Author: Nina Xiang, China Money Network
The metaverse — a concept that first appeared in Neal Stephenson’s 1992 science fiction novel Snow Crash — has been described as the Internet’s next chapter. It allows people to experience the internet in three dimensions and ultimately engage all five senses in immersive technologies. In contrast to today’s cyberspace in which the exchange of information is central, the metaverse has been referred to as the Internet of experience.
The nature of the metaverse can be better understood by examining the context of its nascent development. The saturation of the internet and mobile internet – by 2022 there will be 6.64 billion smartphone users or 84 percent of the world population – means that consumers and technology platforms need innovation to create new growth opportunities. The COVID-19 pandemic has also changed the way people work, live, entertain and move, creating long-term demand for activities performed in virtual environments. These factors allowed the inclusion of the metavers.
Opinions differ about what the metaverse is and how it should and could develop. Some digital technology specialists see the metaverse as a vast and interoperable network of real-time, three-dimensional virtual worlds experienced synchronously by everyone on Earth. This is a lofty vision with a low probability of realization in the short term. In reality, the metaverse will largely run on the existing rails of the internet with additional layers on existing structures.
While some metaverse users will interact with blockchain-based start-ups that enable the exchange of cryptocurrencies and non-fungible tokens and have greater control and ownership of their data, a greater proportion of consumers will experience immersive virtual worlds using smartphones. and computers on today’s centralized major technology platforms. Technology giants such as Meta and ByteDance are at the forefront of developing more immersive experiences through virtual reality headsets. These companies are likely to maintain their significant market share on internet platforms.
Decentralized platforms based on blockchain, or the so-called new creative economy that Web 3.0 claims to herald, will play a minor role in the metaverse. This is because their resources and capital investment are disproportionately smaller than the large tech companies that build metaverse products based on existing technology, while also experimenting with blockchain. The mass adoption of blockchain-based metaverses is not guaranteed and more time is needed to assess the chances of success to become mainstream technology.
The metaverse will face similar challenges to those already facing the Internet industry in Asia-Pacific. A major challenge is data localization regulations that require companies to store or process data domestically. China, India, Australia, Indonesia and Vietnam have implemented or plan to do so implement data localization requirements and restrictions on cross-border data transfers, a trend likely to expand as countries become more concerned about security and data sovereignty. For companies operating across Asia, this complicated regulatory landscape will incur significant compliance costs, hinder the free flow of data, slow operations across regions and hinder innovation.
For example, under China’s current data regulations users cannot freely explore virtual worlds hosted outside their country’s borders and metaverse builders are forced to create localized versions of their product in every jurisdiction. The Great Firewall of China will continue into the metaverse. The tight policies of online gaming and game consoles are an indicator of how the Chinese government is likely to extensively censor and control metaverse content. If more countries adopt China’s strict data regulations, the most likely outcome is a splinter net where products, users and data are locked into separate pools by regulatory schemes.
Collecting sensitive personal data presents another challenge for the metaverse. Virtual reality headsets equipped with sensors that track eye, hand and body movements will eventually monitor individual facial expressions and vital signs. It is increasingly likely that governments will localize data processing and storage and impose strong regulatory frameworks to address data security and privacy. This can increase the likelihood of a fragmented collection of local networks rather than a globally connected metaverse.
These challenges are part of a wider regional fragmentation along regulatory, geopolitical, ethical and cultural lines in Asia-Pacific. Technology regulation in China has: chopped off Chinese cyberspace of the rest of the world. India has forbidden more than 270 Chinese apps believed to pose a threat to national security since 2020. The interconnected tech ecosystem between the two countries no longer exists. Other countries are becoming battlegrounds for Chinese and American tech giants battling for market share and influence. Such fights make them more likely to take action to ban metaverse content, as they currently do with online gaming content.
This vortex of technical, governmental and commercial resources of internet fragmentation is likely to break the future virtual world by reducing the interoperability and interconnectedness of the metaverse. In this scenario, the metaverse is born with an inherited defect, a reflection of the increasingly divided nature of our physical world.
But steps can be taken to mitigate these challenges and maximize the positive uses of the metaverse.
First, countries must work together to develop metaverse business applications. By removing the legal and regulatory barriers to creating consumer applications, companies can foster regional collaboration. A three-dimensional metaverse could increase the ease with which professionals in different countries can collaborate on architectural design or product development projects. The quality of education and training currently delivered using traditional video conferencing could also be significantly improved in a more interactive metaverse.
Governments could also use the metaverse to address common challenges such as climate change and alternative energy development. For example, using digital twins — the virtual representation of an object or process — can more accurately predict the impacts of climate change. This provides a huge advantage to island nations dealing with its devastating effects.
Second, the region can address unequal access to the Internet and technology. Throughout Asia there are completely different access levels. By 2025, 65 percent of Asia-Pacific mobile subscribers will still be using a 4G connection, with an additional 12 percent reliant on 2G or 3G technologies. Efforts to pioneer new technologies must be balanced against caring for those left behind. If the metaverse is where people interact and do much of their lives and work, leaving much of the Asian population behind would betray the promised benefits of more intimate connections and facilitating remote work.
Finally, governments and private companies should strengthen regional cooperation in a targeted manner. As geopolitics becomes tangled up with technology it is becoming increasingly difficult to pursue pan-regional coordination in sectors as broad as the metaverse. It is more realistic for private enterprise organizations and alliances to pursue specific goals, such as hardware manufacturers setting standards for virtual and augmented reality headsets. Attempts to increase interoperability between different metaverses are less likely to yield concrete results.
The metaverse is the future of the internet, but without regional and global cooperation it will likely arrive broken and imbedded with great inequality. It faces similar challenges to those plaguing today’s internet ecosystem and could further entrench fragmentation. While the splinternet is likely to deepen in the coming decades, there are options for mitigating the potential consequences of a fractured metaverse and maximizing its positive uses. Exploring those avenues should be the goal of all stakeholders in the Asia-Pacific.
Nina Xiang is an award-winning journalist and founder of the China Money Network, a news and data platform that tracks China’s smart investment and technological innovation.
This article appeared in the most recent edition of East Asia Forum Quarterly†Asia’s digital future‘, Volume 14, No. 2.