The metaverse is creating a major new economy
The growth of the digital world has the potential to reshape society and redefine the concept of value. How will the metaverse change the game for investors? Who will control our data in Web 3? Entrepreneurs, academics and tech investors offer their views on the opportunities and challenges ahead.
For Yat Siu, Co-Founder and Executive Chairman of Animoca Brands and Founder and CEO of Outblaze, both digital entertainment firms, the growth of the digital asset ecosystem is as significant as the emergence of a major new economy on the global stage.
“It's like when China joined the world with global trade; it wasn't just China that benefited,” he said at the 25th Credit Suisse Asian Investment Conference (AIC). “The whole world had good economic growth as a result.”
Digital asset technologies have developed beyond early cryptocurrency experiments and now underpin a growing number of virtual worlds, where users can meet, play and – increasingly – earn an income, with non-fungible tokens (NFTs) providing a means of recording asset ownership.
The early iterations of the metaverse, such as The Sandbox, developed by Animoca Brands, have been dominated by gaming. But the potential use cases for the metaverse extend well beyond gaming, challenging traditional concepts of ownership and reshaping the way society interacts.
“We think of non-fungible tokens really as the parallel of digital property rights, meaning that NFTs will do to the digital world what physical property rights did to modern capitalism and democracy,” said Siu. “And that's because right now, the most valuable resource on this planet is data.”
Alexis Ohanian, Founder of Seven Seven Six and Co-Founder and former Executive Chairman of Reddit, sees gaming as just the beginning for the metaverse and Web 3 – a more open internet that relies on decentralized blockchains rather than major platform providers.
“We're at a new phase here with Web 3 that is very similar [to the early internet],” he explained “A lot of what exists today may look like a toy or may look kind of silly, but very, very quickly, we're going to realize this will have massive implications for so many industries.”
“Many of us are already living in the metaverse and don't really know it,” he added.
Into the metaverse
Many people associate the metaverse with immersive experiences that are made possible by virtual reality (VR) and augmented reality (AR) services or equipment. While there is scope for sales of this enabling technology to grow exponentially, it isn’t the only sector set to benefit from the rise of the metaverse.
Saurabh Agarwal, Managing Director at Warburg Pincus, advises investors to “widen your aperture and also look beyond pure-play tech or digitally native businesses”. Many digitally-enabled or tech services businesses lend themselves well to digital transformation and are well-positioned to benefit from the rise of the digital economy in the region, he said.
Metaverse driving AR/VR headset market growth
Manish Nigam, Head of Global Sector Research at Credit Suisse, echoes the assessment. “We view the metaverse as a more spatially immersive, compelling, and frictionless internet which comprises five essential components: infrastructure, hardware, content, platforms, communities, and payment mechanisms,” he said. “The metaverse should eventually bring profound changes to the entire technology, media and telecom (TMT) sector.”
The future of money
The future of the internet and digital assets also has profound implications for the financial services industry.
“There isn't a major financial institution in the world – both in banking and investing – that isn't in one way, shape, or form, being quite fundamentally challenged to develop a point of view on…this whole array of technologies, including, in particular, Web 3.0 and the token economy,” said Blythe Masters, CEO of Motive Partners and a member of the Board of Directors at Credit Suisse.
Eswar Prasad, Tolani Senior Professor of Trade Policy at Cornell University and Senior Fellow, Brookings Institution, sees blockchain technology as the end of the “era of cash”.
“Digital payments are rapidly becoming the norm around the world,” he said. “It will soon be possible to conduct a broad range of transactions, even purchasing a house or car, without traditional intermediaries such as lawyers and real estate brokers.”
But Prasad sees limits to the use of cryptocurrencies such as bitcoin, which he believes has become too volatile and expensive to function as a medium of exchange.
“Such decentralized cryptocurrencies could end up posing risks to the traditional financial system, especially if these assets are acquired by unsophisticated retail investors who get taken in by the allure of the new technologies and do not understand the risks,” he said.
The metaverse is far from the only emerging technology on investors’ horizons. Mo Gawdat, Founder of the non-profit One Billion Happy, former Chief Business Officer for Google X, and the author of Solve for Happy, believes more dramatic changes are in store as technology evolves.
Developments in artificial intelligence (AI) will soon overtake human capacities, according to Gawdat, who cites predictions that a machine will become the smartest being on the planet by 2029.
“We are entering into an age where the technology that we're building is no longer a slave to us. The technology that we’re building is going to become living beings that grow and propagate on their own. AI is an example of that.”
This technology transition will be funded by a new generation of investors, who are more comfortable with technology than their parents – and richer, too.
“We're in the midst of one of the greatest – the greatest – intergenerational transfers of wealth the world has seen,” said Masters. “And the next generation of wealth holders and inheritors…don't do business the way that their parents and grandparents did.”
As this growing cohort of younger investors go deeper into the metaverse and embrace Web 3 technologies, the digital asset ecosystem will offer new opportunities for wealth creation.
A new global economy is emerging – and there is still much more to come.
“It's not quite the wild west. It's more like an open frontier,” said Ohanian. “It's like space. The potential here for this technology is infinite.”