To get the best out of the metaverse, Hong Kong needs long-term vision

Through the metaverse, Hong Kong can overcome the economic challenges of Covid-19 and land restraints, create new business models and offer the young social freedom
But first, it needs to focus on development and building substance with a long-term outlook

Adam Au

Published: 6:45am, 2 Feb 2022

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Switzerland last year began to accept non-fungible tokens (NFTs) on its new digital exchange platform. Initially spurned as a bubble, NFTs are now expanding their frontiers across the cryptocurrency community and the mainstream alike.

NFTs are the harbinger of a new digital era in the form of the metaverse. In principle, the metaverse is a virtual-reality space in which users can interact in a programmed environment. Incorporating virtual and augmented reality to simulate real-life experience, the concept has been dubbed the newest iteration of the internet, or “Web 3.0”.

NFTs and the metaverse are interconnected. In a metaverse, participants can showcase and trade digital forms of art and property using blockchain-backed NFTs.

The metaverse is entering the peak of its hype cycle. Its value is estimated at US$1 trillion, according to digital currency investor Grayscale. One business opportunity involves the buying and selling of digital real estate built on decentralised platforms. Such virtual land will allow digital identities or avatars to live, work and interact with each other.

People have been receptive to the idea of the metaverse. Hong Kong’s biggest names, such as New World Development’s Adrian Cheng and PwC, both early investors, have lent credence to the metaverse’s social and financial potential.

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But what about accessibility for the public? What will the upside be for other Hong Kong entrepreneurs?

For one, the metaverse will help fulfil the younger generation’s desire to break the mould of socially constructed identities and restricted mobilities. The quixotic wish can now be achieved in an alternative, albeit digital, universe with no government interference or favouritism.

By stretching the corners of the internet into a four-dimensional environment of virtual reality, enterprises can create new business models that enhance interoperability with the real world. Participants can also benefit from such immersive experiences.

The metaverse brings together the playability of blockchain gaming, the connectiveness of social media and true digital asset ownership through NFTs to its participants.

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Once the metaverse fully unfolds, participants can develop new identities (or even genders) like video game avatars, to create and trade digital assets such as music, art, fashion items and real estate. That leads us to the next benefit: it provides an alternative to our overdependence on limited physical space in Hong Kong.

The resurgence of Covid-19 has tamed the tentative optimism of a return to economic normality as we continue to experience partial lockdowns. Dozens of concerts and theatre performances have also been cancelled or postponed due to Omicron.

What if these events could switch to a digital avatar-based concert? In the US, Justin Bieber recently performed a virtual concert using his own avatar in a motion-capture suit.

This is another advantage of utilising digital land – it is immune from the contagion that continues to wreak havoc and redefine normality. The paradigm shift brought on by the metaverse might help explain the hype around virtual property transactions in recent months.

Further, taking part in the open metaverse ecosystem grants more opportunities than mere digital ownership. As the metaverse narrative begins to catch on with a younger demographic, it will enable access to and the creation of a new class of assets.

For example, blockchain-based games – like traditional video games – give players ownership of in-game achievements. Players can monetise in-game items, such as the wearables of their avatars or digital land plots, to trade with other players.

Monetisation encourages participation and fosters a sense of belonging, which further boosts innovation to create items for sale. It’s a self-reinforcing cycle.

Even if a person does not initially have money for purchases, he or she can work in the metaverse. If that person finds a market, it will give them a new identity. This prospect will change the dynamics of living and working for a new generation that interacts with the metaverse.

Nearly all Hong Kong-based entrepreneurs identify rents as the major challenge to doing business. Perhaps the excitement inspired by the metaverse can be a segue to not only tokenise non-traditional assets like real estate and art, but also invite local talent to innovate without the constraints of land and space, and most relevant now, Covid-19.

Unlike the real world, the metaverse is built on an air of accessibility. The endorsement of high-profile athletes and celebrities has made the concept even more consequential. While still in the early stages, it presents numerous potential social and financial opportunities.

This is not to say it is flawless. Just like any online-enabled communication application, technology barriers, erosion of human relationships and privacy issues are all roadblocks. If our history with technology is anything to go by, these problems are likely to be transient. Our focus should be on building substance, on development and a long-term vision.

The convergence between the virtual and real worlds might have seemed like science fiction a little over a year ago. When it comes to NFTs and the metaverse, we should look to use its accessibility and economic opportunities. We should assess how our economy might benefit from it. To thrive in such an environment, we must all learn to adapt, as we have through the pandemic.

Adam Au is the head of legal at a Hong Kong-based health care group