Virtual Reality: Atmosphere of the Gold Rush in the Metaverse

Status: 03/03/2022 3:39 p.m.

They are called “The Sandbox” or “Decentraland”: investors are now moving millions into virtual worlds. Above all, the “virtual earth” becomes an object of speculation. And big companies want to get involved.

By Christian Kretschmer, SWR

A demo tour of “Decentraland” isn’t exactly convincing: you can visit a casino, fly on a kite, or stand at the counter of a virtual bar with your avatar. That’s fine, but it feels more like an error-prone “open world game” than a groundbreaking virtual world. However, if you wish, you can invest colossal sums in Decentraland thanks to cryptocurrencies. And that’s what a lot of people want right now. What is happening here?

“A huge speculative bubble”

Online worlds like “Decentraland” or “The Sandbox” are now marketed as “metaverses”. They are virtual worlds that draw inspiration from the real world in the broadest sense – alone, so the promise, more colorful, more exciting and limitless. At least since Facebook changed its name to “Meta” and wants to go from a social network to a virtual reality provider, there has been a hype around parallel worlds.

A few examples: An investor purchased virtual land in Decentraland’s Fashion District for the equivalent of US$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 rapper Snoop Dogg’s virtual mansion, you have to pay half a million dollars. “A huge speculative bubble,” says Tilman Baumgärtel, media scientist at Mainz University of Applied Sciences. “You can see it just by watching prices skyrocket.”

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

Image: SWR

Artists and businesses are giving the trend new momentum

The hype is also fueled by artists giving virtual concerts in the Metaverse. And finally, by established companies that want to test new business models. Nike recently acquired a virtual sneaker manufacturer. Adidas is now also involved. “Especially from the perspective of consumer goods brands, it makes sense to try it there,” says Philipp Sandner, an economist at the Frankfurt School of Finance & Management. A young target group is already withdrawing from social media, but can easily be reached via online worlds. A trend that is likely to continue, says Sandner: “I used to collect Panini photos. It’s entirely possible that my six-year-old daughter will spend her money on digital status symbols in the future.”

Digital Weapons Company

“In the gaming industry, digital armor or weapons have long been traded for a lot of money,” says media scientist Baumgärtel. The network culture is now becoming an interest for investors. The technical basis of this new virtual goods boom are various cryptocurrencies. Possessions are deposited into the metaverse as so-called NFTs, non-fungible tokens. These cannot simply be exchanged like cash, but rather correspond to digital certificates of ownership. In the case of virtual properties, one can imagine an NFT as an entry in the land register.

NFTs have recently hit the headlines, especially on the art market. Digital works of art, but also memes or viral videos, are sold at auction for millions. A trick in the literal sense of the term, in which we try to solve a “problem” inherent in digital works: namely that they can be copied without loss of value. Because unlike physical works of art, there is no original work. Ultimately, NFTs artificially create exclusivity by making a buyer the owner of a digital work that, in principle, anyone can download. “The exclusion mechanisms of the conventional market are removed from the virtual market,” explains Baumgärtel. The “artificial scarcity” also applies to virtual lands, which can theoretically be extended infinitely thanks to computing power.

There is still a lack of suitable devices

But there is also a danger for investors: “You just don’t know which Metaversum platform will prevail and thus crowd out the others,” says economist Sandner. “Technically, everything is interesting, but should we invest? I am skeptical.” Nevertheless, there are useful applications: virtual meetings or virtual tourism could gain importance in a few years. However, Sandner says good end devices, such as virtual reality glasses, are still not widespread. “It is clear that we are still at the very beginning of development.”

Media scientist Baumgärtel brings back memories of the early 2000s. At that time, “Second Life” began to become a virtual parallel world. “As far as I know, not much is happening anymore,” jokes Baumgärtel. In the financial sector, however, one sees incredible potential, as a recently published estimate by JP Morgan bank clearly shows: According to this, more than a trillion dollars could be returned to the metaverse in the years to come. The gold rush in the metaverse has only just begun.

Leave a Comment