By: Tushar Sehjpal, Senior Specialist – CX Consulting, LTIMindtree

We stand at a juncture in the evolution of the internet where the next big step towards the metaverse will disrupt how people interact with the physical and virtual worlds. Therefore, it becomes imperative to understand the basics of the metaverse and how it could evolve in phases, the underlying technologies, products, services, and markets to make informative decisions in the next iteration of the digital economy.

Apart from the COVID-19 aftermath, 2021 created a buzz around the metaverse due to some concrete investments made by technology giants such as Meta (Facebook) and Microsoft. We are at the threshold of witnessing the next big thing after the internet. The latest report predicts that the metaverse economy could be worth up to $13 trillion with 5 billion users by 2030.

Defining the metaverse

While trying to decipher the real meaning of the metaverse since it made some major headlines across the world in early November 2021 when Facebook rebranded itself to ‘Meta,’ it is evident that the real definition of metaverse will remain in flux and that it depends upon whom you ask.

Currently, there is no consensus in the industry about what the metaverse is. Majority of the definitions circulating in the public domain associate metaverse with the idea of a community-based immersive digital environment. In its more mature state, the metaverse will enable persistent, decentralized, collaborative, interoperable digital content to co-exist with the spatially indexed and organized content in the physical world in real time.

While no single organization will be able to create the technology (let alone build the whole metaverse on its own), some vendors will be playing multiple roles. Let us take the example of another Tech giant–Microsoft, which ventured in a low-key, yet logical way into the metaverse with Microsoft Mesh, an infrastructure element with huge potential for metaverse use cases. It acts as a collaboration framework, which users and vendors can use to build upon their own experiences. Recent acquisitions like Activision Blizzard (Microsoft’s single biggest ever purchase at $68.7 billion) reinforce Microsoft’s content and tooling capabilities. Then we have the hardware devices like Holo-lens 2.0, which lets users interact or experience digital content.

The core of the Metaverse

While different organizations are talking about their own metaverse, we are already witnessing precursors to the metaverse making investments. The use cases and solutions are glimpses into what may become the metaverse, eventually.

The definition of the metaverse is still in flux. What we are essentially talking about is a combinatorial trend. The convergence and interaction of individually important, discrete, and independently evolving technologies and trends give rise to another trend—bringing us closer to the ‘real’ metaverse.

The 4Ds of the Metaverse

1. Decentralized: Metaverse stands on the core principle of decentralization in the Web 3.0 economy, wherein creators can contribute to the development as well as influence the roadmap of a true open-source web experience. Case in point – The users or participants in the metaverse reality will be able to travel across various virtual worlds using their Avatar. Unlike Web 2.0, where centralization allowed digital imperialism to prevail, the Web 3.0 metaverse promises an upgraded alternative digital space powered by blockchain with Decentralized Autonomous Organizations (DAOs). This is in contrast to the dystopian ideas of centralized control of the metaverse by monolithic corporations and governments. (e.g. Non-Fungible Tokens (NFTs) instead of marketplaces and galleries, Decentralized Finance (DeFi) as the financial system)
2. Distribute: The ability to transport users to another time or place which isn’t their current physical surroundings. The users or participants may be thousands of miles apart but will be able to interact in a virtual environment using their Avatars. Metaverse will bring a radical change in the way people socialize, collaborate, work, learn, train, and play. It will drastically diminish the real-world constraints of time and distance.
3. Displace: The ability to change the world around using the power of spatial computing. Metaverse can transform the user’s environment as it allows the digital world to intersect and interact with the physical world. The idea is to let users experience the pervasive, ubiquitous digital information from the metaverse in real-time to enhance or augment how they eventually experience the world. It changes the world around the user with relevant, interesting, and actual information (e.g., Hyper reality.)
4. Deal: The metaverse will have its own independent virtual economy (buy, sell, stake, trade, or invest). Users (creators and participants) will be able to deal with or transact over virtual goods and services through digital currencies and assets. (e.g., Crypto coins, NFTs, etc.)

My perspective on the metaverse

The metaverse will be an extension of the internet, the web 2.0. The interpretations of the metaverse will depend upon the kind of experiences that it will offer to its Users.

For the sake of simplicity, the metaverse can be potentially classified into two categories.

1) The Social metaverse: A boundless version of the digital environment where creators will be individual agencies. (e.g., fashion, beauty, gaming, virt-real estate, meta sports, etc.) Although it may still be too early to draw any firm conclusions, many expect it to be similar to a digital city that hosts all real-world elements, if not more, like houses, parks, shops, museums, and roads. It could also be the case that users experience life across different virtual worlds created by communities sharing ideas, beliefs, culture, and norms.

2) The Business metaverse (Omniverse): A rule-based metaverse that operates within the boundaries of the business model or business function it caters to. (e.g., Manufacturing metaverse, Factory of the future, etc.). Every organization will have its own version of the metaverse depending upon its unique business model and vision for the future. It would allow the business owners to organize themselves in the metaverse, keeping in view the classical value chain perspective of the firm, yet operate as a more decentralized, collaborative, and efficient organization.

PS: This categorization of the metaverse is purely based on the perceived value of the use cases to any generic user or business owner/employee in the metaverse. The Social metaverse may thrive more on the concept of the notional value of digital experiences and assets. However, for a sustainable business, metaverse will carry real value as it would impact the top/bottom line of the firm (with real dollar value associated). Both these categories of the metaverse will potentially influence each other.

How the metaverse could evolve from here: A perspective

As per the findings of the Social Media analytics study undertaken by Gartner in 2021, business leaders are optimistic about new opportunities created in multiple industries and the new interactions among people. The ultimate goal of the metaverse will be to coalesce the different opportunities arising from the new interactions or activities. However, in the short term, we will witness many iterations of metaverses with evolving experiences.

Each technology and service provider currently has its own version to define the metaverse, and the future is deeply rooted in its current business strategy and capabilities.

The evolution of the metaverse could be represented in three overlapping stages (see figure 2 below)–

For Market/Product Leaders, the distributed metaverse is in progress right now. Many of the market characteristics of the distributed Metaverse solutions are counter-intuitive to an autonomous metaverse. E.g., the siloed, app-based, non-interoperable content experiences that we have today. These do not completely satisfy the decentralized, interoperable, and shared vision of the metaverse. The current walled-garden approach to the metaverse also strongly limits User experiences.

What this first stage encompasses are the catalysts or the precursors – promising use cases and applications based on commercially available products and services that we know today. (e.g., social networks, online games, e-commerce, cryptocurrencies, NFTs.). These catalysts satisfy one or more of the characteristics of the metaverse depending on the application; however, they are vendor-centric concepts at this point. There are also many challenges in this early phase of the metaverse – it is rare to see vendors benefit from aligning or partnering with other vendors, let alone the competitors. Due to this, any potential gain that could be realized due to combinatorial innovations is still limited. The individual vendors tend to be responsible for driving any such innovation. The challenge for the Product Leaders in this embryonic phase is creating a sustainable and profitable business based on the precursor Metaverse use cases. And because the metaverse is still being created, most vendors will build a Product strategy based on the niche application or Use cases in the metaverse. These may not necessarily be representative of the metaverse as a whole or meeting the ultimate potential of the metaverse. Numerous limits to progress and development also characterize this phase – not only is it challenging for providers, but it also proves risky for early adopters. So, while there are early adopters of the emerging innovations, they come with the high risk of implementing a Metaverse precursor that does not yield the proposed business benefits in the long run or just falls short of mature metaverse expectations. This is further worsened by the cost of exit or leads to unrecoverable investments in software, hardware, and services that get replaced by newer innovations/ iterations.

In the combinatorial metaverse stage, the nature of interactions starts changing, viz.

1. Interpersonal interactions due to the nature of digitally and spatially organized/ indexed content being available;
2. Interaction of humans with digital content, whether via spatial computing or a purely digital environment; and
3. Interaction of digital-to-digital content.

This shift will be critical to opening new opportunities and challenges for Product leaders to engage with customers and partners. It will involve further changes in the competitive landscape, market dynamics, and business models. (e.g., vendors might not need to create a strategy for the challenges that will arise with content inoperability). The focus in this stage will be on handling ‘content portability’ (Participants will be able to bring their digital content along with them wherever they go in the metaverse, like the ability to wear digital merchandise earned in a game to a virtual event or drive to an event in their recently purchased digital sports car). This will potentially lead to novel competing standards, and the major players will have to build strategies to win this battle.

Vendor development efforts will also see a considerable shift from pure App-based models to super Apps, which combine multiple services, actors, providers, and associated marketplaces (e.g., Alibaba, Amazon, Facebook, Instagram, Roblox, Whatsapp, WeChat, etc.). The growth and popularity of these super apps will eventually drive Tech vendors to adopt more composable pricing models, interoperability standards, and secure user data sharing.

In the later stage, as we transition to the more advanced version–the Autonomous metaverse, decentralization will be at its peak, and the impact of combinatorial advancements will define the path forward. Due to this shift, a new set of technology leaders will rise while displacing a few from the previous phase. In this evolved metaverse phase, applications and use cases that enable collaborative and multi-source experiences will reach majority adoption. Persistent, spatially organized, and indexed content will move well beyond the early adopters. Early adoption of content interoperability will be one of the indicators of a mature metaverse, which will thrive on more realistic and vivid digital experiences.

Users will be exposed to more curated and decentralized content, which will form the foundation of ‘Virt-real’ experiences. The decentralization of the data will enable real-time and localized content updates.

The evolution of the metaverse in these 3 phases seems to be linked with a couple of unlocking steps-the consumer hardware piece, the content piece, and the partnership piece, where the partnership between creators and platforms will play a pivotal role in the overall growth and scalability story. The journey ahead seems to be exciting!

The most imminent challenge(s) for the metaverse

The biggest roadblock for the metaverse is the fact that there is no industry-wide standard definition available as of now. This gives an opportunity to the industry and the policymakers to work together to establish a regulatory framework while the metaverse is in the process of being created. The lack of full understanding of the opportunity and potential risks should not lead to preventative regulations that pose impediments to the future of the web.

If we are going to build the metaverse responsibly, it will focus on key regulatory aspects like content rating and classification, user data privacy, intellectual property(IP, copyright) ownership and infringement, competition, and antitrust. This also comes as a learning from the web 2.0 journey, which brings us to the second challenge related to NFTs. The metaverse would need to simplify intellectual property rights (ownership and selling rights). Users who possess NFT will need to abide by the IP rights as per the digital contracts that govern the transaction to avoid legal ramifications.

The other challenge relates to the Environmental, Social, and Governance priorities that grip today’s world affairs. It will be a daunting task for the creator communities to ensure that the metaverse serves as a medium to connect with people socially and professionally irrespective of their real location. However, there are instances of the dark side of the metaverse, which includes the possible mental-health risks that result from using social media platforms, cyberbullying, the spreading of misinformation on vital issues (such as the pandemic, elections, etc.), the poor handling of data, and so on.

As cryptocurrencies define the concept of money in the metaverse, how environmentally friendly these assets have often been asked. As per the latest data shared by CBECI, EIA, along with Citi Global Insights, the estimated energy consumption for Bitcoin peaked at 148TWh (terawatt hours) in February 2022, which is an increase of 32x from the beginning of 2016. This is alarming as it equates to or rather surpasses the consumption figures of many large nations across the world. This concern is often accompanied by debates on Proof-of-Work and Proof-of-Stake algorithms.

Conclusion

We are still in the early phase of the metaverse journey. There is a lot to uncover in the next decade or so through experimentation, trial and error, inspection, and adaptation. Whether it is just a dream about the future of the internet or its logical evolution, only time will tell.

Let’s see how many of us would end up buying VR headsets by the end of 2022 or rather make an NFT transaction. With smartphones as the gateway to the emerging metaverse world, the momentum seems to be in the positive direction. With technology advancing each day, we should be on the watch out for changes in policy and regulation in this space.