What is the metaverse?
The word “metaverse” is a portmanteau combining the prefix meta (in the sense of “beyond”) and universe. A metaverse is a continuously existing digital space that is created when virtual reality, augmented reality, and conventional physical reality are linked together, including the current Internet.
At the latest since Mark Zuckerberg presented his vision of the metaverse last autumn and then promptly changed the name of the former Facebook company to Meta, the term has entered into the mainstream. However, the term metaverse first appeared in 1991 in the science fiction novel Snow Crash by Neal Stephenson. The book describes the metaverse as a kind of global virtual reality which users move through with avatars. This virtual reality will be particularly familiar to anyone who plays video games, as it is highly reminiscent of the role-playing games of the major game producers.
What can you do in the metaverse?
In contrast to video games, however, users in the metaverse can help shape the worlds and virtually live, learn, work, party, and more in them. The metaverse is intended to be a digital alternative to and/or extension of the physical world – with virtually everything that exists in the real world and many other things that do not, including virtual real estate, virtual belongings, advertising, shopping, games, and more. And naturally, this means that there are many – almost limitless – ways to earn, spend, and even lose money in the metaverse.
A limitless digital goldmine?
The subject of whether or not the metaverse is a goldmine provokes many discussions and arguments in favour of it and against it. Many users and developers believe that the metaverse is the ultimate source of income for the future. This is why there are currently so many companies working on it parallel to, in cooperation with, or in competition with one another – often with very different ideas and objectives. There is currently a race to see who can define the basic standards and goals and thus secure the best starting position for the coming decades. Because naturally, there is one main goal for the majority of the companies working in this field: to earn a great deal of money with the metaverse. Since many of the limitations of the physical world do not apply to the virtual space of the metaverse, some people believe it offers much more significant growth opportunities.
Anyone who wants to understand what exactly Mark Zuckerberg expects from the metaverse would be wise to read the writings of venture capital investor Matthew Ball. His 2020 article “The Metaverse: What It Is, Where to Find It, Who Will Build It” received high praise from Zuckerberg and was subsequently declared to be required reading for the employees of Meta according to media reports. The company reported start-up losses of over USD 10 billion with its metaverse division last year alone, but intends to continue making massive investments in this field.
Life in the metaverse – dream of the future or tomorrow’s nightmare?
However, there is also criticism. Including from very prominent figures such as Tesla boss Elon Musk, who sees the metaverse as “more marketing than reality”. (It must be noted in this context that Mr Musk also very seriously believes that there is more than a 50% likelihood that our real world and we humans are just part of a gigantic simulation.) Netflix CEO Reed Hastings said in an interview that he prefers to concentrate on this world rather than a metaverse. In any case, experts do not expect to see a fully developed metaverse any earlier than in 10 to 20 years due to the immense computing power required. And the topic of energy and resource consumption will naturally be very important for the metaverse, as well.
If the pandemic made anything blatantly clear, it is that we humans long for real encounters, for interactions in real life, for travel, sports, or simply a walk in the park, and above all for contact with other people, not pictures, videos, or voices. What people do not want is to be “chained” to a digital device at home for days on end with a purely virtual world that only offers a very inadequate substitute for physical reality, which can be touched, smelled, and experienced. This is likely also one of the key reasons why previous attempts at a metaverse have failed to take off, including the Second Life project, which was launched in 2003.
Metaverse: What are the pros and cons?
However, Mark Zuckerberg and others are of the opinion that the metaverse will become a world for virtual social gatherings. They see the benefit of the metaverse in the following possibilities, among others:
Meeting friends, colleagues, or one’s boss in the virtual space and thus being able to interact with them on a more intense and personal basis than is possible via the flat screen of a laptop or mobile phone in videoconferencing tools
As an alternative to real meetings without long travel distances, flights, or the like, thus allowing for much more spontaneous interaction
But can a virtual meeting with friends’ digital avatars ever beat an evening in one another’s physical presence, with beer and popcorn in the city? At the very least, it seems quite doubtful. And, at least in the opinion of the authors of this text, it is also not desirable. Future generations may see things differently.
However, there are at least some areas of application in which the metaverse – or elements thereof – could actually be useful, such as
Entertainment,
Education, or
Virtual viewings of apartments and houses.
Nevertheless, it is highly unlikely that the metaverse will ever be able to replace real life. The smartphone was a true breakthrough for interpersonal communication on the go. Suddenly we had access to the Internet everywhere and could get in touch with others, view videos and photos, and search for information. While the metaverse is a further improvement of all this, it does not represent a quantum leap, at least not in the foreseeable future.
At the same time, the use of the metaverse is subject to many risks and unanswered questions:
How can mobbing, (sexual) harassment, verbal (threats of) violence, fraud, and cybercrime be prevented in the metaverse when they cannot even be prevented on the Internet?
Who should monitor and regulate this space? And how and according to whose laws, and with what possibilities for intervention?
Just think about the flood of fake accounts and bots on social networks – how can these problems be prevented in the metaverse? Companies already have tremendous difficulties with this in their largely text-based versions.
Do we as users want to give the social media giants (some of which already have a less than stellar reputation now – just think of privacy violations and the misuse of personal data) even more insight into our private lives or even allow them to essentially control large parts of our lives? Especially because there are more and more reports about the shady side of the often not so “social” media*.
Conclusion
At first glance, the metaverse appears to offer tremendous potential for companies to tap new sources of revenue and profit. In some cases, a veritable gold-rush mentality has emerged. But there are countless unanswered questions and obstacles and it is currently completely unclear whether the concept will ever be realised and take off, particularly because there are so many different companies that are pursuing often conflicting ideas and objectives.
Meta(verse) in Raiffeisen-MegaTrends-ESG-Aktien
Meta (Facebook) envisions itself as the future king of the market, which was not least signalled by the company’s name change. Due to the many scandals surrounding Meta (Facebook) as well as serious regulatory and ethical concerns, we are not currently invested in the company. In addition, we are not convinced by Mark Zuckerberg’s vision of the metaverse. Nevertheless, we will monitor this issue with great interest and adjust our positioning to the related market developments. Upon closer examination, it quickly becomes clear that many potential elements of the metaverse already exist as discrete trends and topics that offer promising growth and earnings potential with or without the metaverse. Raiffeisen-MegaTrends-ESG-Aktien has already been invested in many of these segments for quite some time, including virtual and augmented reality, blockchain, digitalisation, cloud computing, cybersecurity, and many other hardware and software trends. In the fast-paced technology sector, above-average earnings opportunities are also associated with higher risks, such as the possibility that products can quickly become obsolete and be surpassed by new technologies and that companies can lose dominant market positions relatively quickly. In addition, the risks that are generally associated with equity investments – such as increased price volatility and the potential for capital losses and declining values – also apply to firms that are active in the fields surrounding the metaverse and in the related trends and topics.
*A controversial study about the negative impact of Instagram on young girls in particular was recently made public by the Washington Post. Specifically, researchers found that a significant number of young users no longer felt comfortable in their own bodies because they compare themselves with other users of the platform.
The Raiffeisen-MegaTrends-ESG-Aktien exhibits elevated volatility, meaning that unit prices can move significantly higher or lower in short periods of time, and it is not possible to rule out loss of capital.