In the 1992 sci-fi novel Snow Crash, author Neal Stephenson envisioned a ‘metaverse’ – a world where, in the face of a global economic collapse, the protagonist dons a headset to escape reality and enter a virtual space where avatars stroll the streets, digital shops line the pavements and electronic currencies rule the roost.

Roll on 29 years and that vision is close to becoming reality. In October 2021, Mark Zuckerberg announced plans to “bring the metaverse to life,” rebranding Facebook’s now-eponymous name to Meta and investing $10bn in the virtual space.

In Zuckerberg’s vision, consumers would be able to “work, learn, play and shop” in a 3D digital world, creating avatars of themselves to do business, study and visit friends across the globe via virtual and augmented reality.

It might still sound like the stuff of fiction, but Facebook isn’t the only one getting involved. In November 2021, Microsoft unveiled Mesh for Microsoft Teams, a mixed-reality platform described in its blog post as a “gateway to the metaverse,” designed to allow employees to create avatars of themselves and attend virtual meetings. A few months later, the company bought gaming giant Activision Blizzard for $68.7bn in a record-breaking deal that would “provide building blocks for the metaverse,” in the words of Chief Executive Satya Nadella.

Entertainment companies such as Nvidia (inventor of the GPU), Epic Games – developer of the Fortnite platform, where Ariana Grande hosted a virtual concert last summer – and Unity (the world’s leading platform for creating 3D content) are all investing in the metaverse too, while Chinese giant Tencent has filed for 100 metaverse trademarks.

Disney has meanwhile appointed an executive to lead its metaverse efforts, while Manchester City football club has announced plans to build a virtual Etihad stadium in the metaverse in partnership with Sony.

Entire cities are getting in on the game too; Seoul has invested KRW 3.9bn (around $3m) in creating a metaverse, with digital twins of its key attractions set to launch in 2023, and Shanghai is also aiming to offer public services via the metaverse in the coming years.

Transformational moment
While some have downplayed all this as mere hype, others are betting on a metaverse future. Crypto company Grayscale has forecasted a market opportunity of $1trn in yearly revenues, while Morgan Stanley has predicted China’s metaverse market alone could be worth nearly $8trn in the future. A recent report by JP Morgan (Opportunities in the Metaverse) meanwhile concluded “the metaverse will likely infiltrate every sector in some way in the coming years.”

Some believe it could transform the way we do business and live our wider lives altogether. Among them is Melanie Subin, Director at the Future Today Institute, a strategic consultancy that helps organisations prepare for the future.

“I believe it’s almost inevitable that the metaverse will become very pervasive over the next decade,” she told World Finance. “For many, augmented reality devices such as smart glasses are likely to entirely replace the multiple devices we use today, such as smart watches, smart phones and earbuds.”

Yesha Sivan, author, professor and CEO of business platform i8 ventures, agrees. “The metaverse, when it comes to fruition, is going to change our lives much like the internet has completely changed our lives,” he said in a recent interview with German news channel DW Business. “The interesting question, of course, is which domain is going to be affected first.”

Defining the ‘metaverse’
All of this is leading many to question what the metaverse actually is – and what opportunities there might be within it.

Most envisage a world accessed by virtual or augmented reality headsets, where users interact with others via their virtual selves, or avatars. In its fully realised form, sights, sounds and smells would replicate reality – or an enhanced, customisable version of it – with devices “emitting scent particles and altering the feeling of ambient temperature,” according to Subin. “The metaverse will maximise our visual and auditory experiences, and introduce our other three senses into the mix,” she said. “It’s this expansion of sensorial experience that will make any metaverse interaction truly immersive and embodied.”

In the ideal meta-world, users would also be able to hop from one company’s metaverse (such as Meta’s) to another (such as Microsoft’s). “The theory is that each person or organisation would build their own one, but they are all inter-operable and they all speak to each other,” Tom Harding, Bristol-based partner in law firm Osborne Clarke’s commercial team, told Business Live.

How and where this might be used most remains up for debate. For some, its value lies in gaming and entertainment – a place where visitors can prowl the streets under any identity they wish, holidaying in far-flung corners of the world, attending exclusive music events, gambling in virtual casinos and buying digital twins of their favourite fashion products.

For others it’s a space for investment, where savvy types can purchase, develop and sell non-fungible tokens (NFTs) such as digital artworks and virtual real estate, creating whatever they can dream up in their plot of digital land and monetising it in a way not dissimilar to the real world.
Others point to education, business, tourism, medical and military uses; Microsoft has already been contracted to produce augmented reality headsets for the US army in a $22bn deal, for example, indicating the military’s intentions to branch into the virtual realm.

Beyond all of this, the metaverse is fundamentally a space for limitless creativity, according to Vipp Jaswal, Chief Executive of the Interpersonal Intelligence Advisory and a C-Suite Advisor. “The greatest strength – as well as the greatest weakness – of the metaverse is that there are no restrictions,” he told World Finance. “It allows for an explosion of creativity. And it allows individuals to recreate themselves into whoever they want to be.”

The business of metanomics
It’s not just consumers who stand to benefit from Web 3.0. Many have pointed to opportunities in business – from making global communication and remote work easier to opening up whole new revenue streams.

“When you think about the economics of the metaverse—or metanomics—there are opportunities in almost every market area,” reads the JP Morgan report. That includes testing products in a digital environment to lower costs – which is exactly what Hyundai is doing with its Meta-Factory, a digital twin of its Singapore factory, announced in January and set to be complete by the end of 2022. As well as the obvious financial benefits, virtual testing means minimising resources and boosting a company’s sustainability credentials.

Others point to mass job creation in the metaverse. From 3D designers and content creators to digital event producers, the virtual realm has the potential to produce a whole new economic sector. It’s easy to see how certain industries stand to gain, too. There are obvious opportunities in the gaming sphere; Fortnite generated more than $9bn in revenues in 2018 and 2019 alone, according to financial documents, while rival platform Roblox was valued at $68bn in December.

Fashion brands have also been quick to jump on the bandwagon; last year, John Lewis opened a digital shop on Fortnite, while Nike has launched its own metaverse within the Roblox platform (Nikeland). The company also bought virtual shoe company RTFKT, and has already made $3m from selling virtual NFT trainers (see Fig 1). Dolce & Gabbana has meanwhile made $6m from its own collection on NFTs, and Ralph Lauren, Gucci, Balenciaga, Dior and Burberry have all created NFT products too. Even Walmart is planning on selling virtual goods, according to reports.

As well as allowing brands to sell “the same product twice – one in the real world and one in the metaverse,” in Jaswal’s words, there are clear promotional benefits for these brands. If you see a Nike store while you’re tuned in to Roblox, you might just find yourself popping to the physical store too.

Rocking the music industry
It’s not just gaming and marketing that stand to gain, though. Recent metaverse performances by the avatar versions of Ariana Grande, Justin Bieber and Ed Sheeran among others, point to one thing – the metaverse could be about to rock the music industry too.

The metaverse, when it comes to fruition, is going to change our lives much like the internet has completely changed our lives

That could bring several benefits for artists as well as consumers, according to Jaswal. “You could have a one-to-one concert with your favourite pop star sitting in their home,” he said. “You could come into their metaverse mansion, meet their drummer and watch a live performance. That would cost more than a real-life concert because it would be personalised, and the artist could obviously fluctuate the price whichever way they want. So there are huge opportunities for artists to monetise this.” This isn’t empty talk; Travis Scott’s Fortnite virtual concert in 2020 generated $20m in merchandise sales, according to Forbes, and Ariana Grande’s virtual Fortnite performance was expected to pull in a similar figure. Zara Larsson meanwhile told the BBC last year she’d made more than $1m by selling virtual hats, backpacks and sunglasses on Roblox in the space of six months. Take away the costs and venue limitations of physical concerts, and it’s easy to see the potential gains for performers going virtual.

Opportunities for creators
But it’s not only musical artists that stand to benefit from producing virtual versions of their work. If a visual artist or content creator makes an NFT, the creator or company gets paid a royalty every time it’s resold. That’s the case whether it’s a digital artwork (like the set of NFT Bored Ape images that sold at Sotheby’s for $24.4m last September), a plot of real estate or a virtual shoe. That could mean big business for creators and brands, as well as for those investing in the tokens.

That’s one reason many are betting on NFTs as the next big thing in crypto. But there are other advantages to these tokens too – not least the fact they can’t be deleted, copied or destroyed. And while traditional currencies and cryptocurrencies such as bitcoin are ‘fungible’ (meaning one bitcoin can be replaced by another), every NFT is unique.

“Owning an NFT is just like owning an original, one-of-a-kind physical item,” said Eric Anziana, Chief Operating Office of crypto.com. “An NFT is verified on the blockchain – you know who the creator is, where it comes from, and there is no way you can counterfeit it. NFT digital assets are unique in the way they build communities, connect people globally and create long-term value.” With popularity in crypto growing by the day more generally – the number of crypto owners globally grew from around 100 million to 300 million through 2021, according to Anziani – it’s not totally out there to imagine NFTs entering the mainstream in the coming years.

From real estate to virtual estate
That could bring substantial opportunities for investors, and some are already capitalising. One of the biggest areas many are pegging hopes on is the virtual real estate market, with metaverse platforms such as Decentraland, the Sandbox, Somnium Space and Cryptovoxels offering buyers the opportunity to purchase and develop plots of digital land in the hope demand rises and value of land increases.

On their ‘land,’ owners can host (and monetise) events, rent out space to brands wanting to advertise and open shops to sell virtual products.
Some might be sceptical, but prices have already been rising; the average cost of a virtual land parcel across the four main metaverses doubled from $6,000 to $12,000 in the period from June to December 2021, according to JP Morgan, and in January 2022 alone, real estate sales in the metaverse reached more than $85m, according to MetaMetric Solutions.

The cyrptocurrencies being used to purchase these plots are on the rise too; in the days following Facebook’s rebrand to Meta, the value of mana – the digital currency used in Decentraland – soared from less than $1 to a high of $5.79. Several companies are already investing; in November, Tokens.com put $2.4m on a 116-parcel estate in Decentraland (which is divided into 90,000 parcels). The crypto investment firm aims to create a virtual Fifth Avenue in the platform’s Fashion Street district. The same month, virtual property fund Everyrealm – formerly Republic Realm – broke all records by buying a $4.3m plot in the Sandbox that it plans to develop in partnership with games company Atari.

Jaswal believes traditional real estate investors will be quick to jump on the bandwagon. “There will be a lot of investors,” he said. “We’ll likely see a few big players, realtors and real estate agents, followed by a huge tidal wave of smaller players.”

But transitioning from physical to virtual real estate might not be as simple as some are hoping, with several hurdles to overcome.

Janine Yorio, Co-Founder & CEO of Everyrealm, says the value will come from the experiences buyers create on the land they own, rather than just having the land itself. “Virtual real estate is the first step in building the metaverse,” she said. “The value comes from the experiences you create on top of that virtual real estate and the community you bring in through those virtual experiences.”

That means investors will likely need 3D designers and other specialists on board if they’re to profit from the opportunities, meaning some might be left out in the cold. What this virtual realm could enable, however, is a democratisation of the marketplace, increasing access for non-traditional funds and individuals keen to capitalise on the next big trend in a decentralised economy where anyone can own.

A hotbed for the ‘dark web’
But while there are clearly significant opportunities within the sector, many have pointed to the risks – especially while the metaverse remains largely unregulated.

Take away the costs and venue limitations of physical concerts, and it’s easy to see the potential gains for performers going virtual

Among them is Jaswal, who believes the metaverse could be a hotbed for illegal activity. “The metaverse allows the dark web to surface on another platform,” he said. “You could have arms dealers trading via the metaverse, and there’s also potential for scammers to flourish.

“There’s nothing to stop people creating fake personas, either. Someone might create a fake Kim Kardashian stripper in a metaverse club. Who’s going to stop it and how? The company that formed her is going to be based in a city you cannot trace, being paid in a currency you cannot touch. Sue all you want, but who are you suing? Where is the police force in the metaverse? Where is the copyright law, and where are the enforcement authorities? There’s nothing.”

The industry is already facing issues. On Decentraland’s Marketplace, for example, several NFTs contain slurs that haven’t yet been banned (at the time of writing, the name AdolphHitler was currently on sale for 6m ether, or just under $2,000). With the platform running on a ‘decentralised autonomous organisation’ (DAO), the only way for offensive NFTs to be taken down is if enough community members vote (the higher the financial stake they own, the more voting prowess they have).

Charlie Bell, Executive Vice President of Security, Compliance, Identity and Management for Microsoft, made the risks around the metaverse clear in a recent blog post. “In the metaverse, fraud and phishing attacks targeting your identity could come from a familiar face – literally – like an avatar who impersonates your co-worker,” he wrote. “These types of threats could be deal breakers for enterprises if we don’t act now.”

Calls for regulation
Governments are aware of the challenges; EU digital chief Margrethe Vestager has already called for more scrutiny around the metaverse, pointing to new challenges for antitrust regulators in an interview with POLITICO, and cautioning on the need to keep a close eye on NFTs. Others are taking action; in China, Beijing recently implemented new rules on the way companies can operate algorithms, with draft regulations on ‘deep synthesis’ technologies – used to generate or modify voices, videos and virtual settings – that could help prevent deepfakes. The EU is also looking into regulations under its proposed AI Act.

But Jaswal believes more needs to be done. “International governments are being very complacent about how, when and if they are going to impose any form of regulation in the metaverse,” he said. “As a result, the public are going to be exposed to a variety of unethical illegal activities. The metaverse is going to be the ultimate test of how nations cooperate with each other.”

Silicon Valley ‘boosterism’
Of course, all of this relies on the assumption that the metaverse is actually going to take off – an assumption some believe is over-hyped. Among them is Andrew Curry, Director of Futures at the School of International Futures (SOIF), which helps leaders make strategic decisions. He believes the metaverse is more about “Silicon Valley boosterism” than anything else, with tech giants using the ‘metaverse’ term for headlines first and foremost. “The business advantages of talking up the metaverse to investors outweigh the risks,” he told World Finance.

International governments are being very complacent about how, when and if they are going to impose any form of regulation in the metaverse

His scepticism is down to a combination of factors – not least the fact there’s still a long way for technology to catch up with the plans. “The internet isn’t that stable even now in handling video calls, even in the richer parts of the world,” he said. “Whether it will cope with the data requirements of the metaverse seems an open question – at least without substantial further investment in infrastructure. This may not be a priority in the face of investing in other areas, such as climate adaptation infrastructure.”

Curry argues that even if tech does catch up, we’re yet to see what consumer uptake will be like. Bulky headsets – and associated issues such as motion sickness – may well be a potential barrier unless improvements to the current interfaces are made, along with the fact many might not be ready to switch physical interaction for the virtual realm. There’s also the rather large question as to whether rival companies would be willing to cooperate in order to build a unified, inter-operable metaverse, where users could hop from one world (and competing company) to another.

A hybrid future
But many are working on overcoming these barriers – not least improving the interfaces that we would use to access the metaverse. Apple is rumoured to be releasing its AR wearable this year, while Google, Snap and Microsoft are all working on headsets that might just be the golden ticket to a smoother VR and AR experience. Enhancements to blockchain technology are also underway to encourage greater adoption of cryptocurrencies, according to Everyrealm’s Yorio.

Of course, in the same way emails never entirely replaced phone calls, the metaverse is unlikely to ever just entirely replace physical interaction. The most likely scenario will be a combination of digital and real-world meetings, interactions and events – in the same way we are seeing a mix of Zoom calls and in-person meet-ups post-Covid.

Anziani believes that will seep into a combination of physical and digital currencies too. “We will continue to see a steady evolution into a more digital economy,” he said. “This may combine elements of physical transacting and digital transacting into one experience – paying for something in person via a crypto wallet, or going to an NFT gallery in person and seeing digital art, for example.”

Embracing the metaverse
Whether this comes to fruition as many are forecasting – and whether the metaverse ends up transforming our lives altogether or remaining a niche area with just a handful of uses – remains to be seen.

But with more and more organisations embracing the metaverse concept it’s clear this is already having an impact. How organisations shift their business models, how financial institutions adapt to a new crypto-climate and how governments act to regulate the metaverse might be some of the biggest questions we face in the coming years.

Only time will tell how the answers pan out – but if the forecasts ring true, we could just be edging towards a world closer to Snow Crash than we might once have imagined.