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What is the Metaverse? Is Metaverse the future technology?

Metaverse has become a massive trend in the crypto market. So what is Metaverse? Can this trend be continued?
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quangphan
13 min read
Published Aug 24 2021
Updated Apr 16 2024
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After the announcement of Mark Zuckerberg to redefine Facebook from a “Social Media company” to a “Metaverse company”, along with Epic Games (the company behind the game Fortnite) raising $1B in funding with the ambition of turning this game into Metaverse, Metaverse has become one of the most trending keywords.

With the emergence of NFT and Gaming in the crypto market, Metaverse is expected to become the next trend after Play-to-earn.

In this article, let’s go through some main points about Metaverse:

What is Metaverse? What are the attributes of Metaverse?
What is the potential of Metaverse?
Are there investment opportunities with Metaverse?
Is the Metaverse trend only short-term?

What is the Metaverse?

Metaverse is a virtual world created from the Internet and other Virtual and Augmented Reality devices (such as VR or AR) to provide users with the most realistic experience.

Metaverse is like a parallel world with the current world. In this world, through innovative equipment and features, the boundary of creativity will be removed to the fullest extent.

what is the metaverse

If this “abstract” term still seems obscure to you, then the movie "Ready Player One" will give you a more apparent aspect.

The origin of Metaverse

First of all, does the term “Metaverse” appear recently in the era of technology like today?

In fact, no! “Metaverse” was initially mentioned in a Sci-Fi (Science Fiction) novel by Neal Stephenson in 1992 named “Snow Crash”, the story of which describes a place where humans can interact with each other through a Cyberpunk-like space.

Therefore, the definition of Metaverse has existed for a pretty long time (before the Internet era). The word Metaverse itself derives from two other words:

Meta: Means “beyond”.
Verse: In the word “universe”.

⇒ As you can see, the word “Metaverse” means “beyond the universe”.

The characteristics of Metaverse

Some prominent characteristics of Metaverse can be mentioned as:

Sustainability: The ability to maintain high productivity.
Immersion: How realistic Metaverse is.
Openness: Users can connect and disconnect any time at will, which will create an open space for unlimited creativity.
Economic system: A coexisting economy where users can transfer assets between the real world and Metaverse easily, as well as accumulate and earn more possessions.

Different Layers of Metaverse

metaverse ecosystem

There are 4 foundational Layers comprising Metaverse, which are:

Foundation Layer: The infrastructure for connections, which is the Internet.
Infrastructure Layer: The technology that makes up Metaverse, which can be hardware equipment or technologies like Blockchain, AI, Big Data,...
Content Layer: In this layer, there are various games and applications that help users immerse themselves in one or multiple worlds, bringing the most vibrant experience.
True Metaverse: This is the last and final Layer of Metaverse. When the underlying Layers are developed to a specific level, we will be able to witness the true Metaverse.

In the development process, it can be clearly seen that the underlying Layers being fully developed is the basis for the above layers to grow; at the same time every Layer will be constantly updated in this process. More specifically:

The Internet is now incredibly well-developed. Nevertheless, different research units are still regardlessly releasing new Internet technologies, which are getting even faster and more convenient (a typical example is the 5G technology).
On top of the Internet Layer, we can see the Infrastructure Layer that is also growing drastically since big names are still competing tremendously in the hardware industry, as well as more technological advances are being applied into real life.
In the Content Layer, the first pictures of Metaverse have been revealed in the form of various games. This Layer is still in the development stage and is waiting for its infrastructure to become complete so that it can explode in the future.

Some outstanding Metaverse games

Considering current technology limitations, it is nearly impossible to provide the experience as in “Ready Player One”. However, there have been a number of games that follow the concept of Metaverse, some of which are:

Minecraft: An open-world game where users can craft numerous tools, exploit resources and explore the world in their own way, at the same time interacting with other people through a wide range of features and game modes.

what is the metaverse 2
The game Minecraft.

GTA V: In the Multiplayer game mode of this game, users can interact with more than hundreds of other people, with various activities happening around just like in the real world.

what is the metaverse 3
The game GTA V

Roblox: A game that allows users to creatively play via versatile tools. The game also supports VR and Cloud data, at the same time, provides economic incentives for users.

what is the metaverse 4
The game Roblox

In the crypto market, there exists a number of Metaverse games like Decentraland, The Sandbox,... In these games, you can create your own world and possess properties through NFT, as well as trading them through the Marketplace.

what is the metaverse 5
A game in The Sandbox ecosystem

As we can see, Metaverse is still being developed and adopted widely. Nevertheless, there is still a long way to go before we can witness an actual Metaverse as in “Ready Player One”. There currently exists some limitations, such as:

Cannot build user’s experiences realistically due to the limitation of the AR technology (Augmented Reality).
Little interaction among non-blockchain games (assets in one game are not interchangeable with another as well as with real assets). There exists an interaction between blockchain games, but not explicitly.
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Still a small space regarding the creativity of humans.

Why did the Metaverse become popular?

Throughout history, humans have always aspired to explore and conquer: From the biggest oceans and the highest mountains to extraterrestrial mysteries,... However, due to limited financial and natural resources, we couldn’t accomplish these goals easily.

Now, with the exponential growth of the Internet and technology, we have found an alternative solution for those problems: Metaverse.

Given the true Metaverse, we can freely experience and explore the world while waiting for technological advances to serve real-life experiences.

what is the metaverse 6
“Ready Player One” is a nearly perfect instance of Metaverse

One typical example is humans’ demand for exploring the universe:

Traveling around the world has become much easier and more popular. Over time, discovering the Earth will no longer be as appealing as before. Hence, our next target is the whole universe.

However, developing rockets as well as the infrastructure only to serve the need of universe discovery is rather expensive, whereas everything is now only under the testing phase. The boundary of human resources cannot be solved.

Therefore, the solution is to use Metaverse to take experimental tests. VR equipment will help keep the experience as realistic as possible.

As a result, now we are able to explore the universe in the most realistic way at the least cost while still waiting for the above boundary to be addressed.

Besides, with the unlimited creativity within Metaverse, humans will be able to gain more inspiration for other practical inventions.

In the current Covid-19 pandemic, when different countries are applying social distancing, Metaverse is an ideal place for us to realistically interact with each other.

The potential of Metaverse

How big is Metaverse?

With such a huge vision of creating a parallel world to the original world from Metaverse, it can be easily imagined how massive this market can become.

At the moment, data shows that up to 418 trillion USD has existed globally at end-2020 (reference). This indicates how massive this market is, and there are still myriads of developing opportunities in the future.

Nonetheless, the vision is still far into the future. So what are current statistics? According to a research from LD Capital (a Chinese capital investing in Blockchain), the Metaverse industry consists of 2 main components:

The hardware industry: Including the manufacturing of hardware devices (chips, electronic components, AR equipment,...). This is the infrastructure that improves the Metaverse experience.
The content industry: Including all the platforms (mainly games) that help us immerse in Metaverse. In this sector, social media and streaming platforms like Youtube, Tiktok,... can also be mentioned. But with a true Metaverse, it can be argued that these platforms will be integrated into games.

With the hardware industry, according to the research from The Business Research Company, in 2020, this industry was valued at $862B globally, with a compound annual growth rate (CAGR) of 9.4%.

With the Gaming industry, it is currently valued at $170B.

what is the metaverse 8

As we can see, even though Metaverse has not reached its true potential, existing things around it have already given the industry thousands of USD in value. That is not to mention when AR products are popularized and become widespread, this Metaverse Gaming industry will get even larger.

Besides, with the vision “Beyond Universe” from Metaverse, it is possible that in the future, every real-life asset will be brought onto Metaverse in order to create a truly parallel universe (or even above).

⇒ This leads the industry to possibly extend to hundreds or even thousands of billion USD.

What do big names think of Metaverse?

It is no coincidence that Metaverse has such an enormous potential. Besides the fact that it addresses practical demands, it also attracts a massive attention from big names - major organizations that have enough resources to turn such vision into reality.

The first name to be mentioned is Mark Zuckerberg - the Founder & CEO of Facebook.

Sharing his view on Metaverse, Mark said:

“The reality is that today with the mobile internet, we already have something that a lot of people access from the moment they wake up to when they go to bed. I don’t know about you, but a lot of mornings, I reach for my phone by my bedside before I even put on my glasses, just to make sure, get whatever text messages I got during the middle of the night and make sure that nothing has gone wrong that I need to jump into immediately upon waking up. So I don’t think that this is primarily about being engaged with the internet more. I think it’s about being engaged more naturally.”

Besides other works like developing fundamental hardware or VR equipment like Oculus, Facebook actually changed their company name to Metaverse, showing their dedication to this space. Speaking of the reason behind that action, Mark said:

“Today we are seen as a social media company, but in our DNA we are a company that builds technology to connect people, and the metaverse is the next frontier just like social networking was when we got started.”

Other than Facebook, major tech companies like Google, Microsoft, Sony,... have joined Facebook to form XR Association, whose mission is to create the future of “Experiential Reality”.

XR Association was created by big tech companies to develop Metaverse

Another popular name on the list is Tim Sweeney - the CEO of Epic Games. Talking about his aspect of Metaverse, he said that this is a really potential industry in the future and explained why he wanted Fortnite - a game from Epic Games, to be developed into Metaverse.

Additionally, Tim Sweeny also mentioned about Metaverse not existing in the form of a single world such as in “Ready Player One”, but rather in the form of many applications. At the same time, he referred to the ability to interact between different worlds in Metaverse.

In the crypto market, we have also witnessed some opinions being raised, one of which came from the communication leader of Decentraland - Dave Carr.

what is the metaverse 9
The picture taken in the game Decentraland

Following his words, Dave highly appreciated the decentralization of Metaverse, believing that decentralization needs to be prioritized over other factors so that users can be freely creative and possessive about their assets in Metaverse.

Why is Blockchain an ideal place to develop Metaverse?

In reality, Metaverse can be established on the basis of various different technologies. However, in a world where creativity, interaction and decentralization are put on top, Blockchain is an indispensable element.

Blockchain is the key to a true Metaverse

what is the metaverse 10
Source: Jon Radoff

It can be clearly illustrated that the Metaverse industry involves the participation of multiple tech companies in fields ranging from hardware, software, to blockchain or gaming.

As mentioned above, the Content Layer shows first pictures of a true Metaverse, with the main appearances of centralized companies like Google, Facebook, Twitter, Netflix,... or names in the Gaming sector like Playstation, Fortnite, Roblox, Unity,...

An evident problem among these platforms is that there is little to no interaction between them. Users cannot transfer or trade a unique item in Fortnite for an equivalent one in Minecraft, for instance.

Moreover, assets that users are owning actually do not belong to them, leading to the situation that personalization and ownership are not appreciated. Sometimes, all it needs is a small amount of influence from law or companies’ policies, and all users’ items will disappear from their accounts.

All of these problems, turn out to be possibly solved by the Blockchain technology:

Scalability: Current blockchains adopt gigantic scalability, especially those with the concept of Internet of Blockchain, such as Avalanche, Polkadot, or Cosmos.
Interoperability: Assets on different blockchains are transferable through cross-chain technology.
Ownership: This is prominently demonstrated by NFTs - unique tokens that are not interchangeable.
Security: Blockchain technology provides high security that can help protect users from hacks and exploits.

Apart from the above attributes, Blockchain & Crypto has initiated a fundamental economy system with the tremendous growth of DeFi. DeFi (Decentralized Finance) plays an important role of an intermediate bridge that keeps these economic activities happening easily. You can imagine some basic aspects as:

When there exists the demand for trading assets on Metaverse, we already have the coverage of Decentralized Exchanges (DEX) or Marketplaces, working in a decentralized and permissionless way.
The demand for transferring assets between numerous blockchains is met with Cross-chain bridges.
The need of borrowing money to grow business on Metaverse is addressed by Lending Protocols.
Or with Payment Applications, we can transfer assets between the real world and the crypto world at ease.

Consequently, Blockchain technology is incredibly suitable for the development of Metaverse - a parallel, virtual world that allows unlimited scalability and creativity, at the same time appreciating personalization and ownership.

The Market Cap of the Crypto market has now surpassed $2,000B with hundreds of billion USD in TVL (Total Value Locked) across multiple DeFi platforms, not to mention the substantial value coming from NFTs and dApps (Decentralized Applications). Therefore, it is absolutely rational to believe that Blockchain technology will be the key to building Metaverse.

Crucial elements for the growth of Metaverse in Crypto

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Crucial elements for the growth of Metaverse in Crypto

The Foundation Layer contains Blockchains and Smart Contracts, especially those with the concept of Internet of Blockchain like Polkadot, Avalanche, Cosmos,... those with high scalability like Solana, Near, or even those with enormous capacity like Mina,...

The next layer includes dApps that are built on Blockchains. They can be NFTs, Metaverse Games like Decentraland or Sandbox, or DeFi platforms that will be utilized for the future Metaverse Economy.

And ultimately, the last layer consists of Cross-chain bridges that link different Metaverse ecosystems together. In this layer, creativity, scalability and interaction will be pushed to the absolute limit.

Currently, we have not seen a dramatic development in Metaverse in crypto for the following reasons:

The Foundation Layer has not been completed. At the moment, the biggest DeFi ecosystem is that of Ethereum. Nevertheless, the blockchain itself shows significant drawbacks of scalability and transaction processing.
Blockchains with the concept of Internet of Blockhain have only set their first steps.
Gaming dApps like Decentraland or Sandbox couldn’t provide a smooth experience for users like how traditional games are doing.
In addition, Cross-chain technology is not yet fully established, resulting in a massive number of hacks recently.

Predictions about the Metaverse trend

Still a future concept

Even though information technology has been developing considerably, Metaverse is still a future concept and cannot yet explode.

The first proof lies in the fact that at the moment, most VR devices are still limited, expensive, and not widely supported as the market is still immature.

According to Grand View Research, the Market Size of the Virtual Reality Market in 2021 is valued at approximately $22B - a small number considering its huge potential as analyzed above. At the same time, the exponential growth of the VR industry is also estimated to be 18% per year, and the market will reach $70B in 2028.

VR Hardware is the core basis for a true Metaverse. However, it does not mean that VR Hardware has to be fully developed before the Content Layer, but instead both of them will develop in parallel and explode when VR Hardware is ready.

It is evident since major names have participated in the Metaverse field even in the current pandemic:

Facebook joined the Metaverse industry and changed the company’s name to Meta.
Epic Games raised $1B with the vision of building Metaverse.
Microsoft is bringing Mesh, a collaborative platform for virtual experiences, directly into Microsoft Teams.

To summarize, Metaverse is a promising industry in the future. With the involvement of multiple big tech companies, a virtual and parallel world is no longer imaginary.

Investment opportunities with Metaverse

With such a promising future of Metaverse, Blockchain is expected to be the key technology to proceed with that vision. So where do our investment opportunities lay?

First of all, Blockchain platforms

These blockchains have to meet the requirements of:

High scalability for mass adoption.
Cheap and fast transactions with high security.
Massive capacity for storage in order to serve human’s unlimited creativity.

They can be blockchains following the concept of Internet of Blockchain, or deliberately designed for NFT and Gaming. Some of the names can be mentioned as Solana, Mina, Avalanche, Polygon, Cosmos, Near, Flow, Theta,...

However, there are a few notes:

Do the ecosystem, its dApps and their developers follow the vision of Metaverse?
Which one will the big names on the market select?

Second, dApps that directly support the growth of Metaverse

Metaverse games like Decentraland or Sandbox.
Gaming platforms or tools.
NFT Marketplaces.
DeFi platforms, especially ones that allow transferring assets between the real world and the crypto world.

It is also worth noting that if you want to invest in Metaverse games, you have to “skin in the game” in order to directly play and evaluate the games. At the same time, it is important to collect data behind those games to find out how attractive and appealing they are to users.

Third, dApps that support Cross-chain and Interoperability

This is an indispensable part that helps connect different ecosystems. Some examples can be Cross-chain Liquidity or even Cross-chain NFT.

We need to keep in mind that Metaverse is still a concept of future scope. With Metaverse games like Sandbox and Decentraland being not attractive enough, this is not yet the time for Metaverse to explode.