The Mirage of the Metaverse

By Jacqueline Lee
The re-branding of Facebook as “Meta” announced by CEO Mark Zuckerberg on October 28, and the company’s push to develop “an embodied internet that you’re inside of instead of just looking at” has thrown the world into a flurry of metaverse-related activity. Nevermind that this vision will still require decades of research, development, and societal reflection.
Companies—whether new or established in the world of virtual/augmented reality—are affirming Meta’s reported $10 billion bet on what Zuckerberg believes to be the “successor to the mobile internet.” Apple has been filing and winning patents for various headset technologies and designs related to augmented reality (AR), which seems to corroborate analyst Ming-Chi Kuo’s prediction that they will launch their first smart glasses by the end of 2022. Meanwhile, Google—after staying relatively quiet amidst this metaverse hype—has recently been revealed to be working on a new operating system and headset for AR.
Some believe that this meta-hype will usher in Web3, an umbrella term related to the decentralization of the Internet through technologies like cryptocurrencies, non-fungible tokens (NFTs), and the metaverse. While the full form of Web3 remains to be determined, its proponents see an inevitable connection between NFTs and the metaverse. In the past year, metaverse-related cryptocurrencies  (i.e., those tied to a digital world)—have been outperforming other categories including bitcoin, smart contract platforms, and decentralized finance with a surge of 37,000% totaled between five coins (Axie Infinity, Decentraland, Sandbox, Engjin Coin, and GALA) alone. These platforms allow users to play games to earn cryptocurrencies or digital land in their metaverses. The allure of digital ownership is strikingly clear; in early December, “The Metaflower”—a virtual luxury yacht—was sold for $650,000, becoming the most expensive NFT in metaverse history, while “land” has been sold on both Axie Infinity and Decentraland for upwards of $2 million each.
Given this heightened anticipation and investment into the metaverse, it is unsurprising to see organizations around the world collaborating and attempting to ride the digital wave. Brands such as Chipotle, Vans, and Nike have already been building their own meta-worlds on Roblox to engage customers, but have yet to connect virtual activity to the sale of real-world objects.
As the metaverse continues to grow in scale and public adoption, there is an expectation for high-value real-world commercial opportunities. There is even interest in exploring the market for digital luxury goods. Gucci, one of the few leading this charge, noted the promise of the digital art space and auctioned an NFT—a three-channel video loop inspired by its fall 2021 collection—for $20,000 given to charity in June 2021. In late September, Dolce & Gabbana set a record for auctioning an NFT collection of five physical-and-digital and four solely digital pieces for 1,885.719 Ether, or close to $5.7 million.
Adidas has announced partnerships with NFT communities to engage customers with digital goods in a place where the “most original ideas” can be expressed. They plan to launch their own NFTs which will be coupled with exclusive virtual wearables and other experiences to be enjoyed across metaverses. Even the hotel chain Marriott International has debuted NFTs. And while some remain - at best - confused or - at worst - cynical of the pieces’ future value, Marriott commented that they will continue to build their presence in the metaverse in 2022. Even the city of Seoul has announced plans to build its own metaverse for government services such as making reservations of city facilities, riding tour buses, visiting re-creations of destroyed historical sites, and even filing administrative complaints.
This is not the first time the idea of the metaverse has been hyped. More than a decade ago, Linden Lab created “Second Life”, a digital platform built on the belief that “we would all spend an increasingly large fraction of our lives in a virtual world.” Users could buy virtual land, build anything their imagination and the program’s tools would allow, and meet others. At its largest, Second Life had a self-reported GDP of $500 million. Yet few years after its peak in the mid-aughts, Second Life stopped growing and brands abandoned their efforts to establish virtual stores in the early metaworld.  
Whether this revival of interest in the metaverse is as short-lived remains to be seen. However, several new factors will undoubtedly affect the general public’s receptivity and sustained adoption for such innovations. Second Life founder and early metaverse architect Philip Rosedale underscores the shift in companies’ motives from simply persuading you to buy their products to influencing you to spend more time online, the duality of the increasingly social nature of the Internet and pervasive digitalization of general social interactions, and the effects of the COVID-19 pandemic. The pandemic has limited almost everyone’s in-person social interactions, seeding greater desire for a way to travel and socialize when physically confined.
Many technical advancements in the last few years may help usher in a more realistic and enjoyable version of the metaverse. Easy examples include 5G’s promise of faster networks to enable the transfer of the huge amounts of data needed for a rich metaworld experience, new mobile edge compute technologies such as new microchips and Internet of Things (IoT) devices.
Certain sociopolitical factors further complicate the meta landscape. How can the metaverse deal with an enhanced experience of the online harms we already experience today? In an interview with Time, anthropologist and author of Coming of Age in Second Life: An Anthropologist Explores the Virtually Human, Tom Boellstorff expressed his belief that Second Life’s subscription model kept problems such as misinformation off the platform. In contrast, Meta’s focus on the sale of virtual goods and advertising in the metaworld make it unlikely for the new platform to be protected from such social harms. Multiple analysts have already raised alarms that without any legitimate scrutiny of Meta’s attempted actions in designing this new space, it is more probable that the metaworld will simply lead to the monetization of more personal data with a greater potential for abuse and greater issues on content moderation.
But the metaverse is larger than Meta and there are other questions outside of the actions of one company that must be answered before we see a safe, secure, healthy, and equitable metaverse. These questions with societal impact are not new and that have already been posed to tech companies like Facebook, Amazon, and Google. If we are determined to avoid the situation in which a sole company dictates the organization and rules of one ultimate metaverse, how will multiple mini-meta-verses interact? Who can and should determine this interoperability – nations, private companies, or individual users? How will the metaverse deal with the complications of the internet – from internet addiction to child safety to its widening geopolitical fragmentations?
The rise of the metaverse signals a potential turning point for these issues. The answers likely cannot be fully addressed by any one individual, entity, or institution, but only through active participation by various parties and stakeholders. These important conversations have already been initiated in various congressional hearings. In the last two years, voices from Big Tech stood before Congress to testify in widely publicized hearings on topics ranging from disinformation, the role of algorithms promoting harmful content, to anti-competitive behavior or privacy and security protections.
However, with all this talk, follow-through action is increasingly necessary, especially before we get caught up in the whirlwind of money, NFTs, and fictional promises involved at this stage of Web3. The metaverse – or the idea of it – simply provides greater motivation for these processes where though the stakes may be higher, the benefits of effective policies could be just as well. As Francesca Bria, president of the Italian National Innovation Fund, warns, it is short-sighted to believe that Web3 and NFTs will independently solve the problems that they are built upon. While exciting and futuristic, the colorful image that the metaverse is projecting is only a mirage that should not distract us from the reality that we have a long campaign ahead for effective regulation. And effective regulation, while less exciting, is still vital to secure Web2 as a more dependable foundation upon which any trustworthy successor can develop.
Jacqueline Lee is a former research intern with the Strategic Technologies Program at the Center for Strategic and International Studies in Washington, DC.
The Strategic Technologies Blog is produced by the Strategic Technologies Program at the Center for Strategic and International Studies (CSIS), a private, tax-exempt institution focusing on international public policy issues. Its research is nonpartisan and nonproprietary. CSIS does not take specific policy positions. Accordingly, all views, positions, and conclusions expressed in this publication should be understood to be solely those of the author(s).