Ethereum creator pours cold water on Zuckerberg’s Web3 dreams

Many investors have suspected that Mark Zuckerberg’s metaverse dream is doomed to fail, causing Meta stock to more than halve in the past six months.

Now they have a prominent critic to back them up.

Vitalik Buterin, creator of the Ethereum blockchain that is second only to Bitcoin in total capitalization, said the Facebook founder and his company Meta are jumping the gun with billions of dollars in investments to create products that ultimately may never find a market .

“It’s too early to know what people really want,” he posted on Saturday. “So anything Facebook creates now will be deleted.”

Zuckerberg cannot dismiss Buterin’s criticism lightly, since the latter describes himself as a believer in the postuniverse.

And Buterin has good reason to want to succeed rather than fail. This is because its two signature cryptocurrencies, ETC and then ETH, are expected to facilitate all kinds of commerce in its mixed reality metasystem and decentralized financial system known as Web3.

For now, even Zuckerberg wouldn’t deny that he has a long way to go.

Meta’s fledgling conversion efforts, grouped under the Reality Labs division, posted second-quarter operating losses of nearly $3 billion.

Coupled with a steady decline in profits from its core businesses, Facebook and Instagram, quarterly profitability fell to just 29% from 43% in the previous period. This was Meta’s worst result since it released separate financial data in the fourth quarter of 2020.

Facebook’s Web2 becomes Meta’s Web3

This has raised concerns that the group’s two main cash cows can no longer compete with Chinese rival ByteDance’s hugely popular TikTok app and are now entering a period of managed decline.

Meta’s shares are down 54% since the start of this year versus just a 20% drop in the broader tech-heavy Nasdaq Composite.

Zuckerberg renamed the company from Facebook — which is closely associated with the centralized, commercially driven era of Web2 — in part to demonstrate his commitment to driving future growth in new business areas.

“Given some of the product and business constraints we face now, I feel even more strongly now that the development of these platforms will unlock hundreds of billions of dollars, if not trillions, over time,” he told investors on Wednesday after reporting the first of income. fall.

He acknowledged that building the metaverse would “obviously be a very expensive undertaking over the next several years” and pledged to slow the pace of some related spending and further delay investment.

And while Meta expects third-quarter revenue at Reality Labs to fall sequentially in the second quarter, Zuckerberg confirmed he was confident it would prove to be a “huge opportunity” for the company that was worth the cost.

“It enables deeper social experiences where you feel a realistic sense of presence with other people, no matter where they are,” Zuckerberg explained.

No proven business model

The metaverse may potentially be years away, but companies are already buying virtual property despite the lack of a proven business model.

Yuga Labs recently sought to build on its success as the creator of the Bored Ape Yacht Club collection of non-fungible tokens (NFTs) by launching a demo of its new Metaverse Otherside that attracted 4,500 people last month.

Aside from the complexity of achieving a shared virtual experience in real time, however, it was unclear what would drive engagement beyond financial speculation, for example the value of its Otherdeed NFTs, which are traded on OpenSea.

Most video games already offer stories, quests, and skill trees, and gamers, a potential core audience comfortable living in virtual worlds, are notoriously hostile to attempts to further monetize the space through the unnecessary addition of NFTs.

“I don’t think any of the existing corporate efforts to deliberately create the metaverse are going anywhere,” Buterin wrote.

Meta, meanwhile, is pinning its hopes on this year’s release of Project Cambria, which is expected to be the successor to the Oculus Quest 2 VR headset.

“It will be a high-end device focused on business users and work, with high-resolution color mixed reality,” Zuckerberg said Wednesday. “I think people will be quite surprised by it.”

Both Buterin and Zuckerberg could end up being right about the postuniverse in different ways. It may end up being the cornerstone of future social interaction, but it may not be the Meta that reaps the benefits.

This story was originally featured on Fortune.com

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