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The future of the internet: from the metaverse to web3

Let’s start with what really impacts decisions in the business world: the numbers. From an annual analysis called “Follow the Money,” run by DEVO Lab at SDA Bocconi, what clearly emerges is that two drivers of the new evolution of the web - the metaverse and web3 – are attracting not only media attention, but hefty financial investments as well. Around the world, companies and startups that work on metaverse technologies raked in over $430 million in investments in the final quarter of 2021 alone, compared to $11 million total in 2020. Of these 2021 funds, 83% were concentrated starting in the month of October – coinciding with Facebook’s famous rebranding as Meta. In tandem with this, an investment trend is underway in companies that specialize in web3 technologies, since the two concepts are often linked in managerial conversations. In fact, comparing all of 2021 with Q1 2022, investments exploded by 142%, topping $380 million from January to March 2022 (vs $157 million total the previous year).

But where are these investments going? Capturing investor attention in the Early Stage, Seed and ICO (Initial Coin Offering) are metaverse companies like NAVERZ, a platform that lets you design 3D worlds, populate them with virtual objects, and then launch live streams so users can interact; or Inworld AI, where users can create avatars and characters whose movements are controlled by AI; or Space, which combines digital commerce and socialization based on the immersive experiential paradigms of the metaverse. As far as web3, interest is shifting to a more infrastructural level of technologies, with companies like Mina, The Graph and QuickNode which are working on building scalable protocols and laying the groundwork for the new web.

As for the current managerial debate, an obvious problem is that the concepts of the metaverse and web3 tend to blur together; they’re used interchangeably to characterize the evolutionary stage the internet is experiencing today. But it’s a hyper-simplification to think of web3 as a new phase of the web (after the birth and growth of the internet (1980s and 1990s) and the affirmation of web 2.0 paradigms (2004 till today)); the same goes for positioning the immersive virtual worlds of the metaverse in the new context. This perspective could lead companies to overestimate opportunities, and by the same token, underestimate risks. Opening up an immersive virtual space on Roblox, the go-to platform for Generation Alpha, doesn’t necessarily mean going on web3, in the same way that buying an NFT doesn’t make us citizens of the metaverse. We need to have a better understanding of how the two technological concepts tie together, how we can exploit them, singly or jointly, and what risks are involved. To do so, we should focus on the respective definitions, and more importantly, on the potential value of each concept.

The term ‘metaverse’ was coined by Neal Stephenson in his 1992 book Snow Crash to describe a three-dimensional space where real people could move around, share experiences, and interact via personalized avatars. Today, ‘metaverse’ in a broader sense means any advanced, interactive, immersive experience, in which users can socialize, get professional training, play games, follow lessons, attend meetings, enjoy cultural experiences, and much more. Among the many technologies that make these kinds of experiences possible (for example, advanced virtual graphics, computer vision, and data analytics), virtual reality (VR) plays a leading role in enabling immersive access to these new virtual realities.

Moving on to web3, this term was coined in 2014 by Gavin Wood, co-founder of Ethereum and developer of Polkadot. Web3 aims to become a new decentralized internet thanks to the use of blockchain, the technological infrastructure underpinning Bitcoin and other cryptocurrencies. With web3, rather than in a network of centralized servers, data would be spread out evenly across the entire network. There is a very pragmatic reason behind the need to do this. Today, information exchanged on the internet is tracked by well-known techno-giants (with GAFA-Google, Apple, Facebook and Amazon leading the way), which means user privacy is extremely limited. Having a more open, democratic web is the driving force prompting many techno-utopians to turn to web3. A cyberspace that should make the internet the open environment it once was, uncontrollable and accessible to everyone, dusting off the initial promises of the 1990s, promises which were later broken in the oligarchical structure controlled by we-all-know-who.

The implications of these precursory reflections for the companies and managers who are coming to terms with these issues are myriad. In light of all this, the initial assessments of new use cases linked to these paradigms must be done by focusing on the level of decentralization of the infrastructure (web3) and the degree of immersion of the experience (metaverse). What’s more, these characteristics must be considered with an eye to the objectives companies and the needs of target users. As of today, there is no predominant approach, so it will be interesting to see which paradigms will prevail in the years to come.

But whatever happens, we can’t neglect to mention the risks that come with the benefits of an immersive experience or a decentralized infrastructure. As for the second, risks arise for the most part from the limited scalability and the absence of governance or control. For the first, we can’t forget that the level of maturity of the enabling technologies, above all VR, is still evolving and not completely up to the task of supporting the long-term vision for many use cases.

Keeping all this in mind, we should be able to avoid history repeating itself, that is, what happened in the 2000s with the Second Life experiment. After an initial moment of euphoria, the platform’s userbase shrunk drastically because the project lacked a strong purpose that could capture the real needs of users.