Key Takeaways:
Four years since Mark Zuckerberg pivoted to the metaverse, the concept is now being counted among tech’s biggest fails in recent memory.
One of the main reasons for the decline of the metaverse is the rise of generative AI.
Despite the slump, some projects continue to thrive, with experts saying the sector is shedding pretenders.
The idea of an alternate digital utopia where people could connect and interact in immersive virtual environments sounded like a done deal when Mark Zuckerberg shared his vision for the metaverse in October 2021.
The billionaire Facebook founder billed the metaverse as the next frontier of the Internet, and the company began to spend billions in developing the technology it needed to achieve its then-newly-found strategic vision.
Zuckerberg even renamed Facebook to Meta to reflect his new focus on building the metaverse, a virtual world where people can interact, work, and create using technologies like virtual and augmented reality.
With the amount of money that Meta [the company has invested about $46 billion in the metaverse since 2021] and other competitors spent towards the idea, it was hard to imagine how it would not take flight.
At one point, artists, including Sir Elton John and Travis Scott, hosted concerts in the metaverse, while people also toured cities and attended art exhibitions in virtual environments.
But four years after Meta CEO Zuckerberg’s strategic shift, the metaverse has become one of tech’s biggest failures in recent memory. Unable to meet its lofty promises, the billions that once flowed into the sector have dried up, and public interest is down badly.
According to DappRadar, in 2024, trading volume and sales counts for metaverse NFT projects reached their lowest levels since 2020, with volumes slumping 80% and sales crashing 71% from a year earlier.
AI Encumbered 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.
“Generative AI delivered immediate and scalable impact,” Irina Karagyaur, cofounder and CEO of ecosystem growth agency BQ9, told Cryptonews.
Karagyaur, who is also an expert contributor to the United Nation’s International Telecommunications Union (ITU) Focus Group on the Metaverse, added:
“Unlike the metaverse, which demanded expensive infrastructure, AI-based tools – ChatGPT, Midjourney, and DALL·E – offered instant accessibility. Businesses and consumers gravitated toward AI for automation, content generation, and efficiency gains. The shift in venture capital was decisive: funding flowed into AI startups, deprioritizing metaverse initiatives.”
Herman Narula, CEO of metaverse venture builders Improbable, told Cryptonews that AI played some role in the metaverse’s demise.
He said the technology captured “the spotlight as the ‘next big thing,’ diverting attention away from the metaverse.” There were other factors, too.
“The word ‘metaverse’ took some heat for being tied to speculative crypto hype, where companies raised significant capital, sold a lot of assets, and made promises that ultimately went unfulfilled,” Narula said, noting:
“More importantly, early versions of the metaverse, or proto-metaverses, failed to live up to expectations, offering closed, limited environments that restricted user activities.”
Major metaverse-focused projects such as Decentraland (MANA), The Sandbox (SAND), and Axie Infinity (AXS) rose sharply after Meta entered the scene.
Now, as questions swirl over the future of Meta’s dream, the token prices have crashed amid reports of extremely low daily active users.
SAND, MANA, and AXS have all slumped by over 95% each since their November 2021 highs. MANA peaked at $6.96, SAND at over $5.20, and Axie Infinity at about $153.
But a new analysis of on-chain data from crypto research firm Glassnode shows that despite the price volatility, “holders with strong conviction are steadily increasing their positions” across all three projects.
For example, Glassnode says a significant supply concentration formed around $0.60 for MANA, reflecting increased buying activity following a price drop. Similar accumulation patterns are true for SAND and AXS, too.
“The continued accumulation across major metaverse tokens indicates that many investors see these projects as undervalued opportunities rather than failures,” the firm noted.
At the time of writing, MANA, the native token of Decentraland, is trading at $0.27, down 2% on the day, per CoinGecko data. The Sandbox’s SAND fell 3.2% to $0.28, and Axie Infinity’s AXS lost more than 1% to $3.43.
Expensive Gear Deters Metaverse Adoption
Charu Sethi is a Web3 expert and a principal ambassador at decentralized proof-of-stake blockchain Polkadot (DOT). In an interview with Cryptonews, Sethi said the business case for the metaverse was not fully developed at the time it gained popularity.
“Brands rushed in with NFT-driven concepts and expensive virtual land, but few users found lasting value,” she said. “For instance, Decentraland and The Sandbox, despite attracting millions in investments, often hovered below 5,000 daily active users.”
Sethi spoke about how high-end virtual reality (VR) and augmented reality (AR) headsets as well as “complex logins further deterred adoption.”
The hardware is key to adding a sense of reality to the metaverse experience.
“As a result, money and attention shifted to artificial intelligence, which provided an immediate return on investment (ROI),” she said, stressing that the quick wins from AI “overshadowed the metaverse” for many enterprises.
As part of the metaverse race, Meta and Apple introduced VR headsets to allow users to immerse themselves in virtual spaces.
Using the hardware, people can do all kinds of stuff in the metaverse, including gaming, social interaction, and even virtual work, all through their avatars. The headgear is costly.
Apple’s Vision Pro costs $3,500, and Meta’s Quest 3 headset starts from $500. That compares with AI tools such as ChatGPT, which are free for limited use. Premium users pay just $20 per month for unlimited use without any additional hardware purchases.
Karagyaur, the ITU metaverse expert, said virtual reality headset adoption has lagged because gadgets like Apple Vision Pro and Meta Quest 3 only “attracted niche users rather than mainstream consumers.”
She stated:
“With no clear path to sustainable revenue, the metaverse’s high-cost, high-risk model became increasingly difficult to defend.”
For Kim Currier, head of marketing at the Decentraland Foundation, the metaverse isn’t just about VR and AR. “It’s about creating shared virtual spaces where people can connect, explore, and build together,” she says.
Currier told Cryptonews that while Apple’s Vision Pro and Meta Quest 3 have “sparked new conversations around immersive tech, most people aren’t looking to wear a headset all day.”
She’s more excited about how AI and the metaverse could bring real benefits to people, whom she describes as “the heart of the metaverse.”
The Decentraland executive does not see the rise of generative artificial intelligence as “competition” but rather as an “opportunity,” saying:
“AI-powered tools can make world-building faster, help people find what’s happening in virtual spaces, and make metaverse experiences feel more dynamic and personalized. If anything, AI is going to help virtual worlds evolve in ways we’ve only started to tap into.”
Shedding Off Pretenders
Currier blamed the decline of the metaverse on what she called “a mix of overinflated expectations, technical limitations, and shifts in the broader tech landscape.”
According to Currier, the current slump is a much-needed reset to separate opportunists from real value builders, telling Cryptonews:
“Like any bear market, this was a reset – one that left space for the real builders to step in, learn from what didn’t work, and focus on creating experiences that actually resonate with people.”
Karagyaur, the CEO of the BQ9 ecosystem agency, noted that the metaverse isn’t disappearing—it is “evolving into a set of AI-enhanced, domain-specific applications,” responding to public interest.
“While the initial hype may have faded, what remains is something far more meaningful: a shift from corporate-controlled virtual worlds to community-driven ecosystems to humans,” she detailed, adding:
“Industrial applications, such as Siemens and NVIDIA’s work with digital twins, continue to grow, but the real energy is in platforms like Roblox, Fortnite, and Somnium Space, where communities—not companies—are shaping the experience. These platforms don’t sell an escape from reality; they empower people to create, connect, and collaborate.”
As Polkadot’s Sethi pointed out, gaming platform Roblox surpassed 80 million daily active users in 2024 and reached a peak of four million concurrent players this year.
Epic Games’ online video game Fortnite continues to grow, attracting an average of 10 million users per event.
Part of Fortnite’s winning formula, says Sethi, comes from tapping into commercially successful brands like Balenciaga and Star Wars, which she estimates keeps over one million players returning daily.
Not All Doom and Gloom
Zuckerberg’s big bet on the metaverse has been a complete disaster, experts say. In 2024, Reality Labs – the Meta arm responsible for developing metaverse products – reported a record operating loss of $17.7 billion.
Over the past six years, Reality Labs’ total losses are close to $70 billion, according to the latest earnings data. However, while Zuckerberg’s plans appear to have gone up in smoke, some projects continue to thrive.
DappRadar’s 2024 Games Report highlights two metaverse projects it says made a strong impact during the year: Mocaverse and Pixels.
Mocaverse, a project by Animoca Brands, brought the MOCA token and an on-chain decentralized identifier called Moca ID, amassing a quickfire 1.79 million registrations and integration with 160 web3 applications.
The project secured $20 million in funding to expand its ecosystem and launched the Realm Network, “promoting interoperability across gaming, music, and education,” the report says.
Pixels originally launched in 2022. Last year, the browser-based farming multiplayer online game “gained significant traction,” surpassing one million daily active users.
Pixels moved from Polygon to the Ronin Network, integrating its so-called Farm Land NFTs into the Mavis Marketplace.
DappRadar also mentioned some notable developments at Yuga Labs’ The Otherside Metaverse, The Sandbox, and Decentraland, which launched a new desktop client that reportedly “delivers improved performance and better visuals.”
Decentraland’s creator-first economy remained “a standout feature,” said the report, with creators retaining 97.5% of their sales and earning 2.5% royalties on secondary sales – the highest revenue share in the industry.
Still, something is woefully missing. According to DappRadar:
“The absence of a ‘killer app’ capable of driving [metaverse] mass adoption led to reduced media attention and a pivot in focus among companies that had heavily invested in virtual worlds.”
Wither the Metaverse?
The success of the metaverse will “depend on integration, not isolation,” Karagyaur, the ITU expert, told Cryptonews. She explains:
“It will survive where it complements existing industries, not where it attempts to replace them. The next phase of digital evolution will not be about escaping reality—it will be about improving it.”
Improbable founder and CEO Narula, whose company built Yuga Labs’ The Otherside Metaverse, said value-driven innovation can rescue the metaverse. Beyond the flashy aesthetics, there must be utility for the user.
“The metaverse has always been a deeper, more grounded concept, rooted in meeting people’s fundamental need for fulfillment,” he said.
“While the ‘flashy’ Meta-investor-call metaverse has faded, the brass tacks version we’re working on and building tech for remains strong.”
Narula added that “tweens and teens” spend a lot of time on gaming platforms like Minecraft, Roblox, and Fortnite, engaging in “increasingly sophisticated experiences, participating in economies, and even holding virtual jobs.”
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