Mark Zuckerberg, CEO of Meta (formerly Facebook), recently gave us a taste of his vision for the metaverse. The company aspires to be a leading force in this emerging trend. Contrary to the company’s recent rebranding, the social media platform didn’t create the metaverse concept. Although the company is betting big on merging social networking and interactive gaming with extended reality, so are many other players.
The metaverse concept is a persistent online three-dimensional extended reality environment where users transition between worlds with their avatar and digital possessions. Essentially, a metaverse could be the core social platform where users interact and portal to various digital worlds. Not much different to how you move between web applications using the Facebook Login single sign-on feature.
Several virtual worlds already exist. Some are on centralised platforms, like Second Life, Fortnite, Minecraft and Roblox, and others are decentralised platforms, such as Decentraland, SandBox, Axie Infinity and Illuvium.
One of the most engaging features of virtual worlds is letting users create avatars to portray themselves in the virtual world, purchase items, collect loot and trade with other users. The difference between centralised and decentralised virtual worlds is that centralised ones are closed ecosystems, and your avatar, possessions and profile are locked in one environment. However, decentralised virtual worlds use cryptocurrencies for processing payments, NFTs for tokenising digital property, and blockchains to make information secure and accessible.
Current decentralised virtual worlds like Decentraland and The Sandbox let users buy virtual real estate on the platform, equipment, wearables for their avatar, artwork and other attributes. These features rely on NFTs to authenticate the item, prove ownership and enable trading of digital objects. NFTs are essential in creating scarcity and establishing an economy based on supply and demand principles within an ecosystem.
Using public blockchains makes decentralised virtual worlds infinitely extensible. An often-overlooked advantage of blockchain technology is the infrastructure is open, and any platform or app can integrate, and anyone can build on top of it; it’s permissionless. The metaverse could be a platform aggregating various decentralised digital worlds. Let’s not forget that social media platforms are nothing without their users and the content they generate, so extensibility is imperative to user adoption and engagement.
Meta won’t necessarily own the metaverse, it could be any of the platforms racing to be the dominant force in this emerging sector. But Meta has substantial resources at its disposal, as do other tech giants. Meta has joined the metaverse race and has 20% of its current headcount assigned to virtual and augmented reality projects and is looking to hire an additional 10,000 personnel in the EU. We’ll likely see some interesting developments in the coming years. For now, the metaverse is still an early concept, but NFTs are well-positioned to play a crucial role.
Up to now, NFTs are best known for their association with owning digital artwork, in particular, avatars like Cryptopunks, The Bored Ape Yacht Club and Cool Cats. Still, they don’t have much utility besides bragging rights. Many already know that Twitter founder, Jack Dorsey, is a decentralised technology advocate. He sold the rights to his first-ever Tweet as an NFT raising millions for charity. Twitter recently built a tool for users to apply their authenticated NFTs as profile pictures. This example is one of the first mainstream use cases of NFTs being used for self-representation, albeit a very limited one.
NFTs will play a vital role in enabling an open metaverse allowing users and businesses to interact with objects. For example, businesses can offer merchandise and limited-edition memorabilia as NFTs or offer digital counterparts of physical products they sell in the real world. I also see the metaverse providing amazing opportunities for e-commerce (or meta-commerce). For example, a metaverse platform could sell or lease virtual storefronts to attract avatar footfall.
Regardless of the role NFTs play in the metaverse, a three-dimensional interactive environment will completely disrupt how social media companies monetise their platforms and how advertisers promote their products and services.
For instance, advertisers could conduct product placement exercises and recruit brand ambassadors to represent them in the metaverse. Or establish virtual storefronts and showrooms to showcase products, or host virtual events, such as digital fashion shows, concerts and sporting events. While metaverse platforms can charge advertisers for access, one of the most disruptive monetisation initiatives would be to launch a digital currency (remember Libra?), allowing platform providers like Meta to facilitate payments and take a commission from every sale facilitated in the metaverse.