Metaverse is one of those technologies that, like cryptocurrencies, has turned the world upside down. In the metaverse, players can work simultaneously in different markets in multitasking mode at any time and anywhere. Thus, the meta-market combines consumer risks typical of the traditional market (including fraud, manipulation and lack of transparency) with new regulatory gaps in terms of data protection, competition rules and legislation.
Origins of the metaverse
The metaverse is the last step in the digitization of social activity, especially economic activity. It relies on the Internet of Things (IoT) that connects an increasing number of social elements (objects, processes and people). IoT is based on the ubiquitous digital communication between people, which is provided by devices such as smartphones. The widespread use of the Internet, following the advent of the World Wide Web, provided a high level of interconnectedness.
Current challenges associated with the metaverse include improving usability, reducing hardware costs, and mastering complex software and data processing capabilities. It’s only a matter of time before the evolving technologies underlying the metaverse support its mass adoption.
There is no generally accepted definition of a metaverse. Below are some convincing definitions proposed in the literature. The metaverse is:
- “An alternative economy or world in which users can interact with other users in a permanent, computer-generated environment… accessible through technological devices.”
- “An interconnected, experimental, three-dimensional virtual world where people can communicate in real time anywhere to form a permanent, user-driven internet economy that spans the digital and physical worlds”.
- “Expanding the digital space where users can interact in real time and get an experience similar to that in the real world”
- “An online environment where people can interact in real time in the form of avatars… meet, buy and sell digital art or real estate, attend live concerts”.
- “An advanced version of the Internet… applying real world features to the digital world and digital features to the real world… a fully functioning economy on physical and digital platforms”.
Advantages of virtual worlds
The metaverse expands social activity into a virtual sphere in which there is no spatial dimension and associated conditions. Today, as it says Coinmarketrate.com to enter markets, playgrounds, concert halls and events, you need to move. We face obvious limitations when moving from one store to another, from one concert or event to another. Such restrictions include, for example, opening hours of a particular type of activity and various circumstances that may arise on the way to the place you are interested in (for example, bad weather and traffic jams). We can’t move from one place to another in a matter of seconds and we can’t be active in different places at the same time (multitasking).
In the metaverse, we can visit and move between shops, games, concerts and events at any time, without restrictions and potentially unexpected events that characterize the spatial dimension. We can move from one place to another in a matter of seconds or be active in many places at the same time (multitasking). Since the metaverse is completely digital, it can be inhabited by controlled AI characters with whom we can interact on an equal footing, for example, employees, colleagues, associates, participants, etc.
Economy
From the point of view of economic operations, the metaverse is no different from the traditional market. Users pay for their consumption and market activity in the metaverse (for example, for events, transactions in virtual stores and games) the same as in the traditional market – regardless of the method of monetization of transactions (fiat money or cryptocurrencies). Although the experience is virtual, investment and consumption are real.
As mentioned earlier, research reports from leading organizations such as Goldman Sachs, Morgan Stanley and Bank of America predict that the meta-market could grow to $8 trillion by 2025. However, the lack of spatial dimension, round-the-clock availability, the fundamental lack of regulation and the digital nature of the metaverse, which allows interaction between AI-controlled characters and people or avatars controlled by people, determine the key economic differences between the Metaverse market and the traditional market.
Regulatory and legal issues
The metaverse market faces gaps in data protection, competition rules and enforcement capabilities, which exposes consumers to additional risks compared to the traditional market. In the metaverse, consumers tend to be exposed to the same risks as in the traditional market.
Typical risks include security issues and fraud, manipulation, legitimacy, transparency and authenticity of information. Therefore, the metaverse should be subject to the same rules that apply to economic activity in the traditional market.
The fully digital nature, lack of spatial dimension and round-the-clock accessibility characteristic of the metaverse cause a new need for regulation.
The digital nature of the metaverse implies far-reaching, comprehensive capabilities for data collection, storage and analysis. This phenomenon leads to a new dimension and deepening of the typical data processing problems faced in the traditional market. In the metaverse, consumers are exposed to the collection of unprecedented amounts and types of personal data (movements, actions, concentration, duration, facial expression, tone of voice, vital signs, etc.) that can be analyzed by AI and used to influence behavior (for example, by AI-controlled characters).
Data protection rules and their implementation in the metaverse pose new challenges and require adjustments, including to reduce the risk of market manipulation.
The lack of spatial dimension and unlimited accessibility characteristic of the metaverse rethink competition and challenge the traditional notion of jurisdiction. Consumers in the metaverse can multitask in different virtual locations as multiple companies can communicate and collaborate with each other. Competition regulation and its implementation will require various adjustments to solve new problems. Metaverse is a potentially universal dimension and requires globally defined rules. Although the rules can be adjusted to take into account the peculiarities of geographical jurisdictions, their application should be global.
The growth of the metaverse is driven by technology and, as the history of digitalization has shown, in a sense unstoppable. Digitization carries potential benefits for society. However, the increasing introduction of digitalization will expose the population to identified regulatory gaps that need to be addressed immediately to reduce risks to consumers, ensure fair competition and effective law enforcement.
Solving these problems is crucial to creating a sustainable and universal new market. Regulators should learn from the regulatory challenges that have recently emerged in digital innovations, such as cryptocurrencies and decentralized applications, and address regulatory gaps specific to the metaverse. At the same time, regulators should be aware of the importance of managing expectations and ensuring the stability of the digitalization process.
Conclusion
Technological progress has brought significant benefits to society and has proved unstoppable. Digitalization is no exception. Metaverse is the last step in the process of digitalization of social activities, especially economic ones. It expands the traditional market and includes an environment characterized by the absence of a spatial dimension, unlimited accessibility and digital functions that allow interaction between characters controlled by artificial intelligence and people or avatars controlled by people. However, transactions are not something virtual, and it is estimated that by 2025 the value of this sector will reach $8 trillion.
The digital layer on top of the traditional market creates new risks. It exposes subjects to the collection, storage, analysis, and use of data on an unprecedented scale and scope to potentially influence behavior. The lack of spatial dimension and unlimited accessibility also challenge the rules of competition and the geographical concept of jurisdiction. Regulators should manage these risks wisely and adopt rules that contribute to the sustainable development of the metaverse, increasing its value. And these are threats only to the area that we are more or less aware of.