Written by John McGhee
From the Desk of an Intern
The Metaverse, at least in theory, is a large virtual world in which one would interact with others and partake in various daily activities, even replacing them in some instances. The idea of a Metaverse originally came from the 1992 science fiction novel Snowcrash, where humans live out part of their life inside a virtual world. The Metaverse which are being built today are a deviation from their original science fiction roots, opting for a more practical and realistic approach with the limited current technology available.
A handful of companies building their own Metaverses are selling virtual real estate to raise money. Virtual real estate is essentially a plot of land in a Metaverse that can be bought and sold as a unique digital token, an NFT, that represents a location in a virtual world and proves ownership. This plot of land can be terraformed, or built upon similar to real physical land, within the limits of the software. There are many companies built upon this idea, but Decentraland and Sandbox are two of the major ones. They host their own separate Metaverses with similar systems. They both use cryptocurrencies as a main form of currency, each with a market cap of around $1 billion dollars. These currencies have followed the same trend, peaking in late 2021 at around $6, then beginning a steady decline to around $0.60 in 2022 where they sit today.
Land plots in the Sandbox Metaverse sell for around $1,200, though some have gone for significantly more, such as a $450,000 sale for a plot of land next to snoop dog’s virtual house, last year. Decetraland is pricier on average, costing upwards of $2,000 a plot. This land is expensive for a digital product, it offers no real utility in itself and relies on new demand to hold its value. With high inflation and interest rates, there are fewer people investing in the virtual world.
In order for these land plots to appreciate in value, these Metaverse platforms would need to gain widespread adoption, something they are currently struggling with. The first roadblock for these platforms is technology. In their current state, these platforms look and feel like an unfinished video game as opposed to a billion-dollar virtual world. Granted, they are still in development, but their future does not look promising considering their current state.
The fact that these platforms are built off cryptocurrencies may be another roadblock in their path to adoption. People are much more cautious with blockchain technology now than ever before. A CNBC survey found that public opinion on cryptocurrencies has been dropping rapidly, with only 8% of people having a positive opinion of blockchain as of November 2022, down from 19% just 6 months earlier.
Behind the scenes – both Decentraland and Sandbox are struggling with maintaining a concurrent user base. Decentraland reported an average active user count of 410, fewer than the number of people currently playing the original half-life game made in 1998. A 3rd party website found that 2,240 unique accounts made transactions on the Sandbox platform over a 7-day period. This number does not reflect the number of users on the platform, but does give an interesting look into how many people are actively interacting with the economy. Sandbox’s own metrics reported in a Twitter post months ago state that around 39,000 unique users are active each day on their platform, a number that contradicts the 3rd party research. These metrics do not look great, especially considering the $1 billion value of the currency.
Meta has invested more than any company into building a Metaverse, pouring $30 billion into development, while still having little to show for their efforts in terms of an actual Metaverse. They have made minor advancements in virtual and augmented reality technology within the platform. If Meta builds a functioning Metaverse that gains widespread adoption, it will need to recuperate the money it lost in development, likely through selling user data to brokers and advertising.
With the sheer number of advertising the average American sees, around 4,000 to 10,000 a day, advertisers are always looking for new ways to get in front of customers and make an impression. The Metaverse offers an opportunity to advertise in front of a captive audience.
I don’t believe that virtual real estate will ever take off, as it feels more like a mix of popular technology buzzwords than it does a new age of the housing market. You can’t live in a virtual home. As for the Metaverse as a whole, virtual reality does have its practical uses, such as education or virtual meetings, but the Metaverse prophesied by Meta will not exist in the near future. Neither the technology nor the user base is there. My generation would likely be the target for a product like this, as we already spend the most time in front of screens compared to any other age group, but no one I know has any interest in being involved with the Metaverse.
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