The Metaverse Overview 

Looking back at 2021 – the first year of the Metaverse – its breakout was much more intense and the responses of market participants were much faster than they were when the internet entered global consciousness. A glance at the global and Chinese markets reveals that the Metaverse is by no means just an experiment for small-scale players, but has become a landscape for all of humanity to explore the next stages of development in society, technology, legal systems, and the arts. With the sharp drop in Metaverse-related stock prices in 2022, excessive enthusiasm of capital market has since started to subside, and people now view the Metaverse opportunity more rationally. The Metaverse will fundamentally reshape people's productivity, lives, and social relationships, in time creating a new world. After the excitement subsides, companies that focus on accurate positioning, continuous development, and outstanding ability will produce a viable Metaverse that inspires renewed excitement.

Deloitte China launches the report of The Metaverse Overview: Vision, Technology, and Tactics to discuss the development vision of the Metaverse, analyze current stage of Metaverse technologies and cases, build the framework of the Metaverse industry, and explore how companies should respond to Metaverse opportunity.

Vision and Values

1. Starting from the original meaning of "Meta (Meta) + Verse (Universe)", Deloitte has defined and imagined the future of the Metaverse as "a converged world of the virtual and the real". This has four meanings:

• Meaning 1: A virtual mirror world that simulates reality. The Metaverse includes a virtual world that simulates almost every element of the real world, including individual identity, enterprise identity, the business world, entertainment, social interaction, civilization, legal, tax, and governance structures, and one of the most critical features of our real world—feelings. This is an important starting point for understanding and envisioning the future direction of the Metaverse.
  
• Meaning 2: A native virtual world. The Metaverse includes another virtual world. This is an innovative, native virtual world that has all the elements of the real world, such as people, objects, environments, rules, etc.
• Meaning 3: The real world. The real world is an integral part of Metaverse. All elements in the virtual mirror world are facsimiles of elements in the real world. The value of the virtual world is generated by interactions between it and the real world.
• Meaning 4: Convergence and interaction of the virtual and real worlds. First, convergence and interaction of the virtual and real worlds: In the end, the virtual world and the real world will form a closely converged and interacting world—from the virtual to the real, the real to the virtual, the virtual in the real, and the real in the virtual. Second, the entrance to virtual reality: the first is to apply digital tools, including portable and wearable AR/VR devices, and the second is to apply brain-computer interface technology, which transmits electrical and biogenic signals directly to the human brain, achieving real-time, barrier-free information exchange.

Figure: Definition and meanings in the Metaverse

2. Six characteristics of the Metaverse:

• Characteristics 1: Realistic immersive experience. Realistic immersive experiences provide verisimilitude of the senses, objects, and environment, and have driven Metaverse excitement.
• Characteristics 2: A complete world structure. The Metaverse, meanwhile, will be a complete replica of the real world, simulating all of its 10 elements.
• Characteristics 3: UGC. UGC is a new creative arena in which Metaverse residents create content and applications in their own virtual worlds.
• Characteristics 4: Huge potential economic value. The creators of Metaverse platforms will endow the Metaverse with scarcity through technologies and manage digital asset rights through these technologies so data becomes tamper-proof. The Metaverse has less scarcity than the real world, making it possible for it to surpass the real world’s economic value.
• Characteristics 5: New regulations. The concept of the Metaverse as a parallel world means weakening "central privilege" in the real world.
• Characteristics 6: Big uncertainty. Governance structure is the core issue in the Metaverse, that is, who will be on top of its future governance structure. When designing the Metaverse, all creators will need to decide who has the final say in the virtual world and who owns its economic benefits.

3. The value the Metaverse will bring to people is multifaceted, spiritual and material, including five main elements:

• Entertainment: games and social activities, where players enter the Metaverse to enjoy immersive and realistic interactions, resulting in a pleasant experience of games and socializing.
• A second Life: collaboration platforms where creators build their own personal worlds in a virtual space, giving individuals the opportunity to experience a life that is different from the real world.
• Efficiency in the real world: Technologies such as digital twins, XR, and AI can improve the efficiency of many industries, including education, manufacturing, and retail. Activity in these industries will be unconstrained by time and space, experiences will be upgraded, and quality will improve.
• New wealth: virtual currencies and trading in virtual objects provide an opportunity to reshuffle wealth.
• New influence and social status: in virtual communities, creating a different avatar for oneself and partaking in social activities provide opportunities to achieve a new social status.

4. Development of the Metaverse is in its infancy and the ideal form of the Metaverse will eventually arrive. However, as the Metaverse matures, it will inevitably encounter bottlenecks that need to be broken through. The five major Metaverse bottlenecks at this stage are: Portability of access to the virtual world, Rules of governance in the virtual world, Industrial Metaverse applications, Information security and privacy, and Energy supply.

Figure: The five major Metaverse bottlenecks

Technology

1. The sequence of user access to the Metaverse and its corresponding technologies have the following five clusters:

• Access, which emphasizes immersive experiences driven by XR.
• Interaction, which focuses on high simulation interactions between different users or objects, driven mainly by AI and supported by game engines.
• Digital content, the creation of virtual objects or spaces using digital twins, real-time rendering, and 3D engines.
  
• Rules and identity, which support mutual recognition and interactions between different users and entities in the virtual world, typically based on blockchain.
• Large-scale, continuous online availability to ensure continuous operation and real-time feedback of the virtual world as if it were the real world. This requires a large number of high-speed computing and information transmission capabilities that use cloud computing, high performance computing, wireless communication (5G and 6G). In addition to enabling interactions, AI algorithms will underpin most other technologies.

Figure: Required technologies for Metaverse scenarios and characteristics

2. At present, various technologies only meet the development needs of the initial Metaverse:

• XR. In somatosensory realization, visual and auditory simulation interaction is currently the most advanced technology in the virtual space. Simulations of smell, touch, and ideas (human thinking) have started. Simulated taste, a synthesis of multiple senses, has not yet been achieved.
• Blockchain. Blockchain has developed steadily. After an early stage of exploration, market preparation, and recognition, it has entered industrial deployment, most commonly in the financial sector. In the Metaverse, blockchain and NFTs will resolve problems around ownership and identification of production and assets in the Metaverse.
• IoT. The development of IoT has three stages: pre-outbreak, outbreak, and full-scale outbreak. At present, the core technology of the global IoT continues to develop, with the creation of unified standards, an improving industrial ecosystem, and a rapidly developing global IoT industry. However, it will take a few more years before the IoT outbreak. Development problems need to be solved for IoT to achieve scale and accelerate its evolution are high cost, immature technology, security issue, etc.
• Mobile communication networks. The ideal Metaverse requires at least 6G or even more powerful networks. 6G network communication should be fully implemented by 2030. 6G can go far beyond the powers of 5G to support microsecond or even sub-microsecond delay communication, then it will also be possible to achieve almost zero-latency shuttle interactions in the Metaverse.
• Computing power. In the past 20 years in China, the application of computing power made advances and the construction of computing centers has accelerated. With high-performance computing (HPC) focused on scientific research applications and key fields such as simulation, oil & gas, and meteorology, the use of computing power has become more diverse through deployment in intelligent applications fields like animation rendering, life sciences, aerospace, unmanned driving, the financial economy, and smart cities. Business applications have been enriched and growth in industry applications is accelerating.

3. Technologies will eventually converge to empower various application scenarios, liberate productivity, advance insights, improve decision-making, and upgrade business.

Figure: Examples of Metaverse-related technology applications

Industry

1. We view the Metaverse as a large enterprise application with four layers:

• Access layer: VR/AR, somatosensory devices, brain-computer interfaces, and other technologies that connect users to the Metaverse.
• Application layer: Generates all digital contents and applications, including environment building, industrial manufacturing applications, games, social activities, digital artworks, economic activity, and virtual offices.
• Technology platform layer: Contains technologies that support virtual community building, community rules and application development, including the generation and import of virtual infrastructures such as blocks and architectures; supporting technologies such as game engines and content distribution platforms; and AI algorithms that support intelligent applications and interaction.
• Technology infrastructure layer: The underlying technologies of the Metaverse including internet, IoT, 5G/6G, and cloud computing.

Figure: Industry Framework

2. There are four main classes of Metaverse solution providers: internet companies, hardware companies, software development companies, and new entrepreneurs. In the future Metaverse landscape, these four classes of company will be involved in stronger cooperation inside, and stronger competition outside, each class. Platform-based players (mainly large internet and technology companies), rely on their mature technologies, broad user bases, and existing application scenarios to quickly deploy Metaverse applications. Benefiting from capital advantages, they can expand their Metaverse reach through investment or M&A in areas not yet covered by their own businesses. This section analyzes these industry giants and provides an overview of their Metaverse layouts.

3. NFTs are one of the fastest-growing arenas of the Metaverse. Participants in NFT circulation are either upstream-creators, midstream-platforms, or downstream-bidders. NFTs generate value at every link, including gas fees charged by blockchains, sales and trading fees charged by platforms, and copyright payments to content creators.

Metaverse tactics for enterprises

1. The development of the Metaverse are currently in the agrarian age when primary applications are spreading rapidly and a huge amount of new enterprises and services are emerging. The Metaverse will experience a long-term development to maturity in the future with potentially significant risks related to addiction, privacy, intellectual property, economics, oligopoly, and governance.

Figure: Potential risks

2. Generally, China's attitude towards the Metaverse has been to embrace it actively but move forward cautiously: The MIIT has said it will support SMEs with digital transmission, seize the opportunity to push forward new infrastructure and develop the digital economy, and cultivate innovative SMEs specializing in the digital industry and innovative SMEs in emerging industries such as the Metaverse, blockchain, and AI. However, China’s policies on digital currencies and digital art transactions are the main reflection of its cautious attitude towards the Metaverse.

3. The Metaverse presents a huge opportunity but also major risks. Enterprises aiming to embrace the Metaverse should take the following approaches:

• Active learning. The Metaverse is essentially a new technology-driven revolution in society with deep influence. To embrace this change, enterprises should understand its full scope before seeking opportunities in the Metaverse.
• Gain first-mover advantage. The capital market, enterprises, and individuals accepted the concept of the Metaverse rapidly. It gained acceptance much faster than the internet did when it emerged. This means each window of opportunity will not be open for long and first-mover advantage is key.
• Treat the Metaverse as an advanced digital transformation. Businesses that want to empower themselves with Metaverse technologies and models can consider these part of their overall digital transformation and intelligent upgrading.
• Focus on business model innovation based on core competitiveness. Companies that want to enter the Metaverse market to develop innovative businesses should explore the Metaverse value chain to find a link in that chain that fits their existing capabilities.
• Build an ecosystem. Metaverse technology is becoming increasingly precise, and demand for application scenarios is expanding. Enterprises must build ecosystems around their core competitive advantages to provide customers with integrated application scenarios and solutions.
• Avoid risk. Act according to national polities, protect data and network security to prevent data breaches, and avoid speculation in the Metaverse to prevent economic risks.

References:

1. 于佳宁、何超《元宇宙》
2. 清华大学《元宇宙发展研究报告2.0版》
3. 北京大学&安信证券《2022年元宇宙全球年度报告》
4. 头豹研究院《2021年中国NFT平台研究报告》
5. 国海证券《元宇宙专题深度——未来的未来》
6. 《中央部委首提元宇宙，多地政府超前布局》