What is the Metaverse? Investment Opportunities and Risks

As the metaverse approaches mainstream adoption – as many expect it will in the coming years – it could change the way we deal with money. For investors, the metaverse can offer opportunities to get in on the ground floor – or close to it.

Then again, the metaverse could be a passing fad that fails to achieve widespread adoption. Either way, as an investor it is important to view the metaverse with eyes open for the risks as well as the potential opportunities.

The metaverse is immersive and digital

When the word “immersive” is paired with “digital experience,” it often refers to virtual reality and augmented reality environments, often obtained through video games.

Virtual reality (VR) technology allows you to “enter” an immersive digital space through an audio/visual headset.

Augmented reality (AR) technology overlays virtual characters and objects on real spaces through the use of a device, such as your mobile phone or tablet. In an AR environment, real and virtual spaces are combined, allowing you to interact with characters and objects in both “worlds” at the same time.

Although most virtual and augmented reality environments are proprietary—accessible only through channels provided by or licensed by their developers—the metaverse seeks to connect these worlds, making each interoperable so that users can seamlessly enter any world of their choosing.

A look at the metaverse economy

Why are so many businesses paying attention to the metaverse? In addition to offering a next-evolution social technology where people can interact across multiple virtual worlds, it is also an emerging commerce space in which digital and physical goods and services can be bought and sold.

Digital goods and services. Users can purchase a wide variety of digital goods and services for their avatars or their own virtual experiences. This can include anything from brand name accessories to cars and even real estate.

The merging of virtual and real trading. When transactions take place in both the virtual and the real world, the potential for commerce can merge and even double (eg buying a Gucci handbag for your avatar as well as for real use).

This goes beyond the purchase of digital goods linked to real value, such as digital art through non-fungible tokens (NFTs), blockchain-powered smart contracts that have applications in a real-world context, or cryptocurrency that can be converted into fiat cash. It is about experiencing real services in a virtual space or buying real goods through a virtual store.

For example, the NBA’s Brooklyn Nets made sports history as the first professional sports team to broadcast a game in an immersive virtual theater, which they coined the “Netaverse.” Viewers could watch the game as if they were on the court.

The prospect of buying and selling physical goods from stores in the metaverse is an emerging opportunity that is likely to attract more businesses as this hybrid economy develops. Imagine going to an immersive virtual grocery store to purchase items that are then delivered to your front door (in the real world).

A few anchor concepts of the metaverse

Instead of thinking of the metaverse as a “replica” of the real world, think of it as an extension of the real world through virtual means. It has its own economy, with products and services that may be unique to specific virtual environments. But in the end, real time and money are spent in an environment that cultivates real interaction.

While it’s difficult to sum up an emerging event that’s rapidly evolving, the metaverse has some fundamental anchors that seem consistent:

Interoperability. The metaverse will be created by multiple organizations, businesses, developers and creators in a way that will be seamlessly interconnected and interconnected. Virtual co-location. The metaverse must offer the sensation of interacting with real people in a virtual space.Virtual identity. The metaverse aims to provide a way for humans to have a consistent, expressible identity across all interconnected worlds.Virtual ownership. The metaverse aims to support transactions of value and ownership in a virtual or real world capacity.

The bottom line

The metaverse is likely the next evolution in social and commercial technologies. As with the birth of the Internet and its mass adoption in the 1990s, no one can predict what the metaverse will become in the years ahead, what technological innovations it may bring, or how it may affect the daily functioning of society and commerce. But its potential as an extension of real-world experiences could be greater and more impactful than anyone can imagine today.

As an investor, proceed with caution as metaverse growth follows a similar trajectory to that of the Internet a few decades ago. The number of potential use cases and investment opportunities quickly overwhelmed the available resources and capital. The boom turned to bust, and only a handful of those “dot-com darlings” survived the fallout and eventually thrived.