“Metaverse Masterclass” is a series of reports, articles and interviews from experts around different topics in Metaverse. This is an article by Naomi Oba, originally published on Minima.

The Web is constantly evolving. Web 1.0, for the first time, made information available to anyone to access with nothing more than an internet connection. Web 2.0 brought tremendous improvements in usability, the richness of experience, and more importantly, turned everyone into a potential content creator.

Thanks to Web 2.0 platforms, we stayed connected with our friends, even during lockdowns, and could order anything from wall art to hardware wallets from the comfort of our living room — Delivered straight to our door. What’s not to love?

The downside of the convenient Web 2.0 we’re enjoying is that we’re constantly tracked. Google knows our most intimate worries, Instagram (or is it also now Meta?) knows that you’ve been stalking your ex, and Amazon knows all the things you’ve ordered. All this information together gives them a reasonably accurate idea of what you might be likely to buy, which is what advertisers pay for.

Our data is harvested and monetized without any benefits to ourselves. Consumers are slowly waking up to the implications; as an IRS survey indicates, only 17% of participants found personalized ads ethical.

In recent weeks, we’re seeing Big Tech starting to hijack a term that’s been used by crypto enthusiasts for a while: Web 3.0. Microsoft is planning to establish Excel tribes (VFOOKUP)in it, and Facebook’s rebranding is trying to turn it back into a cool, Metaverse company.

That’s not the Web 3.0 we meant, nor the one we want to see come to fruition.

The Semantic Web

Even before Bitcoin, Tim Berners-Lee, the inventor of the world wide web, spoke of a new iteration of the Web (3.0), which he coined the Semantic Web. When talking of the Semantic Web, he referred to a version of the Web that is more open, smarter, and more autonomous. All the things that our current Web 2.0 has lost.

Semantic is a term from linguistics that is defined as “relating to the meanings of words or phrases.”

In the semantic Web, machines would process content in humanlike ways and enhance user experience and connectivity. This semantic Web hasn’t entirely happened yet. Ten years ago, we might have thought that by now, AI would be able to communicate and completely understand humans, but we’re not there yet.

How would a machine know the difference between Jaguar (the car) and Jaguar (the animal)? For us, when used in a conversation, it’ll be obvious, but for a machine, it’s not. Building AI that grasps these taxonomies and concepts on every word is complicated. Just ask the team at IBM how it’s going with their AI assistant Watson.

So if Web 3.0 is not the semantic Web as envisioned by Tim Berners-Lee, what is it?

Features of Web 3.0

Web 3.0, despite having been mentioned over a decade ago, still is not a clearly defined term. Britannica features an article on Web 2.0 that refers to Web 3.0 but lacks an article on it. A pattern repeated across other encyclopedias.

While there might not be a unified definition yet, Web 3.0 has a set of features that set it apart. Crypto plays a significant role in Web 3.0, but it’s a lot more than just value transfer.

• Open: The new Web is built from scratch on open-source software. That means anyone can develop on top of it, contribute, propose changes and add new features. The entire development cycle happens in plain sight — a level of transparency unheard of by Web 2.0 companies.

Interesting fact: In 2021 100% of the top 500 supercomputers are running on Linux, an open-source operating system

• Trustless: Web 3.0 is a network that allows users to interact trustlessly -without a need to disclose their identity. They can choose to interact privately or in public. Instead of trusting one party explicitly, trust is now placed implicitly into all nodes holding up the network.
• Permissionless: In 2020, India shut down access to the internet for millions of its citizens 109 times — despite an increase in demand triggered by the pandemic. Media Outlets such as the New York Times are blocked for Chinese citizens, and Social Media Platforms tend to censor accounts that they find critical. The new Web 3.0 is the complete opposite. Anyone can participate without any authorization whatsoever from governing bodies or other traditional gatekeepers.
• Ubiquitous connectivity: This is the part where the semantic Web comes into play again. It can be seen as a part of Web 3.0 — the part in which information is more connected thanks to semantic metadata. Data can be accessed from anywhere, at any time, without relying on centralized cloud providers such as AWS or GCP.
• 3D graphics: Three-dimensional designs will create a more realistic engaging cyber-world (also dubbed the Metaverse) that creates new business opportunities and could blur the lines between the real and the digital world.

Trustless, permissionless, open — sounds like Blockchain? Yes, it is. Blockchain will be the backbone of Web 3.0, among other technological components.

What powers Web 3.0?

Chris Dixon, General Partner at az16, believes that Web 3.0 is just around the corner (Source). This is primarily down to the technological advancements we’ve made in the last few years. Web 3.0 relies heavily on Edge Computing, Blockchain, and AI & Machine Learning.

Edge Computing

In 2019, every second, 127 new devices were connected to the internet for the first time. We don’t just have smartphones anymore. We have entire smart homes now. All these devices create a tremendous amount of data. The traditional approach to analyzing such data would be to send it to a centralized data center. However, Web 3.0 is pushing computing to the edge of the network.

Edge Computing works on a decentralized approach by processing data closer to the point where it’s generated. Already by 2025, 75% of data will be processed outside the traditional data center or cloud, according to Gartner’s estimates.

Processing data on your device is great but even more vital in combination with the next component of Web 3.0: Blockchain & tokens.

Blockchain & Tokenization

Public, permissionless blockchains underpin Web 3.0 and enable data generators for the first time to be fully in control over the data. Similar to how edge computing pushes the act of computing to the edge of the network, tokenization empowers participants at the margin.

Suddenly, it’s not the Big Tech platforms in control anymore, but all the individuals making up the network. With Tokens, every user gains property rights to the things they purchase and create online. Non-fungible tokens are a perfect fit for unique assets and IDs.

Cryptocurrencies, as natively digital currencies that function without a central entity controlling their supply, are the payment network for Web 3.0. With cryptocurrencies, users can transfer value without the need for middlemen, often at a fraction of the cost of using centralized institutions.

AI & Machine Learning

Artificial Intelligence and Machine Learning are already employed by most Web 2.0 platforms today. Just think of the LinkedIn chat that suggests answers to your messages. These are generated based on machine learning, AI use in everyday life. While sometimes far off, at times it’s quite convenient to be able to just click on “Thanks, you too”, instead of typing it all out.

On Web 3.0 AI will play a role in making this version of the web more intelligent, and powerful in regards to processing information. It will enable machines to better interpret what the meaning behind data is, and deliver a smarter user experience. Accessing data on top of decentralized structures could provide powerful predictions on things that go way beyond targeted advertising into areas like drug design and climate modeling. We already see companies like Ocean protocol explore ways to train AI without exposing the underlying data owner’s privacy.

Together, these technologies build the backbone of Web 3.0. At this point, we’re just scratching the surface of Web 3.0, but it could bring vast improvements once truly established.

Why we want Web 3.0

So far you might wonder, what the benefits are that Web 3.0 will bring along, and why we should care.

• Disintermediation: no more paying to rent-seeking middlemen, no more reliance on Big Tech for your livelihood, or even just your social life
• Resilience: A truly decentralized Web 3.0 built on the back of blockchain can’t be shut down.
• Access: Regardless of gender, income, and demographics, anyone will be able to access Web 3.0. You won’t need a government-issued ID to access Web 3.0 services. Your decentralized ID (your history on Web 3.0) becomes your ID.
• Power to the people: your data is going to be yours on Web 3.0. Instead of being tracked down, organizations will come to you and offer to pay you to access your data. You will be able to monetize assets you previously couldn’t. With Brave, we already see how this could play out in advertising. You get paid to watch ads; your attention is valuable.

Overall, Web 3.0 tackles many of the problems we face when interacting with Web 2.0, where we’re often the product and not in control of what happens with our data. Web 3.0 will entirely shift how we think and interact with web services. It’s a more human-centric Web, with native money that enables anyone to start entering transactional relationships with others all over the world.

For Web 3.0 to deliver on the above benefits, we must build it on truly decentralized networks. Networks in which everyone is equal, and no one player has the power to shut others down. There is no space for big conglomerates in Web 3.0 unless they give up control.

Web 3.0, when done correctly, could be a return to the original web. A web where “no permission is needed from a central authority to post anything…there is no central controlling node, and so no single point of failure…and no “kill switch” (Tim Berners-Lee, 2021).

The Web is constantly evolving. Web 1.0, for the first time, made information available to anyone to access with nothing more than an internet connection. Web 2.0 brought tremendous improvements in usability, the richness of experience, and more importantly, turned everyone into a potential content creator.

Thanks to Web 2.0 platforms, we stayed connected with our friends, even during lockdowns, and could order anything from wall art to hardware wallets from the comfort of our living room — Delivered straight to our door. What’s not to love?

The downside of the convenient Web 2.0 we’re enjoying is that we’re constantly tracked. Google knows our most intimate worries, Instagram (or is it also now Meta?) knows that you’ve been stalking your ex, and Amazon knows all the things you’ve ordered. All this information together gives them a reasonably accurate idea of what you might be likely to buy, which is what advertisers pay for.

Our data is harvested and monetized without any benefits to ourselves. Consumers are slowly waking up to the implications; as an IRS survey indicates, only 17% of participants found personalized ads ethical.

In recent weeks, we’re seeing Big Tech starting to hijack a term that’s been used by crypto enthusiasts for a while: Web 3.0. Microsoft is planning to establish Excel tribes (VFOOKUP)in it, and Facebook’s rebranding is trying to turn it back into a cool, Metaverse company.

That’s not the Web 3.0 we meant, nor the one we want to see come to fruition.

The Semantic Web

Even before Bitcoin, Tim Berners-Lee, the inventor of the world wide web, spoke of a new iteration of the Web (3.0), which he coined the Semantic Web. When talking of the Semantic Web, he referred to a version of the Web that is more open, smarter, and more autonomous. All the things that our current Web 2.0 has lost.

Semantic is a term from linguistics that is defined as “relating to the meanings of words or phrases.”

In the semantic Web, machines would process content in humanlike ways and enhance user experience and connectivity. This semantic Web hasn’t entirely happened yet. Ten years ago, we might have thought that by now, AI would be able to communicate and completely understand humans, but we’re not there yet.

How would a machine know the difference between Jaguar (the car) and Jaguar (the animal)? For us, when used in a conversation, it’ll be obvious, but for a machine, it’s not. Building AI that grasps these taxonomies and concepts on every word is complicated. Just ask the team at IBM how it’s going with their AI assistant Watson.

So if Web 3.0 is not the semantic Web as envisioned by Tim Berners-Lee, what is it?

Features of Web 3.0

Web 3.0, despite having been mentioned over a decade ago, still is not a clearly defined term. Britannica features an article on Web 2.0 that refers to Web 3.0 but lacks an article on it. A pattern repeated across other encyclopedias.

While there might not be a unified definition yet, Web 3.0 has a set of features that set it apart. Crypto plays a significant role in Web 3.0, but it’s a lot more than just value transfer.

• Open: The new Web is built from scratch on open-source software. That means anyone can develop on top of it, contribute, propose changes and add new features. The entire development cycle happens in plain sight — a level of transparency unheard of by Web 2.0 companies.

Interesting fact: In 2021 100% of the top 500 supercomputers are running on Linux, an open-source operating system

• Trustless: Web 3.0 is a network that allows users to interact trustlessly -without a need to disclose their identity. They can choose to interact privately or in public. Instead of trusting one party explicitly, trust is now placed implicitly into all nodes holding up the network.
• Permissionless: In 2020, India shut down access to the internet for millions of its citizens 109 times — despite an increase in demand triggered by the pandemic. Media Outlets such as the New York Times are blocked for Chinese citizens, and Social Media Platforms tend to censor accounts that they find critical. The new Web 3.0 is the complete opposite. Anyone can participate without any authorization whatsoever from governing bodies or other traditional gatekeepers.
• Ubiquitous connectivity: This is the part where the semantic Web comes into play again. It can be seen as a part of Web 3.0 — the part in which information is more connected thanks to semantic metadata. Data can be accessed from anywhere, at any time, without relying on centralized cloud providers such as AWS or GCP.
• 3D graphics: Three-dimensional designs will create a more realistic engaging cyber-world (also dubbed the Metaverse) that creates new business opportunities and could blur the lines between the real and the digital world.

Trustless, permissionless, open — sounds like Blockchain? Yes, it is. Blockchain will be the backbone of Web 3.0, among other technological components.

What powers Web 3.0?

Chris Dixon, General Partner at az16, believes that Web 3.0 is just around the corner (Source). This is primarily down to the technological advancements we’ve made in the last few years. Web 3.0 relies heavily on Edge Computing, Blockchain, and AI & Machine Learning.

Edge Computing

In 2019, every second, 127 new devices were connected to the internet for the first time. We don’t just have smartphones anymore. We have entire smart homes now. All these devices create a tremendous amount of data. The traditional approach to analyzing such data would be to send it to a centralized data center. However, Web 3.0 is pushing computing to the edge of the network.

Edge Computing works on a decentralized approach by processing data closer to the point where it’s generated. Already by 2025, 75% of data will be processed outside the traditional data center or cloud, according to Gartner’s estimates.

Processing data on your device is great but even more vital in combination with the next component of Web 3.0: Blockchain & tokens.

Blockchain & Tokenization

Public, permissionless blockchains underpin Web 3.0 and enable data generators for the first time to be fully in control over the data. Similar to how edge computing pushes the act of computing to the edge of the network, tokenization empowers participants at the margin.

Suddenly, it’s not the Big Tech platforms in control anymore, but all the individuals making up the network. With Tokens, every user gains property rights to the things they purchase and create online. Non-fungible tokens are a perfect fit for unique assets and IDs.

Cryptocurrencies, as natively digital currencies that function without a central entity controlling their supply, are the payment network for Web 3.0. With cryptocurrencies, users can transfer value without the need for middlemen, often at a fraction of the cost of using centralized institutions.

AI & Machine Learning

Artificial Intelligence and Machine Learning are already employed by most Web 2.0 platforms today. Just think of the LinkedIn chat that suggests answers to your messages. These are generated based on machine learning, AI use in everyday life. While sometimes far off, at times it’s quite convenient to be able to just click on “Thanks, you too”, instead of typing it all out.

On Web 3.0 AI will play a role in making this version of the web more intelligent, and powerful in regards to processing information. It will enable machines to better interpret what the meaning behind data is, and deliver a smarter user experience. Accessing data on top of decentralized structures could provide powerful predictions on things that go way beyond targeted advertising into areas like drug design and climate modeling. We already see companies like Ocean protocol explore ways to train AI without exposing the underlying data owner’s privacy.

Together, these technologies build the backbone of Web 3.0. At this point, we’re just scratching the surface of Web 3.0, but it could bring vast improvements once truly established.

Why we want Web 3.0

So far you might wonder, what the benefits are that Web 3.0 will bring along, and why we should care.

• Disintermediation: no more paying to rent-seeking middlemen, no more reliance on Big Tech for your livelihood, or even just your social life
• Resilience: A truly decentralized Web 3.0 built on the back of blockchain can’t be shut down.
• Access: Regardless of gender, income, and demographics, anyone will be able to access Web 3.0. You won’t need a government-issued ID to access Web 3.0 services. Your decentralized ID (your history on Web 3.0) becomes your ID.
• Power to the people: your data is going to be yours on Web 3.0. Instead of being tracked down, organizations will come to you and offer to pay you to access your data. You will be able to monetize assets you previously couldn’t. With Brave, we already see how this could play out in advertising. You get paid to watch ads; your attention is valuable.

Overall, Web 3.0 tackles many of the problems we face when interacting with Web 2.0, where we’re often the product and not in control of what happens with our data. Web 3.0 will entirely shift how we think and interact with web services. It’s a more human-centric Web, with native money that enables anyone to start entering transactional relationships with others all over the world.

For Web 3.0 to deliver on the above benefits, we must build it on truly decentralized networks. Networks in which everyone is equal, and no one player has the power to shut others down. There is no space for big conglomerates in Web 3.0 unless they give up control.

Web 3.0, when done correctly, could be a return to the original web. A web where “no permission is needed from a central authority to post anything…there is no central controlling node, and so no single point of failure…and no “kill switch” (Tim Berners-Lee, 2021).

“Metaverse Masterclass” is a series of reports, articles and interviews from experts around different topics in Metaverse. This is an article by Lane Rettig, originally published on Etherean.org.

The advent of immersive digital worlds give us an unprecedented opportunity to rethink the relationship between people and property. Let’s take advantage of it before it’s too late.

Ownership

We rarely, if ever, pause to think about concepts as abstract as ownership. Indeed, the idea of ownership is woven into the very fabric of modern society thanks to capitalism. When you actually reflect on it, however, you realize that ownership is a pretty strange notion.

It’s one that I’ve been thinking about a lot recently. Ownership makes intuitive sense to me in the physical, offline world. If there’s one bowl of single serving pea soup between us, then either you have it, and can enjoy it, or else I do, and can — but not both. Of course it’s even more germane for truly scarce commodities like land: we can always grow more peas and make more pea soup, but we cannot really grow more land (reclaimed land aside).

In the digital realm, Bitcoin also makes intuitive sense. There is clearly some value in the idea of digital gold, even if its scarcity is artificial and socially enforced. Why? Because currency is useful, and in order for currency to have value, it has to be scarce. Bitcoin is pretty close to a platonic actualization of decentralized, digital currency.

What doesn’t make intuitive sense to me is ownership of other types of digital assets, in particular things like digital art and “land” in virtual worlds. In order to understand why I feel this way, I’ve been pondering the basic question: What does it really mean to own something?

We’re used to the way ownership works in the pre-blockchain world. To own a piece of land, for instance, means to have a publicly recognized, verifiable title to it, entitling its owner to use, profit from, or dispose of it however they please, within legal bounds.

On the surface, blockchain-based ownership actually isn’t that different. What it literally means to own some bitcoin is to possess a few bytes of data, a cryptographic “key” that can be used to “unlock” a transaction stored in the Bitcoin distributed ledger.1 This is not unlike holding a title to land, with the caveat that a bitcoin private key is a bearer instrument in the sense that he who holds the key holds the bitcoin that it controls. In the case of Bitcoin, possession really is 99% of the law.2

In both cases, ownership is publicly verifiable and enforceable. Indeed, without these properties, the whole idea of ownership is pretty meaningless. The main difference is that enforcement of the first is primarily legal, whereas for blockchain-based assets like bitcoin, it’s primarily cryptographic and computational in nature.

Ownership is social

In fact, ownership of both land and bitcoin is a socially enforced construct.

Land, of course, has intrinsic value: it’s practically useful for renting, growing, building, or storing things. It’s therefore tempting to think that the value of land derives entirely from its intrinsic value, but in fact, its value is highly social. This should be evident when you consider two otherwise identical plots of land in two different social settings: one in the middle of a highly desirable city, the other thousands of miles away from the nearest town. Moreover, to own land is to rely on a public, verifiable land registry, title to the land, and various institutions and mechanisms of the state to enforce that ownership, such as evicting a delinquent tenant or calling the police if someone trespasses.3

Ownership of bitcoin, too, may not seem inherently social at first glance due to the cryptographic nature of its enforceability. However, if you peer a little deeper, the social layer becomes visible. The private key and the ledger entry corresponding to your bitcoin holdings have value only because other people believe they have value. In other words, just like fiat currency, bitcoin has no intrinsic value. Another reason bitcoin has value is the fact that a group of people has agreed to run software that conforms to the Bitcoin protocol, not to debase bitcoin by issuing too much of it, etc..

Presentation

But there’s an important way in which these two types of asset differ. Tangible artifacts such as land need no presentation layer. Digital assets, on the other hand, are meaningless and, indeed, invisible without a presentation layer. You can only claim, and see, and spend the bitcoin you own because you have a wallet application that talks to the Bitcoin network on your behalf, interpreting things like cryptographic keys and presenting them to you as legible things like transactions and balances.

The idea of a presentation layer is a very old concept in the digital world. Think of reading your email on your laptop versus reading it on your phone. You’re using two very different applications to access and interact with the same data: this is the presentation layer. The possibilities for how to present even the most mundane data creatively are endless.4

Fungible and nonfungible assets

The concepts of ownership and presentation get very interesting in the world of digital assets. The first and most common form of digital asset is the fungible asset, which includes bitcoin: like a dollar, every bitcoin is the same as every other bitcoin, so they are totally fungible.5

By contrast, an asset like land, or a piece of art, is not fungible. Each one is unique and special. Nonfungible assets can be traded, but the correspondence is never precisely one to one: even two plots of land of identical size that are near each other will almost certainly have characteristics which mean their values will differ!

While the concept of a nonfungible asset makes intuitive sense in the tangible world, in the digital realm it’s a bit murkier. It’s easy to value bitcoin because of its fungibility. What makes an asset like land or art nonfungible is that it has a lot more variables. Land, for instance, is valued not only on the basis of its area, but also its shape, location, drainage, elevation, history, improvement/development status, neighbors, etc..6

A digital nonfungible asset, however, has none of these intrinsic properties. Like bitcoin, under the hood it’s really just a series of bytes on a ledger. Everything else — including all of the properties that actually matter — lives in the presentation layer, and is therefore subjective.

On the one hand, this disconnect between the ownership layer and the presentation layer is wonderful because it allows for a lot of creativity in how digital assets are composed and presented. Witness one of the oldest, and most well-known, nonfungible digital assets: CryptoKitties. One could build a different presentation layer that presents the same underlying genetic data that gives a kitty its fur color and eye shape as, say, a robot, or a pair of shoes. One can also compose multiple nonfungible digital assets: giving a crypto kitty a unique hat, for instance.

On the other hand, however, there’s something odd and a little troubling about the way that all of the variables and properties that matter in a nonfungible asset are open for interpretation in the presentation layer. This calls into question even very basic concepts such as value and ownership. Do you really “own” a CryptoKitty in any meaningful sense if under the hood what you possess is really a series of bytes that have no intrinsic value and are meaningless without interpretation? What about a piece of virtual art — say, a digital image — when, in practice, you really only control an arbitrary series of bytes on some ledger that are at best a hash of the contents of the art, and at worst are totally arbitrary? Given that the art is digital, it’s trivial to copy, and many people may choose to enjoy or even display it simultaneously, “ownership” or no.

Assets can have value for intrinsic or extrinsic reasons. Intrinsic reasons tend to be less subjective and to require less interpretation, whereas extrinsic reasons tend to be highly subjective and to rely on a socially-constructed interpretation. You can acquire an oil painting, hang it in your house, and admire it. No one else in the world can possess and admire precisely the same piece of art in the same way at the same time. This uniqueness is an intrinsic source of value for traditional forms of art. Digital, nonfungible assets do not have this same property. Their value is almost entirely extrinsic and subjective.

To be clear, I am not suggesting that digital art, land, collectibles, or nonfungible assets in general have no value. My point is that, to the extent that we as a society collectively choose to attach value to them, that value will necessarily be fundamentally different in nature from the value of traditional assets such as land and art. We’ve barely begun the process of understanding these assets and the ways in which they may possess value in the eyes of society.

As fascinating as digital assets are, there’s an aspect of the way they’re being marketed today that worries me.

Reimagining

What attracted me to blockchain was the once-in-a-century opportunity that it presents to reimagine so many aspects of our society: how we communicate and collaborate, how we relate to one another, how we form institutions and bonds of trust, etc.. In the same way, blockchain presents us with an equally rare opportunity to totally reimagine basic social concepts like art, community — and, yes, ownership. It is of course natural that we should start by attempting to import already-familiar ideas and analogues. Some of them may even stick! Decades later, we still have a “recycle bin” sitting on our “desktop”: great, useful examples of skeuomorphism. Some less useful analogues, however, should be jettisoned while we still have the chance.

Rather than attempting to recreate the world of scarcity, of “this is mine, not yours,” why blithely bring these offline constraints with us into the digital realm? The entire point of the digital world is that, free from the constraints of the physical world, digital assets need only be precisely as scarce as we want them to be! Digital assets need not be rivalrous nor exclusive: we can both enjoy a digital bowl of pea soup, and my enjoyment doesn’t detract one whit from yours.

As we collectively undergo a once-in-humanity phase shift from an offline, agricultural and industrial world, a world of scarcity and need, to a more digital, online world based on data and information, we have a unique opportunity to rethink fundamental concepts such as wealth and ownership. We have a rare opportunity to transition from a scarcity mindset into one of abundance. The next hundred years of human society will be less about which scarce assets we own and exclusively control, and more about which networks we are a part of — and, thus, which connections and information we have access to.

What sort of novel experiences could we conceive of if we relax the constraints of the offline, tangible world? It’s probably too soon to tell, since we’re still quite early in the development of virtual worlds and experiences, but the platforms that exist today do offer a glimpse. One good example is the avatar: platforms like Decentraland, Mozilla Hubs, AltspaceVR, and VRchat, not to mention Fortnite, offer users a fantastic array of ways to express themselves in the form — literally — of avatars of all shapes, sizes, colors, species, and agility. Some platforms do allow users to buy or pay to upgrade their avatar, and maybe that’s okay, but I suspect the dominant model will let the user express themselves creatively at no or very low cost.

Just an ordinary day in the crypto VR meetup scene: lower fidelity than an in-person event, perhaps, but lots more latitude for creative expression. A panel chat, part of Consensus Distributed, held in VRChat.

It’s about the experience, dummy

The point is that we should be innovating on the experience, and that means innovating on the presentation layer, not on the ownership of arbitrary blobs of cryptographic data. The average person cares a lot more about experience and self-expression than they do about some abstract notion of self-sovereign ownership. There’s a reason that well-designed, centralized games like Fortnite have hundreds of millions of active players while the most popular dapps have many orders of magnitude less.

Ownership is not, in and of itself, an experience. If you ask me it’s not something that 99% of humanity cares about or is looking for in the digital world. As one example, young people everywhere are frustrated by high levels of debt, and property that feels totally out of reach (a situation that’s quickly getting worse). I suspect they’d sooner keep living in the offline world than subscribe to a digital world that also forever relegates them to second-tier, rentier status.

There is probably some value in moving existing traditional assets, such as stocks, bonds, and derivatives, onto blockchains. And the idea of fractionalizing ownership of traditional assets such as art or real estate is genuinely interesting. Indeed, work on all of this is proceeding apace in the #DeFi space.

But let’s not seek to commoditize all the things. Once we figure out the experience, there will be ample time to figure out the economics. By leading with economics, the same old economics we’ve been stuck with for generations, we’ll never win the hearts and minds of the 99% of people who feel less than enfranchised by the current system.

My greatest fear is that, in conceiving of and building a new, digital world for humans, we manage only to recreate and indeed to exacerbate existing socioeconomic divisions that have sown strife and discord in the offline world for millennia — in other words, a Black Mirror-esque dystopia.

The types of people that have been the most active thus far in conceiving of, and building, digital worlds, and blockchains, have by and large been beneficiaries of the current system. It’s therefore unsurprising that we should have recreated aspects of the system, such as scarce assets and old-fashioned property rights, on chain.

But it’s time we recognize this opportunity for what it is — an epoch-making opportunity to rethink every human social system — and boldly envision and build a better future together. In particular let’s be careful not to enshrine ownership and property rights as primal, at the expense of intangible but essential things like experience, identity, and self-expression.

[Special thanks to James Prestwich for invaluable pre-publication input.]

1. This, of course, assumes you hold the keys and custody the bitcoin yourself, which you really should do. Not your keys, not your coins. If you don’t, holding bitcoin is really not very different from holding fiat money in an ordinary bank account. ↩
2. Whether or not the legal system of this or that jurisdiction might provide some protection if this key is stolen is a thorny question and will differ from place to place and case to case. This is what makes up the last 1%. ↩
3. This works well enough where property rights are clearly delineated, and enforced, and where one can rely on the rule of law. It doesn’t work so well where these things are not the case. Witness jurisdictions where people hold land without explicit title, or where all land is owned by the state and can be requisitioned for state purposes at any time. The concept of ownership is much fuzzier in such situations. ↩
4. One of my favorite examples of creative presentation of everyday data is the Foursquare Time Machine. ↩
5. This is an oversimplification and isn’t completely true in practice for digital assets like bitcoin — read more about crypto’s “fungibility problem.” Fungibility and privacy go hand in hand, and true fungibility is a goal of privacy-preserving platforms like Zcash. ↩
6. To be fair, in addition to these intrinsic properties, land does have a set of extrinsic properties that are the product of a social presentation layer, so to speak: things like zoning, taxation, air rights, etc.. Here, the presentation layer is the set of formal and informal laws and norms that apply to the land’s ownership, use, and disposition. ↩

“Metaverse Masterclass” is a series of reports, articles and interviews from experts around different topics in Metaverse. This is an article by Jamie Burke, CEO and Founder Outlier Ventures, originally appeared on Ourlier Ventures Blog.

We believe the next phase of growth in the evolution of DeFi will come not from better integration into the existing financial system, more regulation or real world assets and CeFi but instead by unlocking digital value already native to the Metaverse.

In our follow up to The Open Metaverse OS paper we introduce MetaFi: decentralised finance in the Metaverse.

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Background context

The concept of decentralised finance (“DeFi”) has been steadily gaining momentum within the crypto community since 2018. Built on the principles of sovereignty of wealth, permissionless innovation and the promise of financial inclusion, the mission of various DeFi protocols and applications is to construct a digital financial system that is more open, innovative, efficient and less extractive than the one the majority of the world still relies upon today, which in contrast is referred to as CeFi or TradFi.

While DeFi has commanded a lot of attention in the crypto space, its adoption is still relatively low, estimated at under 5% of all crypto assets being put to work as collateral in it. In 2021, DeFi achieved $4.6bn in annualized monthly revenues, which is less than 5% of JPMorgan’s revenues last year. Furthermore, DeFi is still primarily limited to basic forms of borrowing and lending against stablecoins, Ether, or wrapped Bitcoin. While there is notable work being done to create bridges from centralized finance (CeFi) into DeFi — for example, to introduce real-world and income-bearing instruments as new forms of collateral — an increasingly hostile regulatory environment, low capital efficiency, and challenges around managing counterparty risk for institutions make this bridging seem a long way off.

In this paper, we propose that the majority of growth in DeFi will not be driven by CeFi. Instead, we explore how it unlocks value in the Metaverse through what we call “MetaFi”: the decentralised financial tools of the Metaverse. But what is the Metaverse exactly? What kinds of value exist within it? And more importantly, how will DeFi be combined with continued innovations in tokens and crypto-assets to enable MetaFi at scale?

In advance of reading this article, and if you are new to the Metaverse and our thinking, we recommend first reading our Open Metaverse OS thesis published earlier this year back in January 2021. You can download and read the original paper and updated primer here.

However, in summary, the Metaverse could be understood as an interface layer between the physical and virtual worlds, comprising a combination of innovations in hardware and software, but most importantly, an economic system parallel to the fiat financial system. In that context, it’s critical that we think about it in terms of financial inclusion. This anchor will be important as we unravel the concept of MetaFi.

The internet in its current state suffers from drawbacks like limited inclusion of digital assets by the banking system, dynamic terms and conditions of centralized platforms and value being siloed in platforms by design.

We view MetaFi as one of the potential solutions to these problems as it adopts the core DeFi principles of unstoppability and composability.

This paper outlines how the adoption of MetaFi will be driven by four key trends: improvement of the DAO services stack, mutualisation of risk, development of financial tooling, and gamification of finance and the financialization of everything. These trends will be most visible in the main clusters of activity of MetaFi, like virtual worlds, games, avatars, wearables, marketplaces, yield-bearing NFTs, and access tokens. We invite you to download the full paper for a complete overview of MetaFi and the possibilities it will unlock in the medium to long term future.

Some paragraphs from the report (Download the full report)

The Metaverse is Crypto

As discussed, the Metaverse is first and foremost an economic system, a meta-economy if you will, that enjoys supremacy over any one digital economy, virtual world or game which should rather be considered a singular instance of the Metaverse, or individual verse. In fact, on a long enough time horizon, as the combined GDP of this meta-economy outgrows those of nation states, so too will it enjoy supremacy over their fiat based economies. We believe, The Open Metaverse at least, is an open and permissionless version of this meta-economy, made possible through what we might in aggregate refer to as Crypto. And in the absence of an alternative meta-economy today you could, and we do, make the argument The Metaverse is Crypto and Crypto is The Metaverse.

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Status Quo of the Digital Economy

Today, there are billions of dollars of value currently trapped in proprietary web platforms such as social media (Facebook, Instagram or TikTok) or gaming (Fortnite and Roblox). What we refer to as Web2 has actively and deliberately built “moats” to trap that value and the user for as long as possible in order to extract as much “lifetime value” as possible for the benefit of shareholders. Web2 firms generally operate on the principle of shareholder supremacy over all else, even or especially, at the expense of the user. This value, in the case of social media or free-to-play games, is often primarily monetized through advertising and the profits generally not directly shared with the users themselves. Even with Roblox, where the whole premise is the ability of creators to monetise their user-generated content (UGC), the percentage they receive is only estimated to be 25%1. This extends to the music streaming model and programs on YouTube. In aggregate, it is estimated that the digital economy is currently worth US $11.5 trillion globally, equivalent to 15.5% of global GDP2. It has grown 2.5x faster than global GDP over the past 15 years, almost doubling in size (since 2000) with an increasing percentage of the population depending on the internet for their livelihood. If we zoom into a subset of the digital economy — the digital creator economy, it is currently only a fraction of the mainstream digital economy, but its core areas are growing. This includes fields like publishing, gaming (skin creation), digital art, streaming, music, film, and more. On the supply side, there are currently up to 50 million3 content creators in the space, who consist of mostly amateurs (46.7 million)4 and around 2 million professionals. Professional participants in the digital creator economy can easily earn up to $100,000 per month. However, the majority earn much less, their income is irregular, and receipt of funds as they work their way through the system can take several months after delivery. We argue that much of the digital creator economy today would not be considered part of the Metaverse, because value is not freely tradable across platforms and is primarily locked into the value of platform equity alone.

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Web 3, NFTs and the Metaverse

In contrast, in the Web3 world of crypto-currencies, DeFi and NFTs, the whole paradigm is oriented around the user and their sovereignty: their identity, data and wealth. In Web3, even data itself can be a form of digital wealth and income. This means that while there are still platforms that help with the creation, discovery or curation process, the user is in full control of the output and can freely transfer value between platforms to resell, borrow and lend against in a completely permissionless way. In short, transferability is a fundamental “property right.” Unsurprisingly, we have seen in the early successes of Web3 that when moats are removed and transferability made possible, people spend more time and money on platforms they like, such as the blockchain game Axie Infinity5. This is something we laid out in our previous paper. Long-term, the Metaverse and its platforms (including much of Web2) will adopt Web3 technology and principles, not necessarily because it’s philosophically the right thing to do, but because it’s good business.

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Defining MetaFi

For us MetaFi is an all-encompassing term for the protocols, products and/ or services enabling the complex financial interplay between non-fungible and fungible tokens (and their derivatives). For example today, with MetaFi an individual could use a fraction of an NFT as collateral in a DeFi lending platform. To understand MetaFi, we must first highlight the two core principles of DeFi that make it possible. It is 1) unstoppable and 2) composable, acting as a form of “money lego” for developers, which in aggregate form a highly innovative parallel financial system. Developers all around the world can openly participate and compete to provide the highest yields, whilst ruthlessly removing inefficiencies. It is also important to note that regulators can only limit how the fiat-based systems they oversee interact with DeFi, but not necessarily what happens in DeFi itself — that is, as long as projects and their teams themselves are sufficiently decentralised. MetaFi brings together these DeFi principles to the wider Metaverse through a mix of non-fungible and fungible tokens combined with novel forms of community governance such as Decentralised Autonomous Organisations (DAOs). The combination of these different crypto primitives enables a fully-fledged parallel economy bringing hundreds of millions, and eventually billions of users, into the crypto ecosystem over the next decade.

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“Metaverse Masterclass” is a series of reports, articles and interviews from experts around different topics in Metaverse. This is an article by Sandra Helou of Zilliqa, originally appeared here.

New virtual worlds are full of opportunities, writes Sandra Helou of Zilliqa. But what if real-world problems get magnified in the metaverse?

What are the risks of recreating reality in the metaverse?

In Neal Stephenson’s 1992 science fiction novel “Snow Crash,” the world was offered its very first taste of a parallel digital universe. Predating non-fungible tokens, the metaverse has been part of the literary and entertainment canon for almost 30 years now. Often depicted as a virtual escape from the limitations of reality, the metaverse is seemingly a logical next step as we look at where we’re headed as a society.

With so much of our lives already lived online — from our very own digital representations housed on social media platforms to the extent to which we rely on online marketplaces to shop for leisure or necessity — the infrastructure is already here. But as projects, startups and big firms alike hope to cash in on the metaverse trend, we must pause and ask ourselves: what are the risks in store?

Is this real life or is this just fantasy?

In South Korea, we’re now seeing the stirrings of a new phenomenon. With rising property prices, socioeconomic inequality and dismal career prospects following the devastating impact of the coronavirus pandemic, Generation MZ is hurriedly flocking to the metaverse. In the metaverse, buying and selling pockets of land suddenly becomes a very real possibility and when combined with real-world monetary value, it serves as a leveling force in a society where the odds aren’t necessarily fair.

Defined as the age group that grew up with digital connectivity since birth, Generation MZ combines both millennials and Gen Zs alike. This new segment of society has had to contend with the realities of an “untact” economy more than ever, as it pertains to a “contactless” state of affairs — befitting, considering the impact of a pandemic that has demanded social distancing.

Untact is a concept that describes “a future where people increasingly interact online and companies replace humans with machines to immunize themselves against the effects of rising wages and a rapidly aging workforce.” South Korea itself has already committed to becoming a leader in developing technologies and infrastructures for an increasingly untact world. Sure enough, its citizens are some of the world’s dominant users on metaverse platforms such as Earth 2 and Decentraland.

South Korea, as well as other markets such as the Philippines, where citizens have flocked to virtual worlds like those offered by Axie Infinity, show how persistent structural inequalities are driving people to seek out alternatives. It may not be a dystopian present just yet, but the catalyzing factors are similar. It’s a similar trend we’ve observed with digital assets, amid rising inflation, currency devaluation and economic instability — people will want to maximize their returns in the hopes of making any gains possible.

Deepening digital divides

In the same way, when it comes to accessing the metaverse, what of the inequalities that could potentially arise there? Much has been said about Facebook’s foray into the space, largely enabled by its Oculus business unit. Critics have been quick to point out that the entrance of big tech into the metaverse simply takes away from the core tenets of where the internet is already headed in terms of the rise of Web 3.0 — a more decentralized, equitable online ecosystem. With Facebook at the helm, the metaverse is likely to become but another opportunity to leverage ever-growing swaths of user data for monetization while harkening back to the same issues of surveillance and accountability in the virtual world.

Meanwhile, the growing inequalities we’ve already seen in terms of the digital divide may very well be magnified in the metaverse. Equal access to the same tools and infrastructures when engaging in immersive, continuous 3D landscapes will likely require not only a great deal of computational power but also high-speed internet access and top-of-the-line headsets. Similarly, with advertising likely being a key component of funding “closed” or corporate-backed metaverses, will inequality be determined by who can afford an ad-free version of a metaverse or whose avatar is of better quality? Do we not risk creating a new divide of haves and accessibility?

With so many aspects of life now being lived online, across education, career, and even dating, leveling these infrastructural access points to the metaverse will be critical.

A glitch in the matrix

French philosopher and sociologist Jean Baudrillard coined the term hyperreality, the state in which reality and simulation are so interwoven that we lose sight of the distinctions between the two. Baudrillard argues that eventually, the simulated world matters more than the “real” as it becomes the site from where all meaning and value is derived. Much like Generation MZ who now find that much more satisfaction can be achieved by flipping real estate in Decentraland, will there ever be a state in which we’ll only ever want to be plugged in?

Eventually, if it does become the case that the idea of the metaverse simply becomes reality in itself, what do we want it to be based on? If we look to “Snow Crash” as a cautionary tale, what we end up seeing is the rise of city-states ruled by the interests of big business — inequality ultimately prevails, and the metaverse instead serves as a virtual escape, an idealistic distraction from the ruins of reality.

We, as the collective blockchain ecosystem — whether that’s NFT projects, play-to-earn games, or virtual worlds — coupled with a growing number of programmers and UX designers around the world have the opportunity to create something really great. Empowered by an ideology of decentralization, we can develop a metaverse that is accessible, fair and beneficial to all, no matter who they are, and where they might be. Let’s not waste the opportunity, we don’t need to borrow from reality — instead, we can do more.

“Metaverse Masterclass” is a series of reports, articles and interviews from experts around different topics in Metaverse. This is an article by Noah Shin published on Venturebeat.

The year was 2021; Webster Dictionary had added a slew of Gen-Z-related words and phrases like digital nomad, NFTs, blockchain, cryptocurrency, augmented reality, and my new personal favorite dubbed by Mark Zuckerberg, the metaverse. The translation? The internet is evolving to a stage that is more immersive, intuitive, and one step closer to completely immersive virtual reality experiences. Zuckerberg may make Meta the first big tech corporation to invest $10 billion in a virtual universe, but we are beginning to see indications that other major corporations will soon follow suit.

Technology is encroaching on a new era where the different forms of technological communications merge into one seamless experience, from work meetings to social life to workouts to conference calls. In a study by Pew Research, 90% of U.S. adults say the internet has been essential for them during the coronavirus outbreak. Screen time is at a record high, so a massive shift to a more immersive online presence seems almost inevitable. Online activity has accelerated during the global pandemic when digital technology has served as a lifeline for many Americans and corporations, whether that’s seeking new job opportunities or Zoom meetings for teleworkers. Moreover, digital tools and the hiring of young technologically savvy workers are becoming points of emphasis in every sector, from finance to health care, and manufacturing.

So what does this mean? The public is witnessing an internet evolution greater than the innovations from the DotCom era or Social Media era, or perhaps even greater than the internet itself. Consumers are approaching a time of digital immersion, stamped by the approval of big tech giants and corporations everywhere. Now, most of us have begrudgingly conceded that the internet is a powerful tool and even deserves to have a monetary value attached (hello, cryptocurrency). For everyday American consumers, it is necessary to be aware of this digital immersion and how it affects our daily lives – from job opportunities to educational art and science curricula.

Technology companies look to incorporate video game elements

In his keynote presentation on Facebook company’s rebranding to Meta, CEO Mark Zuckerberg states: “If you ask people today what they thought the metaverse was…people that follow the space would say it’s about gaming, and that’s because gaming provides many of the most immersive experiences, and it is the biggest entertainment industry by far.”

The gaming industry certainly dominates the entertainment industry. On January 17, 2019, tech-streaming giant Netflix company announced its biggest consumer company rival in a letter to shareholders, “We earn consumer screen time, both mobile and television, away from a very broad set of competitors…We compete with (and lose to) Fortnite more than HBO…There are thousands of competitors in this highly-fragmented market vying to entertain consumers.” Since June 2020, Fortnite has surpassed over 350 million registered users, and gamers logged 3.2 billion hours in the game in April 2020 alone. Assuming people live until they’re 79, that is the equivalent of 4,624 human lifetimes.

Online video games, console games, and mobile games have billions of downloads and continue to emerge as one of the most prevalent media forms in our society. Most console and role-playing games (RPG) already incorporate versions of their metaverse into their gaming structure. Game companies like Roblox, Epic Games’ Fortnite, and Grand Theft Auto already have metaverse-like platforms which depend on their communities for their business model. In-game purchases of character skins and other game assets are the majority slice of a game company’s ad revenue, especially free-to-play games. Open world games continue to stand at the forefront because it opens a virtual reality space where users can interact with the computer-generated environment and the ecosystem of users.

Online communication fosters positive interaction. Online games are highly social, and communication among friends and online players promotes teamwork and delegation for different game roles to succeed. Gamers are not in the monolithic category; there is no rigid or fixed type of uniformity when discussing role-playing games. That psychology of online communication among users is what tech companies are looking to imitate. Another instance of this gaming integration includes child and toy elements into gaming frameworks. By integrating child-like effects into their technology like friendly-looking avatars, cartoon guns, and harmless games, these factor into a fun, interactive experience – something game developers understand and what tech companies look to enact into their metaverse structures.

Fortnite numbers are statistics any company would salivate for, and we are beginning to see these corporations follow suit. Google, Microsoft, Apple, and hundreds of startups continue testing virtual and augmented reality products, from glasses to deals with game companies. Large tech corporations are investing in-game platforms in hopes of a more lucrative business model. Nike has quietly filed trademarks in preparations of selling virtual apparel, which apparel consumers can don via their virtual avatars. The Los Angeles Staples Center was given $700 million to change its name to Crypto.com Arena by the Singapore-based cryptocurrency exchange app. Adidas partners with NFT gorillas Bored Ape Yacht Club and other NFT communities, and the Seoul Metropolitan Government (SMG) has publicly announced its work into their version of a virtual communication ecosystem with economic, cultural, tourism, and civic services, provisionally dubbed Metaverse Seoul.

Digital assets will skyrocket in value

The point is: Virtual communities make these companies successful, and if big corporations and governments are working to create virtual realms, it’s more than likely that Facebook’s metaverse will thrive and remain sustainable, so long as they continue to be community-centric. As tech frontiers shift their focus to building virtual worlds, further attention turns to its byproducts. This includes the entire spectrum of digital assets. I have a personal bias towards the role between game companies and implementing photo capture modes within their console systems or art developed to what is now known as virtual photography. As video games evolve to hyper-realistic models, the lure to capture the game world’s beauty and emotion follow a newly implemented innovation that might interest audiences outside the gaming genre.

Virtual photography shows its value by presenting a form of memorabilia while showing still imagery can exist in a new, exciting digital medium. Console games with photo-op modes offer new innovative compositional tools, options to incorporate aspects like painting and illustration, graphic design, and other artistic tools. There is a practical use here that can aid workflow and design processes while offering engaging, interactive material.

Within current gaming audiences, where teen and gen-z consumers are the primary markets, game developers tend to focus on an important aspect: fun and entertainment so users can spend as much time within the virtual world. Role-playing games seek to extend the gamers’ experiences past the general story mode.

Redefining digital art

Virtual photography is just one of the many examples of branding the new modern digital artist, and it changes the perception of branding digital artwork. Type “media jobs” on the LinkedIn job board, and you’ll see a million different titles. Digital communications manager, social media strategist, graphic design manager, NFT creatives, multimedia specialists, et cetera.

Technological intuitiveness and a certain amount of media fluidity are becoming necessary to navigate the world of industry professionals. I can recall a time I was teaching a summer tech camp in Palo Alto, California, where students were given curricula in the forms of vlogging, 3D building, audio engineering, and design. Maybe the most surprising classes were the video game-oriented classes, where teachers taught students the fundamentals of Roblox, an online video game platform and game creation system. Most importantly, the camp taught students the fundamentals of building, coding, and design, all through playing a video game. While this is a relatively new trend, educational institutions are seemingly embracing the educational aspects of gaming.

The tech metaverses will prove valuable for its educational purposes. Virtual realms can aid in institutions teaching logic and problem solving than many school curriculums. Puzzle games, select real-time strategy games, and select simulation games fall into this educational category. Games with gameplay elements that require users to utilize creativity are called Sandbox Games. Minecraft (2011) and The Sims franchise are building task games with no true end objective. Educational platforms seek new ways to integrate the arts with the sciences, and gaming turns out to be one of the most innovative aspects of progressive curricula.

It’s no surprise that digital immersion is expanding at an exponential rate, and many video game corporations have used similar business models for years. These games generate a mass ecosystem of game users by following most entertainment structures. The most successful games create open-world gaming environments with interactive possibilities while maintaining a compelling narrative with goals and objectives and minimal constraints. If tech companies like Facebook look to follow suit, maintaining an integral, loyal community must remain at the forefront of their mission.