From an adoption perspective, giving people a reason to engage is critical to success: a gathering of friends, a game or a business meeting in a virtual collaborative space. If the experience doesn’t add value in and of itself or elevate beyond a non-metaverse version of that experience, then elaborate development projects will sit idle as nothing more than exercises in 3D design. For those building the metaverse, the challenge is to create rich, immersive experiences and provide a compelling reason to come to the metaverse. Given the proliferation of smart devices and lower-than-ever barriers of entry in a global service economy, the war for attention in the digital world has only just begun, and metaverse experiences, despite their 3D realistic nature, will compete for digital mindshare.
New forms of value exchange in the metaverse
The metaverse is far more than a place to hang out in a 3D version of internet surfing. This view fails to understand the impact that the combination of Web3 and metaverse will make on the value that can be created and exchanged in virtual environments.
The ability to tokenize assets or create derivative trading instruments using blockchain technology may unlock potentially new business models and create marketplaces for digital assets and client advisory services. Web3 unleashes value models in the creation, storage and exchange of digital assets, while the metaverse provides the canvas on which to paint this new digital economy. Anywhere there is commerce, there is the need for trusted intermediaries, even in a Web3 landscape bent on reducing the reliance on centralized platforms.
Today, global brands are already selling digital and real-world products in the metaverse, creating new revenue streams adjacent to and extending product lines. Whether you’d like your avatar dressed in the latest “metafashion” or like to shop in the metaverse for real-world goods, users today can express themselves and spend their dollars, and crypto, in the metaverse. Creators can monetize their own content and artistry, selling to their peers and enhancing the metaverse experience for others. This all requires payment infrastructures, including on- and off-ramps to fiat currency. Financial services firms have been de facto trusted sources for such services in the current real-world economy, and it would be expected that the metaverse provides new opportunities to extend these services.
Right now, tools like digital wallets to facilitate these transactions are not user friendly; not well integrated to traditional financial infrastructure; and serve in hybrid roles, including custody for both cryptocurrency and digital assets. The on- and off-ramps from crypto to fiat currency and back are complex, unfamiliar and inhibit adoption. These tools can benefit greatly from the decades of understanding financial institutions possess regarding how to make tools user friendly and remove friction from transactions.
Decentralized finance (DeFi) seeks to remake the financial system in more of a peer-to-peer model, removing friction in transactions and the need for a middleman. While not dependent, the metaverse and DeFi may evolve in a symbiotic way as metaverse environments encourage the development of communities, including commerce. Today, creators in metaverse spaces design and market digital goods for consumption in the virtual world. They conduct transactions peer-to-peer, on the blockchain, largely without traditional financial intermediaries. Financial services firms could meet metaverse dwellers where and how they want to transact, making the experience more user friendly, and safer, introducing technology and services to protect consumers.
On one level, the metaverse can be viewed as a set of immersive technologies, such as 3D modeling, virtual reality, augmented reality and extended reality, that can make the digital world feel more real for humans or make real-world experiences feel more digitally connected. This can range from virtual worlds designed in sophisticated game engines, with which users can find themselves playing for days and hours, to development platforms purpose-built to design discreet metaverse experiences for business functions or social events. While devices such as goggles or headsets enhance these immersive experiences, three-dimensional virtual worlds can add to an experience even when viewed on two-dimensional flat screens.
This evolution to fully immersive virtual reality vs. lighter-touch augmented reality glasses, which place virtual objects in the context of the real world, and even two-dimensional interfaces for three-dimensional worlds, is still unfolding. But this view focused primarily on the user experience technology layer is just scratching the surface on what the metaverse can be. Combined with the decentralized infrastructure, digital identity and digital asset ownership achieved through blockchain technology, a Web3-empowered metaverse will be a place where users explore, create and conduct commerce with real ownership over content, assets and spaces.
Today in the metaverse, users own NFTs not only representing digital art but also penthouse apartments, ski chalets and yachts that exist in the virtual world, where they can invite friends and business colleagues to meet virtually. Technologies like smart contracts will embed programable functions into digital assets allowing ease of transfer, collateralization and empowering new financial services.
For companies looking to make investments in the metaverse, it’s critical to consider both the interoperability of these new technologies and their level of maturity. Identity, for example, enabled by digital wallets, may replace the ubiquitous logins we use today to traverse digital platforms. A digital wallet provides a way to validate one’s identity and a place to store digital assets. It also serves as a critical element of interoperability, allowing our identity and assets, via our avatar, to travel with us across metaverse platforms, much like a virtual world passport. Connected metaverses where users can move freely between experiences benefit from the network effect and increase the commercial opportunities available to participants.
The way forward
How to start in the metaverse is a daunting task, considering how hyped and conjoined many of the concepts have become. It first requires an assessment of where on the value chain a firm wishes to participate directly and where it should partner. Most importantly, it requires a definition of strategic goals and an objective look at a firm’s current capabilities and the development of an overarching roadmap for entry.
Identifying the technologies critical to success, tracking their maturity, and developing the partnerships necessary to execute an entrance into the metaverse is all part of building that roadmap. As technology matures and experiences evolve, firms must treat this roadmap as a living guide and constantly assess progress. The result should be a strategy aligned to best fit opportunities relative to current and needed skillsets.