Metaverse and Money: Decrypting the Future

Contributor(s): Citi GPS

The Metaverse as a concept has been around for a few decades. However, interest in the virtual world spiked at the end of 2021 following a rise in sales of non-fungible tokens (NFTs) as well as announcements from Big Tech players indicating their interest and investment in the space.

Today, the most popular way to experience the Metaverse is via a video game played on a virtual reality (VR) headset. But in the report that follows, we discuss the possibility that the Metaverse is moving towards becoming the next iteration of the internet, or Web3. This “Open Metaverse” would be community-owned, community-governed, and a freely interoperable version that ensures privacy by design.

Users should increasingly be able to access a host of use cases, including commerce, art, media, advertising, healthcare, and social collaboration. A device-agnostic Metaverse would be accessible via personal computers, game consoles, and smartphones, resulting in a large ecosystem. Using this broad definition, the total addressable market for the Metaverse could be between $8 trillion and $13 trillion by 2030, with total Metaverse users numbering around five billion.

But getting to that market level is going to require infrastructure investment. The content streaming environment of the Metaverse will likely require a computational efficiency improvement of over 1,000x today’s levels. Investment will be needed in areas such as compute, storage, network infrastructure, consumer hardware, and game development platforms.

The definition of what counts as money in the Open Metaverse is also likely to be very different from what counts as money in the real world today. Interoperability and seamless exchange between underlying blockchain technology are critical to ensure a frictionless user experience. Different forms of cryptocurrency are expected to dominate, but given the multi-chain trend in the crypto ecosystem, cryptocurrency will likely coexist with fiat currencies, central bank digital currencies (CBDCs), and stablecoins.

Finally, if the Metaverse is indeed the new iteration of the internet, it will mostly likely attract greater scrutiny from global regulators, policymakers, and governments. Issues such as anti-money laundering rules for exchanges and wallets, the use of decentralized finance (DeFi), crypto assets, and property rights will all have to be addressed.

The Metaverse Is Potentially an $8 Trillion to $13 Trillion Opportunity

We believe the Metaverse may be the next generation of the internet — combining the physical and digital world in a persistent and immersive manner — and not purely a Virtual Reality world. A device-agnostic Metaverse accessible via PCs, game consoles, and smartphones could results in a very large ecosystem. Based on our definition, we estimate the total addressable market for the Metaverse economy could grow to between $8 trillion and $13 trillion by 2030.

Metaverse Use Cases

Gaming is viewed as a key Metaverse use case for the next several years due to the immersive and multi-player experience of the space currently But we believe that the Metaverse will eventually help us find new and enhanced ways to do all our current activities, including commerce, entertainment and media, education and training, manufacturing and enterprise in general. Enterprise use cases of the Metaverse in the coming years will likely include internal collaboration, client contact, sales and marketing, advertising, events and conference, engineering and design, and workforce training.

Still Early: Metaverse Infrastructure Building

In the current state, the internet infrastructure is unsuitable for building a full-immersive, content streaming Metaverse environment, that enables users to go seamlessly from one experience to another. To make the vision of Metaverse a reality, we expect significant investment in a confluence of technology. Low latency — the time it takes a data signal to travel from one point on the internet to another point and then come back — is critical to building a more realistic user experience.

Money in the Metaverse

We expect the next generation of the internet, i.e., the Metaverse, would encapsulate a range of form factors of money, including the existing/traditional forms of money and also upcoming digitally-native forms of money — cryptocurrency, stablecoins, central bank digital currencies (CBDCs) — that were out of scope in a pre-blockchain virtual world.