According to Bloomberg, the metaverse, built on digital assets, faces significant challenges despite initial promises of revolutionizing human creativity through web3. Web3, based on blockchain technology and digital tokens, was expected to allow individuals to monetize their creativity without interference from big tech. However, key indicators such as the prices of NFTs and other tokens linked to popular platforms are mostly declining.
Tokens.com made a significant investment in web3 in 2021, spending $2.5 million on a plot of real estate in Decentraland, a virtual space accessible via web browsers. Visitors could engage in activities like playing poker or attending fashion shows. Tokens.com CEO Andrew Kiguel likened purchasing metaverse land to buying real estate in a growing city, with plans to develop and trade these digital properties. However, the value of these digital properties, which are essentially tradeable, nonfungible tokens, has plummeted, with Tokens.com’s virtual real estate portfolio losing 80% of its value.
Even large companies attempting to create centralized versions of the metaverse have faced difficulties. A business offering metaverse property loans also suffered during the collapse. In early 2022, the company issued a loan for a property valued at $40,000 with a 25% down payment but has since rejected every loan application. When land values crashed, the first and only mortgage was returned at cost.
Crypto and NFTs remain too complex for the average person, according to Reitzik. He believes that a metaverse operating on fiat currency is more likely to attract the general public and businesses. James Casey, an associate professor of computer game design at George Mason University, shares a similar view. He argues that fiat currency and centralized assets are necessary for the metaverse to succeed in the near future. Casey, who spent over 12 years as a video game developer, notes that while blockchain is excellent technology, game companies prefer to own their databases. He believes that people still want to own virtual assets and see the metaverse as a new frontier of ownership.
