Technology has become a part of life that allows various activities to develop by exploring new things that did not exist before. This disruption is found both in interactions between people through social media and in economic activities that are rapidly increasing through e-commerce platforms.
Unfortunately, amid these advances, there are limitations of Web 2.0 technology as the basis for the development of the current digital economy. In Web 2.0, social interactions still depend on the intermediary function through social networking service providers such as Facebook, Twitter, etc. In contrast, economic transaction activities depend on e-commerce platforms or financial technology (fintech) for payment transactions. This intermediary brings together sellers and buyers, provides payment services, and curates information content and user profiles.
So one of the weaknesses of the centralized internet Web 2.0 is the inability of users to control personal data, which gives rise to the exploitation of these data for corporate interests behind the personalization of services that sometimes look free. With the support of massive user data, large corporations such as Apple, Microsoft, Google, Facebook, and Amazon get many data as new oil takes advantage of its role in a two-sided market where personalization of services allows data aggregation from users. To then be monetized directly or indirectly.
This gap then gave birth to Web 3.0-based internet technology which is the next evolution of Web 2.0. This technology offers end-to-end digital asset transaction capabilities where users have the authority to control personal data. This technology is built on the foundation of Blockchain technology which allows digital peer-to-peer registration, which records and stores transactions between parties where each party has access to transactions recorded in a ledger. Furthermore, this recording allows the information chain (or transaction) to be stored chronologically and permanently. Although blockchain is more associated with crypto money in Indonesia, globally, this technology is used in logistics, land ownership certification, and other functions.
In web 3.0, Blockchain technology requires users to have a digital wallet representing identity in sending money (cryptocurrency) or assets (crypto assets) directly without intermediaries such as banks. Thus, users’ privacy is maintained where the nature of all transactions or data recording is transparent. This transparency also supports increased trust between entities within a community or society.
Metaverse in Web 3.0 is the next evolution of the current Internet. With this technology, users get a more profound experience where the boundaries between digital and analog spaces will be increasingly blurred. The Metaverse is interesting because the idea of ??a world and the concept is different from the real world. It is allowing monetization opportunities from the birth of more sophisticated social interactions.
Metaverse is driven by two technological development factors: the frontend (display) factor is the evolution of the gaming industry, such as the use of Augmented Reality-Virtual Reality (AR/VR), and the backend factor is the massive implementation of blockchain technology. Metaverse citizens interact and play like playing games (gamification), building the world collectively through the play-to-earn mechanism. Not only through physical development but also through government development using the mechanism for achieving consensus through voting.
Social regulatory agreements are recorded in smart contracts, analogous to laws that apply in the real world and law enforcement tools. If there is a violation, the smart contract will automatically remove the infringing actor or entity from the metaverse world. Economic activity also gets an essential share along with increasing social interaction. In this case, cryptocurrency and crypto assets represent money and goods in the Metaverse.
In addition, the Non-Fungible Token (NFT) will act as a certificate of ownership of digital goods. The buying and selling of artworks through NFT on platforms like Opensea NFT are also used in the Metaverse. Crypto assets in the form of NFT will be used as a representation of goods and land ownership in the real world. The younger generation familiar with role-playing games will have the opportunity to actualize the opportunity to build a metaverse world as they do on video game devices. The difference is that they will enjoy the monetization of their activities through this Metaverse.
The explosion of this technology will lead to a tremendous increase in economic value. Currently, the Indonesian digital industry’s gross-merchandise value (GMV) has been recorded at 70 billion USD in 2021 and is projected to reach 146 billion USD by 2025. This value is equivalent to the combined GMV of Thailand, Vietnam, and Malaysia. Metaverse enables a much more explosive economic value both directly and indirectly with a wide range of innovation possibilities.
Directly, economic value will be boosted by the increasing need for hardware and software in forming the metaverse ecosystem. Data from Fitch connect shows that up to 2021, Indonesia has had an extraordinary increase in IT equipment spending: covering software of 35 billion USD and hardware of 55 billion USD. The cost for cloud shopping needs has also increased sharply to 30 billion USD in 2021 and is predicted to increase to 125 billion USD in the next five years. The need for IT infrastructure will have a tremendous multiplier impact, primarily if it is driven by backward and forward linkages from the domestic industry. Suppose we refer to the most conventional calculation that the multiplier coefficient of the IT sector is two, according to research by Raul Katz in 2010. In that case, this figure is sufficient to justify that for every Rp. 1, the demand for IT products above will double the economic value of Rp. 2.
Furthermore, indirectly the formation of economic value will also be driven by the birth of digital assets created in a decentralized manner, such as NFTs and blockchain-based cryptocurrencies. Based on data from the Commodity Futures Trading Regulatory Agency (CoFTRA), currently, there are 7.5 million Indonesians transacting crypto compared to 2020, which only reached four million people. Regarding volume, the value of crypto transactions has reached IDR 478.5 trillion as of July 2021, which is quite a substantial amount equivalent to 6% of Bank Indonesia’s money supply (M2) of IDR 7572 trillion as of November 2021.
The key to this digital transformation of Metaverse will lie in the readiness of the community to remain aware of the potential costs and benefits of each investment option they will make in Metaverse, as they would when they invest in a conventional investment portfolio.
Note: This article has been published in Koran Kontan, Issue 1 March 2022