Why the metaverse is inevitable

By September 22, 2022The Sandbox
Click here to view original web page at www.ejinsight.com
DBS is partnering with The Sandbox to create DBS BetterWorld, a decentralized virtual game that provides an interactive metaverse experience. Photo: DBS
DBS is partnering with The Sandbox to create DBS BetterWorld, a decentralized virtual game that provides an interactive metaverse experience. Photo: DBS

The metaverse is more wide-reaching than a mere product of the Web 3.0 revolution. It speaks to something fundamental in human psychology, providing a chance to break away from the constraints of the physical world and to have experiences otherwise impractical or impossible. The metaverse is so compelling because it gives humanity a promise of escapism, catharsis, progression, and achievement with less or no risk. As metaverse concepts and technologies continue to evolve, human centricity, including customer focus and a view on social responsibility and sustainability, should be at the forefront of all development.

Where is the metaverse heading?

The metaverse is inevitable, partly because of how exciting the vision is, in offering humanity a way to live, play and work differently in a digital reality. At the same time, something we call “demographic gravity” will influence metaverse adoption.

Over the past couple of years, the workspace has permanently changed with widespread adoption of hybrid work and virtual meetings. Short-format video has supplanted long-form. NFTs and play-to-earn models have emerged. Performers have conducted online experiential concerts to a far larger audience than would be possible in a physical venue. Underpinning this is the continued development of hardware and software powering the metaverse which many of our children will natively adopt. Each successive generation will increasingly live, play and work within an alternate digital reality.

Which business models will succeed in the metaverse?

DBS recently estimated that the market opportunity of the metaverse could be worth around US$3 trillion to US$10 trillion in 2030. For businesses planning to enter this space, there are three business models which can help them succeed:

• Incorporating the metaverse into existing business models to drive competitive differentiation (virtualising a production line, or a sales demonstration);
• Creating or orchestrating new experiences in the metaverse (gaming, high-risk exploration, social engagement); and
• Providing the underlying infrastructure and components (the “picks and shovels”) of the metaverse

The first two types of business model must focus on content-driven experiences. Taking a human-centric view, the promise of the metaverse is one of proxy experiences engaging a wide band of human senses. Those senses need to be engaged in a way that sparks the imagination. It stands to reason, therefore, that the most successful metaverses are the ones which have the most engaging content.

Content owners and providers are then expected to decide the technology infrastructure, instead of the other way round. Starting with conceptualising the intended experience, the technology that best delivers this experience is then selected. Content owners and providers will have the commercial power to decide the technology infrastructure, much in the same way Disney+ introduced competitive pressure to Netflix.

The third business model of providing underlying technology infrastructure is usually shaped by the direction of the first two models. But in some cases, the technology infrastructure can emerge as more independent developments with wider implications. Examples of this in the past include video streaming platforms, Web 3.0 cross-chain interoperability or NVIDIA’s next-generation graphics processing unit.

The financial services perspective, and its contribution to the metaverse

The financial services industry will benefit immensely from the rise of the metaverse. Many traditional banks and neobanks will be pursuing “outside-in” business models – replicating banking experiences, customer engagement and branding with metaverse functionality. What DBS finds most interesting is the “inside-out” business model – enabling and embedding value-added financial services into the metaverse, including facilitating exchange between digital and non-digital financial assets and flows.

Financial service providers by themselves are not likely to generate sufficiently engaging content to drive this business model. A credible “inside-out” strategy will involve partnerships with content giants or intellectual property franchises to co-design economic and financial interoperability between metaverses and the physical world.

Such providers need to be fully conversant with the “picks and shovels” of the multiverse of metaverses. Considerable inefficiency will be introduced if the financial services offering is incompatible with an on or off-ramp bridging metaverses with the physical world and vice versa. Much of this will happen if, for example, onboarding, anti-money laundering and sanctions tooling is stuck in the non-digital age.

An “outside-in” strategy may be adequate, but an “inside-out” strategy is far more engaging and impactful. To put a human-centred lens on this, designing for economic and financial interoperability is in the long-term best interests of both business and society.

-- Contact us at english@hkej.com

All Today's Crypto News In One Place