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“Meta… verse…” you think, as if splitting up the portmanteau is going to reveal a hidden meaning. This is the twentieth time you’ve heard the term this week. Your mind conjures up images of virtual reality, gaming and missing out on life-changing investment returns.
As with any emerging technology, there are plenty of different interpretations of what it is and what it means for the world.
1. The metaverse is gaming. Nope, the metaverse is not gaming. Gaming is an activity you can do within the metaverse — along with many others.
2. The metaverse is virtual reality. Saying the metaverse is virtual reality (VR) is like saying that the internet is your phone. Your phone isn’t the internet: it’s a way of interfacing with the internet. In the same way, you can imagine experiencing the metaverse through VR, but you can also imagine experiencing the metaverse through your laptop.
3. The metaverse will replace the real world. The dystopian movie trope is that we’ll all be living in some barren wasteland, “plugged in” to a virtual world (i.e., the metaverse). However, in a less-bleak reality, the metaverse won’t replace the real world. It will be additive to the real world, an expansive virtual environment where you can do any number of different things: work, socialize, play, create, explore and more.
4. The metaverse is a fad. The metaverse is a fad in the same way cars were a fad and the internet was a fad. Yes, we’re still 5+ years away from a fully realized metaverse and the technology we’ll need is far from complete. But even today, we’re already living in a very primitive version: we work remotely, we socialize and learn virtually and we find entertainment without leaving our homes. Our human needs won’t change: we’re not going to stop socializing, learning, working, or looking for entertainment. However, as always, how we meet those needs will continue to evolve as our technology advances.
5. The metaverse will be a monopoly. Companies like Meta and Microsoft are two of the world’s most valuable companies because they’re prescient. They have a knack for skating to where the puck will be and they’re able to scale fast. But jumping on the bandwagon early doesn’t mean they’ll control the metaverse.
One of the core tenets of “Web3” — with Web3 being an iteration of the internet powered by blockchain technology — is decentralization. Decentralization means that Web3 aspires to be owned and controlled by the community and the individuals who are building it, rather than by large and centralized organizations like Meta and Microsoft.
The development of the metaverse will see waves of both centralization and decentralization. Building new technology is incredibly difficult and despite what idealistic Web3 folks (myself included) tell you, it often requires a high degree of centralization for a long period of time. However, because of the unique openness of blockchain technology, decentralization is always around the corner — blockchain’s architecture sustains that promise. Much like today’s internet, the metaverse won’t be controlled by a single entity, it will be a tapestry of centralization, decentralization, large and small.
So, what is the metaverse and why now?
The metaverse is the future of the internet: A massively scaled, interactive and interoperable real-time platform comprising interconnected virtual worlds where people can socialize, collaborate, transact, play and create.
We’re reaching an inflection point. Web2’s success, remote work and widespread hardware and technology adoption are all at all-time highs. There are 5 billion internet users and 3 billion gamers in the world (more on this later) and crypto has emerged as both the infrastructure layer and the zeitgeist that will fill in the blanks: digital currency, fully functioning digital economies, ownership of digital goods and true interoperability across countless interconnected systems.
From Minecraft to the metaverse
As with any misconception, there’s often an element of truth. One of the primary misconceptions we need to understand is the connection between gaming and the metaverse. As we said earlier, the metaverse isn’t gaming, but gaming is how we reach the metaverse at scale. Why?
Gaming is an on-ramp that drives mass adoption of new technology. We saw this with Atari in the 80s, early iOS (Angry Birds) and Facebook (FarmVille) in the 00s. Gaming will succeed in bringing billions of people into Web3 and ultimately the metaverse. People will be drawn in by novel and enticing games and before they know it, they’ll become immersed in the ecosystem. Gaming will be the single largest on-ramp for crypto and eventually the metaverse.
Additionally, gaming is a testnet for the metaverse. “Testnet” is a common term in crypto. As you might have guessed, it’s a place where you can test and iterate before scaling a new product to millions of people. In fact, millions of people are already experiencing the metaverse at a much smaller scale. Let’s take the online gaming company, Roblox, as an example. People can create an account and profile and use their identity to access countless games and virtual worlds. With Roblox, you can play, socialize, create and even make money through virtual goods.
Yes, Roblox looks like a game for kids. But games like Roblox show people what’s possible. They hide the technology and put the value and enjoyment front-and-center. As Web3 investor Chris Dixon of Andreessen Horowitz said, “The next big thing will start out looking like a toy.”
The connection to crypto
Crypto is a technology layer. It enables digital goods (e.g., NFTs), digital ownership, true digital economies and more. All of these are applicable to both the metaverse and gaming. This is easier to conceptualize in the latter: I can have an NFT that represents an in-game item, a marketplace where I can buy and sell digital goods and I can earn in-game currency, which I can likely withdraw to my “real world” bank account.
Gaming will be the single biggest on-ramp to bring billions of people into crypto, Web3 and ultimately the metaverse. Novelty-seeking will drive people to try this new and unfamiliar technology and crypto-enabled games will be a natural testnet for what an eventual metaverse might look like.
State of the Union
We’ve seen a lot of exciting progress in the gaming space, particularly the development of the first wave of crypto-enabled games and virtual worlds. But perhaps a better way to think about them is as a technology and financial infrastructure demo. They focus on the economics and the technology above the experience, enjoyment and mass adoption.
Let’s take two of the most prominent virtual worlds: Decentraland and Sandbox. Decentraland has 20,000 daily users. Sandbox has 30,000 monthly users. At its peak, Minecraft had 141 million. The digital currencies that power these virtual worlds both have market caps in the billions of dollars, despite having usage that effectively rounds to zero. Their value is driven by the prospect of future growth: people accumulating in-game assets and currency under the assumption they’ll make money.
At the same time, we need to be grateful for the work these companies and teams are putting in. They’re pioneers and what we learn from their efforts will pave the way for the metaverse. Most people don’t appreciate just how difficult it is to develop a game or virtual world, with many of our favorite games taking more than 10 years to make.
But ultimately, the goal isn’t to showcase technology. The goal is to build great experiences powered by great technology, with the technology being the invisible part. People won’t think of “crypto,” “NFTs,” or their earlier misconceptions, they’ll think about the experiences they’re having in games or the metaverse, enabled by technology.
Alex Reeve is Group Product Manager atCoinbase
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