The Metaverse is a digital world where people can meet and interact in real time, and a place where almost anything could be possible in the future. But does the Metaverse have what it takes to become the next, great technological development? The topic recently attracted a lot of attention – and could open opportunities for both companies and investors.
Read more: Metaverse: five questions about Facebook’s new virtual world
Metaverse – the virtual twin
Imagine going to the office, sitting down at your desk, having a coffee with your colleagues during the break, or sitting together in a meeting room to hold a meeting. Now imagine that you’ve done all that virtually – in real life, you’re sitting at your desk at home. Your entire workflow has taken place virtually: in the Metaverse, a virtual twin of our real world.
The possibilities offered by the Metaverse and what you can do in this virtual world are even more far-reaching. As in the real world, it should become possible to work, travel, meet friends, attend concerts, or buy houses. Unlike the situation that takes place purely virtually, however, the costs of doing so can become very real. Real estate, luxury goods and art, for example, are currently among the most expensive goods in various virtual worlds. And just as in real life, prices and sales are rising rapidly in the metaverse. According to the financial information service Bloomberg Intelligence, the metaverse business is expected to be worth around 800 billion U.S. dollars by 2024 – and the opportunities for growth have not yet been exhausted. A huge new market beckon.
But what exactly is the metaverse?
Considered the next generation of the Internet, the metaverse is a place where the physical and digital worlds come together. In this “network of the future,” the Internet as we know it today is combined with new, virtual worlds and elements from the real world in an innovative design. As a further development of social technologies, the metaverse enables digital images of people, so-called avatars, to interact with each other in a variety of situations. Whether at work, in the office, attending concerts or sporting events, or even trying on clothes, the Metaversum provides a space for endless, interconnected virtual communities. Access is enabled using virtual reality (VR) headsets, augmented reality (AR) glasses, smartphone apps or other devices. In other words, it is a virtual parallel reality in which all participants are interconnected.
Future or present? Already tangible in the field of gaming
One area in which the metaverse can already be experienced, at least in part, is the gaming industry. Games like Second Life, Roblox, Minecraft or Fortnite are strongly reminiscent of the metaverse. Players: inside create their avatars and equip them with individual accessories. Some of these games even have their own digital currency.
But the Metaverse is not just a place for fun and games. In addition to the technology industry, companies from a wide variety of sectors, such as the financial industry, the real estate sector, or even the art industry, are sensing big business. But for the Metaverse to become a reality, some technological developments are first necessary. The two-dimensional Internet must be transformed into a three-dimensional world that can be seen, heard, and felt. In short, a world that feels real must be created.
Numerous companies are investing in the metaverse
The trend received a lot of attention at the end of 2021, when Mark Zuckerberg – the founder of Facebook – renamed his company “Meta Platforms.” Not only does he want to take his company into a new era, but he also talks about the Metaverse as “a new generation of the Internet.” But it’s not just pioneer Meta that wants a share of the giga market. In the meantime, numerous tech companies have staked their claim to the new digital world. Among them, for example, is tech giant Microsoft, which recently announced the acquisition of Activision Blizzard – a game developer. But graphics card manufacturer NVIDIA, Walt Disney, Netflix, or smaller players like Roblox have also jumped on the bandwagon.
Major technological progress needed
The necessary technology is currently still in its infancy. Significant advances in computer power, artificial intelligence, Internet bandwidth and blockchain technology are needed to make the vision a reality. Artificial intelligence, for example, is critical to ensure that errors in the simulation can be detected and automatically corrected. Tremendous computing power will be needed to make the virtual world appear real and to avoid even the smallest delays in transmission. In addition, a wide variety of technological aids, such as sensors or virtual reality glasses, are indispensable to allow the virtual world to come into being at all. Finally, the virtual world requires currency and a functioning economy. This is made possible by non-exchangeable tokens, so-called NFTs (Non-Fungible Tokens). These cannot be copied and can be clearly assigned to an owner. Whether this technological progress can really be achieved is still unclear today. However, many experts agree that the Metaverse has what it takes to become the “next big thing”.
Investing in the Metaverse
Last year, Vontobel already issued a tracker certificate on a fixed metaverse basket with a term until 2023. To be able to continue to do justice to the fast-moving future trend, a product on a dynamic strategy index (Vontobel Metaverse Index) without a fixed term will now follow.
The strategy certificate on the Vontobel Metaverse Index tracks 30 companies that have an exposure to the metaverse to participate in its development. Relevant technologies such as virtual or augmented reality, digital payment, blockchain, semiconductors and cryptocurrencies are identified and included in the index. Investors can thus invest in the trend around the Metaverse with just one investment. There is a fee of 1.25 percent p.a. in the index. The index is calculated in U.S. dollars, so there is a foreign currency risk for investors. Investors in the certificate also bear the market risk of the shares contained in the index, like a direct investment, i.e., price declines, as recently in the tech sector, are possible.
- Market risk: The development of the share prices of the respective companies depends on many entrepreneurial, economic, and cyclical factors, which the investor must consider when forming his market opinion. The share price may also develop differently than expected, which may result in losses.
- Currency risks: Since the currency of the underlying index is U.S. dollars and the index contains stocks and securities listed in non-euro currencies (e.g., U.S. dollars), the value of the certificate also depends on the exchange rate between the respective foreign currency (e.g., U.S. dollars) and euros (currency of the certificate). As a result, the value of the certificate (in euros) may fluctuate significantly over the term.
- Issuer / creditworthiness risk: Investors are exposed to the risk that the issuer and guarantor may not be able to fulfill their obligations under the product and the guarantee – for example, in the event of insolvency or an official order for liquidation measures. Such an order by a resolution authority may also be issued in the run-up to insolvency proceedings in the event of a crisis of the guarantor. A total loss of the capital invested is possible. As a debt security, the product is not subject to deposit protection.
Would you like to get more information and create your metaverse project? Contact Enkronos today.