Tech firms make big bets on a brave new virtual world

Tech firms make big bets on a brave new virtual world

Tech firms make big bets on a brave new virtual world
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The virtual world has been defined as people buying things that don’t exist, from people that don’t own them. This is as far-fetched as it sounds, if one considers that the value of money has always depended on what people think it is.

Global brands are taking up this notion. When Facebook rebranded as Meta last October, it brought the issue of virtual world economies to the fore.

So, what is the metaverse that has recently gained so much traction?

One of many definitions is that it is a collection of shared virtual worlds that are interoperable, in the sense that people can navigate them while taking with them digital assets and a new digital identity.

Blockchain epitomes this as it transfers the original version of digital assets, not a copy, from place to place, making virtual reality more like reality.

Assets are either fungible — such as money that can easily be exchanged for goods or services — or non-fungible tokens that cannot be easily traded. In virtual worlds, sellers deliver property rights on assets that cannot be copied. As long as this is possible, there will be a market between willing buyers and sellers.

Markets have been affected by technological advancements in delivery systems and some see the metaverse as the next major breakthrough following on from the personal computer, the internet and the current mobile phone era.

With tokens for money and tokens for property in place, a real economy can form a metaverse. In this metaverse where tokens of all kinds are freely bought and sold in transparent marketplaces with no distortions for practices that corner the market, the laws of supply and demand can then operate under digital identity.
Where will this brave new world of virtual reality go?

Critics suggest that this might expand as more people begin to create digital identities that travel with them across different experiences. But the question is — will everyone be convinced to enter this brave new world or stick to more comforting real-world assets?

Regulators around the globe are watching this process closely. During the LEAP tech conference held in February in Riyadh, Ziad Al Yousef, deputy governor for development and technology at Saudi Central Bank, known as SAMA, said crypto assets have now emerged as a great technological development, but noted that these assets are still at an early stage in many countries, with many people hesitant about using them as real money.

The UAE has taken the first steps in the GCC by creating a regulatory and licensing authority for crypto assets, perhaps noting that the future belongs to whoever designs it. While, in the US earlier this month, President Joe Biden requested the Treasury Department, the Commerce Department and other agencies prepare a report on the future of money and its potential security threat misuse.

The use of NFTs has opened the door for potential criminal activity. The UK tax authority, HM Revenue and Customs, seized three non-fungible tokens in February as part of a probe into a suspected VAT fraud involving 250 alleged fake companies. HMRC said three people had been arrested on suspicion of attempting to defraud it of £1.4m. The tax body said the suspects in its fraud case were alleged to have used “sophisticated methods” to try to hide their identities, including false addresses, prepaid unregistered mobile phones, virtual private networks and false invoices while they pretended to engage in legitimate business activities.

Even global business giants like Meta CEO Mark Zuckerberg face market realities. The tech giant saw its stock market value slump by more than $230bn on Feb. 3, a record daily loss for a US firm. Its shares fell 26.4 percent after quarterly figures disappointed investors. Meta also said that Facebook’s daily active users had dropped for the first time in its 18-year history, but the tech giant faces a whirlwind of different problems.

Last April, Apple brought in its app tracking transparency policy. It lets people choose whether or not they want to be tracked around the internet by companies, like Meta, who can then sell that information to advertisers. That is a major problem for the business, because finding information out about its customers and selling it to advertisers is how the group makes most of its money.

Yet the tech giant’s name has been changed to mark a new concept — the metaverse — a thing that doesn’t yet exist and won’t do for a while. But a brave new world is being promoted out there that often borders on science fiction, many are still skeptical.

• Dr. Mohamed Ramady is a former senior banker and professor of finance and economics, King Fahd University of Petroleum and Minerals, Dhahran.

Disclaimer: Views expressed by writers in this section are their own and do not necessarily reflect Arab News' point of view