The Metaverse and The Technologies That Power It
By: Ankith Suresh
This article appeared in Qrius.
To enhance our experiences with extended reality and improve various aspects of the digital world, technological evolution is crucial. Metaverse is one such place of rapid technological development. The term has been floating around for quite a while now and can be described as a highly immersive internet where users can access Augmented Reality and Virtual Reality environments and enjoy different services through personalized avatars and other digital technologies. It is the convergence of virtual and physical reality where users can participate in nearly anything- they can vote on issues affecting the groups they are a part of and the apps they use; they can create and trade NFTs and they can even get paid to play games. Since it develops a new economy, user ownership represents a true revolution.
Global Market Trends
The idea of shared worlds fueled by virtual goods and immersive, interactive digital experiences, has captured the attention of the commercial world. Although the space is still in its infancy, the long-term consequences might not be insignificant. The technology is anticipated to open new business prospects in a variety of industries, especially for businesses that produce virtual platforms, the parts that go into them, semiconductors and chips that can render ultra-realistic images, and the software that goes with them.
This most recent market assessment estimates that the market for metaverse technology would grow to $1600 billion by 2030 from its estimated value of $40 billion in 2021.
Table 1 – Global Metaverse market growth statistics, Source: Precedence Research
The applications of such a digital phenomenon are endless. It heavily influences the gaming, entertainment and social networking industries while providing virtual venues for concerts, co-working and other forms of social interaction and business. However, it doesn’t end there. The applications extend into numerous other domains as summarized in the table below.
Table 2 – Metaverse Applications
Key Technologies powering the Metaverse
Fig. 1 – Categorization of Metaverse Technologies
The focus on metaverse development technologies today draws attention to a new internet era. It’s easy for many people to think that the top metaverse technologies are virtual and augmented reality. However, the metaverse wouldn’t be built entirely on AR/VR. Several other technologies like spatial and edge computing, 3D modeling and blockchain need to combine to provide a comprehensive immersive experience. A few of the important technologies powering the metaverse are discussed below:
The two powerful engines that are essential for enabling virtual experiences are augmented reality and virtual reality. They are crucial metaverse development tools for building immersive and fascinating three-dimensional metaverse environments. With VR and AR, physical simulations can be made possible, greatly enhancing the metaverse experience. As a result, users can experience the metaverse’s virtual worlds physically by hearing, feeling, and interacting with them. The integration of AR and VR in the metaverse could lead to significant expenditures in the development of AR and VR hardware from businesses.
Open design and transparency are two important needs in the metaverse. The decentralized and open environment needed for the metaverse is provided by the blockchain applications. Blockchain technology could enable the introduction of numerous capabilities in the metaverse. Digital ownership verification, governance, value transfer, digital collectability, interoperability, and accessibility are a few of them. Most importantly, the use of cryptocurrency in the metaverse makes it clear how significant a role blockchain plays as one of the leading technologies for metaverse development. In order to transfer value in the metaverse, cryptocurrency is essential.
iii. Networking & Computing
Networking technology uses sensors and other devices to act as a conduit between the physical world and the internet. This strengthens the link between the metaverse and physical things or gadgets in the physical world. They enable the effortless transmission and reception of information once a device is connected to the metaverse, improving how accurately the physical world is replicated there. It also gives the metaverse access to real-time information gathered from the outside world.
iv. 3D Visualization and Reconstruction
The creation of realistic spaces in the metaverse requires 3D reconstruction or spatial computing. It aids in keeping the metaverse’s photorealistic structures, objects, and physical locations consistent with the fundamental tenets of physics and science.
Although 3D reconstruction in virtual product development is a fairly well- developed idea, its method of application has changed over time. Real-world experiences are replicated virtually because of the work of businesses like real estate and e-commerce, which connect these areas into the metaverse.
Under the hood
Fig. 2 – Metaverse System Architecture
The Metaverse system architecture features the immersive virtual world layer supported by the metaverse engine layer. The supporting metaverse infrastructure ensures that the metaverse is scalable, enables universal access and is trustworthy for users.
The infrastructure layer uses Networking and Computation technologies with storage capabilities that leverage edge intelligence while the engine Layer consists of the XR(AR/VR), 3D and Blockchain technologies that are supported by AI, Data Rendering & Scalable technologies that generates, maintains, and enhances the Virtual World.
Our analysis illustrates the different technologies that would drive the Metaverse growth in the near future. A few metrics used to create this comparison include social media growth, funding analysis, the industry wide contributions of each technology etc. The research also looks to highlight the importance of new and emerging technologies such as Blockchain and Networking as key contributors on par with the more well-known AR and VR technologies.
To begin with, we created a market map of the biggest contributors to the metaverse within each technology. By segmenting the metaverse into separate technology levels and identifying the important vendors committed to making the metaverse a reality, we tried to present a framework that helps navigate this topic.
Fig. 3 – Market Map of Metaverse Technologies
Note: This market map does not claim to cover the entire market. Companies are ordered by principal use case and subcategories are not necessarily mutually exclusive. The focus of this research is on private startup companies, but to provide market context, a few carefully chosen public companies are also included
In order to analyze the impact of each technology on the metaverse we looked at startups in the U.S that contribute to metaverse growth exclusively through the technologies defined before. We shortlisted close to 15 companies for each technology, thereby creating a dataset of 61 companies in total. The metrics on which each of these companies were analyzed were chosen as follows:
- Funding: The total funding amount (in $) received by the company.
- Social Media Growth Rate: The %change in the twitter followers of a company within a 3-year period (2019-2022) to understand the consumer perception.
- Start Date: The year in which the company was founded to understand the timeline of emergence of each technology.
- Industries Impacted: A categorical variable denoting the industries the company (hence the technology) has impacted. The industries chosen include: – Entertainment and Media, Gaming and E-Sports, Fashion and Retail, FinTech, Security, Healthcare, Real Estate.
1. Start Date Analysis
The first part of the analysis included looking at the number of companies catering to a particular technology that was founded over a given time period. This helped to understand the market momentum for the technologies over the years.
Fig 4 – Bar chart showing the distribution of the founding date of metaverse companies in our dataset
From the graph it can be seen that although AR/VR companies have generally emerged earlier in the market other technologies have seen a significant rise post the 21st century with Blockchain seeing a surge in the number of companies post 2010.
2. Funding Analysis
The next part of the analysis included looking at the total Funding amount received by each company. The total funding for each company within a particular technology category was interpreted to be the total funding for that technology since only companies whose niche was that particular technology was taken.
Fig 5: Bar chart depicting the total funding amount ($M) for each of the four technologies The funding amounts seen here are only for the companies in our dataset and are not intended to be exhaustive of the space.
Plotting the total funding amount for each company within each technology bracket revealed that Blockchain technology was the most heavily funded domain. The rise of funding in Blockchain can be attributed to its numerous applications including being the framework behind the more recently popular cryptocurrency and NFT technologies.
The graph also shows that while blockchain was the most funded, the other technologies have also received a substantial amount of funding with the funding for AR/VR being the 2nd highest and the fundings for Networking and 3D Visualization right behind. This strengthens the belief that the other lesser-known technologies are also crucial for building the metaverse environment.
To put the funded amounts into perspective, the chart below shows the last ten years of fundings of global Metaverse companies along with the number of deals in each year. The total funding over the last decade amounts to around $20B, while the funded amounts in our dataset account for just under $8B thus representing about 38% of the global funded values.
Fig. 6 – Combined chart depicting capital invested and the deal count over the last decade. Source: Pitchbook
3. Social Media Analysis
The next part involved looking at the popularity of the technology in terms of its social media presence. We looked at how the twitter follower count of these companies changed over the period of 3 years (2019-2022). The % change in the follower count was used to analyze the social media growth of the company. This gave us insights in terms of how popular these companies (and hence the technology) were among the public.
Fig. 7 – Social media growth rate for each technology pre and post covid (2019-2022). The numbers shown are through the analysis of the companies in our dataset and are not indicative of the overall numbers for each technology.
From the graph we were able to see a surge in the social media follower count of Blockchain and AR/VR companies. This leads us to a few inferences:
a. The surge in blockchain and AR/VR follower growth rate can be explained by the enormous traction and popularity it has received from the consumers. This can also be linked to the start date analysis where we were seeing a higher number of blockchain companies emerge post 2015.
b. The slow but steady growth rates for the Networking and 3D visualization companies could be explained by the fact that since these are more technical domains their explainability is low which tends to reduce their popularity among the general public.
4. Industry Impact Analysis
We then looked at the number of industries influenced by each technology. Here the categorization was done such that each technology can influence multiple industries. Our main aim while doing this was to understand which technology is having the most diverse use cases and to also find out what these use cases were.
The industry impact analysis for each of the technologies reveals that Blockchain and AR/VR have their presence in all of the technologies due to their ability to cater to diverse use cases. We can also see that Entertainment & Media, Gaming and Esports and Fashion & Retail were the most widely popular use cases of the metaverse technologies.
Fig. 8 – Industries catered to by the different Metaverse technologies (through the companies in our dataset)
The bottom line
The metaverse’s components are still evolving at a breakneck pace. Understanding the technologies that power this digital space becomes essential to reap the benefits. Through our research we have highlighted the four main technologies that make up the metaverse. We have shown how these technologies interact with each other to create the different layers of the metaverse and how these different layers contribute to the various products and services that are used by the consumer.
Our analysis into each technology’s impact revealed that established technologies like AR/VR continue to significantly impact the metaverse environment while the internet revolution in the last decade has allowed newer technologies like Blockchain to take center stage. The funding and social media analysis also reinforces that Blockchain has become a technology followed closely by both investors and consumers alike. We have also found out that technologies such as 3D Modeling and Networking – although lesser known to the general public – show a steady growth rate and are becoming important and necessary contributors to build and develop this highly immersive digital ecosystem.
- https://businesswire.com/news/home/20220511005493/en/Metaverse- Technology-Market-Outlook—A-224-Billion-Opportunity-by-2030— ResearchAndMarkets.com#:~:text=Technologies%20contributing%20to%20the% 20development,(AI)%20and%20spatial%20technologies.
- https://www.uschamber.com/on-demand/technology/the-metaverse-what-it-is- and-how-businesses-can-leverage-it
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