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The marvels of the metaverse

Metaverse – a new magic word that is casting a spell over the world of investors. But what does it mean and how should we interpret these developments? Investors and institutions alike should start preparing themselves now for this third dimension of the Internet.

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One thing is certain: we are only at the very beginning of this development. Nonetheless, today hundreds of billions of US dollars are already being invested in this area. Examples range from the renaming of the Facebook parent company to Meta, through the design and sale of 3D glasses, to the development of digital assets, so-called non-fungible tokens (NFTs), which someday will be able to be used to manage ownership-like rights.

The metaverse is often referred to as part of Web 3.0 – that is, the third technological generation of the Internet. Web 1.0 consisted of an Internet with purely static homepages; later, social media were developed; and, with Web 2.0, the network became more colourful, more versatile and a real heavyweight in terms of its economic potential. And now we are on the verge of the next major development: it is all about experience over information, decentralised over centralised. The focus here is on platform business models and virtual economic areas. All of which is brought together by the metaverse in a collective third dimension.

Transcending virtual to reality
What began a long time ago in the world of computer games is now set to be standardised and made available to a broader public. Technologically speaking, the metaverse is a series of interconnected digital 3D worlds where avatars can move freely from one world to the next. These virtual (economic) areas are long-lasting, occur in real time and many are “governed” by users – although it remains to be seen what will prevail as the dominant model in time, or whether we rather see a coexistence of models alongside one another. The metaverse uses various known technologies and protocols, specifically also blockchain protocols.

For many people, that still sounds somewhat futuristic or reminiscent of a game. A simple example shows what could happen in the not-so-distant future: Microsoft founder Bill Gates wrote in his blog at the end of 2021 that in “two to three years” we will likely no longer be holding our electronic conferences face to face or two-dimensionally through computer screens, like we do today, but rather we will be meeting in the third dimension.

Where do we go from here?
The next step towards avatars – our counterparts in the electronic world that can be deployed in any way we want – is no longer that far away. So will we soon be sending avatars to boring meetings? Who knows. If we are to believe what the experts are predicting, in the coming years we will be able to work, play and meet others in this new dimension – and invest there as well. Possibilities range from digital artworks, through virtual land purchases, to designer accessories for your avatar.

The metaverse is still only in its infancy in terms of technology – it will probably take quite some years to achieve a degree of maturity where we’re able to feel a global impact.

There are still some technological hurdles to be overcome on the way – especially on the hardware side. In order to “construct” this third dimension in a way that is reasonably realistic, what is needed are high-performance computers. And lots of electricity to operate these processors. We are also quite a way off from a regulatory perspective, for example when it comes to recognising an avatar’s digital signature, property rights or dispute settlement mechanisms. There are also security issues that need to be clarified, the technology is not yet scalable to the required extent, and a number of political questions remain unanswered. So who will govern this new world?

At the same time, investors and institutional clients would be well advised to take some time now to familiarise themselves with this new environment. There are no boundaries to your experimentation – both literally and figuratively. The possibilities are endless: personal experiences in the third dimension, online introductions to theory, first attempts with investment products. But extreme caution is recommended. So make sure you choose a partner you can trust.