6 Things to Know about the Metaverse
While cryptocurrencies have taken a hit in public perception with the collapse of FTX, this is still an exciting time to be engaged in the new frontiers offered by “Web 3.0”. We recently spoke with some experts in the field about the possibilities open with the expansion of key Web 3.0 technologies. We think that these are six things you need to know about the metaverse.
1. What Even IS the Metaverse or Web 3.0?
It’s totally understandable to be confused a bit here. Facebook rebranded as Meta, making the very discussion of a “metaverse” seem like it’s limited to one social media platform. To clear this up, let’s take a quick look at the history of the internet as a social phenomenon. Sometimes moving forward requires looking backwards; if it didn’t, cars wouldn’t have rear view mirrors.
First, electronic communication is older than most of us would believe: Ray Tomlinson sent the first email ever in 1971. The internet was developed by DARPA: the Defense Advanced Research Projects Agency. Consumer use of any of this technology would come a bit later. We can think of things in three rough periods: Web 1.0, 2.0, and 3.0.
Web 1.0 ran from roughly 1985-2003, according to Maximilian Schmidt, Swiss Metaverse Lead at EY. It was an era of centralized, company-based, control of information. Information flowed one way: from AOL, MSN, or other providers to the consumer. Companies made money from selling advertising space on their websites, akin to the print media paradigm. Consumers were limited to “read-only” permission of information.
We are still very much in the Web 2.0 era, although this overlaps with Web 3.0. Web 2.0 branched off in about 2003, and moved information control from service providers to platforms. Information was no longer on your AOL login screen but shared across social media, evolving from Friendster to MySpace to Facebook. One main change was that consumers could now create in the space as well. Think of Instagram and YouTube as prime examples of user-created content platforms. Consumers are now on “read-write” permissions on most sites, but users do not own the content or information.
Web 3.0 started around 2015 and is continuing to develop around us. It features a further move away from centralized company control into decentralized networks. To use a social media example, Twitter is a Web 2.0 service: it is centralized, users have the ability to “write” into the information stream, but users do not own and cannot monetize that information. Mastodon, which had a spike in popularity concurrent with Elon Musk’s purchase of Twitter, is more of a Web 3.0 network. There is no central company called “Mastodon”. Different servers use a common language to talk with each other, allowing not just writing but ownership of the content stream. Mastodon is a decentralized network that has no capacity to monetize users’ information.
The metaverse, then, can be thought of as an alternative/virtual reality that is always present. We can currently use augmented and virtual reality services for work and play, but they are not persistent in the way that the metaverse will be. Forward-thinking companies and even government entities have already begun to stake out space in the metaverse.
2. What Opportunities Does the Metaverse Offer?
We asked Schmidt about some of the opportunities companies ought to be thinking about with regard to Web 3.0 and/or the metaverse. By 2027, the market size of the metaverse is expected to reach $800 billion. Companies already involved in Web 3.0 or metaverse concerns currently have a market cap of $27 billion. Consumers are already making 19% of their purchases online as of 2021. More surprisingly, perhaps, the total global spending on non-fungible tokens (NFTs)—we’ll discuss more about NFTs later—reached $41 billion in 2021.
It is not enough, however, to simply put up a claim sign on this digital frontier. Companies who wish to enter this potentially lucrative space need to figure out the right platform to use to do it. They will need to build out the virtual space and decide how their users will interact with the company and with each other while there. Companies will need to add talent to their firms in order to manage all of these complex and subtle dynamics. This won’t be as simple as putting up a website to let customers and clients know how to reach you. Indeed, some of the infrastructure that will be required to really move fully into Web 3.0 hasn’t even been built yet.
3. What Risks Will You Encounter?
Schmidt pointed out that the incredible benefits of the metaverse do not come without risk. Some of these are common risks for any online business. Companies must all deal with customer privacy around data storage and processing. The metaverse, however, brings unique challenges to privacy because of its immersive nature. Just as existing privacy regulations had to adapt to online management of data, so too will they need to adapt to the more immersive version of the internet.
Identity theft can be complicated by the metaverse, as well. More than just accessing bank accounts or credit cards, bad actors will potentially be able to steal our visual identities. They won’t be undergoing any kind of permanent physical change, but when we are interacting via digital avatars, it is possible for a fraudster to go further than accessing one’s account and indeed could steal one’s avatar and therefore one’s visual identity. Both this and the privacy concerns above will naturally lead to legal and legislative complications. Given the borderless nature of a virtual world, jurisdictional confusion is a very real risk.
The hardware and infrastructure demands of the metaverse introduce the risk of inequality, as well. “In order to use augmented reality, we need the latest smartphone and handset technology,” warns Schmidt. “VR experiences require high-tech, expensive headsets as well as strong and reliable connectivity.” Access inequality is an issue we’re already struggling to address, and it does not seem that the metaverse will ease that pressure.
NFT Ticketing: A Use-case
One of the more compelling use cases for metaverse technology is already being deployed. The use of NFTs for event ticketing has the potential to revolutionize a moribund industry. We spoke with Josh Katz, Founder and CEO of YellowHeart, to learn more about how this all plays out.
4. NFTs Can Fix Event Ticketing
The last major innovation in ticketing was the introduction of the barcode. QR codes came later, but are really just a functional refinement of the same thing: validation data stored in a monochrome graphic that can be scanned mechanically. While they’ve helped reduce ticketing fraud somewhat, the system as it currently exists doesn’t really work well for either artists or their audiences.
The debacle around ticket availability for Taylor Swift’s recent tour is a fantastic case-in-point for this particular problem. The primary beneficiaries are ticket middlemen: brokers who beat fans to the limited resource of event tickets and then resell those tickets at an incredible markup. In this case, neither Swift, nor the venues, nor anyone involved in the tour receives any of the additional money fans have to pay to attend the concert.
5. NFT Ticketing Enhances Opportunity for Holder and Seller
Katz pointed to several advantages of NFT ticketing for both the ticketholder and ticket-seller. One intriguing possibility is live upgrades to seating. If a concertgoer sees empty space closer to the stage with a fixed ticket, they can either sit pat or risk ejection by slipping into a better seating area. The dynamic nature of NFT ticketing allows that concertgoer the possibility of upgrading that ticket live at the event. The fan gets a better seat, and the venue can earn some income on that better ticket rather than leaving money on the table.
With standard ticketing, both venue and artist must spend time, money, and energy to re-engage a concertgoer after the event. You’ve bought the ticket, and that’s the end of it. You might get a follow-up email asking for you to rate the experience, but the ROI for that outreach is notoriously low. NFTs offer the opportunity to engage customers before, during, and after an event in a more dynamic fashion. Push notifications can notify fans of exclusive opportunities, food and drink vouchers can be airdropped to a customer’s wallet, or video and audio highlights of the event can be sent exclusively to ticketholders who attended the event.
6. NFT Ticketing Enhances Experience for Artist and Fans
The benefits of this technology extend beyond single or even recurring event access. Artists and fans have the opportunity to create a truly interactive community through NFT-powered memberships. Katz pointed to a case study in which blues artist G. Love was able to partner with YellowHeart to offer his fans an NFT-powered membership that goes far beyond the traditional one-way fan club relationship.
Fans were offered a free NFT membership via social media. Once redeemed, the holders were then airdropped exclusive media such as behind-the-scenes video of G. Love’s recording sessions. They were granted early access to new releases, the exclusive opportunity to purchase physical merchandise, perks at live shows during the subsequent tour, and additional benefits. All of this resulted in a much closer interactive relationship between artist and fan and was crucial in propelling G. Love’s album “Philadelphia Mississippi” to a number one debut on the Spotify Blues chart.
Far More than Crypto
Novelist William Gibson coined the term “cyberspace” in his short story “Burning Chrome” in 1982. He has been credited with no small measure of prescience in his depictions of technological innovation, but we will hopefully avoid the more dystopian aspects of much of his work. The infrastructure does not yet exist—but it is coming—to allow the metaverse to truly flourish as an always-on alternate reality. Companies and leaders in any industry sector, not only entertainment and technology, will need to stay on top of key developments and unique use cases for these emerging assets. The future is coming fast and in some important ways is already here.