What is the Metaverse? Enter the Matrix

Will we end up living in a parallel universe run by computers, as in the Matrix?

This is a beginner's guide to understanding the Metaverse in 2023

So if you want to learn:

1. What the Metaverse really is (does it exist yet?)

2. Where does it come from and how it works

3. Metaverse use cases, pros & cons + lots more

Let's dive right in.


  1. What is the Metaverse Summary
  2. Understanding the Metaverse
  3. Metaverse Pros and Cons
  4. FAQs

1. What is the Metaverse Summary

The Metaverse has emerged as the next “buzzword” in the cryptocurrency industry. However, Neal Stephenson coined the term in 1992 to describe a 3-D virtual universe, and the first Metaverse-like experiences began in the early 2000s with “games” such as Second Life (2003) and Roblox (2006). New technologies like augmented reality (AR), virtual reality (VR), and cryptocurrencies, among others, show Metaverse’s promise.

But what exactly is the Metaverse? We can define the Metaverse as “just games.” The Metaverse isn’t much more than an avatar (a digital image of yourself), people dressing up in virtual costumes and interacting, whether it’s killing monsters, playing games, attending events, or doing business deals. The Metaverse is analogous to Role-Playing Games (RPG). 

The Metaverse is essentially you and other people “plugged” to the internet via VR (Virtual Reality) or AR (Augmented Reality) on a shared digital space where you can interact and participate in virtual economies powered by cryptocurrencies.

The Metaverse is still in its infancy, and seven layers are being developed as we speak: 

  • Layer 1 – Infrastructure (Foundation)
  • Layer 2 – Human Interface (Hardware)
  • Layer 3 – Decentralization (Distributed Computing and Cryptocurrencies)
  • Layer 4 – Spatial Computing (Software)
  • Layer 5 – Creator Economy (Artists)
  • Layer 6 – Discovery (Community/Network-driven content)
  • Layer 7 – Experience (User Experience)

The possibilities for Metaverse applications are only limited by our imagination. The most prominent ones are gaming, working virtual environments, social Networks & entertainment, virtual tourism, education, sports, commerce, real estate, fashion, online dating & socializing, and marketing. 

According to Bloomberg, the Metaverse could generate $800 billion in revenue by 2024 from a number of sources including social media ads, gaming, AR & VR hardware, live entertainment, and gaming software (services & ads).

The Metaverse presents numerous benefits such as an immersive remote work experience, new career opportunities, real-time collaboration and innovation, community-driven content & immersive activities, enhance the learning experience, patient-healthcare professional innovation, and may accelerate the adoption of cryptocurrencies. 

However, the Metaverse has a lot of challenges such as personal identity issues, identity & reputation problems, data privacy and security issues, lack of regulation, early-stage technologies, and the possibility that they will worsen the Addiction Age.

Nobody knows what the future holds for humanity, but one thing is certain: the Metaverse has the ability to drastically alter our lives.

Continue reading if you want to immerse yourself in the Metaverse!

2. Understanding the Metaverse

To comprehend what the Metaverse is and how it works, we must go back to its origins.

A Brief History of the Metaverse

Although the Metaverse has recently been associated with cryptocurrencies, gaming, augmented reality (AR), and virtual reality (VR), metaverse-like elements have existed since the early 2000s.

The Internet (1991): Tim Berners-Lee issued the first invitation to collaborate on the WorldWideWeb (www) on August 6, 1991. This marks the birth of the internet. With the internet, people can read, create and share information from anywhere with an internet connection. The internet is a critical component in making virtual worlds a reality.

Snow Crash (1992): Neal Stephenson introduces the concept of the metaverse in his science-fiction novel Snow Crash to describe a 3-D virtual universe.

The Matrix (1999): In 1999, a science fiction movie directed by the Wachowskis was released. Despite the fact that the Matrix makes no mention of the Metaverse, we regard it as a true Metaverse, a computer simulation into which you can plug yourself and engage in activities identical to those found in the real world. The Matrix depicts a dystopian future and warns us about the dangers of the Metaverse.

What is Real? 

“If real is what you can feel, smell, taste, and see, then ‘real’ is simply electrical signals interpreted by your brain.”


Digital Twins (2003): Michael Grieves of the Florida Institute of Technology applies the concept of digital twins, first proposed by David Galerneter in his book “Mirror Worlds,” to manufacturing. A digital twin is a virtual replica of a real-life physical product, building, or person. It could be a chair, a desk, a lamp, a house, or even your next-door neighbor. A digital twin may reproduce any item that exists in the actual world. Digital twins set the groundwork for the metaverse’s creation.

Second Life (2003): The first Metaverse was actually founded 20 years ago. Philip Rosedale created “Second Life,” a virtual world where users can create avatars (virtual representations of themselves) for socializing, learning, and business. They allow users to live a “second life” in an online virtual environment. Second Life even has its own virtual currency, the Linden Dollar (L$) which users can use to engage in online economies within its virtual environment. Second Life has an active user base of a million people and is an example of a metaverse with a centralized authority. 

Roblox (2006): In 2006, Roblox, an online game platform that allows users to create and play games developed by others was introduced. During the 2020 pandemic, it rose to become the third highest-earning game of the year.

Bitcoin (2009): In 2009, an anonymous developer called Satoshi Nakamoto published the Bitcoin whitepaper, titled “Bitcoin: A Peer-to-Peer Electronic Cash System.” Bitcoin is the first decentralized currency that leverages a new powerful technology called the Blockchain to perform transactions without the assistance of a central authority. Bitcoin sparked the cryptocurrency revolution, which has now spread throughout the metaverse.

Gacha Games (2010): The first play-to-earn games were based on the gacha (toy vending machine) mechanic. Gacha games entice players to spend in-game currency in exchange for a randomly generated virtual item (like a loot box). This in-game currency can be obtained through playing the game or by purchasing it straight from the game publisher using real-world money

Ready Player One (2011): Ready Player One is a science-fiction novel written by Ernest Cline that introduced the concept of a virtual reality world (Oasis). OASIS is a MMOSG (massively multiplayer online simulation game) created by James Halliday that began as an online gaming platform and ultimately expanded into a global virtual reality for everyday life. In 2018, Steven Spielberg turned it into a film

Media & Entertainment

NFTs (2012): A non-fungible token (NFT)  is a type of cryptocurrency used to verify ownership of something unique, such as digital artwork, sports cards, real estate, or in-game and metaverse items. The notion dates back to 2012, when “colored bitcoins or coins” were created, in which additional information was added into a bitcoin transaction so that it is no longer fungible but unique. Nowadays, NFTs are minted (created) with smart contracts instead of “colored coins.”

NFTs are crucial in the metaverse, from avatars to digital land to unique in-game items that can never be exactly duplicated or forged

Ethereum (2013): In 2013, programmer Vitalik Buterin published the Ethereum whitepaper. Ethereum went live in 2015.  Ethereum is a “world computer” or Do It Yourself platform that allows anybody to build smart contracts and combine them to create decentralized apps (dApps) or services without the need for a centralized authority. Ethereum allows minting (create) NFTs with smart contracts (code) and any gaming or metaverse application (dApp) you can think of.  

Decentraland (2015): In 2017, the first Ethereum-based decentralized VR (Virtual Reality) game was launched. Decentraland bridges the gap between real and virtual worlds. Decentraland uses a 3D universe called LAND, in which you may play games, purchase, and trade real estate, and other digital assets using Decentraland’s cryptocurrency, MANA.

Decentraland (MANA) sparked a wave of NFT gaming and metaverse projects such as Enjin Coin (ENJ), which allows developers to tokenize in-game items, and Axie Infinity (AXS), which, in addition to the above, introduces a “pay-to-play-to-earn” model in which participants pay the starting costs and can earn cryptocurrency and NFTs by playing. These projects become well-known in the 2021 NFT explosion. 

Pokemon Go (2016): Pokemon Go was the first game to combine the virtual and the real world using augmented reality (AR). Pokemon Go employs GPS-enabled mobile devices to identify, collect, train, and battle virtual animals known as Pokémon, which appear to be in the player’s real-world location.

Fortnite (2017): Fortnite, a multiplayer game and social hub, is released in 2017. Fortnite is well-known for its virtual concerts and tours. In 2020, Fortnite hosted the first metaverse concert, featuring American rapper Travis Scott and DJ Marshmello in front of 30 million people.

Axie Infinity (2018): Another popular game was released in 2018. Axie Infinity proposes a cryptocurrency play-to-earn model that allows players to earn a steady income by raising virtual pets. Axie Infinity is popular in low-income countries like the Philippines, where it has replaced full-time employment or welfare. Axie Infinity does not provide a 3D environment, but it does present users with the opportunity to work in a metaverse-like environment and earn real income. 

Alien Worlds (2020): In 2020, Alien Worlds, a multi-metaverse where you can play with unique digital items (NFTs) was created. Alien Worlds introduces DAOs (decentralize autonomous organizations) and cross-chain bridges to connect blockchains such as BSC, WAX, and Ethereum

Mesh (2021): Microsoft enters the Metaverse in 2021 with their platform Mesh, which enables 3D virtual collaboration across multiple devices via mixed reality applications.

Meta (2021): Facebook joins the Metaverse and changes its name to Meta in 2021. Mark Zuckerberg, CEO of Facebook, discusses his ambitious plans for the metaverse, a social, 3D virtual realm where individuals from all over the world can connect. 

What is the Metaverse?

To be fair, the Metaverse isn’t fully operational yet because the supporting technologies are still in development. We can, however, appreciate platforms with metaverse-like components, such as video games that use virtual (VR) and augmented reality (AR), host in-game events, and create virtual economies using cryptocurrencies. The Metaverse is part of the “final stage” of Web 3.0, which is the decentralization of society through redistributing power back to creators and teams.

We can define the Metaverse as “just games.” The Metaverse isn’t much more than an avatar (a digital image of yourself), individuals dressing up in virtual outfits and interacting, whether it’s killing monsters, playing games, or doing business deals. The Metaverse is similar to Role-Playing Games (RPG). 

The most formal definition is the following: 

Metaverse = Physical (You) + AR (Augmented Reality) + VR (Virtual Reality) on shared digital spaces supported by cryptocurrency technology. 
  • Physical (You): Refers to a totally immersed experience that includes both the mind and the body. The goal is to generate electrical impulses that your brain can comprehend in order to produce a present (as real as possible) experience.
  • Augmented Reality (AR): Augmented Reality refers to the practice of augmenting your surroundings by adding digital features to a live view, which is frequently accomplished via a smartphone’s camera. In AR, the real environment coexists with the virtual world created by AR. 
  • Virtual Reality (VR): Virtual reality entirely replaces the real environment with a computer-simulated reality. It is a fully-immersive experience. 
  • Cryptocurrencies: Cryptocurrencies are mostly used to prove ownership of unique metaverse assets (NFTs) such as avatars or in-game items, to create decentralized (no third parties) and trustless (blockchain) virtual economies, and to build dApps that enable Metaverse functionality. 

The Metaverse is basically you and other people “plugged” to the internet via VR (Virtual Reality) or AR (Augmented Reality) on a shared digital space where you can interact with one another and participate in virtual economies powered by cryptocurrencies.

Note: There are many more technologies in use here, which we shall look at in the following section. Furthermore, there is not a single Metaverse, but rather a collection of metaverses that interact with one another. In other words, a Multiverse.

How does the Metaverse work? Building the Metaverse

According to gaming specialist and Beamable CEO Jon Radoff, the Metaverse is divided into seven layers that are still under development. 

Layer 1 – Infrastructure (Foundation)

The first thing we need is a basic infrastructure to make the Metaverse possible. We require technology that enables our devices, connects them to the network, and delivers content. From existing technologies like the Internet and Cloud computing to new technologies under development such as 5G and 6G to the creation of tinier hardware to boost functionality, speed, and capacity (bandwidth). This is all necessary for a smooth metaverse experience.

Layer 2 – Human Interface (Hardware)

The second requirement is a human interface. This is how we connect to, or “plug into,” the Metaverse. This is how we become “cyborgs” by increasing our capacities using technology. In other words, Augmented Reality (AR) and Virtual Reality (VR) hardware.

The human interface layer includes any eXtended Reality (XR) hardware, from smartphones to smartglasses/headsets, haptics, wearables, biosensors, etc.

Layer 3 – Decentralization (Distributed Computing and Cryptocurrencies)

This is where cryptocurrencies and blockchain technology come into play. The Metaverse worth creating, unlike OASIS in Ready Player One, is decentralized and not controlled by a single entity. In other words, a place where creators have complete ownership over their data, inventions, and money.

The Decentralization infrastructure consists of distributed computing (linking together multiple computer servers over a network) and microservices architecture (small independent services), which create a scalable ecosystem ranging from commerce systems to specialized AI to diverse game systems. 

Also, a decentralized Metaverse needs cryptocurrencies and blockchain/DLT technology to create decentralized virtual economies, services (dApps), unique avatars, or in-game items (NFTs) and establish digital trust. Blockchains like Bitcoin, Ethereum, Flow, Theta, Binance Smart Chain, and others lay the groundwork for an “ownership economy.”

Last but not least we have edge computing, which aims to bring computation and data storage closer to data sources to improve response times and save bandwidth. 

Layer 4 – Spatial Computing (Software)

If Layer 2 (Human interface) is the metaverse hardware, Spatial Computing is the software that allows us to enter and manipulate 3D environments (VR) as well as augment the real world with more information and experience (AR).

The key aspects of Spatial Computing software include: 

  • 3D Engines: 3D Engines display the geometrical dimensions necessary for animation. 
  • Geospatial Mapping: Mapping and understanding the internal and external worlds. Examples include Niantic Planet-Scale AR, Cesium, and object recognition
  • Voice and gesture recognition
  • Data Integration: Ability to process data from many devices that communicate and exchange data (Internet of Things) and biometrics from people (e.g.,  biohacking and quantified self applications). 
  • Next-gen user interfaces: The current user interfaces (UI) need to be upgraded to improve user experience as well as support many information streams. 

Layer 5 – Creator Economy (Artists)

According to Jon Radoff, every creative economy in the past (from web development, gaming, e-commerce to the metaverse) has gone through three stages: 

  • Pioneer Era: The pioneer era is the early stage of a new technology in which everything must be written or built from scratch. There are almost no tools, and everything requires effort, time, and money. For example, the initial websites were written in HTML, and developers created their own shopping carts for the first e-commerce sites. 
  • Engineering Era: Following the early success of a new technology, the optimization phase begins with the addition of new tools to decrease time and effort while increasing throughput. Stacks like Ruby on Rails, for example, made it easier to build data-driven websites. Graphic libraries such as OpenGL and DirectX allowed game developers to render 3D graphics without having to know much low-level coding. At this stage, entry barriers are still high, and specific technical skills are required, but they are more accessible.
  • Creator Era: The creator era is dominated by artists, entrepreneurs, and designers because the entry barriers are low and tools require little to no code. Because of the low entry barriers, the number of creators grows exponentially. When the technical components are no longer as time-consuming, more time is allocated to creativity, and new possibilities emerge. For example, you can now launch an e-commerce website with Shopify in a couple of minutes without knowing a single line of code. Websites can be easily created and maintained with WordPress, Wix or Squarespace. 

The metaverse’s experiences are getting more immersive, social, and live (in real-time). New technologies are being developed to aid in the creation of metaverse experiences.

Layer 6 – Discovery (Community/Network-driven content)

The Discovery Layer is concerned with how people find the information they require to enjoy new experiences. Over the years, there has been a shift from outbound marketing (proactively reaching out to consumers to pique their interest, even if they have not requested it) to inbound marketing (consumers are already interested in a product and seek information). 

Inbound marketing is community-driven and considerably more cost-effective because people are already interested in the content or events they want to join. NFTs and social tokens are promoting engagement in creator communities that goes beyond blog comments and videos. 

The Metaverse takes it a step further and allows a new form of community to emerge, a real-time community in which customers not only consume content but actively participate in shaping it in real-time. This is known as the content-community complex

Layer 7 – Experience (User Experience)

The final layer is concerned with the actual user experience when gaming, engaging in social, sports, entertainment, or commercial activities of any kind. 

The “dematerialization” of physical space will allow us to enjoy previously scarce experiences. Personalized experiences, live and social entertainment, such as music concerts, immersive theater, or movie experiences, which have already appeared in Fortnite, Roblox, and Rec Room, will become the norm.

The content-community complex mentioned in Layer 6 will create new experiences, events, social interactions, stories, and breakthroughs in real-time. 

Metaverse Use Cases

The Metaverse is becoming a “buzzword,” but what are its applications?

  • Gaming: Second Life, Axie Infinity, Decentraland, and Sandbox provide the earliest metaverse experiences. These platforms let users to create their own content, avatars, games, and interact with other users depending on the rules of a certain metaverse. The Gaming metaverse also offers the option to generate income in a metaverse with its play-to-earn model, which allows players to earn cryptocurrency, trade unique in-game items (NFTs), and own land (real estate).
  • Work Environment: Thanks to the Metaverse, we will work in a virtual space without the need for an office or a physical presence. We could engage with our coworkers through avatars in workrooms or organize remote meetings with a more immersive experience. Nike, Microsoft, YouTube, Disney, Intel, and startups like Virtuwork, Inworld AI, Upland, and Gravity Sketch are already developing the virtual business infrastructure required to make it a reality.
  • Social Networks & Entertainment: Another space where we can find Metaverse-like experiences is in the social networks and entertainment industry. Fortnite already holds music concerts and movies. ARShow, a social AR streaming platform, created the first-ever augmented theater production. Ray Oldenburg coined the term “third place” (beyond home and work) to describe the venues for community life, social interaction, and creativity. These experiences will get more immersive, in real-time as time goes on.
  • Virtual Tourism: Technology has advanced to the point where you can visit any location without physically being present. The Metaverse will deliver an immersive experience, the first point of view to sense the environment as if we were physically present there. Another application may be using virtual tourism for company retreats and other team-building activities. Matterport already made it possible to visit five Egyptian heritage sites using VR. 
  • Education: The Metaverse could potentially improve students’ and professionals’ learning experiences by bringing all of their senses together and truly living a certain scenario, resulting in a more intensive practical experience and greater knowledge acquisition. The metaverse school will provide a virtual learning environment in which everyone can receive a high-quality education tailored to their specific needs.
  • Sports: Apart from enjoying sports venues, the Metaverse will provide immersive and fun fitness workouts as Supernatural already does. 
  • Commerce: The Metaverse will also enhance the shopping experience, clients will have the chance to try on, feel, and test the product or have instant advice from assistants. Zara and Shopify are hard at work to make this a reality.
  • Real Estate: Estate agents and clients do not have to waste time traveling to multiple houses, apartments, and so forth. Any client will be able to view all available options in real time. Virtual Land in gaming metaverses like Decentraland and Sandbox is already a profitable market worth more than $500 million in 2021.
  • Fashion: The fashion business has already made its way into the Metaverse. Gucci, for example, developed its “Metaverse Design” category on Roblox. Users can already purchase exclusive outfits on the gaming website.
  • Online Dating & Socializing: The Metaverse has the potential to revolutionize the online dating industry by offering a more dynamic experience and even increasing intimacy in long-distance relationships.
  • Marketing: Brands can capitalize on exclusive marketing opportunities in the various virtual worlds in the metaverse to give a more personalized experience, opening up an entirely new realm for marketers.

As you can see, the Metaverse’s applications are virtually unlimited. Some of them may take some time to materialize, but the groundwork is already in place.

Metaverse Market Potential

According to Bloomberg, the Metaverse could generate $800 billion in revenue by 2024 from a number of sources including social media ads, gaming, AR & VR hardware, live entertainment, and gaming software (services & ads).

Estimates in Nov. 2021 by Grayscale Research are even more optimistic and predict a $1 Trillion market from a number of sources such as digital events, advertising, and e-commerce. 

Nobody can forecast the future, but one thing is certain: there is a lot of potential in the metaverse.

3. Metaverse Pros and Cons

The Metaverse is still in its infancy, and it will take many years to fully develop and integrate all of the associated technologies. The Metaverse has the capacity to improve our lives, but it also has the potential to further imprison us.

Here are the Pros and Cons of the Metaverse: 

Remote Work Experience: The 2020 pandemic has accelerated the remote working trend, forcing firms to embrace new online communication tools. The Metaverse could provide interactive, immersive 3D virtual environments to foster communication, collaboration, and innovation.Personal Identity issues: The perception of space and time, as well as the distinction between the Real and the Virtual, become increasingly blurred. Full immersion in the Metaverse can result in users spending significantly more time in the Virtual world and withdrawing totally from the real world. This may exacerbate self-acceptance and identity issues, as well as addictions, and produce a new slew of psychiatric challenges.
New jobs and revenue streams for both users and creators: The creator era is already here, entire new universes can be built with the metaverse, the possibilities are endless. With the “automation” of the real world, people will be compelled to find other sources of income; the Metaverse can provide users with reliable income and new career opportunities.Identity & Reputation problems: One of the Metaverse’s challenges is to have an identification and reputation system in place to prevent bots or other individuals from impersonating you. We should be able to verify and authenticate that we are interacting with a specific person or object.
More opportunities for collaboration & innovation: With the metaverse, anyone from anywhere in the world can engage and interact in real-time with others. This opens the door for new “innovation clusters” to arise, and ideas will travel faster than they already do.Data privacy and security issues: As we become increasingly reliant on technology, we must boost cybersecurity standards. New approaches to personal data, privacy, and digital property are required, which may involve providing even more personal data than is already provided. Cryptocurrencies and Blockchain technology are crucial for ensuring decentralized privacy.
Community-driven content & immersive activities: Information will be more targeted, new like-minded communities will arise, and the immersive experience will bring all senses to activities such as live concerts, sports, theater, and other enjoyable pursuits.Lack of regulation: How virtual environments and economies will be regulated remains a mystery, and much work remains to be done.
Enhance Learning experience: The Metaverse is creating new opportunities for more immersive learning and education, as well as better and faster knowledge acquisition.Technologies must improve significantly: Most of the technologies involved in the Metaverse are still in their infancy, and they must improve in order to give a seamless experience.
Patient-healthcare professional innovation: The Metaverse will enable interaction between patients and healthcare professionals, regardless of geographical restrictions, and will even address emergencies in a timely manner.The Addiction Age might get worst: We are already in the Addiction Age, a time when technology has successfully hijacked our attention spans, sapped our prefrontal cortex, and disrupted our focus. We have built an artificial world that is unsuitable for our evolutionary DNA. We lack energy because we are not doing what we were created to do: we are sleep-deprived, continuously stressed out, consuming junk food, and suffering from a slew of new diseases that hinder our performance and make us sick. The Metaverse is adding new inputs to the mix, which, if we are not careful, will only worsen the addiction era.
Accelerate the adoption of cryptocurrencies: Cryptocurrencies are essential for developing a decentralized Metaverse, as well as providing trust, security, and proof of ownership. The Metaverse will catapult blockchain technology and cryptocurrency to new heights.

4. FAQs 

What is the Facebook metaverse?

There isn’t a single player that owns the Metaverse. However, companies like Facebook and Microsoft are aggressively investing in the development of a “centralized metaverse” or centralized solutions for certain use cases. In 2021, Meta (formerly Facebook) spent $10 billion on the Metaverse, effectively going all in. Previous Facebook initiatives included the acquisition of Oculus VR Business in 2014, as well as work on AR smartglasses and wristband technology.

The current leaders of the Metaverse are blockchain-based (decentralized) games such as Decentraland, Sandbox, and Bloktopia. Corporate ventures like Roblox, Microsoft’s Minecraft, and Epic Games’ Fortnite are now lagging far behind.

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Marc Arbonés
Marc is a millennial economist, systems thinker, crypto investor (since 2017), crypto writer, and peak performance consultant. He is the Editor and Founder of Altcoins Mastery, where he supports creators and investors in capitalizing on a "fairer" financial system powered by Crypto, DeFi, and web 3.0.