Human beings are social beings. Connecting and networking are central to our DNA. Our ability to cooperate on a massive scale has enabled creation of civilization - commerce, culture, art, architecture, language, science, empires, nations. None of these would have been possible without humans cooperating beyond tribes, geographies and generations. This cooperation has been facilitated by creation of systems & technologies which have transcended our mental and biological capacities (we can only cooperate closely with 150 beings). These ‘technologies’ range from money (which helped us scale trade) to wheel (scaling travel) to empires/nations (scaling tribes). In recent times, one such technology has been the internet. 

The Internet has connected humans across the globe like never before. We can talk to anyone we want, can buy anything from anyone, learn from subject matter experts, check out places we aren’t likely to visit physically (inside of a volcano anyone?), connect with our favorite artists, play games with anyone we want…the use-cases are endless. Cheaper devices and data have made the internet accessible to massive population segments (Facebook reported ~3 Billion Monthly Active users in March 2022 alone), turning our world into a global village. So, what is the next level of networking? It’s not simply having access to the internet, but actually ‘living within’ it. This is where the concept of Metaverse comes into the picture.

Metaverse was introduced into the lexicon by science fiction writer Neal Stephenson in his 1992 novel Snow Crash as a portmanteau of ‘meta’ and ‘universe’. Here humans, as programmable avatars, interact with each other in a 3D virtual space that uses the metaphor of the real world. The term started gaining prominence with adoption of AR/VR technologies, especially for the gaming use-case. Tech behemoths started building their own AR/VR/MR stacks to extend it to other use-cases, with Facebook buying Oculus Rift in 2014 as the next bet for social media evolution, to Microsoft launching Hololens in 2016 to tackle business Mixed Reality applications. However, broad based adoption was limited due to high costs, device clunkiness and lack of quality content. Broader adoption of web3 tools has changed all of that, with metaverse making a strong comeback (so much so that a tech-tycoon rebranded his company).

 As with any term popularised by web3, Metaverse’s definition can appear nebulous, with everyone having their own definitions over the years, pointing to how it means different things to different people. Personally, I have found Piers Kicks definition (Piers is a prominent VC in blockchain gaming space) to be the most succinct and meaningful - “The Metaverse is a persistent, live digital universe that affords individuals a sense of agency, social presence, and shared spatial awareness, along with the ability to participate in an extensive virtual economy with profound societal impact.” This definition characterises metaverse in a certain way with certain characteristics. Let’s look at them below

Metaverse characteristics

• Persistent: This means metaverse never “resets” or “pauses” or “ends”, it just continues indefinitely (very similar to our observable universe)

• Massively concurrent: It should facilitate the presence of millions of concurrent users, while also providing each user with an individual sense of “presence”. Millions of avatars should be able to attend events at the same time without sharding servers. 

• Synchronicity: Metaverse will exist for everyone consistently in real-time, with pre-scheduled or spontaneous or closed events (just as it happens in real life).

• Interoperability: Users should be able to utilise digital assets, data, content, identities etc. across platforms and experience seamlessly. For example, users should be able to use their Counter-Strike gun skins in Fortinite, or carry their League of Legends avatar to Dota. This implies both Open Source governing protocols AND Hardware agnosticism.

• Content Rich: It’s critical that Metaverse is populated by “content” and “experiences” created and operated by an incredibly wide range of contributors, some of whom are independent individuals, while others might be informally organized groups or commercially-focused enterprises. This will form the backbone of ‘supply’ to satisfy the users’ demands. 

• Incentivised: Metaverse needs to be a place where users can be meaningfully employed. They can invest, create, lease, buy and sell goods and services in a similar way as in the real world.

These characteristics are ‘ideal’, detailing attributes of how a Metaverse might appear in its ‘final form’. We are nowhere close to achieving these traits, requiring us to take significant strides over 3 major areas

• Massive server capabilities to facilitate persistence, concurrency and synchronicity at scale. Further, user-friendly devices for Metaverse accessibility and versioned softwares which can be operated on low-end devices as well are critical to mass adoption.

• Open Source Protocols which enable interoperability across platforms seamlessly with minimal/zero gas fees (transaction fees) is necessary. No one can ‘own’ the metaverse completely. This is easier said than done, since it’s completely opposite to the ethos of tech giants today. This clash of open vs closed is being played out today with Epic battling a protracted legal battle with Apple over playstore fees.

• Widely accepted incentivization for creators to create/produce all kinds of digital goods and services within Metaverse is essential for consumer adoption. This is where the creation of Bitcoin and subsequent developments around blockchain have been critical. Though this has opened up a few use-cases, large-scale metaversal immersion is quite some distance away.

While a metaverse in its final form is a long way away, there is one industry which is leading our march towards a metaversal economy - Gaming. 

Gaming has been central to increasing usage of virtual platforms. Games are unique because it’s both a large consumer market (there are 3.24 billion game players globally) as well as extremely demanding technologically (usually powerful computing is required for niche applications such as quantum calculations, scientific research, space travel etc with lower market sizes). The amount of computing power required to handle all possible gameplays and hyper-realistic environments at scale is immense. Since these experiences attract billions of users, the investments over the years have been massive as well leading to faster technological leaps - massively scalable synchronous web services, widely accessible low latency databases, content management services and data sciences tools. Though these advancements have improved concurrency and graphics, games aren’t exactly metaverse since employment opportunities have been limited (biggest use-cases have been around gaming tournaments), games aren’t exactly interoperable and we are still quite some distance away from true concurrency and persistence at scale. 

However, wider adoption of cryptocurrencies has democratised economic opportunities. The virtual goods market is estimated to grow to $190B by 2025, largely driven by NFTs. Gaming assets such as tools, avatars, skins etc can be minted as NFTs, which can be further bought and sold by users. Gaming companies such as Blockade allow developers to build games on blockchain, hence allowing developers to mint in-game assets as NFTs. Axie Infinity (a pokemon-type game) issues creatures called axes as NFTs which can be used for creating an ‘axie army’ for in-game battles. These axies have unique abilities based on their ‘genes’, and their combinations can produce millions of game plays. Axies can be bred too, which can be sold to other players in the platform as NFTs. Many gaming platforms allow users to trade their NFTs on in-house secondary platforms, which is a massive change from licence based web 2.0 games where such markets were deemed illegal (most such secondary sales were done in black markets). In fact, this in-game ‘assetization’ has even led to speculation around land within games (especially where owning land is pivotal in game context). For example, in Final Fantasy XIV, in-game housing confers recreational and status benefits, which has led to rampant land speculation, calling for institution of a land tax (?!) in such scenarios.

Such rent-seeking behaviour notwithstanding, gaming has broadly led to development of a sub-economy where anyone can build and monetize content, leading to the term ‘Creator Economy’ 

Gaming & Creator Economy: Companies such as Unity and Roblox have been pioneers in creating user generated games. Unity has over 1.5 million monthly creators with 8000 apps per month created. While these game engines started off being primarily for creating games and associated assets, they have rapidly expanded into creation of all forms of assets and experiences. For example, Hong Kong International Airport was designed in Unity - not because it’s the best tool to design an airport, but because it was superior at simulation. As a game engine, Unity could not only render a not-yet-real environment, but realistically stress-test it for calamities, a backed-up runway, and for the flow of humans in an emergency. Similarly, Unreal Engine (owned by Epic Games, the creator of Fortnite), which has a stack of tools to power thousands of games, has been used to render and shoot Disney’s The Mandalorian. Director Jon Favreau was able to literally enter its digital sets to frame a shot and position characters. Hence, these softwares designed by gaming companies to enable independent developers to create games on their platforms expanded to include creation of other forms of media as well as industrial engineering. Cars are being designed using game engines, with the same software being deployed in the end-product. Hummer’s dashboard UI is now based on the Unreal Engine and can simulate the vehicle live.  

This metaverse strategy isn’t by accident - Epic Games's CEO Tim Sweeney has talked about a two pronged focus; one of them is about capitalising Unreal Engine to enable “all of the companies throughout the industry to have a real-time 3D presence”. The other focus involves expanding Fortnite from a game to ‘experiences’ that could reach a billion users. These experiences are where Gaming platforms are truly transitioning from a virtual platform to a virtual universe.

Roblox has been a leading company in terms of leveraging user-generated games. Most of its games come from the 9.5 million creators on its platform. Creators use Roblox studio to craft games and associated assets & avatars, which are played by 54 million daily active users. This variety of games allows players to shift from one ‘universe’ to another seamlessly, exploring them in whichever identities they want to with their friends. Roblox hosts private servers  where users can play in one of their ‘worlds’ with only people they know. Players can utilise these servers for all kinds of social events from meet-ups & birthday parties to larger events such treasure hunts. Fortnite’s Creative Mode already feels like a proto-Metaverse. Here, a player loads their avatar (one which is specific to them and can be used across any of Fortnite’s games) and lands in a game-like lobby and can choose from thousands of “doors” (i.e. space-time rifts) that send them to one of thousands of different worlds with up to 99 other players. 

Additionally, since the pandemic began, both Fortnite and Roblox have hosted multiple concerts. 33 million players attended Lil Nas X’s concert, whereas Travis Scott’s Concert on Fortnite attracted 45 million attendees over 5 concerts. Piers Kicks writes about his experience of attending this concert, where he talks about users’ avatars queuing outside for verifying their digital tickets, interacting with each other in scarcely believable landscapes and the overall intensity of the digital experience (“was arguably the closest one can come to taking acid without actually taking acid.”). In a nutshell, this experience had everything a real world concert has, and then so much more.

Branding: These experiences have further presented significant branding opportunities for companies. Fortnite is increasingly becoming a medium through which other brands, IP, and stories express themselves. In 2019, Star Wars: The Rise of Skywalker released a clip exclusively in Fortnite as part of a larger, in-game audience-interactive event that included a live interview with director J.J. Abrams. Other kinds of branding include leveraging ‘Limited Time Modes’ , or LTMs in Fortnite, which are events within a game that have a limited time duration (usually no more than a week). These LTMs have been leveraged by likes of Marvel for publicising their upcoming movie releases (before release of Spider-Man: No Way Home, Spiderman became available as a playable skin and web-shooters being available to other avatars as a special weapon) or Nike releasing Air Jordan merch.

As more and more users are spending time on these platforms, more and more use-cases are opening up. Gaming seems to have become the first major industry where massive employment opportunities are present within the digital landscape, with opportunities for players, developers and designers across industries. Further, virtual goods are becoming an asset-class in themselves, leading to diversified investment opportunities in the metaverse. As more and more industries open up, more and more people will be spending time within the metaverse, connecting with each other in ways they hadn’t before. As a networked species, we are all set to take our next leap