Where are the bottlenecks in the development of the metaverse?
Written by: Mu Mu
Recently, Bitcoin has been continuously reaching historical highs, just a step away from $100,000. Many sectors in the crypto industry are showing signs of recovery, while the once-prominent 'metaverse' still seems a bit lonely—not just the crypto metaverse, but the entire tech industry's 'metaverse' remains silent.
Once hailed as 'the next generation of the internet,' with tech giants eagerly investing, the metaverse is now hardly discussed and has almost 'vanished.' What happened to the metaverse? Can it 'kill' back?
What is happening with the metaverse now?
Not long ago, Meta's financial report showed that its Q3 metaverse department was still suffering significant losses. According to public reports, social giant Facebook fully transformed to All in on the metaverse and rebranded as Meta in 2021. Its department responsible for the metaverse, Reality Labs, was established in 2018. The large-scale transformation in 2021 increased investments in the metaverse but also opened up space for losses, resulting in hundreds of billions of dollars in losses over the past few years.
In a public letter in March 2023, Zuckerberg stated that Meta would focus on company efficiency, streamline projects and reduce expenses in the RL business area, and continue to invest in metaverse-related businesses while focusing on the combination of AI and the metaverse. Despite reducing expenses, it has not yet reversed the loss situation.
Although continuously suffering significant losses, Meta seems not to have given up on the metaverse track. It always believes that the metaverse 'is the core that defines the future of social connections,' constantly adjusting and optimizing its business lines while continuing to invest and layout.
Looking at the domestic scene, media reports indicate that Alibaba is also optimizing and scaling its metaverse department 'Yuanjing' to respond to the trend of declining enthusiasm in the metaverse field, laying off dozens of employees. This move aims to optimize the business structure and improve organizational efficiency, while continuing to focus on the development of metaverse applications and tools to provide relevant services to customers.
In the capital market, the financing amount for metaverse startups this year is also very low. According to Crunchbase data, this year, companies related to AR, VR, and the metaverse have raised approximately $464 million from seed to growth stages. This is also the lowest level for the industry in years. It is reported that many metaverse startups have not completed another round of financing after raising funds in 2021.
The metaverse and Web3 proposed by the crypto community are both referred to as the next generation of the internet. Although there are certain differences, the overlap between the two concepts is quite high. Some people say that Crypto and the metaverse are a match made in heaven, and blockchain is also the cornerstone of the metaverse.
The crypto metaverse was once filled with high hopes and is also a large-scale application scenario expected by the crypto industry. However, judging from the extremely low display rates and almost zero interaction of social network accounts of leading crypto metaverse projects, it seems to be somewhat sluggish. There is no significant sign of recovery along with the rise of Bitcoin, and it appears that most people have lost interest in this sector.
The only exception currently is Roblox, once hailed as the first stock of the metaverse. Its financial report shows that its revenue and user base continue to grow robustly. Supported by strong data, even if the metaverse concept is no longer popular, the company's stock price has risen from $21.6 at the bottom in 2022 to $52 now, reaching a market value of about $36 billion, which can be considered good performance.
What went wrong with the metaverse?
It is evident that the metaverse is in a classic 'trough period after the bubble burst' in the tech industry. New technological concepts always go through such a period. The internet, blockchain, and AI have also experienced this, and of course, every industry in a trough period will face its own challenges. Perhaps solving these issues will be the moment when the metaverse begins to emerge from the trough.
1) Infrastructure and technical bottlenecks
In terms of the vision of the metaverse with ultra-high-quality and immersive experience space connectivity, this application can almost be perfectly achieved in a single-player environment. Many AAA games reflect this, but these AAA masterpieces are mostly single-player. Connecting these large virtual spaces, often over a hundred GB, to the internet for simultaneous use by a large number of users is quite challenging. One issue is that internet infrastructure is insufficient (bandwidth and speed), and another is that existing technology is inadequate to support such scenarios.
Taking Meta's metaverse space as an example, the rough and 'abstract' visuals presented by Zuckerberg during the demonstration were heavily criticized, which do not resemble the metaverse we envision. Simply put, the current infrastructure and technology face bottlenecks that cannot simultaneously satisfy high-quality graphics and smooth experiences.
2) Funds and attention are being 'shifted' by AI
AI is so hot that the limited funds and attention in the market have been drawn to AI, and the high investment in the metaverse has naturally cooled down. Not only that, but AI has also occupied GPU computing resources urgently needed by the metaverse, just as the mining of crypto assets once occupied and drove up the graphics card resources of gamers. These external factors make innovation and exploration in the metaverse even more challenging now.
3) Lack of profitability
Currently, the metaverse products on the market have produced little output and profit apart from early users who bought some AR and VR hardware out of curiosity for novelty. While Meta firmly believes that the metaverse is the future, the current internet is more efficient, convenient, and low-cost. Applications like Meta’s rough metaverse have not gained user favor and are not essential, which is the main reason why they have not been profitable.
An industry that has been continuously losing money can only be sustained by a few giants; most startup teams can only helplessly give up halfway.
Will the metaverse come back?
The value and future of the metaverse are undoubtedly undeniable, and giants like Meta have not stopped their investments. Zuckerberg firmly believes that the future will come. But in what form will it return?
1) The next generation of AAA masterpieces, we are approaching the future of the metaverse.
The recently popular first domestic AAA masterpiece Black Myth: Wukong has brought Chinese ancient architecture into virtual space, allowing us to experience the cultural treasures of China in the game, which has been praised by gamers both domestically and internationally.
It is reported that the team behind Black Myth: Wukong has adopted the latest AI technology (AI-driven DLSS3), which brings higher frame rates and better graphics. The AI-driven DLSS represents a revolutionary breakthrough in AI-powered graphics, achieving performance multiplication. DLSS 3 can create more frames and enhance image quality using AI. This indicates that the infrastructure and technical bottlenecks of the metaverse are gradually being overcome.
2) Crypto + Metaverse continue the legend
When the metaverse was at its peak, people said that assets like Bitcoin were riding the wave of the metaverse hype, just like many tech companies previously hopped onto the blockchain concept and exited the 'knockoff CryptoKitties' game. Now that Bitcoin's price has broken through, the crypto metaverse sector may bring more funding and possibilities. With the continued influx of capital and talent, original conceptual ideas will gradually revive.
The metaverse supported by Crypto will be more perfect, and the complementarity between the two is shaping a new virtual economic model. The two have been described as a match made in heaven, with the main points of combination including the following aspects:
A. Ownership of virtual assets and digital identity
NFTs (Non-Fungible Tokens) are like the 'bricks and tiles' for building the metaverse. In the future open metaverse space, each user will own their own virtual asset data and unique identity, protecting personal assets and privacy in the virtual world. User identity will be managed and verified through encryption technology, ensuring data security, privacy protection, and transaction transparency.
In the leading crypto metaverse project The Sandbox, users can freely trade virtual land and items, which are composed of NFTs and protected by blockchain.
B. Decentralized economic system, incentive mechanisms, and creator economy
Crypto has also brought a complete decentralized economic system to the metaverse, from token incentives to creator economies, all validated by the crypto industry. These are very important for an open and collaborative virtual world. Concepts like P2E provide genuine income for creators, players, and communities in the virtual world. With a complete economic system, a sustainable virtual world can be built.
In the future, with the development of the metaverse and Crypto, it will also be possible to connect different metaverse spaces through NFT virtual assets, achieving interconnectivity in the virtual world.
Overall, the metaverse is like a parallel virtual world, where the native assets in the virtual world are crypto assets. The combination of the metaverse and Crypto still has a high degree of compatibility.
Summary
The reason for being overshadowed by AI is not that the metaverse is not good enough, but rather that AI is more essential. In a context of liquidity scarcity, the value is more intuitive. In fact, the current market rally in the crypto realm is almost exclusively focused on Bitcoin and meme-related sectors. Once the environment improves and liquidity is sufficient, the metaverse and many concepts with practical application value should gradually revive. However, in such a capital-intensive sector, it is not easy to emerge successfully; we must also look forward to the metaverse's 'ChatGPT moment.'
