The Three Metaverse Wars

Date: 10/19/2021
Author: Mr. X


In the history of failed predictions, Paul Krugman’s 1998 claim that the Internet’s effect on the world economy would be “no greater than the fax machine’s” is somewhere at the top. At the risk of duplicating his error, I’m going to make one just as sweeping.

The metaverse will change society more than the Internet.

The line between real life and the Internet is still stark. You can get by without being online. If you are truly committed, you can still run a successful local business without a massive web presence. More importantly, our “real lives” and what people pretend to be online are two different things. For some, like particularly committed gamers, the worlds never even meet.

That could be changing soon. The metaverse would allow people to combine their “real” identity through an avatar with a virtual world. That virtual world would be used for business, entertainment, education, and everything else that can be imagined. This could eventually develop to the point where many people consider it preferable to the “real” world. This may become the next way of doing business, as the new normal of remote working combines with employers’ desire to have some direct oversight of their employees.

Non-Fungible Tokens (NFTs) may also find their place here. “Owning” a virtual product seems bizarre or even pointless now. However, if there is a “virtual” world, no matter how grand, technological requirements will impose the same problems of scarcity that exist in our world. Owning a digital item will make sense. Virtual real estate companies – perhaps operating similarly to those who bought common names with “.com” when the Internet was first beginning – are already in operation.

If you want to get conspiratorial, the metaverse concept is something that the public has been primed for through films like The Matrix, Avatar, and Ready Player One. The key is that the distinction between “personal” and “digital” identity fades. The term itself was coined by author Neal Stephenson, author of Snow Crash. Reading that novel is not a bad idea if you want to have some guidance about where we are heading.

A world where you can be, do, and experience anything imaginable sounds like paradise to many. To others, it presents a dystopian nightmare. It’s probably going to be a combination of both. “You can kind of think about this as an embodied Internet that you’re inside of rather than just looking at,” said Mark Zuckerberg of the concept. “We believe that this is going to be the successor to the mobile Internet.”

This could be a tool for enslavement as well as liberation. Already, we live in a world where some demand digital IDs that contain certain information before people are allowed to engage in commerce. Following the assassination of a Conservative MP last week, some in the British government are urging an end to online anonymity altogether. Will people be able to operate anonymously within these virtual worlds? Or will you be tracked as thoroughly as certain states track individuals today?

There’s also no consensus what the “multiverse” will even look like. Facebook (FB) is reportedly going to be hiring 10,000 people in the European Union to work on creating its version, but Roblox (RBLX) has an early lead. Unity Software (U) and Epic Games will also be important combatants in this war for control, as 3-D avatars and graphics will be essential to whatever is created.

There is the possibility of several “worlds” being created by leading tech companies. Nvidia (NVDA) has created a platform called NVIDIA Omniverse, which is designed to connect these 3D worlds into one shared universe.

The amount of capital, computing power, and commitment needed to create all this is staggering. The companies that will be at the forefront of making the metaverse are likely to be the same ones who control the digital economy today.

Nonetheless, the metaverse will probably be the setting of a three-front war, or, rather, a war being fought at three different levels. The major alliances are already taking shape now and investors should be paying close attention to anything that even mentions this concept.

The first level will be the level we have discussed – the battle between major companies that have already begun building their version of the metaverse. Alphabet, Facebook, Microsoft, Roblox, Unity, Nvidia, and other companies at this level will be the giants warring here. There are likely to be major partnerships and mergers that take place over the next few years as companies reorient themselves to conquer this new virtual space. One reason I remain bullish on Roblox over the long term is because it looks like an obvious partner for a tech company that has fallen behind in the competition over the metaverse.

However, the second level is probably the most important when it comes to geopolitics. This is where national governments and international organizations come into play. Since the 2016 election, the American government has been very concerned about the possibility of foreign actors using misinformation to create confusion and chaos within the political process. Innovation Hub, which brands itself a community “where experts and innovators from everywhere collaborate to tackle NATO challenges and design solutions,” is currently discussing concepts like “cognitive warfare.”

China meanwhile, has been very aggressive in recent months in making sure that the literal party line is followed online. It is essentially governing pop culture from the top down. As for Russia, it is working hard to develop and promote its own “sovereign” social media applications.

The metaverse will create an entirely new threat environment for national security. In April, the hack of Colonial Pipeline Co. took down the largest fuel pipeline in the United States and briefly led to scenes of panic at gas stations in some areas. The threat of ransomware has only become more apparent in the months since. The Hill ran a column in July calling for a total ban on cryptocurrencies. Treasury Secretary Janet Yellen and SEC head Gary Gensler have also spoken skeptically of the entire sector and suggested more regulation is warranted.

Yet while the government scrambles to catch up to cryptocurrency, the metaverse is going to create far more complicated and stranger territory to police. Ransomware, fraud, misinformation, industrial espionage, and other threats are going to collide with a legal framework not built to regulate a fully immersive online world. We may end up with various metaverses that are jealously guarded by powerful states as forcefully as were the territorial boundaries of Europe in the nineteenth century. Major companies may be forced to choose between great powers as globalization declines.

Finally, there’s the war that will be taking place at the lowest level – and where there might be the most opportunity. That’s the world of NFT creation, cryptocurrency applications, and other efforts to form the bits and pieces that will fit into the metaverse. Some of this is going to be pushed from the top down. Celebrities are forming partnerships with various companies to push their own NFTs and Draftkings (DKNG) is working to push sports-centered NFTs. Individual creators are also making fortunes in a very short time through their own crypto art.

Indeed, if there’s one thing that people with a bit of graphic design and cryptocurrency savvy can do right now, it’s learning how to make NFTs and promoting them on the various marketplaces that are emerging.

In the long run, I think this lowest level of the metaverse war is going to be the most interesting and the most dangerous. The world is becoming more controlled, supervised, and moderated. At the same time, there’s more geopolitical, technological, and informational chaos. That chaos will provide a means for bad actors to profit by inflicting misery on others. Yet it will also provide an opening for individuals or small teams to outmaneuver large companies by solving the small problems or serving the small markets that will emerge in the metaverse.

It’s impossible to predict what the metaverse will look like exactly. However, barring a global catastrophe, I think its coming is something of an inevitability. Once fringe online spaces have already radically changed “real-world” culture. States and media institutions threatened by these changes have largely abandoned the old ethos of free-speech and are far more insistent on the need to regulate what’s happening online.

Yet new communities, applications, and tools will always emerge that enable people to resist any attempt at centralized control. In order to remain free in this strange new world, you’re going to need to know how to use them. To become wealthy, you’ll need to master them.

Today, it’s important to understand technical analysis to trade stocks and options. Tomorrow, it’s going to important to understand cryptocurrency and NFT basics simply to navigate the metaverse. Begin learning now. Your future self (perhaps in avatar form) will thank you.

Mr. X is an investment analyst working in the Washington DC area who specializes in the intersection of business and public policy. After fifteen years working in politics, he writes on a classified basis for RogueInvesting.com three times a week to bring you news on what those with power are debating, planning, and doing.

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