Author: Jeffrey Gogo, Cryptonews
Translated by: Tim, PANews
Key Points
Four years have passed since Mark Zuckerberg fully bet on the metaverse, and today this concept is listed as one of the biggest failures in the tech industry in recent years.
One of the main reasons for the decline of the metaverse is the rise of generative artificial intelligence.
Despite the overall downturn in the industry, some projects continue to show strong development momentum. Experts point out that this field is undergoing a process of eliminating false participants.
When Mark Zuckerberg articulated his vision for the metaverse in October 2021, the idea of a digital utopia where people could connect and interact in immersive virtual environments seemed achievable.
The billionaire founder believed the metaverse was the next frontier of the internet, and the company immediately began investing billions of dollars to develop the technology needed to realize its metaverse strategic vision.
Zuckerberg even renamed Facebook to Meta to reflect its new strategic ambition to build the metaverse. The metaverse is a virtual world built on virtual reality and augmented reality technologies, where people can interact, work, and create.
Given the massive amounts of money that Meta (which has invested about $46 billion in the metaverse since 2021) and other competitors have poured into this concept, it is hard to imagine why the metaverse has failed to take off.
Once, artists including Sir Elton John and Travis Scott held concerts in the metaverse, while people began to tour cities and visit art exhibitions in virtual environments.
However, four years after CEO Zuckerberg's strategic pivot, the metaverse has become one of the most significant failures in the tech industry in recent years. Due to its failure to deliver on grand promises, the tide of billions of dollars that once flowed into the field has receded, and public interest has plummeted.
According to DappRadar data, the trading volume and sales of metaverse NFT projects in 2024 have fallen to their lowest levels since 2020, with trading volume plummeting 80% year-on-year and sales down 71% compared to the previous year.
Source: DappRadar
AI "Intercepting" the Metaverse
According to experts, one of the main reasons for the decline of the metaverse is the rise of generative artificial intelligence (AI) chatbots, such as OpenAI's ChatGPT and Google's Gemini.
Irina Karagyaur, co-founder and CEO of the BQ9 ecosystem growth agency, told Cryptonews: "Generative AI has achieved instant and scalable business impact."
Karagyaur, who is also a member of the United Nations International Telecommunication Union (ITU) metaverse focus group, further pointed out:
Unlike the metaverse, which requires high infrastructure investment, AI tools represented by ChatGPT, MidJourney, and DALL·E demonstrate immediate usability. Business users and consumers are turning to AI due to optimized automated processes and improved content generation efficiency. The strategic shift in venture capital is particularly significant: capital is flooding into AI startups, while metaverse-related projects are facing downgrades.
Herman Narula, CEO of the metaverse venture incubation agency Improbable, revealed to Cryptonews that AI has played a considerable role in the decline of the metaverse.
He stated that AI technology has taken the spotlight as "the next generation of disruptive technology," leading to a massive shift in attention away from the metaverse. Additionally, this evolution involves multiple other factors.
"The term 'metaverse' has faced criticism for being associated with speculative cryptocurrency hype, where companies raised large amounts of money, sold numerous assets, and made a series of promises that ultimately went unfulfilled," Narula further pointed out:
"More importantly, early versions or prototypes of the metaverse failed to meet expectations, as the closed and limited environments they provided greatly restricted user activities."
After Meta (formerly Facebook) announced its entry into the metaverse, related tokens such as Decentraland (MANA), The Sandbox (SAND), and Axie Infinity (AXS) saw significant price increases.
Now, as doubts about the future of Meta's metaverse dream continue to grow, the prices of related tokens have plummeted amid extremely low daily active user numbers.
Since reaching historical highs in November 2021, the prices of SAND, MANA, and AXS tokens have all fallen over 95% from their peaks. MANA once hit a historical high of $6.96, SAND surpassed $5.20, and Axie Infinity's AXS token even reached a staggering price of about $153.
However, a recent on-chain data analysis from cryptocurrency research firm Glassnode shows that despite the price volatility, "committed holders are steadily increasing their positions" in these three projects.
For example, Glassnode noted that the MANA token has formed a significant accumulation zone around $0.60, reflecting increased market buying activity after the price drop. Similar accumulation patterns are also seen in SAND and AXS tokens.
Glassnode believes: "The ongoing accumulation phenomenon of major metaverse tokens indicates that many investors see these projects as undervalued investment opportunities rather than failure cases."
According to CoinGecko data, as of the time of writing, the native token MANA of the Decentraland platform is currently priced at $0.27, down 2% for the day; the token SAND of The Sandbox platform is down 3.2% to $0.28; and the Axie Infinity ecosystem token AXS is down over 1%, currently at $3.43.
Hardware as a Roadblock
Charu Sethi is an expert in the Web3 field and also the chief ambassador of Polkadot. In an interview with Cryptonews, Sethi stated that the business model of the metaverse was not fully mature when its concept became popular.
"At that time, major brands were launching NFTs and expensive virtual land projects, but very few users were gaining sustained value," she said. "For example, Decentraland and The Sandbox attracted millions of dollars in investment, yet their daily active user numbers have long hovered below 5,000."
Sethi also mentioned that the high prices of high-end virtual reality (VR) and augmented reality (AR) headsets, along with "complex login processes," further hindered the popularity of the metaverse.
Hardware devices are key to enhancing the metaverse experience.
"Therefore, funding and attention have shifted to AI, which can provide immediate returns on investment," she emphasized: "For many businesses, the quick returns brought by AI make the metaverse seem less appealing."
As part of the metaverse race, Meta and Apple have launched VR headsets that allow users to immerse themselves in virtual spaces.
After using these hardware devices, people can do various things in the metaverse through digital avatars: gaming, social interaction, and even virtual office work. However, these types of headsets are somewhat expensive.
The Apple Vision Pro is priced at $3,500, while the Meta Quest 3 headset starts at $500. In contrast, AI tools like ChatGPT offer limited free services, with a $20/month premium version providing unlimited services without requiring users to purchase additional hardware.
ITU metaverse expert Karagyaur pointed out that the VR headset market is stagnating because devices like the Apple Vision Pro and Meta Quest 3 "can only attract niche user groups and have failed to open up the mass consumer market."
She said: "Due to the failure to explore a sustainable profit model, the high investment and high risk in the metaverse field are becoming increasingly difficult to justify."
Kim Currier, market director of the Decentraland Foundation, pointed out that the metaverse is not just about VR/AR hardware narratives. "It creates a virtual space for human collaboration, where users can socialize, explore together, and create new things," she emphasized.
Currier continued: Although the Apple Vision Pro and Meta Quest 3 "have already sparked a wave of innovation, the consumer side will still face the reality that the vast majority of users find it unrealistic to wear headsets all day."
Currier is more interested in how AI and the metaverse can bring real benefits to people, referring to these individuals as "core users of the metaverse."
This Decentraland executive does not view the rise of generative artificial intelligence as "competition," but rather as "an opportunity," stating:
"AI tools can accelerate the construction of virtual worlds, help people track dynamics in real-time within virtual spaces, and make the metaverse experience more dynamic and personalized. It can be said that AI will help the virtual world evolve in ways we have only just begun to explore."
Industry Restructuring
Kim Currier, market director of the Decentraland Foundation, attributes the weakening of the metaverse to: "market bubbles caused by overextended expectations; technological bottlenecks that are hard to break through; and structural changes in the tech industry."
Currier told Cryptonews that the current phase of cooling in the metaverse is actually an industry value reconstruction, and this reshuffling is filtering out loyal builders:
"Like all bear market cycles, this is a major reshuffling of the industry—clearing the market to leave space for loyal builders who will understand the boundaries of the metaverse's role and focus on products that users truly need."
BQ9 ecosystem CEO Karagyaur emphasized that the metaverse is not heading towards extinction but is undergoing a technological paradigm shift—this field is "evolving into AI-powered vertical application clusters based on public demand."
"While the initial hype may have faded, what remains is something more profound: a shift from enterprise-controlled virtual worlds to human-centered, community-driven ecosystems," she elaborated, adding:
"Although industrial applications (such as Siemens and NVIDIA's collaboration in the digital twin field) continue to develop, the real vitality has shifted to platforms like Roblox, Fortnite, and Immortal Worlds. Here, the experiences are shaped by user communities rather than enterprises. These platforms do not sell escapist solutions but empower people to create, connect, and collaborate."
Polkadot blockchain project representative Sethi cited industry data indicating that the gaming platform Roblox will surpass 80 million daily active users in 2024, and this year has set a record with a peak of 4 million concurrent users, continuing to lead in metaverse user engagement metrics.
Epic Games' phenomenon game "Fortnite" maintains strong growth momentum—according to the latest operational data, its user reach per event consistently exceeds 10 million, solidifying its position as a leading platform for social entertainment in the metaverse.
Polkadot blockchain analyst Sethi deeply deconstructed the ecosystem empowerment model of "Fortnite"—through brand strategies that link virtual and real-world experiences with luxury brand Balenciaga and the phenomenon film IP "Star Wars," the platform has successfully built a commercial loop with daily user retention in the millions, demonstrating the ongoing value creation of metaverse IP operations.
Hope in the Darkness
Experts say that Zuckerberg's gamble on the metaverse has turned into a complete disaster. In 2024, Meta's Reality Labs, responsible for developing metaverse products, reported a record operating loss of $17.7 billion.
Meta's official financial report shows that Reality Labs has accumulated losses nearing $70 billion over the past six years. Although Zuckerberg's metaverse blueprint has turned into a mirage, several projects within the ecosystem still show counter-trend growth.
Blockchain data analysis firm DappRadar released the "2024 Annual Gaming Industry Report," highlighting two of the most influential metaverse projects this year: the digital identity protocol Mocaverse and the blockchain gaming platform Pixels, both achieving breakthroughs in user scale and commercial value through differentiated ecosystem building strategies.
Source: DappRadar
The Mocaverse project developed by Animoca Brands launched the MOCA token and a decentralized on-chain identity called Moca ID, attracting 1.79 million user registrations in a short time and successfully integrating with 160 Web3 applications.
The report noted that the project has secured $20 million in funding to expand its ecosystem and launched the Realm Network aimed at "promoting interoperability in gaming, music, and education."
Pixels was first launched in 2022. Last year, this browser-based farm-themed multiplayer online game "gained tremendous attention," with its daily active user count surpassing one million.
The Pixels project has migrated from Polygon to the Ronin Network and integrated its assets known as "Farm Land NFTs" into the Mavis Marketplace.
DappRadar also mentioned some significant developments in Yuga Labs' Otherside metaverse, The Sandbox, and Decentraland. Among them, Decentraland launched a new desktop client, which reportedly "enhanced operational performance and optimized visual effects."
The report pointed out that Decentraland's creator-centric economic system is its "notable feature," allowing creators to retain 97.5% of their sales and earn a 2.5% royalty share on secondary transactions of digital assets—this revenue distribution ratio sets a record for the entire industry.
Despite this, there are still serious shortcomings in certain areas. According to DappRadar's data:
"Due to the lack of 'killer applications' that can drive mass adoption, media attention has declined, and companies that previously invested heavily in the virtual world have shifted their business focus."
Is the Metaverse Declining?
ITU expert Karagyaur stated in an interview with Cryptonews that the success of the metaverse will "depend on integration, not isolation." She explained:
"It can only continue to develop where it can complement existing industries, rather than in areas trying to replace them. The next stage of digital technology development will no longer aim to escape reality but will focus on improving reality itself."
Narula, founder and CEO of Improbable, the company behind Yuga Labs' metaverse platform The Otherside, pointed out that value-driven innovation can save the metaverse. Beyond dazzling visuals, users must possess practical value.
"The metaverse has always been a deeper, more grounded concept rooted in meeting people's basic needs for self-actualization," he said.
"While the 'flashy' Meta investor conference-style metaverse has gradually faded, we are still working on a version that focuses on technology and practical effects," he said.
Narula also mentioned that teenagers and minors "spend a lot of time on gaming platforms like Minecraft, Roblox, and Fortnite, engaging in increasingly complex virtual experiences, economic activities, and even virtual work."
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