April 4, 2023
We’re still trying to define the metaverse, and with some companies seemingly halting their metaverse efforts, enterprises want to know if the metaverse is or is not the next big thing.
It is, but we need to adjust our expectations and timeline—the metaverse is inevitable in some form. We will don VR headsets to perform certain jobs, meet sometimes as avatars in a virtual office, and try immersive experiences from our favorite brands.
Interest and investment will ebb and flow over the next few years as with any new technology, but we are undoubtedly heading towards a metaverse or multiple metaverses where the physical and digital worlds merge to enable new ways of working, socializing, shopping, learning, etc.
With that said, there are many new terms and technologies associated with the metaverse. We went over 5G, edge computing and AI, but what about Web3, blockchain, and NFTs? Let me put it simply for you and me both:
What is Web3 and how is it different from the metaverse? Web3 is the third generation of the internet, essentially a new, decentralized model for using and governing the internet. Developers are currently working on Web3, building new protocols and apps for decentralized data storage, trustless transactions, new forms of digital ownership, etc. The most popular Web3 projects today include Ethereum and IPFS.
Why 3? Web1 was the read-only (worldwide) web. Web2 is characterized by user-generated content (social media) and centralization. Web3 is the next proposed evolution, a rather utopian vision of the web based on anonymity, transparency, privacy, collaboration, and immutability—pretty much a backlash to the current reality in which a small group of companies control/own the content and make money by scraping users’ data.
Advocates for Web3 say it’s about putting control of the web back in the hands of its creators and users. They pitch it as an open, blockchain-based, crypto-friendly, democratized version of the internet. You would use Web3 to access the metaverse, but both concepts are still in their early stages and not guaranteed to evolve as expected or hoped.
Problems with Web3: Encrypted communication, hidden identities, and content that can't be censored or deleted? Sounds good, but there are challenges and concerns. For one, critics of Web3 argue it’s “rife with speculation” with parallels to the dot-com bubble before it burst. Moreover, blockchain technology is currently expensive and inefficient (it can cost thousands to store one megabyte of data on a blockchain distributed ledger), not to mention bad for the environment.
Today, Web3 and metaverse are often used interchangeably. When someone says Web3, they are probably referring to the metaverse. Companies exploring Web3 are likely experimenting with NFTs and immersive experiences within existing browser-based virtual platforms like Decentraland and The Sandbox.
A blockchain is a shared digital ledger or database, essentially a way to record and store information accurately and securely without the need for a third party like a bank to establish trust. Blockchain systems are managed by a decentralized network of computers (nodes) and based on the consensus of all network participants.
How it works (basic level): Data is stored in blocks linked together in a chain. In the case of transactions, each block contains a list of transactions, a timestamp, and a unique cryptograph signature called a hash to ensure the block’s authenticity. Each time a transaction takes place, a record is created and added to a block. Once a block is filled, it’s added to the end of the chain and cannot be changed without network consensus and without altering all subsequent blocks.
Main benefits: Greater accessibility, security (nearly impossible to tamper with undetected), efficiency (faster processing), reduced operational costs (no centralized servers or third-party fees), stability (no single point of failure), and more.
Relationship to crypto: Bitcoin, a type of cryptocurrency, is built on a blockchain, Bitcoin, Ethereum, and Dogecoin each run on their own blockchain. Ethereum is also an open-source platform for building public blockchain apps. (Ethereum Enterprise is designed for business use cases.)
Applications: Technically, you can use blockchain tech to record anything, including transactions (most common), votes, inventory, copyrights, etc. Walmart uses blockchain to track produce from farm to store for traceability in case of an outbreak. Other use cases include health records, energy asset management, and all kinds of peer-to-peer transactions.
Cons: High energy consumption (mining, or the process of adding new blocks to a chain, can be energy-intensive), scalability (as the blockchain grows, the network can become slower), immutability (data cannot be removed to fix mistakes or protect privacy), implementation costs (requires specialized expertise and infrastructure), not 100% secure, lack of regulation, and more.
An NFT is a non-fungible token, a unique digital asset “that cannot be replaced with something else.” NFTs can be anything digital—art, video clips, animations, and even Tweets.
Stored on a blockchain (typically Ethereum), NFTs are essentially certificates of authenticity and digital ownership that can be sold and traded in marketplaces like OpenSea and Rarible, often at very high prices. They grant ownership and usage rights of a digital asset, though not necessarily exclusive rights or copyright ownership.
NFTs are like any other speculative asset. The value is based on perception and demand. Collecting NFTs has become its own culture, with NFT-based communities like Bored Ape Yacht Club and celebrity NFTs. While some people see NFTs as an investment opportunity, others collect them for social status or to support digital creators.
Applications: NFTs are the primary way brands have been experimenting with Web3. Embracing NFTs makes sense for brands like Nike and Gucci. A line of virtual sneakers adds to Nike’s existing collector community while keeping the brand relevant. Luxury brands are using NFTs and other virtual goods to target Gen Z, but there are potential use cases beyond fashion and retail.
For one, NFTs can represent ownership of physical or real-world items like artwork or real estate. Tokenizing such assets makes investment and trading easier, allows for fractional ownership, and reduces the risk of fraud.
How are NFTs different from digital goods? NFTs are digital goods, but unlike other digital goods that can be freely copied, downloaded, and shared, NFTs are unique and verifiable. They can be owned, traded, and monetized. Think of NFTs as a new approach to ownership and value in the metaverse.
Hear from 90+ enterprises using/testing AR/VR/MR (XR) and related emerging technologies today: