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Author: Nina Xiang, China Money Network

The metaverse — a concept that initially appeared in Neal Stephenson’s 1992 science fiction novel Snow Crash — has been described as the next chapter of the internet. It will allow people to experience the internet in three dimensions, eventually engaging all five of their senses with immersive technologies. In contrast to today’s cyberspace which is centred on the exchange of information, the metaverse has been called the internet of experience.

The nature of the metaverse can be better understood by exploring the context of its nascent development. The saturation of the internet and mobile internet — in 2022 there are 6.64 billion smartphone users or 84 per cent of the world’s population — means that consumers and technology platforms need innovation to foster fresh growth opportunities. The COVID-19 pandemic has also changed the way people work, live, entertain and move around, generating long-term demand for activities conducted in virtual environments. These factors have provided an opportunity for the uptake of the metaverse.

Opinions vary on what the metaverse is and how it should and could evolve. Some digital technology specialists envision the metaverse as a massive 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 near-term realisation. In reality, the metaverse will largely ride 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 larger portion of consumers will experience immersive virtual worlds using smartphones and computers on today’s centralised big tech platforms. Technology giants like Meta and ByteDance are spearheading the development of more immersive experiences via virtual reality headsets. These companies are likely to maintain their significant market share of internet platforms.

Decentralised platforms based on blockchain, or the so-called new creator economy which Web 3.0 claims to herald, will play a minor role in the metaverse. This is because their resources and capital investments are disproportionally smaller than the big tech companies that are building metaverse products based on existing technology while experimenting with blockchain on the side. The mass adoption of blockchain-based metaverses is not guaranteed and more time is needed to assess its chances of success to become the mainstream technology.

The metaverse will face similar challenges to those already faced by the Asia Pacific internet sector. One major challenge is data localisation regulations that require companies to store or process data domestically. China, India, Australia, Indonesia and Vietnam have either implemented or plan to implement data localisation requirements and restrictions on cross-border data transfer, a trend likely to expand as nations become more concerned with security and data sovereignty. For companies operating across Asia, this complicated regulatory landscape will add significant compliance costs, hinder the free-flow of data, slow cross-region operations and hamper innovation.

For example, under China’s current data regulations users cannot freely explore virtual worlds hosted outside of their national borders and metaverse builders are forced to create localised versions of their product in each jurisdiction. China’s great firewall will persist into the metaverse. Its tight policy of online gaming and game consoles is an indicator of how the Chinese government will likely censor and control metaverse content extensively. If more countries adopt China’s strict data regulations the most likely outcome is a splinternet where products, users and data are enclosed in separate pools by regulatory schemes.

The collection of sensitive personal data poses another challenge to 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 localise data processing and storage and impose vigorous regulatory frameworks to address data security and privacy. This may compound the likelihood of a splintered collection of local networks rather than a globally connected metaverse.

These challenges are part of broader regional fragmentation along regulatory, geopolitical, ethical and cultural lines in the Asia Pacific. Technology regulations in China have severed Chinese cyberspace from the rest of the world. India has banned 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 US tech giants fighting over market share and influence. Such fights make them more likely to adopt measures to ban metaverse content, as they currently do with online gaming content.

This swirl of technical, governmental and commercial sources of internet fragmentation is likely to fracture the future virtual world by lowering the interoperability and interconnectedness of the metaverse. In this scenario the metaverse will be born with an inherited defect, mirroring the increasingly divided nature of our physical world.

But steps can be taken to mitigate these challenges and maximise the positive applications of the metaverse.

First, countries should cooperate on developing metaverse business applications. By removing the legal and regulatory barriers to making consumer applications, businesses can foster regional collaboration. A three-dimensional metaverse could increase the ease with which professionals in different countries can work together on architectural design or product development projects. The quality of education and training currently delivered using traditional video conference could also be greatly improved in a more interactive metaverse.

Governments could also use the metaverse to address common challenges such as climate change and the development of alternative energy. For example, the use of digital twins — the virtual representation of an object or process — can more accurately predict the impacts of climate change. This presents an immense advantage to island nations dealing with its devastating effects.

Second, the region can address unequal access to the internet and technology. Across Asia there are vastly different levels of access. In 2025, 65 per cent of mobile subscribers in the Asia Pacific will still be using a 4G connection, with a further 12 per cent relying on 2G or 3G technologies. Efforts to pioneer new technologies should be balanced with looking after those left behind. If the metaverse is where people will interact and conduct much of their lives and work, leaving a large proportion of Asia’s population behind would betray the benefits promised of more intimate connections and facilitation of remote work.

Finally, governments and private companies should strengthen regional cooperation in a targeted fashion. As geopolitics becomes entangled with technology, it is increasingly difficult to pursue pan-regional coordination in sectors as broad as the metaverse. It is more realistic for organisations and private enterprise alliances to pursue specific objectives, such as hardware makers setting standards for virtual- and augmented-reality headsets. Efforts to increase interoperability among different metaverses are less likely to yield concrete outcomes.

The metaverse is the future of the internet, but without regional and global cooperation it will probably arrive broken and embedded with great inequality. It faces similar challenges to those plaguing today’s internet ecosystem and may further entrench fragmentation. Although the splinternet is likely to deepen over the next few decades, there are options to alleviate the potential impacts of a broken metaverse and to maximise its positive applications. Exploring those avenues should be the goal of all stakeholders in the Asia Pacific.

Nina Xiang is an award-winning journalist who is founder of the China Money Network, a news and data platform tracking China’s smart investments and technology innovation.

This article appears in the most recent edition of News JU Quarterly, ‘Asia’s Digital Future’, Vol 14, No 2.

The post Metaverse — the latest chapter of the Splinternet? first appeared on News JU.

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