff 13% of Meta’s workforce.

When it comes to the Metaverse itself. Yikes. It is important to note that Meta (formally known as Facebook) and the metaverse are two entirely disconnected entities. The concept of the metaverse was around before the arrival of Meta and will undoubtedly continue to develop irrespective of Metas issues.

Metas’ Horizon worlds is described as ‘an ever-expanding social universe where you can hang with friends, meet new people, play games, (and) attend cool events.’ The reality is Zuckerberg failed to get the ‘social’ bit right, with reports of overwhelmingly sad, empty worlds – and even complaints of sexual harassment!

Additionally, ‘Zuck’ decided to brand himself in the universe and focus on creating real, lifelike corporate spaces for people to operate in. The argument has been raised that people dread going into the office in the real world – so why try and emulate it in an imaginative one, with so many fantastical alternatives in concept. 

In changing the branding of Facebook to Meta, Zuckerberg was signifying the next steps of this new, technological era. A grand unveiling of this new exciting technological world. A premature unveiling to say the least.

The world may not be ready yet, but the concepts of a meta, Web3 future still seem inevitable, and whilst Nigel Green believes Meta will recover and rise again, it remains to be seen who will be cutting the tape when the true unveiling takes place.

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