The hotly debated Metaverse, the overlooked current situation, great opportunities and concerns

This article is sourced from Catcher's Note, edited by Li Miaomiao.

The term "Metaverse" first appeared in Neal Stephenson's 1992 science fiction novel "Snow Crash." With Roblox going public this year and Epic Games claiming to have secured $1 billion in investment to realize the Metaverse, these events have ignited excitement in overseas capital markets and have also influenced the domestic market.

As with various concepts that suddenly become popular, there is too much noise, and we need to think deeply about its essence. So what is the essence of the Metaverse? What will be the evolution and development path of the Metaverse? What are the blockbuster applications of the Metaverse?

Recently, Catcher's Note & Chain Catcher interviewed six investors and entrepreneurs in the Metaverse space, including Wang Tianfan, Managing Director of BAI; Zhou Wei, Founding Managing Partner of Genesis Partners; Hu Sen, CEO of MetaApp; Chen Yuheng, CEO of rct AI; Vincent, Partner at Cloud Nine Capital; and Yuan Yu, Partner at Cloud Nine Capital. They provided some insights and thoughts on the development of the Metaverse.

1. Why is the Metaverse being widely discussed now?

Wang Tianfan, Managing Director of BAI: Because the current internet user engagement time is nearly 8 hours, people are beginning to yearn for longer durations and deeper interactions. Therefore, the Metaverse is an abstract description of how users will exist in a heavily internet-based environment in the future.

Zhou Wei, Founding Managing Partner of Genesis Partners: For those who enjoy science fiction, the Metaverse has existed for a long time. The development and maturity of technology have made its creation easier to achieve. Whether from a technological perspective or a user perspective, entrepreneurs have been trying. The reason for previous failures was due to various issues; now we have naturally reached the tipping point of quantitative change to qualitative change.

Furthermore, the increase in online time has intensified users' demand for an identity system, and with the popularity of multiplayer online games, users are increasingly fatigued by pre-set content. Additionally, for nearly a decade, most games have been rehashing old ideas in new packaging, and users are eager for a more immersive environment; their understanding and needs of the world have reached a new high.

Hu Sen, CEO of MetaApp: Frankly, I feel that while the term Metaverse has existed for a long time, its unfamiliarity is comparable to newly emerged terms. Now, there are three main reasons for the discussion: the primary driving factor is Roblox going public; secondly, we are essentially entering a digital survival society, with users spending more time online than ever; thirdly, there have been relatively few large-scale independent To C products that have emerged in the past three years, and both capital and talent are searching for potential growth points.

Chen Yuheng, CEO of rct AI: The essence of the Metaverse breaking the dimensional wall is that this time the node is not driven by a single industry but by multiple industry trends colliding simultaneously, forming a "singularity" effect.

First, the gaming industry has been in a rapid growth phase in recent years due to the popularity of game engines and mobile games. The outbreak of the pandemic acted as a catalyst, directly driving the frenzy in the gaming capital market. The maturity and popularity of the gaming industry are the fundamental basis for this wave of Metaverse singularity explosion.

Secondly, online social interactions have also experienced unprecedented growth due to the pandemic. The demand for social interaction brought about by remote work and the inability to gather offline can only be met through real-time online socializing.

Moreover, the AI industry experienced what may be seen as the most significant turning point in 2020. The bold investments and innovative breakthroughs by OpenAI and Google in large models have given the industry new hope in achieving AGI, and domestic giants have also achieved good results in their attempts.

Therefore, AI-generated content, as an important technology for realizing the "self-growth" characteristic in the Metaverse, has illuminated the direction of applications and implementations behind it. What remains is just the engineering challenges and investments in data and computing power.

In addition, the blockchain industry welcomed a new wave of industry enthusiasm for NFTs in 2020, which are closely related to digital assets and economic systems in the Metaverse. Thus, for the first time in history, the internet industry and the crypto industry have both reached a peak simultaneously.

Finally, the turning point of the VR industry in 2020 has also supported this singular explosion of the Metaverse. For example, the unexpectedly high shipment volume and user base of Oculus Quest 2.

Overall, when so many industries encounter a significant historical turning point simultaneously, it is not surprising to see the global capital market's frenzy for the Metaverse.

Vincent, Partner at Cloud Nine Capital:

There are three factors: First, the development of infrastructure technologies, such as VR/AI/cloud gaming/blockchain; second, the pandemic's black swan event has increased online interaction time and changed user habits; third, Roblox, as the first Metaverse concept to go public, has become the ignition point.

2. What is the essence of the Metaverse?

Wang Tianfan, Managing Director of BAI: The Metaverse currently represents everyone's personal Hamlet; everyone in the industry is interpreting this term differently, which is both good and bad.

On the positive side, it indicates that everyone is exploring, and there is no conclusion yet. Entrepreneurs still have room to maneuver. This is akin to how 10 years ago, Tudou was exploring UGC in video, and now we see the maturity of Douyin and Kuaishou. There were various explorations along the way, and before the final form is determined, anyone has a chance.

On the negative side, many people are packaging their projects using the Metaverse concept, which I believe will not have opportunities, and the founders may be deceiving themselves.

Zhou Wei, Founding Managing Partner of Genesis Partners: In fact, the Metaverse is still too early, but the good thing is that it will not be as early-stage as the previous AR and VR markets. Currently, the products on the market are still far from this concept, with low levels of commercialization, and the content is not rich enough to immerse users completely. Therefore, whoever can first establish a foundational technology that supports development for many years to come and retain users through operations—allowing them to immerse themselves while continuously creating content—will succeed first. Choosing to get involved now will play an important role in shaping this environment.

I want to emphasize that not all games are Metaverse, but there will definitely be many games within the Metaverse. We will also use several characteristics to judge the Metaverse:

First is identity; you need to define who you are, and in the Metaverse, we have only one identity, which is fundamental; second is social relationships, where you can make friends; third is the economic system, which is key to long-term sustainability; fourth is rules, as the Metaverse is a very autonomous world, there must be corresponding rules, but these rules will definitely be defined collaboratively by users and the platform.

Hu Sen, CEO of MetaApp: I believe the form of the Metaverse is the ultimate form of online entertainment and socializing, which will be more open, with some virtual spaces and meta-rules that will allow for more atomized production, more efficient output of diverse gameplay and experiences, longer tail and fragmentation, and rapid distribution to the right people, leading to faster formation of consumption and feedback loops. Many people will be willing to express themselves, generating content out of love, and completely without profit motives.

The Metaverse is currently too hot, which is both good and bad. The good part is that more people and money will come in, raising their flags and strengthening the vitality of the sector, just like the mobile internet ten years ago. The downside is that if it heats up too early, it may lead to overexploitation. If the bubble grows larger, objectively speaking, you will have to engage in more bubble-like activities, leading to a lose-lose situation.

In fact, general users do not clearly understand the Metaverse; they are just wondering if new opportunities will arise because they need something to realize their bizarre dreams. I have always believed that the Metaverse is a beautiful yet vague world. It is precisely because it has not been realized that people keep talking about it, just like how we no longer discuss mobile internet now that we use smartphones every day.

Chen Yuheng, CEO of rct AI: The Metaverse is the next generation of the internet. It allows all social activities of humanity in the real world to be mapped into one virtual world after another, enabling more natural and efficient interactions.

At the same time, the Metaverse has several distinct and unique characteristics. The most important characteristic is the sense of identity (Identity). The establishment of identity can occur through various means, such as social relationship chains, economic systems, or the immersive experience on screen. It is precisely because there are multiple pathways to establish identity that we can see products like Roblox, Honor of Kings, Cryptovoxels, or Oasis VR, which are prototypes of the Metaverse.

Another very important characteristic is more natural interactions. The Metaverse not only allows users to have another identity in the virtual world but also breaks the information prison dilemma that all users in today's mobile internet cannot escape through more spatially aware game visuals and experiences. In the virtual world, due to the inherent sense of space, the range of information users can access is greatly expanded, no longer limited to the "list" method of information acquisition in the mobile internet era.

The Metaverse also has three underlying elements that are key to supporting its surface characteristics: perpetuity, self-growth, and scalability.

"Perpetuity" is mainly reflected in the economic and governance systems. If it is a strongly centralized system, it is difficult to see a theoretically perpetual governance system because the pursuit of maximizing commercial interests is the nature of centralized business. Decentralization can fundamentally solve this issue.

"Self-growth" corresponds to the content generation problem we are currently addressing in the virtual world. The virtual world needs to be able to generate more content supply than humans can create, emerging from the system, to truly surpass the current mobile internet and real world in scale.

"Scalability" is more reflected in cloud services. Currently, many cloud gaming companies or traditional cloud service providers are addressing scalability issues. Another angle to achieve scalability is in the rendering part of game engines, supporting large-scale content.

Yuan Yu, Partner at Cloud Nine Capital: Even now, there is no particularly accurate definition of the Metaverse. However, I firmly believe that users will prefer content expression carriers that are closer to real and natural interaction methods, which may be reflected in perception and the environment's feedback to users. In other words, it will be closer to real-life experiences than the current internet interaction experiences that the public is accustomed to.

3. How to understand the implementation of the Metaverse?

Wang Tianfan, Managing Director of BAI: Devices and products solve the non-fragmentation problem, AI assists in content creation, and blockchain aids in asset accumulation.

Zhou Wei, Founding Managing Partner of Genesis Partners: The key is to have a native mindset and design architecture, rather than designing after seeing the Metaverse become popular. There needs to be strong capabilities at the underlying engine level, which is currently the most challenging aspect. The "new world" must be shaped to be sufficiently malleable, with more user-friendly operational methods, but not purely a foolproof approach to creating a "real" world in the virtual space.

I do not prioritize VR and AR technologies; I have always believed that what makes something fun is not clarity but content, just like a good movie today is not because it has 8K clarity, but because it has an engaging storyline.

Hu Sen, CEO of MetaApp: The realization of the Metaverse depends on interoperability and unified identity. Without interoperability, everyone is scattered in different villages, leading to no commerce, no division of labor, no economies of scale, and no industrial age; without interoperability, everyone is scattered in different local networks, leading to no portals, no search engines, no social networks, and no information age; similarly, without interoperability, everyone is scattered in different interactive content, leading to no unified avatar, no friendships, no virtual asset accumulation, and no Metaverse.

Regarding the ideal path to realizing the Metaverse, I am generally pessimistic and see three issues.

Issue one: Currently, the biggest technological gap is the capacity to support ultra-large-scale virtual worlds. Existing foundational laws and technological infrastructure cannot support the various free derivations and changes within large static and dynamic scenes unless the technical architecture is changed or the technology directly achieves the final effect (rather than meta-rules, which clearly suppresses creativity).

Issue two: Ultra-large-scale multiplayer connectivity. So far, all game engines are primarily single-player and do not natively support multiplayer synchronization. 3D and physics work well in single-player, but even simple connectivity requires separate programming and high demands on engineers.

Issue three: From a commercial perspective, the terminal has indeed reached a critical point. The shipment volume and optical effects of VR and AR have reached an impressive level, but unfortunately, this battlefield belongs to mature companies. Once large mature companies capture the terminal, whether they can give up some control and open up relatively free interoperability is commercially questionable and may not be a friendly entry point for entrepreneurs.

Chen Yuheng, CEO of rct AI: I believe the implementation of the Metaverse requires three components: AIGC (AI-generated content), DAO (Decentralized Autonomous Organization), and cloud.

AIGC (AI-generated content)

For the virtual world, AI plays a foundational role in the construction and development of the Metaverse. AIGC is divided into two main parts: one is image-based AI, including technologies for generating skeletal animations, facial expressions, motion capture, and image recognition, scene generation, and asset import related to spatial scenes, as well as rendering, modeling, and particle systems related to infrastructure.

The other is logic-based AI, including technologies for semantic understanding, language models, and dialogue robots related to language dialogue, as well as general artificial intelligence and scenario-based decision models (multi-agent single goal, multi-agent multi-goal) related to decision logic.

DAO (Decentralized Autonomous Organization)

Centralized autonomous organizations are another important characteristic that distinguishes the Metaverse from the current internet and virtual worlds, built on the foundation of AIGC.

After the emergence of recommendation algorithms, machines gradually replaced humans in the selection process. At this stage, while we see an increase in content volume that can meet demand, the granularity is gradually decreasing. However, since the vast majority of content is still produced by humans, it is impossible for every detail of the content to be generated in real-time according to different people's needs, and users' choices have become increasingly marginalized.

Therefore, blockchain technology is the best technological path to realize decentralized autonomous organizations (DAOs), and the developer ecosystem built on blockchain technology itself will develop at a rapid pace.

Cloud

With the development of communication technology, algorithms, and cloud technology, AI's capabilities can be fully unleashed. Currently, the focus of cloud gaming and cloud experiences should be on "games" or "experiences," while the meaning of "cloud" is: to reconsider and realize all aspects of interaction mechanisms, gameplay, and settings based on cloud characteristics, fully leveraging the advantages of the cloud while minimizing the disadvantages of traditional processes, and more quickly creating richer digital content;

At the same time, in the interaction between users and the virtual world, personalized content experiences should be rapidly generated and iterated based on user preferences. Only such experiences can be called true cloud experiences because they can provide users with new demands different from the past, rather than fulfilling existing demands that could be achieved without the cloud.

As the Metaverse spans multiple fields such as AI, blockchain, gaming, and social interaction, the driving force that can stimulate new user demands lies in the native virtual beings created by AI. Therefore, companies in the AI field will, in the long run, become the most successful ones. However, in the short term, there are too many factors that can influence specific product performance, so companies in every field actually have the opportunity to establish certain advantages and then supplement their AI capabilities; this path is also feasible.

Vincent, Partner at Cloud Nine Capital: The Metaverse will have a series of open tools, shared protocols, universal asset standards, and hardware as infrastructure. The openness of the infrastructure layer will require no permission, allowing developers not only to develop scenes but also to create middleware and protocols for other developers to use. User data and information will not belong to any centralized entity, and anyone can freely analyze and use this data. Ultimately, the Metaverse will consist of numerous small Metaverses, with user identities, data, and assets natively synchronized across them.

Thus, the implementation path cannot be completed by a single company but will be achieved collaboratively by companies, communities, and individual developers. The entire process will be like building blocks, where each open component will become a "block" of the Metaverse, constructed from the bottom up rather than top down.

4. What will blockbuster applications of the Metaverse look like?

Wang Tianfan, Managing Director of BAI: My preliminary prediction is that it will at least utilize gamification methodologies, based on stronger AI and blockchain infrastructure, and will be related to VR and AR in some way.

Zhou Wei, Founding Managing Partner of Genesis Partners: I believe it will be a content platform, which will have two important characteristics: first, whether your underlying engine allows amateur developers to participate in content development and whether it enables everyone to create content easily; second, a high-quality, well-structured economic system can ensure creators' long-term willingness to create, which is also the long-term cornerstone for stimulating creators' enthusiasm, and this economic system should be similar to the real-world economic system, with complete and clear trading rules.

Some also believe it will be AAA games. AAA games will certainly succeed in some dimensions, such as becoming a more free centralized gaming platform and being more profitable. However, as I mentioned earlier, games can only be considered a subset; the Metaverse must attract non-gamers to play, while AAA games can only satisfy gaming enthusiasts.

Hu Sen, CEO of MetaApp: We can clearly see some specific characteristics of blockbuster applications. First, find a sufficiently large industry that can form barriers through long-term accumulation; second, it must be both open and commercially viable, with the scenario potentially being just a standalone scene; afterward, abstract various specific rules and constraints to give everyone more space to derive specific rules;

Finally, deeply understand user needs. For example, in the gaming industry, commercial games are the most profitable, and we would love to create them, but most users actually prefer particularly fun casual games. Therefore, commercial games are more suitable for specific gaming enthusiasts, leading to a significant mismatch. Creating content forms that most users like and need is the foundation for a blockbuster, and it is our development process: from aggregation to content platforms and then to SaaS tools to organize content production.

Chen Yuheng, CEO of rct AI: From the attributes of the Metaverse, it emphasizes the interactive experience in the native virtual world. Roblox is merely a product situated between the digital virtual world and the native virtual world, serving as the first stage toward the Metaverse.

AI will become an essential element of the next blockbuster application of the Metaverse. From the perspective of end users, consumer experience, and demand, AI can create intelligent native virtual species that provide users with new social relationships.

These social relationships are connections that do not exist in the real world. Before people complete their understanding and acceptance of them, users trying to comprehend the social relationships established between virtual species and between humans and virtual species can only reference real-world human social relationships for analogy, leading to cognitive errors and biases.

In this social relationship centered around virtual species, the growth logic of virtual beings born from algorithms and code will likely differ from that of real humans. From their perspective, the necessary inputs they require, such as computing power, corpus, and scene knowledge, will be outputs for us, and our relationship with them will shift from purely consuming digital content to a supply-demand relationship.

They will reciprocate the resources we provide for their survival and growth with the currency or other resources we need. Therefore, this is a relationship different from what we currently understand, which can satisfy people's needs in scenarios involving interests, professions, games, hormones, etc.

Of course, any new generation of applications and products will encounter various resistances during their early development, often stemming from users' excessive reliance on existing demands and the intervals of cognitive advancement. In the long run, only products that can genuinely stimulate new user demands and meet them will gain more user support in the new era, thus jointly building the Metaverse with global enterprises, organizations, and users.

Yuan Yu, Partner at Cloud Nine Capital: From a technical perspective, the iteration of new graphics, physics engines, and reinforcement learning technologies will certainly provide product developers with tools to create the next generation of experiences. From a product standpoint, I believe there is no need to deliberately pursue a so-called "ideal end state." I am also exploring its specific form, but one thing is certain: it must provide users with experiences that exceed expectations in the right user scenarios.

5. What will the Metaverse look like in ten years?

Wang Tianfan, Managing Director of BAI: A heavily internet-based lifestyle means that a significant proportion of the 24 hours will be spent in a connected and heavily interactive state (similar to gaming). This lifestyle will not alienate users from real life; rather, it will provide users with a new foundation for existence, which includes economic sustainability and fulfillment in life.

Zhou Wei, Founding Managing Partner of Genesis Partners: In fact, the key in the next ten years will be whether creators can sustain the ecosystem and whether the platform can maximize user content creation energy.

I envision that in ten years, the content stock will be as rich as what we see on Kuaishou and Douyin today, with algorithms helping you find the most suitable content. You will spend a lot of time finding your other side within it. It may not necessarily have fantastical or flashy scenes; the key lies in having an engaging storyline, as this sense of immersion is the ultimate significance of the Metaverse.

Hu Sen, CEO of MetaApp: I actually do not know what state the Metaverse will be in ten years, but we know that our requirement is to stay on this path, not to deviate from the general direction, and to commit to finding commercially responsible paths, even if they may not seem obvious at present. The team's energy will focus solely on meeting user content needs, rather than supplementing the Metaverse concept.

We hope that within the next decade, a considerable proportion of the population will experience life in the virtual world, lowering the barriers to entry for games and allowing more foundational but non-professional developers to participate. At the same time, I also hope that our industry will have more specific user analysis and data references in the future.

Chen Yuheng, CEO of rct AI: Just like how Bill Gates faced misunderstanding and ridicule when he imagined the future of the internet on a talk show in 1995, many people today cannot personally feel or understand what the Metaverse will look like in ten years.

Therefore, to imagine the Metaverse ten years from now, we must abandon the default mindset of "the present is optimal" and use new logical approaches to deduce what changes our lives will undergo due to the Metaverse.

I believe that in the future, humanity will create intelligent beings in a virtual world that exist in another dimension. These intelligent beings will not replicate humans; their thinking will be based on predefined data. When they understand different virtual worlds, they will also need to rely on different data structures. However, the birth of these intelligent beings means that the boundaries of human civilization will be expanded once again. We may no longer need to search for extraterrestrial civilizations in the vast universe to broaden the boundaries of civilization.

Ten years may seem short, but in the brief history we have seen, ten years can mean a significant transformation for modern human civilization.

The past decade of mobile internet has gradually revealed issues such as information flow blockage and inefficiency, information overload, and the control of information flow by large centralized nodes, namely commercial giants, along with complex interactions. This reflects some of the problems exhibited by traditional internet during the transition to mobile internet. This also indicates that humanity will ultimately embrace digital civilization, and the Metaverse is the next stage of human civilization's complete digitization.

Vincent, Partner at Cloud Nine Capital: Ten years from now, I speculate that the Metaverse will ultimately take a form that aligns with ordinary user experiences, which may include:

Several application carriers, some resembling the graphics of AAA games, some like the world in "Ready Player One," and some adopting pixel styles. Users will only need to find a world that satisfies their desired style, which does not necessarily have to replicate the physical world in the virtual realm.

Users will be able to traverse any world across multiple devices (mobile/PC/VR) using the same account address system, with identities, assets, and data all shared. Financial, social, e-commerce, and any type of applications can seamlessly integrate into this world.