Virtual Reality: Gold Rush Atmosphere in the Metaverse

Status: 03/03/2022 3:39 PM

They are called “The Sandbox” or “Decentraland”: investors are now moving millions in virtual worlds. Above all, “Virtual Earth” has become the subject of speculation. Big companies want to get involved.

Written by Christian Kretschmer, SWR

The demo tour of “Decentraland” is not really convincing: you can visit a casino, fly a kite or stand at the table in a virtual bar with your avatar. It’s beautiful, but it feels more like a bug-prone “open world game” than a leading virtual world. However, if you want, you can invest huge sums in Decentraland thanks to cryptocurrencies. This is what a lot of people want now. What happens there?

‘Huge speculative bubble’

Online worlds such as “Decentraland” or “Sandbox” are now marketed as “metaverses”. These are virtual worlds built on the real world in the broad sense – only, promise, more alive, more exciting and limitless. At least ever since Facebook changed its name to “Meta” and wanted to change from a social network to a virtual reality provider in the future, there’s been a buzz about parallel worlds.

Some examples: An investor has purchased virtual land in the “Fashion District” of Decentraland for the equivalent of $2.4 million. Game developer Atari has sold a property in “The Sandbox” for more than four million dollars. And for a package next to the virtual mansion of rapper Snoop Dogg, you have to pay half a million dollars. “A huge speculative bubble,” says Tilman Baumgartel, a media scientist at Mainz University of Applied Sciences. “You can see that just by looking at the prices going through the roof.”

You pay with crypto money: at the virtual casino “Decentraland”.

Photo: SWR

Artists and companies are giving more impetus to this trend

This hype is also fueled by artists who give virtual concerts in the Metaverse. And last but not least, by established companies that want to experiment with new business models. Nike recently acquired a virtual athletic shoe maker. Adidas is now participating, too. “Especially from the point of view of consumer goods brands, it makes sense to try them there,” says Philip Sandner, an economist at the Frankfurt School of Finance and Management. A young target group is already withdrawing from social media, but it is easily accessible across online worlds. “I used to collect Panini pictures,” Sandner says. “It’s very likely that my six-year-old daughter will spend her money on digital status tokens in the future.”

digital arms trade

“In the gaming sector, digital shields or weapons have always been traded for a lot of money,” says media scientist Baumgartel. Network culture is now an investor’s concern. The technical basis for this new boom in virtual goods is many cryptocurrencies. Properties are deposited in the metaverse as NFTs, the non-fungible tokens. It cannot be exchanged simply like cash, but rather corresponds to digital certificates of ownership. In the case of hypothetical properties, one can imagine an NFT as an entry in the Land Registry.

NFTs have been making headlines lately, especially in the art market. Digital artwork, as well as memes or viral videos, are auctioned for millions. A hoax in the truest sense of the word, in which an attempt is made to solve a very specific “problem” of digital works: the possibility of copying them without losing value. Because unlike physical works of art, there is no original work. In the end, NFTs artificially create exclusivity by making the buyer the owner of a digital work that anyone, in principle, can download. “The exclusion mechanisms of the traditional market are withdrawn in the virtual market,” Baumgartel says. The “artificial imperfection” also applies to virtual Earth, which can theoretically be expanded infinitely using computing power.

There is still a shortage of suitable hardware

But there is also a risk for investors: “You don’t know which Metaversum platform will prevail and thus crowd out the others,” says economist Sandner. “Technically, this is all very interesting, but should you invest? I’m skeptical.” However, there are useful applications: virtual meetings or virtual tourism can gain importance in a few years. However, Sandner says suitable devices, such as virtual reality glasses, are still not popular. “Obviously we are still at the beginning of development.”

Media world Baumgartel reminisces about the early twenty-first century. At that time, “Second Life” began to turn into a parallel virtual world. “As far as I know, there’s not much more going on,” Baumgartel jokes. However, in the financial sector, one sees incredible potential, as a recently published estimate by JP Morgan shows: According to this, more than a trillion dollars can be transferred into the metaverse in the coming years. So the metaverse gold rush is just getting started.

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