The Current State and Future Potential of the Metaverse

What Is the Metaverse?

The metaverse is a virtual environment, distinct from the real world, where users can engage in a wide range of activities and experiences. Within this space, users operate avatars to interact with others and enjoy everything from gaming and shopping to business meetings.

By leveraging advanced technologies such as VR (Virtual Reality) and AR (Augmented Reality), the metaverse offers highly immersive experiences. For example, using a VR headset enables users to feel as if they're physically present in a virtual environment. AR technology overlays digital information onto the real world, creating entirely new kinds of experiences.

The metaverse has broad applications—not just in gaming and entertainment, but also in business meetings, education, healthcare, real estate, and shopping. The rise of remote work has increased interest in virtual offices and meeting rooms in the business sector. In education, the metaverse allows for learning experiences that transcend geography and enables safe simulation of hazardous experiments.

Experts expect the metaverse to continue evolving and significantly impact daily life and society. It is increasingly referred to as the next generation of the internet.

Current State of the Metaverse and Its Background

The metaverse goes beyond gaming and entertainment, with anticipated applications in education and business—hence its reputation as the "next generation of the internet." In recent years, it has attracted attention worldwide.

The past several years have been pivotal for metaverse development, with numerous companies launching metaverse-related projects and partnerships. Notable examples include:

• Facebook (now Meta)

Facebook rebranded as Meta and announced a strategic focus on building the metaverse. Through VR devices like Oculus Quest and collaboration tools such as Horizon Workrooms, Meta aims to become a leading metaverse platform. The company has invested billions of dollars to accelerate metaverse technology development.

• Microsoft

Microsoft is delivering enterprise metaverse solutions using technologies like HoloLens and Azure. The company is integrating communication tools such as Microsoft Teams into the metaverse and driving adoption for business use cases.

• ROBLOX

ROBLOX is not only a top gaming platform for children but is also considered one of the closest real-world examples of a metaverse project. It offers a virtual environment for users to freely create and share games and content. At its peak, the platform surpassed 200 million monthly active users, reflecting remarkable growth.

Recently, coverage and buzz surrounding the metaverse have slowed, and both the cryptocurrency and metaverse industries have entered a downturn. Key drivers of this cooling trend include:

• Major Cryptocurrency Exchange Bankruptcy

A major cryptocurrency exchange and hedge fund were exposed for manipulating the price of their own tokens and misusing customer assets, resulting in bankruptcy proceedings. This event dealt a major blow to the crypto industry, leading affiliated venture capital firms to file for bankruptcy and causing investor trust and capital to evaporate almost overnight.

• LUNA Crash

The collapse of Terra and LUNA cryptocurrencies triggered a chain of events. Terra, an algorithmic stablecoin, and LUNA, its supporting token, both plummeted in value when Terra lost its dollar peg, rendering LUNA nearly worthless. This crisis severely undermined trust in the crypto sector and led to widespread investor losses.

As a result, the metaverse market has shifted from its previous boom to a period of stagnation, with industry-wide slowdown. However, this phase is widely seen as a temporary correction, and technology development continues steadily.

Why the Metaverse Market Still Has Strong Growth Potential

There are three main reasons why the metaverse market is expected to grow significantly in the years ahead:

• Technological advances that enable seamless metaverse experiences
• The rise of Generation Z, the internet-native demographic
• An increasing number of large corporations targeting the metaverse economy

Reason 1: Technological Advances for Seamless Metaverse Experiences

For the metaverse market to expand, it must offer virtual spaces that users can enjoy without friction. Current limitations include VR motion sickness, hardware barriers, network latency, and security concerns.

VR motion sickness is a common user complaint and prevents long sessions. High-end VR headsets remain expensive, creating a barrier for everyday consumers. The need for real-time processing of massive data sets also means that network speed and processing power are ongoing challenges.

Despite these hurdles, metaverse technologies are advancing rapidly, and many challenges are being addressed. 5G and next-generation networks now enable low-latency, high-speed data transfer, making virtual experiences smoother. AI development has improved automatic translation, content generation, and user behavior prediction, all enhancing user comfort in the metaverse.

On the hardware side, VR headsets are becoming lighter and more affordable, making the metaverse more accessible to a broader audience. As technology matures, participation will increase and the overall market will expand.

Reason 2: The Rise of Generation Z, the Internet-Native Demographic

The emergence of Generation Z (born after 1997) as a central consumer and workforce group is a key driver for metaverse growth. Generation Z grew up with the internet and smartphones and demonstrates strong interest and understanding of the metaverse.

Surveys routinely show Generation Z as the group most interested in participating in the metaverse. They're comfortable with digital communication and entertainment, and they have little resistance to virtual activities.

Platforms like Fortnite and Roblox are already establishing thriving "virtual economies" among younger users. These platforms let users buy and sell virtual items or custom content for real income. Some creators even earn their livelihoods within the metaverse economy.

Generation Z views the metaverse as much more than a gaming platform—it’s a place for building communities, expressing creativity, and conducting economic activity. As they become the dominant consumer and labor force, the boundary between physical and virtual worlds will blur, driving up demand and participation. This generational shift will be essential to the metaverse market’s continued growth.

Reason 3: More Large Corporations Are Targeting the Metaverse Economy

A growing focus on the metaverse economy—centered on cryptocurrencies and NFTs—by major corporations is another catalyst for future market growth.

Facebook’s rebranding as "Meta" signaled a major commitment to the metaverse, including a workforce of tens of thousands for metaverse technology development. Microsoft is building "Mesh," a platform for meetings and networking in the metaverse, targeting enterprise use cases.

Beyond leading tech firms, companies from fashion, automotive, and entertainment industries are entering the metaverse. Top fashion brands are staging virtual runway shows and selling digital outfits. Automakers are opening virtual showrooms for test drives within the metaverse.

Cryptocurrencies and NFTs—blockchain-based digital assets—are deeply integrated into metaverse activity. NFTs verify ownership of land, items, and art, forming the foundation of the metaverse economy. Cryptocurrencies enable cross-border payments and seamless virtual commerce.

Growth in the cryptocurrency and NFT markets is likely to benefit the metaverse sector overall. The increasing involvement of large enterprises and the momentum of crypto and NFT markets could fuel further metaverse market expansion.

Three Major Metaverse Projects

Below, we highlight three leading metaverse projects and explain their features and appeal in detail.

• Decentraland
• The Sandbox
• Axie Infinity

Major Metaverse Project 1: Decentraland

Decentraland is a decentralized metaverse project built on the Ethereum blockchain, founded by Ariel Meilich and Esteban Ordano. Its native token, MANA, is used for purchasing land and trading items within the platform.

Decentraland’s standout feature is that users can buy virtual parcels (LAND) and freely build structures or content on them. Each parcel is recorded as an NFT, ensuring true ownership. Users create galleries, games, shops, and more on their land.

The platform is governed by a DAO (Decentralized Autonomous Organization), allowing token holders to participate in shaping platform policies. This supports community-driven development.

Major Metaverse Project 2: The Sandbox

The Sandbox is a metaverse project on Ethereum where users can create, own, and monetize game content. Like Decentraland, The Sandbox has its own token, SAND, which serves as the platform’s primary transaction currency.

A key feature of The Sandbox is the VoxEdit tool, which lets anyone easily create 3D assets. These assets can be sold as NFTs, so creators can earn income from their work. The platform supports both "Play to Earn" and "Create to Earn" models.

The Sandbox has established partnerships with top brands, artists, and creators—including Snoop Dogg, BAYC (Bored Ape Yacht Club), Ubisoft, and major Japanese companies. These partnerships boost the platform’s visibility and credibility.

Major Metaverse Project 3: Axie Infinity

Axie Infinity draws inspiration from popular Japanese IPs like Pokémon and Tamagotchi. Built on Ethereum, Axie Infinity features characters (Axies), land, and other game assets as NFTs with tangible value.

By holding the AXS token, players can access benefits such as breeding Axies, joining battles, and purchasing land. Token holders also vote on platform governance and the game’s future direction.

Axie Infinity pioneered the "Play to Earn" model, and in some developing countries, players have made a living by playing. Users earn tokens by winning battles or breeding and selling Axies.

The game emphasizes strategic team building and skill combinations over luck. Its breeding system allows for the creation of rare Axies with unique genetics, adding a collectible aspect to gameplay.

FAQ

What Is the Metaverse? Is There a Precise Definition?

The metaverse is a virtual world where users interact as avatars. Users participate in social activities, entertainment, and commerce as digital personas. While there is no universally accepted definition yet, integration with blockchain technology enables a more transparent and decentralized metaverse environment.

What Is the Current Stage of Metaverse Development?

The metaverse has moved past its initial turbulence and is now in a period of robust growth. Corporate participation is rising, technology is evolving rapidly, and practical applications and user numbers continue to grow.

What Are the Main Use Cases for the Metaverse?

Key metaverse use cases include virtual offices, online education, employee training, entertainment, and gaming. Adoption is expanding rapidly in business, including medical simulations, manufacturing design support, and virtual showrooms.

What Technologies Are Essential for the Metaverse?

Critical technologies for the metaverse include VR/AR, blockchain, high-speed internet (5G), edge computing, game engines like Unity and Unreal Engine, NFT tech, and XR interfaces. Integrating the entire technology stack is crucial.

What Are the Investment and Corporate Entry Trends in the Metaverse?

The metaverse market is expanding rapidly, projected to reach 1.87 trillion yen by 2028. Corporate entry is accelerating in education, healthcare, and tourism, and local governments are adopting metaverse solutions. Advances in AI and XR devices are set to further drive market growth.

What Are the Safety and Privacy Issues in the Metaverse?

Risks in the metaverse include personal data leaks, hacking, and fraud. Blockchain and encryption technologies strengthen data protection and transparency, enhancing user privacy and asset security.

How Does the Metaverse Differ from Gaming and VR?

The metaverse covers ongoing social activity in virtual worlds; games are goal-oriented entertainment, and VR is an immersive technology. The metaverse is a comprehensive digital ecosystem that includes VR, while games are one type of experience within it.

How Does the Metaverse Economy Work?

The metaverse economy is powered by multiple revenue streams: creator rewards, services, events, and investment opportunities. Independent tokens and value exchange systems support a self-contained economic zone, with governance and ownership rights underpinning sustainable growth.

What Are the Metaverse’s Future Prospects and Market Size Forecasts?

The metaverse market is forecast to grow from $74.4 billion in 2024 to $507.8 billion by 2030. E-commerce and entertainment will be the main growth drivers, with significant long-term potential expected.

What Are the Challenges and Issues Facing the Metaverse?

The metaverse’s main challenges are privacy protection, security, copyright, personal information management, and ethical responsibility. Addressing these issues will require regulatory frameworks, clear guidelines, and improved digital literacy.