Okay, let’s get one thing straight. All things marketed as the “metaverse” today are extremely primitive versions of it. Most are nothing more than glorified games or online chatrooms. But that doesn’t mean its future is grim. On the contrary, the metaverse is evolving at a shocking pace, and its potential is undeniable.
In this no-BS explainer, we’ll break down what the metaverse is and why you should care. There will be no needless jargon, hype, or buzzwords. Our goal is to help you truly understand, prepare for, and reap all the fruits from the metaverse.
What exactly is the metaverse?
The answer to this question depends. Are we talking about the metaverse as a concept? The practical vision for its future? Or its present implementation? Some metaverse advocates will blur the lines, either on purpose (to sell you sh*t) or because they don’t know better. So let’s clarify the differences.
Concept: The metaverse has seven layers two parts.
The first thing people do to impress you is talk about the “five” or “seven” or “ten” layers of the metaverse. They throw around terms like spatial computing, decentralization, human interface, and so on.
Look, calling those things “layers” is like calling the chef a layer of the cake he’s baking. Yes, those things are important for the metaverse. But we don’t need to overcomplicate the core idea. In essence, the metaverse has just two parts:
First, it’s a shared virtual universe. It’s a digital realm where people can gather, play, shop, and explore. It will have different “worlds” like the Internet has different websites. Those worlds will all be interlinked, and visiting them will be as easy as browsing websites. In each world, you’ll have a digital avatar, which serves as your personal stand-in.
Second, it’s a way to enter that virtual universe. Right now, that’s mostly through computer screens. As the technology improves, it could transition to VR/AR devices, like headsets. And eventually, there may be even more advanced ways, like brain-to-computer interfaces.
Vision: The metaverse will be the Internet… but in 3D!
The vision is that the metaverse will be the next iteration of the Internet. Everything you do on the Internet today, you’ll do in the metaverse… but in 3D.
Have a conference call… but in 3D!
Play games with friends… but in 3D!
Go shopping… but in 3D!
Now at this point, you may be thinking, “Look nerd, I can already do those things in 3D. It’s called getting out of the house.” And you would be right. But what about the billions of other things that you can’t do in “meatspace”?
For example, let’s say you’re fascinated by Mars. Well, sorry to be a downer… but you probably won’t be able to physically visit the planet anytime soon. The best you can do is read about it, watch a documentary, or discuss it with others. And the Internet—in all its digital glory—gives you instant access to all that information.
The metaverse promises to take that to the next level. There will be entire virtual worlds on Mars, which you’ll be able to visit with your digital avatar. Not only will you be able to learn about Mars, but you’ll also be able to experience it. You’ll help terraform it, buy land there, and even build a settlement. You’ll invite your friends, start a business, and sell supplies to other colonizers. And you’ll enjoy all this from the comfort of your living room.
In the metaverse, anything will be possible, limited only by our imaginations. Without the constraints of the physical world, “impossible” experiences will now become possible. At least—that’s the vision for the metaverse.
Present: Does the metaverse already exist?
As you might have deduced, the current metaverse is nowhere close to that dream yet. Most virtual worlds are still janky, underdeveloped, or narrow in use. Most digital avatars are still blocky, low-detail, and sometimes pretty creepy.
To put it plainly, we’re still in the proto-metaverse. That also means we’re still in the “land grab” phase of development. There are dozens of disparate platforms, all jockeying for attention.
Big tech is racing to create the one “metaverse to rule them all.” Meta’s Horizon Worlds and Nvidia’s Omniverse are two options, with Google’s in the works. Epic Games (creator of Fortnite) raised $2 billion to build the metaverse. China’s tech stars have also entered the race, including Tencent, ByteDance, and miHoYo.
There are also plenty of other platforms, backed by startups or smaller teams. They’re often blockchain-based and focus on one aspect of the metaverse, such as gaming. These include Decentraland, The Sandbox, and Roblox. They have a more grass-roots feel, with passionate communities forming around each.
To be clear, in the big picture of the metaverse, these platforms are still in their infancy. Sure, they offer neat experiences and games. Some, like Fortnite or miHoYo’s Genshin Impact, are already wildly popular and profitable. But they’re still just isolated games, compared to the vision of a connected virtual world.
Why should you care about the metaverse?
Let’s return the idea of the metaverse being the next iteration of the Internet. This is a bold claim, but it explains why so many companies see potential here.
The metaverse will have something for everyone.
The Internet revolutionized the way people connect. It tore down all distance and time boundaries. By doing so, it created communities that would have never been possible before.
Let’s say you have an unusual hobby, like stapling bread to trees. (Yes, you read that right.) A hundred years ago, you would’ve been the only bread stapler in your town. You would’ve been labeled an outcast and shunned from society. But today, you can join a dedicated subreddit with over 320K other members.
That’s been the story of the Internet. We started in forums and message boards, and now we’re in subreddits and Facebook groups. The metaverse is the logical next step. It upgrades text-based conversations to spatial 3D interactions.
You could staple virtual bread to virtual trees. You could snap your fingers to conjure different kinds of bread—sourdough, rye, pita. You could generate rows of exotic trees from all corners of the world. And you could do this to your heart’s content.
Of course, stapling bread is just a silly hypothetical example.
Or is it?
One of the earliest metaverse concepts is Roblox, which launched in 2006. Think of it like Minecraft, but catered toward player-designed experiences. Lo and behold, some enterprising player is already selling a stapled bread accessory. Soon enough, we’ll get a whole Roblox world for stapling bread.
Of course, with over 4 million player-developers, Roblox also has more traditional forms of fun. Car Dealership Tycoon lets you run your own high-end car dealership. Adopt Me! lets you raise pets in a post-apocalyptic bunker. Work at a Pizza Place lets you… work at a pizza place?
To be clear, these are all proto-metaverse experiences. Nobody would confuse them with a full-fledged virtual reality. But they are important stepping stones along the way. And they already feature key metaverse ideas like a shared world with custom avatars.
The point is—there will be something for everyone. McKinsey recently conducted a survey of consumers who’ve tried today’s rudimentary metaverse. Almost 60 percent said they’re excited to transition everyday activities to it. As the metaverse continues to get more immersive, that number will only go higher.
The metaverse will make some things radically easy.
In early 2023, the city of Seoul released Metaverse Seoul to the public. Residents can now explore a 3D version of the city and its attractions. Citizens can view official documents, file complaints, and even receive tax filing help. This type of “virtual city hall” is especially important to countries like South Korea. It has a large aging population that may have trouble visiting city offices in person.
The metaverse has also opened a whole new world of live entertainment. Forget buying plane tickets, booking hotels, and waiting in line for hours. Big names in music like Justin Bieber, The Foo Fighters, Ariana Grande, and Travis Scott have all hosted metaverse concerts.
The turnout to these virtual concerts has been staggering. Over 27 million unique users across the globe went to Travis Scott’s Fortnite concert. That’s not total views, by the way—that’s concurrent attendees. To put that number into perspective, it would be enough to fill Coachella 216 times.
The best part? Because it was all digital, admission to the concert was completely free. The platform makes money through sales of digital in-game merchandise instead. With all these advantages, McKinsey & Co. predicts that over half of all live events will move to the metaverse by 2030.
The metaverse will be v0.01 of a teleportation device.
So you can file your taxes and attend concerts in the metaverse… What’s next? Travel and tourism, of course. Tourism is a $1.6 trillion market for good reason—people crave new sights and sceneries.
In the physical world, we’re bound by time and distance. But in virtual space, you can pop anywhere in the world if you have an internet connection. It won’t break the bank, you won’t suffer through jet lag, and even language barriers won’t exist.
For example, you can now tour Egyptian heritage sites like the 5,000-year-old tomb of Meresankh III. You can also tour zoos, national parks, and even the Great Wall of China. And while those “visits” don’t yet rival going in person, the realism gap will get smaller as VR gets better.
But let’s not stop our imaginations there. Right now, we’re recreating real-world landmarks in the metaverse. Yet what’s stopping us from going places that would be impossible in the real world? How about a viewing deck in the Marianas Trench? Or an elevator ride into the Earth’s core? Or a segway tour of Atlantis?
These would all be possible in the metaverse. So while we won’t be able to say “beam me up Scotty” for a long time, our virtual avatars might very soon.
How are NFTs related to the metaverse?
By now, the NFT speculation craze has come and gone. At one point, so many influencers and celebrities were peddling these things in your face. A lot of people got scammed, leaving a bad taste in the general public’s mouth.
So it’s a great thing for the metaverse that the NFT craze is over. That’s because NFTs are actually integral to the metaverse. And now this technology will finally get a chance to develop without rapid speculators waiting to pounce.
NFTs are essential to the metaverse because they let you own digital assets. Think about it this way: if there wasn’t a way to own websites, the Internet wouldn’t exist. Nobody would build YouTube.com or Amazon.com if someone else could just come and swipe their hard work. Similarly, the metaverse will not exist without a way to own things in it. No one would be incentivized to build anything cool.
To solve the ownership issue, we have two options. The first option is to rely 100% on the platform creator (e.g. Meta or Google) in a closed system. This is problematic for obvious reasons. If you buy a plot of metaverse land, but they say you broke terms and conditions… it’s no longer your land. So the better option is to use NFTs, which are blockchain-based and open to all.
What are NFTs and how do they work?
NFT stands for non-fungible token. When something is fungible, it means it can be replaced with something similar. For example, a mass-market book is fungible. If you order a book off Amazon, you don’t care which copy you get. They’re all the same price, interchangeable, and have the same text inside.
But let’s say you end up loving the book. It’s inspired you, and you’ve taken hundreds of notes along the margins. You then take your copy to the author’s meet-and-greet. Afterwards, the author signs your book, with a personalized message just for you. Now, that book is no longer fungible. It’s now one-of-a-kind, especially to you.
This is why an original Rembrandt painting can sell for up to $197 million. You could easily print a photo of the painting and hang it up. But you’re not paying for its look—you’re paying for its history and the fact that it’s an original Rembrandt.
For something small, like a book or painting, having the item itself is enough to “own” it in the physical world. But for something large, like a house, you can’t carry it around with you, right? So instead, we use legal documents like property deeds to denote ownership.
In the metaverse, it’s the same idea. You can’t physically carry around digital assets. Instead, we can use blockchains—massive online ledgers that keep track of who owns what. And on the blockchain, we can upload smart contracts that play the role of the property deed.
When an NFT is created (“minted”), a smart contract assigns ownership to the token. The smart contract can then transfer the token to a new owner when it’s sold. Again, both the NFTs and the smart contract are stored on the blockchain. That means they can be viewed and verified by everyone.
So the next logical question is… what can you buy and own in the metaverse?
As it turns out, the answer is… the same things that people chase in the real world:
NFTs let you own digital status symbols.
Maslow’s hierarchy of needs is the most famous depiction of human motivation. The pyramid starts from food and shelter, and goes all the way up to self-actualization. But right before reaching the top, there lies another level: Esteem.
Esteem encompasses timeless desires like respect, status, and recognition. Put simply, people just want to show off. Cars, watches, luxury bags, Instagram followers… the options are endless. So it’s no surprise that with the metaverse and NFTs, status symbols have gone digital.
Especially as Gen Z consumers enter financial maturity, this mega-trend is unmistakable. In 2015, roughly $5 billion was spent on virtual goods, such as in-game items. Today, that number has increased by 16X to over $80 billion per year.
And as you know: Where there’s blood in the water consumer spending, sharks businesses will follow. Brands like Dolce & Gabbana featured in Decentraland’s Metaverse Fashion Week. Balenciaga dropped a line of “high digital fashion” apparel in Fortnite. Even Gucci got in on the fun, releasing a virtual version of its Dionysus bag in Roblox.
What’s unique about the metaverse is that brands can curate the entire experience. Your favorite celebrity might appear, wearing that nice watch you’ve been eyeing. Or you might get transported to an exotic beach while you browse the latest swimwear line. Or you might get to test drive that new car in a simulated replica of your home city.
Now, buying luxury bags is cool, but there’s an even better way to show off in the metaverse: virtual real estate.
NFTs let you buy land and real estate in the metaverse.
As we’ve seen, websites are the “real estate” of the Internet. Companies pay top dollar for short, catchy, or easy-to-remember domain names. For example, Voice.com sold for $30 million.
So why would companies pay that kind of money? It’s simple. On the Internet, your domain is your “home.” It’s where people visit you, see what you offer, and do business with you. It’s your “plot of land” on the world wide web. And just like in the real world, location matters.
So if the metaverse does become “the next Internet,” then prime digital real estate will shoot up in value. Just as big tech is racing to build the metaverse, many users are racing to buy up virtual land, which are sold as NFTs.
So far, over $1.4 billion in metaverse real estate has been sold. One anonymous user even spent $450,000 on a plot of virtual land in The Sandbox next to Snoop Dogg’s “Snoopverse.”
Of course, a big issue is that these virtual plots are all on different platforms (or “-verses”). Assets on one platform are worthless on another. So right now, it’s very much a horse race, with land buyers also betting on the platform they think will win.
What’s next for the metaverse?
First, the latent potential for the metaverse is extraordinary. Remember, annual spending on virtual goods is now at $80 billion. This is over 1600% higher than it was eight years ago. And while the NFT speculation craze is over, as a technology it’s here to stay. In 2022, the number of metaverse-related patents more than doubled the previous year’s.
However, for the time being, VR technology is still too crude. Devices are still too expensive and experiences still lack immersion. Worldwide shipments of VR headsets in 2022 actually declined by 12% from the previous year. That means we’ll be stuck with a “proto-metaverse” accessed via screens—at least for the near future.
That being said, VR/AR hardware and software won’t be an issue. They will keep getting more vivid and immersive. After all, those are tenable engineering problems. And big companies are pouring big money into solving them.
In the long term, the trickier issue will be the idea of creating a general-purpose world that people want to be in. Right now, everything is still served as isolated experiences. Do you bet on Horizon Worlds? Or do you stake your plot in Decentraland? The point is: consumers have limited time, money, and patience.
Either all these competing platforms will need to work together and be something greater than the sum of the parts… or one of them will need to dominate.
