The Elephant in the Metaverse
A lot has already been written about the metaverse and to avoid rehashing, I first recommend Matthew Ball’s excellent articles on the subject - The Metaverse: What It Is, Where to Find it, Who Will Build It, and Fortnite (Jan 2020) and his Metaverse Primer (updated Jun 2021) for those who want more breadth and depth. To clumsily summarise, the metaverse spans physical and virtual worlds, contains a fully fledged economy, provides interoperability (users can take assets like avatars and goods from one place in the metaverse to another, regardless of who runs which part of it), and is operated by many different players in a decentralised way (i.e. no one company will run the entire metaverse).1
Some of the above characteristics have been around for some time - augmented/virtual reality, virtual worlds (and economies) in games and more recently cryptocurrencies enabling decentralised economies - so what’s new here that warrants us wrapping it all in the term “metaverse”? I think a helpful framing is to see the metaverse as an interoperable system of spaces in which users experience content and participate in activities individually or collectively, concurrently and synchronously, while maintaining a consistent identity or set of identities across them. Based on this framing, many of the components of the metaverse already exist, mediated through a variety of screens and devices, and some of us are almost already living in it (or spending 33% of our lives in it), but some key areas are still missing to truly call it a metaverse. Within each of these lie investible propositions worth looking out for.
Spaces. These are the diverse platforms through which users experience content and participate in activities concurrently and synchronously - game worlds (from multiplayer PC/console/mobile games like Fortnite and Roblox to blockchain games like The Sandbox), virtual/mixed reality platforms mediated through hardware like Oculus and augmented reality glasses, and even live streaming platforms like Twitch and Tiktok - as well as the virtual experiences built on top of these platforms - virtual events like Fortnite concerts by musicians via in-game avatars and effects, virtual activities like Supernatural’s VR fitness, and services that entail or enable the experience of persistent presence like Facebook’s Infinite Office. The growth of the metaverse will require a diversity of platforms and virtual experiences for people to engage in valuable productive and recreational activities, and not a single platform but a universe of connected platforms. As these spaces proliferate, a secondary area of opportunity is in tools for the creation of experiences on top of these platforms.
Identity. These are the profiles, avatars, virtual characters and embodied presences through which we present ourselves in the metaverse. New expressions of identity enabled by platforms of the metaverse will need new ways of creating, enhancing and interacting with those identities, e.g 3D virtual avatars like Codemiko controlled by real-life twitch streamers or created with synthetic media (using deepfakes to mirror the user’s actions/voice), and even Non-Fungible Tokens (NFTs) as profile pictures. Just as we have a persistent identity in the physical world (even if our professional, social, familial, etc. identities may be subsets of said identity), I think interesting opportunities are unlocked by having a similar persistent identity across the metaverse, partly because persistent (or at least correlated) and verifiable identity is needed to verify ownership of assets across different platforms. I’m not referring to single sign on or unified authentication here, but some way to understand (and for others to interact with) one’s virtual identity as the collection of overlapping identities/profiles across the diverse interconnected platforms that form the metaverse. The question of “How do we handle identity?” in the metaverse is still an open one, but I think your crypto wallet address may be part of the answer.
Interoperability. This is the ability to take identity and assets from one platform in the metaverse to be used in another, regardless of who owns each platform. It also extends to the ability of platforms to communicate and interact with one another. This is what makes the metaverse bigger than each individual virtual world. For interoperability to be really impactful, (a) assets need to be owned by users (who may be creators or simply owners) separately from the platform (so that said owners are free to use those assets on any platform), (b) we need an easy way to transfer or deploy assets from one platform to another, and (c) these assets need to have some utility on more than one platform. Today, conventional user-generated content platforms and game worlds own the assets created, uploaded or purchased on their platforms and users aren’t free to transfer or use those assets on another platform (e.g. an avatar skin from one proprietary game world can’t be used in another).
Blockchain and NFTs potentially offer a solution to interoperability because once a digital asset is tokenised as an NFT, it can be verifiably owned by a user separately from any platforms, and NFT marketplaces enable transfer of ownership of these assets between users. But beyond that, much of the interoperability is still missing - many blockchain games or virtual worlds are built as separate virtual worlds that allow users to own assets, but those assets can’t be meaningfully deployed or used on other platforms yet, and the way these separate virtual worlds have been developed so far make it non-trivial to support integration and use of assets from other virtual worlds.
This is what I think is the elephant in the metaverse - the lack of interoperability across platforms. This is also where I think the next stage of development and investible opportunities lie - propositions that facilitate interoperability such as protocols, development frameworks, tools and pipes to connect spaces, identities and utility of assets across platforms in the metaverse, as well as platforms that make it easy to interoperate and integrate user-owned assets from other platforms. When we create interoperable assets, we should consider functionality that can be applied to more than one virtual world, and when we make virtual worlds, we should build functionality to integrate and support usage of assets from other virtual worlds. But this isn’t easy. How do you deal with overpowered weapons or different avatar designs that don’t “fit” in your game world and might break the game in terms of aesthetics, balance and fairness? How do we solve not just for ownership and trading (which we can do with NFTs and NFT marketplaces), but also appropriate integration and usage of user-owned assets across metaverse platforms? What are the meaningful forms of such interoperable usage? Until we make progress in this direction, we’re just building separate metaverses, which makes as much sense as building separate Internets.
This brings us to the long game - I think the leap to the metaverse is the next step in our earlier transition from separate computers and the applications installed on them, to networks of computers with web applications running on and across them. Protocols of the metaverse including blockchains like Ethereum will enable the leap from separate virtual worlds to connected virtual worlds with interoperable assets, ownership and identity spanning across them, enabling us to navigate, negotiate and operate across these spaces. Interoperable, tradable and ownership-authenticated digital assets (NFTs) are the glue of the metaverse. While interoperability is still the missing link2, solving this will bring us a step closer to the real promise of the capital-M “Metaverse.”
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The common vision of a persistent embodied presence in a virtual world, an embodied internet - “instead of just viewing content, you are in it,” as Mark Zuckerberg puts it - may emerge as one flavour of virtual world in the metaverse, but doesn’t have to be the only flavour.
Also keep in mind the question of how protocols for interoperability will be set - by decentralisation or consortium standards.