Metaverse? It’s like the internet, but…

Earlier this year, management consultants McKinsey produced a report stating that the metaverse has the potential to be worth $5 trillion by 2030 and is simply too big for companies. Bloomberg Intelligence recently said that the metaverse is the next big tech platform, attracting online game makers, social networks and other technology leaders to capture a piece of what they claim is already an $800 billion market opportunity. They say that the metaverse is the next evolution of the internet and social networks.

In other words, the “metaverse” is big business, and the fintech world needs to formulate its own strategies to bring domestic finance into virtual worlds.

But why exactly?

Deloitte say that “In the simplest terms, the metaverse is the internet but in 3D” but I don’t think that explains why the Metaverse is so important and why it will change the world of financial services. If Metaverse is just going to be something like Fortnite, but with players selling insurance to each other, it doesn’t seem like much fun. There must be more.

I’d like to offer a different story to explain why everyone should develop a Metaverse strategy: “In the simplest terms, the metaverse is the internet, but with security.”

Definitions of the metaverse can range from the most nebulous notions of online interaction to the more specific, functional uses of immersive experiences, and while they can vary quite wildly, what I see is missing is a common shared narrative that can help inform strategies. (and some short-term tactics) for new products and services that will form the basis of new business in this new environment.

But how should we shape this story? It seems to me that security is central to any useful story about a new virtual space for business to move into. As is often said about the Internet, there is no end to the patchwork of imperfect (and in many ways dangerous) lack of security infrastructure and the resulting lack of what we might think of as a layer of identity and value. Solving the main problem: the internet is not secure.

(And I don’t mean it’s dangerous because you get emails about penis extensions and ransomware links masquerading as information from “Microsoft Support Department”. It’s safe because no one knows what’s real anymore, coordinated vague behavior is the norm and there are toasters, cars, and remote pipeline monitoring programs on the network, all of which are hackable.)

It’s the Economy, Stupid

Deutsche Bank October report This topic talks about multiple metaverse ecosystems that enable digital identity and asset ownership to interoperate through standard solutions. I wholeheartedly agree, and I also agree with their view that this Metaverse could lead to the next e-commerce revolution and that “financial services firms have a significant role to play” in the evolution towards a post-industrial economy.

(By new convention, I will henceforth capitalize Metaverse to refer to a superset of metaverses that will serve many different global communities.)

This e-commerce revolution will happen because standard solutions for trading assets between digital identities will provide a layer of security that is missing from the Internet, because (as I wrote here on Forbes last month) security is an integral part of protection. that’s what the metaverse actually is.

Whether it’s web3 or web5 providing security, verifiable credentials or ghost tokens is a debate best left for another day, but the heart of the story is that Metaverse will have a security infrastructure in place from the start, and that’s why we both know and love Metaverse. It is different from the Internet, but also more attractive than the Internet to many new stakeholders in the economy.

This is not an ideological issue, it is simply that safe transactions are cheaper transactions and financial services will inevitably follow these transactions.

Chances are, like my good friend Lisa Moyle wrote earlier this year, go beyond simply offering traditional services in a new location. To put it bluntly, token trading is already expanding with virtual goods in the art and fashion sectors, which have seen strong investment and the transactions underlying these purchases potentially benefit from the involvement of players in the financial industry.

If Metaverse is indeed an environment with a security platform embedded, and it is a security platform that can support asset exchange mechanisms and determine the ownership of these assets, then we can classify it as a digital value platform and a digital identity. if you use the platform, then it is not an unreasonable prediction that individuals, organizations and businesses will continue to move their operations out of the perils of web1 and the restrictive walled gardens of web2 to take advantage of this fundamental property: security.

Personality And Institutions

It’s not out of place to be skeptical of the Metaverse. Jeffrey Funk, Lee Vinsel, and Patrick McConnell write in some detail about what they call the Metaverse “bubble” and continue to examine the economic effects of bubbles by comparing this tech bubble to past ones. The biggest difference, they say, is that some commodities came out of the dot-com bubble, but “probably not much from the current bubble.” I don’t believe this argument because the goods here are not the Metaverse itself (but it can be interesting and fun) but it will be a connection for a safer commercial connection and better, cheaper and faster financial services.

Bumper sticker version? Tokens are not tulips!

As I’ve written before, I think we can already see a digital value layer emerging through tokens and decentralized finance technologies with mechanisms for exchanging assets without clearing and settlement. But for financial services, we need identity, and it’s not so clear to me how the digital identity layer will come together, although I’m optimistic that the appropriate technologies will soon be deployed in institutional settings that will accelerate the transition of business to the new space.

I say institutional because I’m not sure most consumers will want to manage their digital identity themselves and would rather have regulated entities do it for them. So I think JP Morgan’s digital wallet, which would allow people to choose which credentials they share with their colleagues, to pick just one example, could be very important.

(They highlight five ways digital wallets are changing customer expectations: “Martini” use, personalization, loyalty, integrated banking, and invisible payments. Of course I agree, but I think over time the digital identity components will become more important than the payment components.)

By bringing together new virtual worlds with ownable digital objects, we can create a spectrum of metaverses with specific and desired properties. These worlds will connect people just like the Internet did, but this time securely.

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