Citi GPS: METAVERSE AND MONEY: Decrypting the Future

Have you ever had one of those “aha” lightbulb moments when you realize your grasp of technology, or lack thereof, showed your age? One of those moments hit me like a ton of bricks this week when I was asked to create my own avatar for a presentation in the Metaverse. I did manage to create something functional and presentable. What I did not do, or should I say could not do, was operate my avatar — make it walk or interact. Given the speed at which the Metaverse is advancing, I need to learn this quickly because it was very obvious I was an un-savvy older person in the Metaverse room.

The Metaverse as a concept has been around for a few decades. However, interest in the virtual world spiked at the end of 2021 following a rise in sales of non-fungible tokens (NFTs) as well as announcements from Big Tech players indicating their interest and investment in the space.

Today, the most popular way to experience the Metaverse is via a video game played on a virtual reality (VR) headset. But in the report that follows, we discuss the possibility that the Metaverse is moving towards becoming the next iteration of the internet, or Web3. This “Open Metaverse” would be community-owned, community-governed, and a freely interoperable version that ensures privacy by design.

Users should increasingly be able to access a host of use cases, including commerce, art, media, advertising, healthcare, and social collaboration. A device-agnostic Metaverse would be accessible via personal computers, game consoles, and smartphones, resulting in a large ecosystem. Using this broad definition, the total addressable market for the Metaverse could be between $8 trillion and $13 trillion by 2030, with total Metaverse users numbering around five billion.

But getting to that market level is going to require infrastructure investment. The content streaming environment of the Metaverse will likely require a computational efficiency improvement of over 1,000x today’s levels. Investment will be needed in areas such as compute, storage, network infrastructure, consumer hardware, and game development platforms.

The definition of what counts as money in the Open Metaverse is also likely to be very different from what counts as money in the real world today. Interoperability and seamless exchange between underlying blockchain technology are critical to ensure a frictionless user experience. Different forms of cryptocurrency are expected to dominate, but given the multi-chain trend in the crypto ecosystem, cryptocurrency will likely coexist with fiat currencies, central bank digital currencies (CBDCs), and stablecoins.

Finally, if the Metaverse is indeed the new iteration of the internet, it will mostly likely attract greater scrutiny from global regulators, policymakers, and governments. Issues such as anti-money laundering rules for exchanges and wallets, the use of decentralized finance (DeFi), crypto assets, and property rights will all have to be addressed.

The opportunity for the Metaverse looks exciting, so I’m off to find a seven-year old to teach me some avatar moves.

Kathleen Boyle, CFA
Managing Editor, Citi GPS

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