What the NFT is the metaverse?
Non-fungible tokens, or NFTs, are ownership proof on blockchain technology of the original version of something digital, be that art, characters, tweets, videos or something else. People are paying millions for an exclusive claim on unique digital items (even if they can be copied at no cost). Token sales topped US$3 billion in August on the OpenSea platform as people sought claims on collectables such as Pudgy Penguins and the Bored Ape Yacht Club characters. A cryptocurrency chit tied to a set of 107 of these 10,000 cartoon apes the next month sold at an online auction for US$24.4 million.
The fever over non-fungible tokens puzzles many. One explanation is that people in time will own more digital than physical items because they will spend more time online than offline. When people’s digital presence is more important for impressing others than how they come across in real life, the coolest people will be those who own the best internet art displays, snappiest memes and prized virtual memberships.
“NFTs are a glimpse into the … next generation of mainstream consumer apps built on crypto rails – the social networks, games, and more of the future,” according to Coinbase co-founder Fred Ehrsam. “This is the true beginning of the metaverse.”
The what? The term comes from Neal Stephenson’s science-fiction novel of 1992, Snow Crash. The word’s use beyond the book harks to hypothetical virtual-reality communal spaces on the yet-to-be-built internet where the virtual and non-virtual worlds meet in a three-dimensional way.
Hints of the metaverse’s coming – even arrival, some say – can be seen on the narrow, shared spaces on today’s internet. Perhaps the best glimpse of the future is the Fortnite multi-player battle-based video game that works across all entertainment platforms. Aside from the shooting, Fortnite operates as a social square for its users. Friends meet virtually via their avatars to attend digital concerts that have featured stars such as Ariana Grande. Users can relive historical events such as Martin Luther King’s ‘I have a dream’ speech by being ‘teleported’ to a reimagined Washington in 1963.
For an idea of how the metaverse might operate, seven likely attributes listed by venture capitalist Matthew Ball are a common place to start. The metaverse will never pause or end, and will be live, Ball predicts. It will host an unlimited number of users, be a self-contained economy and span the digital and physical worlds.
The metaverse will depend on unprecedented interoperability so people’s avatars can shift across simulations. The metaverse will be crammed with experiences.
As with the internet, no one would likely control this decentralised, interactive, virtual-reality world that will come with a dollop of augmented reality (a technology that places a virtual image over a genuine scene). But some companies will build the metaverse’s infrastructure and key spaces within it. To eventuate, the metaverse will require standards and protocols to enable people’s single digital identities (or avatars) to experience the teleporting, holograms, simulations, file sharing, pop-up graphics and whatever across platforms, taking with them their virtual possessions and digital currencies. People will then need affordable head-mounted displays embedded with virtual (and augmented) reality technology. Some companies will create the content and experiences. Just like the internet, the more time people spend in the metaverse, the more money to be made from ads, shopping carts and subscriptions.
While no consensus exists on how the metaverse might develop or operate, coders are planning for a virtual world where people might spend up to eight hours a day moving through spaces for work and leisure. That would be a big jump from the US adult average of two hours eight minutes a day on social media now. It might take decades of incremental advances until the metaverse is discernible. It’s likely to be a messy process as platforms and systems become interoperable.
If the metaverse were to suddenly materialise today, it would no doubt be haunted by the same ethical and social questions that dog the internet and, in particular, social media.
Wealthy private companies would appear best placed to exert control over the new public square. Anti-competition concerns would intensify if Big Tech were to get bigger. A magnified ability to gather data might amplify privacy concerns. Content would be contentious.
Technology-wise, it’s reasonable to assume the metaverse will happen. Big advances in the comfort and capabilities of the wearable technology for augmented and virtual reality will be among the signs the metaverse is forming. Perhaps by the time the metaverse eventuates, society will have largely resolved the controversies surrounding cyberspace. The biggest doubt about the metaverse’s success thus might be whether or not billions of people will willingly don head- and eyewear devices to spend so much time in an immersive online world. The failure of virtual reality to break through to mainstream, despite improvements in the technology, suggests people might prefer reality. It’s anyone’s guess.
To be sure, the metaverse needs huge computational advancements to happen. The metaverse might be so many decades off as to be irrelevant now. The shift to protect the privacy of data might hamper its usefulness. Some cynics think the metaverse is spin about the ‘next big thing’ to overcome the handicap that smart phones are passé. Others dismiss the metaverse as rebranded virtual reality.
The tech, entertainment and gaming industries are betting not. Be prepared to hear a lot about how the metaverse is coming and how it will change much. Perhaps the price of non-fungible tokens might prove a guide as to how the arrival of the metaverse is tracking.
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Michael Collins is an investment specialist at Magellan. Michael has worked as an investment specialist/commentator for money managers in Australia since 2000. Before that, Michael worked for 14 years as a business journalist for mainstream...