Imagine being at a concert where you are not only with a group of friends but also 20 million other people, interacting and socializing. Or imagine talking to an avatar from a prospective employer’s human resources department about the company’s recruitment process. Or picture digitally trying out clothing in a virtual shopping mall.

None of these immersive digital experiences are far-fetched, thanks to developments in the Metaverse. The Metaverse is a concept that may be the next generation of the internet, combining the physical and digital world in an immersive manner, possibly intermediated via mobile phones in addition to virtual reality (VR) and augmented reality (AR). Or, to put it another way, the Metaverse is an internet that you don’t simply view but participate in.

The Metaverse is emerging as the next potential big technology platform, attracting both attention and investments. It’s still early to make overly precise predictions around the size of the total addressable market as a lot depends on how the Metaverse is defined. Taking a broad definition, however, the authors of a recent Citi Global Perspectives & Solutions (GPS) report believe the user base could be up to five billion people, giving a total addressable market of between $8 trillion and $13 trillion by 2030.

However, as the report sets out, designing, building and using the Metaverse raises a host of questions around technology, business models, regulation and society more broadly.

Origins and definitions

First, though, where did the Metaverse start? And more fundamentally, what is it? The term was first coined in the world of 1990s science fiction. It described a 3D, photorealistic, digital meeting space in which humans, represented by programmable avatars, interacted with one another. In the early 2000s, Second Life offered a virtual world for users to hang out together and trade virtual items.

However, it wasn’t until late 2021 when popular discussion around the Metaverse really took off. This followed a dramatic rise in sales of non-fungible tokens (NFTs) as well as announcements from Big Tech players indicating their interest and investment in the space.

Mentions of the term took off in US company filings and earnings calls. At a corporate level, the spike in interest was led by landmark announcements such as the rebranding of Facebook as Meta Platforms.

However, an exact definition of the Metaverse is lacking. It is partly a dream of what the future of the internet could be and partly a way to encapsulate the current trends in online infrastructure, including the growth of real-time 3D worlds. There is no set, industry-wide definition.

Citi GPS thinks of the Metaverse as a conceptual next iteration of the internet, supporting a collection of real-time applications and experiences across devices, made up of four components.

First is the space. It is a shared, open, virtual world environment which people can access via the internet with rich, multi-layered interactions. This calls for real-time connections, high-bandwidth networks and exchange centers, among other items that create an immersive digital experience.

Next comes the interface. This refers to the hardware that helps users access the Metaverse, which includes VR and AR headsets, mobile devices, PC and game consoles, smart glasses and other sensory tools.

Third, we have the monetary infrastructure. This is what supports digital payment processes, allowing users to trade digital assets in the Metaverse, which could include cryptocurrencies. 

Finally, we have what the GPS report authors term the compute, referring to the enablement and supply of computing power to support the Metaverse structure. This is the software that brings objects into 3D and allows users to interact with them.

What could the Metaverse be used for?

Of course, gaming is what comes to mind for most of us when we think of the Metaverse. And the next few years will be ones of experimentation, adventure, trial and error.

But as the Citi GPS report explains, drawing on the views of external experts, the Metaverse will eventually help us find new and enhanced ways to perform all our current activities, including commerce, entertainment and media, education and training, and smart manufacturing.

Industry, for example, is already exploring opportunities with digital twin technology, whereby simulations can help cut project costs, time and wasted resources. What is more, Boeing is exploring digital twin technology to build aircraft in the Metaverse.

The technology is also likely to have a significant positive impact on the healthcare and retail sectors. While surgical procedures already use robotics, complex surgeries and training may benefit from AR and VR. Telemedicine and the delivery of services outside large hubs should improve, thereby significantly flattening the challenge of distance. For the retail and fashion sectors, the Metaverse is e-commerce 2.0.

The virtual environment could help host virtual concerts, movie premieres, launch parties and events spanning numerous industry verticals, as well as offering a marketplace for fan collectibles such as NFTs. Museum experiences in the Metaverse are already being built: online group Pixlr Genesis is aiming to build the Louvre of the Metaverse, with NFTs as a way of connecting artists and art connoisseurs globally.

Building it and paying for it

Getting to a Metaverse market of the size Citi predicts by 2030 will require infrastructure investment – and lots of it.

With only one quarter of the global population expected to have fifth-generation (5G) mobile access by 2025, network bandwidth needs to be increased and delivered. In fact, today’s network unreliability makes the current state of the infrastructure unsuitable for building an envisioned Metaverse experience. The content streaming environment of the Metaverse will likely require a computational efficiency improvement of over 1,000 times today’s levels.

That means countless new technologies and infrastructure coming together, including applications around Web3, decentralized finance (DeFi), NFTs and mining protocols. This makes it difficult to exactly quantify the capital expenditure needed for the Metaverse, but the GPS report authors expect it to be substantial.

And design choices are the topic of much debate. Should it be open, built on Web3 building blocks of permissionless and open protocols, or closed, built by the capital-efficient, easy-to-use Web2 platforms?

Big Tech is in a virtual arms race to build the next generation of dominant VR and AR platforms, raising concerns among some that the Metaverse will resemble our Web2 experience of having multiple logins, platform gatekeepers, user data monetization and embedded advertising. Or can we have a conceptually utopian, community-owned and governed, freely interoperable open Metaverse version championed by Web3? In the view of the report’s authors, though, the likely future is not Web3 versus Web2, but coexistence.

Areas of concern

Regardless of model, if the Metaverse is to be the new iteration of the internet, it will most likely attract greater scrutiny from global regulators, policymakers, academic institutions and governments.

One of those areas of concern will be around content moderation, the Citi GPS report’s authors believe, and trying to ensure no harmful and illegal content enters the Metaverse. Another is how to protect the privacy of the users and data collected. Then there are ownership and rights issues, as well as competition and antitrust.

All of this will require a fresh look at regulation. The Citi GPS report believes that policymakers have an opportunity to work together with industry participants to establish a regulatory framework while the Metaverse is in the process of being created – as opposed to the possible risk of front-running technology and innovation by putting in preventative regulations without a full understanding of the potential risks and opportunities.

But whatever form the Metaverse takes, what it costs to build it and how it’s overseen, one thing seems clear: it will likely change the way we live and work, both digitally and physically. Welcome to the dream of the future!