Old Version

Virtual Game Changer

Will the metaverse revolutionize the internet, or is it a concept fraught with too many problems to overcome?

By Yang Zhijie Updated Jan.1

China’s virtual reality industries are expected to see tremendous growth in the near future

While many schools and colleges were forced to postpone in-person graduation ceremonies due to the Covid-19 pandemic, grad students from the University of California, Berkeley designed a virtual graduation ceremony in Minecraft, a world-building game. They rendered more than 100 campus buildings to create “Blockeley University” so the Class of 2020 and their families could still experience their graduation, albeit in a virtual world. When their Minecraft avatars threw their caps in the air, so did the graduates in real life. The two-day celebration included concerts, performances and speeches.  

Some point to Blockeley University as a trial of the metaverse, though it is not exactly the same. American sci-fi writer Neal Stephenson in his novel Snow Crash (1992) was the first to coin the term. In the novel, main character Hiro Protagonist is able to enter a metaverse, a collective shared space, in this case owned by a corporation, either through personal virtual reality (VR) goggles, or through lower quality communal terminals. The virtual space is parallel to the real world and operates under a similar set of rules where people in the virtual space work, entertain, interact, do businesses and even develop land.  

Different from VR role playing games, the metaverse emphasizes “decentralization,” meaning every person there has an equal and free right to generate and produce things and deal with anything they made or earned.  

The 2018 Steven Spielberg-directed movie Ready Player One depicts an addictive metaverse known as Oasis, described as a MMOSG (massively multiplayer online simulation game), so immersive that people live within the worlds they create. Tech firms are now rushing to create their own versions of the metaverse.  

On March 10, Roblox, an American platform that supports multiplayer games listed on the New York Stock Exchange, luring investors with claims it is realizing the metaverse. The same day, Roblox’s stock price rose by 54 percent, with its market value exceeding US$40 billion. In July, Facebook founder Mark Zuckerberg told American scitech blog The Verge that he planned to make Facebook a metaverse enterprise within five years. At the Facebook Connect 2021 release conference held on October 28, Zuckerberg announced Facebook would be rebranded as “Meta,” a bid to solidify the company as being about the metaverse, according to The Verge, who cited Zuckerberg as saying “I think we’re basically moving from being Facebook first as a company to being metaverse first.”  

Prior to Facebook trying to get ahead of the metaverse game, many Chinese enterprises showed interest in investing in this innovative field, though some observers warned the concept is hyped and could be the next tech bubble.  

Key to Internet Transition? 
American tech venture capitalist and developer Matthew Ball published an article on his website in January 2020 titled “The Metaverse: What It Is, Where to Find it, Who Will Build It, and Fortnite.” He wrote that the metaverse is a “quasi-successor to the Internet” that would “revolutionize not just the infrastructure layer of the digital world, but also much of the physical one, as well as all the services and platforms atop them, how they work, and what they sell.” It would be more than a virtual space, virtual economy, game and UGC (usergenerated content) platform, but a real-time world that would be online forever. It supports limitless participants and has a complete economy. It is a world where reality and the digital world converge.  

Zuckerberg believes a metaverse world should be operated and managed by multiple participants in a “decentralized” manner. The metaverse is the goal of many tech giants, Ball wrote, who believes that although the process will be long, the end will be lucrative.  

Since the Roblox IPO, besides Zuckerberg, Microsoft’s CEO Satya Nadella announced at the 2021 Microsoft Inspire, a worldwide partner conference held in July, that Microsoft’s solution is to build an “enterprise metaverse,” an environment across the real and virtual worlds combined with the Internet of Things. The same month, Fortnite developer Epic Games announced it had raised US$1 billion to develop a metaverse. US chip giant NVIDIA has developed its Omniverse “3D real-time simulation and collaboration platform.”  

China has seen competition heating up too. Zhang Daoning, founder of Chinese VR company NOLO, told NewsChina the concept of the metaverse is on everyone’s lips in online games, VR equipment and internet companies. Chinese media reported that 5Y Capital, a leading Chinese venture capital company, has assigned three teams to observe the metaverse field, and Sequoia Capital is reportedly planning to invest in 50 metaverse game companies by the end of 2021. 
According to the Research Report on Metaverse Development 2020-2021 published in October by the New Media Communication Studies at Tsinghua University, the metaverse is a hot topic in Asia. China ranks first in the number of search results for the term, followed by South Korea and Singapore.  

“Compared to the definition in the novel Snow Crash, the metaverse’s present definition puts more emphasis on user-generated content and the combination of the real and virtual worlds,” Wang Ruxi, a postdoc at Tsinghua University and one of the chief writers of the metaverse report, told NewsChina. He attributed the change to more advanced technologies and more accessible business scenarios.  

“That is why the concept is getting more notice from technology circles,” he added.  

Roblox is an online game generation platform targeting children where users can explore and interact. Wang said it is user-oriented rather than developer-oriented – all the games on the platform are made by users, which means they are no longer passive but become producers who also socially interact. Many analysts expect the metaverse to be a breakthrough in internet development.  

“The internet is already saturated with traditional content produced and provided by operators... and TikTok’s model [of user-generated content] proves that users have the right to produce content and it is definitely a future trend,” Liu Zejing, an analyst at Huaxi Securities, told NewsChina. “The metaverse’s user-generated content and limitlessness will attract more users’ time and focus, which is a big temptation for internet enterprises,” he added.  

Supporters believe the metaverse will be the next big thing for the internet and nobody wants to miss it. A report published by CEC Capital in September predicted the metaverse will bring enormous increases in user size, per capita use duration and per capita payments, which indicate much more commercial potential than the mobile internet.  

Others are not so convinced and warn of another tech bubble. Xiang Anling, an academic at Tsinghua University, told NewsChina her team noticed that the soaring price of 25 metaverse concept stocks on September 8 had led to unreasonable public attention on the metaverse – the term was searched nearly 90,000 times that day, a 100-fold increase. The Shenzhen Stock Exchange sent a letter to firms, asking them to give additional description of their metaverserelated business.  

According to Xiang, the metaverse has become a tool for VR, augmented reality (AR) and game companies to attract venture capital, even though they do not possess the core technology to develop it. Meanwhile, venture capital firms are jumping on the bandwagon to attract investment. Xiang suggested a more rational approach is needed, adding the development of any technology involves deflating the economic bubble that forms during the initial stages.  

Virtual and Augmented 
Long before the metaverse became a buzzword, AI and VR were already popular. Game developers and players believe VR is the innovation needed for the next generation of online games, especially role-playing games, and many amusement parks and museums already use immersive VR technology. Virtual reality requires a headset, such as Facebook’s Oculus, and it is a completely constructed digital world. AR programs use an enhanced real-world setting accessed with a smartphone, like Pokémon Go.  

“People’s understanding and attitude toward the virtual world have changed enormously. In the past, people thought the virtual world wasn’t significant, and that people would get obsessed and lost in it, but now people think it’s just as important as the real world,” Wang said.  

Validation has come in the market revival for the virtual terminal, which enables a user to connect to a larger remote server. In 2014, Facebook purchased Oculus, a world-leading VR technology supplier, for US$2 billion, only to find the industry slumped due to bad user experience. The market only started to pick up in September 2020 when Facebook launched its new VR wireless headset Oculus Quest 2, which greatly improved the user experience. In March, Facebook announced that sales of Quest 2 had exceeded the total sales volume of the previous versions of Quest, and while exact figures have not been published, some tech media put total sales at more than five million units by the end of Q1 2021.  

“The big-selling Quest 2 gave a shot in the arm to the VR industry. It’s not only a breakthrough for the VR market, but it also indicates that virtual terminals have become a crucial element to drive the next [technological] revolution,” Zhang Daoning told NewsChina.  

The Chinese government is supporting the VR sector. In China’s 14th Five-Year Plan, the VR/AR industry was listed as one of the five pillar industries of the digital economy. At the end of 2020, Pony Ma, president of internet giant Tencent, proposed in the firm’s annual report the concept of the “Complete Reality of Internet (CRI),” defining it as the integration of online and offline and the real and virtual worlds. In January, leading video platform and Baidu-owned iQiyi received hundreds of millions of yuan in series B financing to develop its VR division, iQiyi Intelligent. At the end of August, ByteDance, the developer of Douyin and TikTok, purchased Chinese VR supplier Pico for 9 billion yuan (US$1.4b).  

“The VR industry froze around 2016 when the price of VR equipment was unaffordable and you needed to be connected to a computer to use it. Quest 2, selling for around US$299, is a turning point. Insiders believe the price has dropped to the level that consumers find acceptable,” Zhang told NewsChina. “Meanwhile, VR equipment’s improvement in portability, configuration and functions also make them more attractive,” he added.  

Although the metaverse is much more than VR technologies, VR is seen as a gateway to the metaverse world, even though VR technology still has a lot of room to improve, according to analysts. For example, VR helmets are still too big, and Zhang revealed that his team is trying to make VR game controllers much smaller, almost ring-sized.  

“The trend is to make VR equipment increasingly smaller, but it depends on the development of micro-display technologies, which needs time,” Zhang said. “And we still need to improve the computing power of VR equipment, or you won’t be able to create an immersive feeling for users like computers do. For the future of VR, terminals and cloud computing must work together,” he added.  

Given the metaverse requires a greater immersive feeling, not only in visual and auditory senses but also for touch and pain, VR needs to break through more technological bottlenecks, analysts said. Meanwhile, the massive amount of user interaction data may be beyond the capacity of 5G.  

“The metaverse needs a lot of complementary technologies, and this includes VR/AR, wearable tech, biometric identification, digital twins [virtual recreations of physical objects] and so on. It will take a long time to apply and popularize those technologies at low cost, during which there are many unknowns,” Xiang told NewsChina, adding that other factors, such as the pandemic and international relations, will also influence the development of this emerging field.  

A screenshot from the game Roblox

A screenshot from the game Roblox

Far Beyond Technologies 
According to Liu Zejing, the metaverse, judging by its content data, is at a preliminary conceptual phase, since VR is dependent on highquality content or it will shed users. “I don’t think price is the major factor that influences whether people buy. Good user experience and high-quality content are more important,” he said.  

Many players have already experienced a metaverse-like world. The American game Second Life, which launched in 2003, enables players to work, do business, establish relationships and get married. Many enterprises, including Toyota Motor, GE, Adidas and IBM developed commercial property in the game and the Swedish Institute, a body responsible for popularizing Sweden’s image, even set up an embassy.  

In China, many role-playing games supported virtual marriage and sales of virtual items years ago, and some Chinese online novels describe an audacious metaverse world where players can feel pain if they are attacked by monsters or other players and can exchange virtual game currencies for real currencies.  

This, however, is not allowed in the real world, as the Chinese government banned cryptocurrency exchange in games. Developers and players cannot set up virtual banks in any game.  

Virtual banks caused big trouble in Second Life when some players refused to pay their customers, who vociferously complained. The developer, San Francisco-based Linden Lab, closed more than 10 virtual banks, only to find many players could not withdraw their virtual money. According to a report by IT Time Weekly, customers of one virtual bank lost a combined US$750,000. Linden Lab eventually banned virtual banks without a real government registration or permit.  

This indicates a predicament for the metaverse – how to supervise and deal with disputes when the virtual world combines and interacts with the real one.  

“A metaverse world should operate under a complete set of social rules, including laws, regulations and moral values, as well as economic, currency and cultural systems... No company now has the experience to do such a thing. It actually can’t be done by one company alone, since the metaverse requires intensive participation of all the enterprises on the industrial chain, rather than one company’s game,” Ji Zhihui, founder of 4U Technology, a Beijing-based VR/AR company, told NewsChina.  

Wang agrees, saying the development of the metaverse cannot operate without oversight and governance of a real country. “On one hand, some countries want to promote the development of the metaverse. On the other, the metaverse’s spirit [of decentralization] is contradictory to a sovereign country,” he said.  

For example, a metaverse world is supported by digital currencies and an economic platform based on blockchain, while countries have different regulations on managing digital currencies. 

On October 14, the People’s Bank of China issued a document that tightens supervision of virtual currencies. It states that any business related to virtual currency is illegal in China and no overseas virtual currency exchange is allowed to provide services to domestic Chinese citizens. 

The Tsinghua metaverse report warned that the metaverse might provide a hidden space for illegal financing and suggested financial supervision should extend to the virtual world to prevent risk as in Second Life. This means that a central authority or governing body must supervise such activity, which goes against the spirit of the metaverse. That is why the Tsinghua report believes it is a pseudo-proposition for the metaverse to advocate “complete decentralization.”  

Intellectual property is another obstacle, according to analysts.  

“A metaverse needs a lot of collaboration by a large number of users, so it needs to [properly] confirm and protect collective intellectual property, which is difficult when some applications are across the virtual and real worlds. For example, has a user infringed on IP if they adapt or transfer other people or scenes or stories from the real world into the virtual world?” Xiang asked.  

Xiang further warned that the metaverse involves the collection and storage of more detailed personal information, including physiological reactions, behaviors, social relationships, emotional states and brain patterns. It is a tremendous challenge to store, supervise and manage that information to prevent crimes.