This article was adapted and translated from Mandarin.

In 1992, science fiction writer Neal Stephenson coined the term “metaverse” in the novel Snow Crash. In the novel, humans employ programmable avatars to interact with each other in a three-dimensional virtual space that is a metaphor for the real world. Stephenson saw the metaverse as the next incarnation of the internet. Since then, the concept has been carried into movies like The Matrix and Ready Player One.

Now, especially after Facebook’s announcement of its new name — Meta — the venture capital community is talking about the metaverse. This is still undiscovered country, but investors foresee great opportunity in this virtual space. According to recent Bloomberg estimates, the value of the current global market of metaverse is about USD $800 billion. When exactly can this concept really take hold? In which scenarios is there more room for imagination?

On November 30, 2021, Steve Chen, GLG Network Member and former Director of Strategy at Tencent — and who was involved in the early days of Roblox — shared an in-depth discussion about metaverse trends. Here are some highlights from that discussion.

What are the characteristics of the metaverse?

Steve Chen: As far as we can see, there are three main features of the metaverse. First, it is a highly immersive experience. This is consistent with previous experiences created by extended reality (XR) devices such as AR and VR. Second, it seems to be a sustainable world in itself: the metaverse is a virtual world that is parallel to reality based on the new computing platform, and it will be associated with people’s daily necessities of life and beyond. Third, there is a clear way to exchange value within it. The interconnection of blockchain technology gives rise to new value creation and value exchange in the metaverse.

According to the current messaging from major players in the sector, the metaverse is based on human-centered experiences, including personal digital identities, social interactions, and daily immersive experiences. It is not a game, but a virtual space of online and offline value exchange. The metaverse is a sustainable system with economy and civilization.

What are the groups of players in the metaverse sector?

Steve Chen: Currently, main players in the metaverse sector can be divided into four camps:

1. Virtual Reality (VF)/Augmented Reality (AR) and Mixed Reality (MR) Providers: For this group of players, the metaverse is a new computing platform and traffic portal based on new ways of interaction after the mobile internet. Trends in the information and communication technology (ICT) industry have come in approximately five waves: microchip, computing platform, operating system, content aggregation and distribution, and application. The whole extended reality (XR) sector is naturally connected to the metaverse through immersive experience.
2. Gaming and Internet Giants: The metaverse itself is regarded as a game-like experience by default, and games we know of are also close to the metaverse experience. Also, internet giants have enabled their own user account systems that are in line with the continuity of the metauniverse. Internet giants in China have a chain of business, including online services like livestreaming and gaming, as well as offline services like convenience stores, logistics, etc. This makes it possible to bring some of the offline value to the online metaverse system.
3. Digital Currency Community/Blockchain Community: In these sectors, the value creation process and benefit distribution are dominated by several giants. As blockchain technology goes to the public, this group of players will likely move toward decentralized blockchain-based value exchange.
4. Infrastructure/Interaction Technology Providers: This group includes existing game engines and companies that provide rendering, tools, and new interactive technologies. They are leading participants with direct experience.

What are the main supporting technologies of the metaverse?

Steve Chen: In terms of underlying support technologies, the metaverse involves six major technical components.

1. Internet of Things: These technologies can provide the metaverse with reliable data and make connections between virtual and real worlds.
2. Networking and Cloud Computing: Advancements in communication network technology are the foundation of the metaverse, and the communication network and cloud games provide the metaverse with network-level technology.
3. Artificial Intelligence: AI provides audio and visual technical support for a large number of metaverse applications.

However, the preceding three technologies are both well established and dominated by large players that control most of the market share, leaving few investment opportunities for newcomers. The next three sectors — interactive technology, gaming, and blockchain — are more suitable for players to enter and invest.

4. Interactive technology: Interactive technology continues to upgrade iteratively, providing an immersive virtual reality experience and deepening perceptual interaction. It includes hardware equipment and engine providers based on AR, MR, and projection, as well as companies engaging across industrial spheres. It is more relevant for companies based on sensor technologies, especially somatosensory (such as motion capture, brain-computer interaction, voice interaction, etc.).
5. Gaming: Like the metaverse, games feature flexible interaction and rich information, providing a platform for creation, interactive content, and social scenarios. The metaverse includes a game engine, VR system construction, 3D modeling, and rendering technology (among other features). However, the gaming and virtual worlds are inherently limited, and only some games can create a strong connection to the metaverse.
6. Blockchain: Among different technologies, the one that is highly associated with the metaverse is mainly developed around Ethereum, including NFT, decentralized finance (DeFi), public chain speed, smart contracts, decentralized autonomous organization (DAO), social system, decentralized exchanges, distributed storage, and other blockchain technologies.

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About the Author

Steve Chen since 2020 has been the COO of AI4FIT, a company dedicated to empowering home gyms with artificial intelligence computer vision technology. From 2015 to 2019, he was Director of Strategy for Tencent’s Mobile Internet Business Group, where he worked on projects for IEG (Interactive Entertainment Group), exploring next-generation hardware and entertainment forms beyond mobile apps, such as consoles, XR, and “Metaverse.” Some of the projects he worked on led to partnerships between Tencent and companies such as Nintendo and Roblox. In early engagement with Roblox, his job involved analyzing the competitive landscape and key players in the metaverse.

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This technology industry article is adapted from the GLG Webcast “Giants Competing in the ‘Metaverse.’” If you would like access to this webcast or would like to speak with industrial automation expert Steve Chen, or any of our approximately 1 million Network Members, contact us.