The metaverse promised a futuristic, immersive internet where users could socialise, work and play in entirely virtual worlds. But years after the hype, the reality has been more muted.
Virtual reality (VR) headsets aren’t flying off shelves, and companies investing billions are still struggling to make the digital universe profitable. So is the metaverse dead, or could AI breathe new life into it?
Mark Zuckerberg’s Meta Platforms (META), via its Reality Labs division (formerly Oculus VR), has poured tens of billions into virtual and augmented reality development.
Yet recent financials underline the difficulty of turning that vision into profit, because by the end of 2024, Reality Labs had amassed almost $70bn (£52bn) in cumulative losses, and quarterly results have remained weak.
Estimates suggest that Reality Labs’ operating losses run into the billions, while its sales remain in the low hundreds of millions, a stark contrast to the massive capital invested. Developing VR, augmented reality (AR) and hardware remains an extremely expensive undertaking, even for one of tech’s largest players.
Developments in AI, however, could revitalise the concept of the metaverse and make it more commercially viable. By enabling human creators to earn royalties via micropayments when generative AI recombines their work, AI could turn virtual environments into a scalable creative economy.
Ken Jon Miyachi, founder of Bitmind, told Yahoo Finance UK that generative AI is drastically reducing the cost and time needed to build high-fidelity digital environments. Instead of large teams designing 3D assets, characters and narratives, AI can generate them on demand.
Miyachi said this makes the metaverse “less speculative and more commercially viable” and could enhance AR by identifying and adding context to the physical world.
However, he warned that AI alone isn’t enough for mainstream adoption. Robust infrastructure and hardware remain critical, and investors must focus on projects that provide real user utility.
“Investors need to understand how projects leveraging AI are providing real differentiation and user utility. There are security and authenticity risks. As the line between human-created and AI-generated assets blurs, ensuring provenance and trust will be essential. We expect standards like cryptographic watermarking and verification to become part of the metaverse technology stack,” Miyachi said.
David Arnez, co-founder of Inflectiv.ai, said that the healthcare and education sectors are likely to benefit most from major developments in AI and metaverse technology.
In healthcare, AI-driven simulations require private, verified, and contextual data, while in education, adaptive learning environments depend on structured and accurate knowledge bases. Arnez emphasised, “Industries with the flashiest 3D graphics may grab attention, but it’s dependable data that moves industries forward.”
Metaverse content creators could use blockchain technology
Jamie Burke, founder of Outlier Ventures, told Yahoo Finance UK how the fusion of generative AI and web3 infrastructure could streamline content production while ensuring creator ownership and fair compensation.
Burke foresees AI agents recombining human-created digital assets, resulting in a surge of personalised content, with smart contracts securing royalty payments from numerous micropayments in digital currency.
The founder of Outlier Ventures delved into the prospects of merging AI and the creative industry, particularly in the context of the metaverse, and enabling the web “to become immersive”.
With the convergence of web3 and AI, Burke sees a world where each piece of AI-produced content can be repurposed and reused.
He believes this has the potential to transform the economic structure of the creative industry. “What if every asset that’s created becomes a unique [non-fungible token] NFT, and every time that asset is reused or a derivative is made of it, then royalties are paid to the original producer?” Burke posited.
Envisioning the future, Burke suggested that AI, with its ability to access a “universal library of content”, will likely take the role of the primary creator, significantly condensing the media production timeline from years to days or weeks.
This process could “democratise the creative industries” and do for content production, what YouTube did for content distribution.
Burke outlined a new paradigm where royalties are dispensed as micropayments to those who own the assets as NFTs on the blockchain.
He further highlighted the importance of NFTs stored on the blockchain, offering an immutable foundation of ownership for artists and creators.
“The great thing about NFTs is, they can represent provenance. They can allow for a digital asset on a blockchain to be unique in some way, to have unique characteristics. And it will make sure that the owners of that asset are fairly remunerated,” he stated.
Burke then detailed the evolution of content creation in the gaming industry and other forms of media, drawing parallels between their processes and the production of blockbuster films.
“It actually takes the same amount of money, time, and people to create a AAA game as it does a blockbuster movie. It’s hundreds of people. It’s three to four years,” Burke explained. He highlighted the insatiable demand for content and the current limitations of the traditional, industrialised production process.
The future of content creation, according to Burke, lies in generative AI. “We’re already seeing now with things like generative AI the ability to create, end to end, a game leveraging generative AI with one solo creator instructing it,” he said, emphasising that this technology significantly reduces production time.
The intersection between AI, web3 and the metaverse
A report by the World Economic Forum (WEF) said the use of AI could expedite the development of the metaverse.
As the metaverse evolves, these organisations underscore the importance of integrating generative AI to create dynamic and personalised virtual environments, facilitating collaboration and understanding.
The integration aims to speed up metaverse development, moving us toward a future where generative AI creates virtual worlds in real time and blockchain guarantees fair compensation for creators through unique NFTs.
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