Last April, I published an article highlighting some of my favourite NFT projects titled “Into the Metaverse” without really unpacking what this concept of a metaverse is. With mainstream attention now on NFTs, I’ve been trying to refine some ideas about how NFTs - and crypto in general - fits into our day to day lives in the forthcoming era of the web. An era where the value of creative, technical, and community work can be realised in the way it has never been before. In this article I will explore…

• What the Metaverse is

• The Differences between a Closed vs. Open Metaverse

• Key Principles for an Open Metaverse

• Where Crypto (DAOs, NFT, DeFi) fits in

This will likely be the first of a series of articles. Let’s dive in

What is the metaverse?

The “metaverse” refers broadly to a social, real-time 3D virtual environment. A digital reality that exists adjacent to our physical one.

Like our physical reality, the metaverse never “resets” or “pauses”, but is a living experience that continues indefinitely and exists persistently for everyone. It is a place where one can invest in, build, and operate entire businesses that compensate individuals for their work. It spans across platforms, virtual worlds, games, and is complete with its own virtual economy, communications, identity and reputation systems.

At first this might sound like something out of a science fiction novel, a congregation place for technologists and gamers. After all, the term “metaverse” was coined in Neal Stephenson’s 1992 sci-fi novel Snow Crash. But the reality is that most of us are already interacting with the seeds of the metaverse without thinking much of it. We meet on Zoom, shop on Amazon, join discussions on Clubhouse, chat on Discord, play on Roblox and Fortnite, and watch streams on Facebook, YouTube, and Twitch. What’s happening on these platforms can be just as “real” as what’s happening offline. You can meet someone through these platforms and collaborate, hire, trade with them and create “real world” value.

The metaverse refers to something beyond virtual worlds and games (meta- = beyond). Fortnite could be considered a proto-metaverse because beyond the Battle Royale game, it has its own economy, intersects different IPs, pays creators for generating content, and facilitates social experiences like concerts and even VC deals… However, it is still limited in the level of interoperability with other worlds and their economies, and what types of activities you can do on it.

We are starting to see friends will go from group chats to group meetups in virtual worlds. Relatives who live on opposite sides of the globe convening in virtual homes. Remote workers holding meetings, attend conferences, and conduct business with people they have never physically met.

• The 2D versions of these apps are already being widely used as teams look for more engaging ways to meet in the COVID era. See hopin, airmeet, crowdcast (conferences). gather.town, ohyay, topia (small group meetings). And of course in-browser virtual worlds like Decentraland and CryptoVoxels where a lot of NFTland events happen on a weekly basis.

The metaverse will become the meeting place for individuals, brands, and creators of all sizes. Just like how every company built a webpage, then a Facebook and Instagram profile, establishing a presence in the metaverse will eventually be part of user acquisition and brand awareness strategies.

In February, Atari launched its headquarters in Decentraland. The HQ is an in-world arcade that will feature legendary titles like Pong, Asteroids, and Missile Command. You can see how something like this might be a more compelling place for friends to hang out over text-based group chat.

As virtual experiences become more immersive and our digital presence becomes more intertwined with our identities, the virtual economy will become more robust as people will equip digital beings with digital goods. The Direct-to-Avatar (D2A) economy will expand beyond gaming to everyday wearable as you equip your avatar for the metaverse as your avatar becomes another form of self-expression. The top free-to-play games like Fortnite and League of Legends already sell billions of dollars worth of skins. As people spend more time in virtual worlds as their avatars, the market for skins, wearables, digital real estate, and art will expand.

As part of their NFT debut, Atari released exclusive wearables that you can purchase for your avatar in Decentraland and The Sandbox. Expect more brands to do this.

A car company’s brand presence in the metaverse isn't just a banner advertising a car, but the experience of driving it around such that you aspire to own one. Even if you don’t buy it in “real life”, a virtual car and brand swag could be sold as NFTs that have real economic value inside of the metaverse as a status symbol or game asset.

You could even offer up services for custom builds and get paid directly in-world. CryptoMotors, digital automakers who sell car models as NFTs, has hired Voxel Architects to build out their CryptoVoxels showroom.

As you can see from the walkthrough above, the CryptoMotors has a whole office setup on their virtual parcel. Today, it serves limited utility besides maybe a team meeting through voice-chat. But in the fully-fledged vision of the metaverse, they will be able to interact with a Miro or Figma board in the in-world conference room to design a new logo or plan sprints. They will be able to transport to their showroom in other worlds like Decentraland. They will be able to test drive their cars through Gotham City in Fortnite. During the meeting, someone could buy everyone a coffee and pay for it with their digital wallet, which is connected to the Uber Eats and Grab Foods wherever they are in the world and have the actual coffee delivered to them.

Of course, this is a long way off and there are big legal, privacy, and technical hurdles to overcome. But it paints a good picture of what a true metaverse experience might look like. Not one world, not one game, not one platform (iOS, Android, Oculus Quest, Playstation, Chrome browser etc.) but the fabric through which these worlds and economies operate, and that anybody can hop into no matter what device they own.

So who will build it?

Closed vs open metaverse

A closed metaverse is controlled by one or a few large companies. ORIGIN in Ready Player One is an example of this. The reason why people fought over ORIGIN is precisely because whoever has power over the this world holds the keys to the kingdom. In a closed metaverse, all the data centres and payment rails are owned by a few entities who can change the rules on developers and users at their whim.

Today we instinctively know which app to open based on the activity we want to do, but there is currently little interoperability between these systems. Our identities are segregated, and our data is owned by someone else. It’s like we are hopping to and from individual closed “-verses” as opposed to having the continuity and portability across one metaverse. Like ORIGIN, there is much value to be captured from being a big player in our metaverse. Even more so if you own and run the whole thing and everybody else are just your “citizens”.

In an open metaverse, different platforms, worlds, and stores are connected and interoperable. Meaning that players can travel from Roblox to Fortnite to CryptoVoxels using the same identity, porting over all their data and assets as they do so. Unlike a closed metaverse, the interoperability layer is not owned and operated by any one entity.

An open metaverse emphasises collective ownership, community governance, and a decentralized economy that is supported by individual nodes around the world. As such, it could ultimately be much larger than what any one company can build on their own.

Why should the metaverse be open?

While the book (Ready Player One) is entertaining, since IOI owns and controls the OASIS’ servers and databases, they could do whatever they want: delete other people, access any information, change the rules of the world, and print themselves infinite currency. So it’s pretty clear that one company can’t control the Metaverse — otherwise it could take away everything you own, change who you are, or even delete you.

— Fred Ehrsam in VR is the Killer App for Blockchains

Whenever we've had any form of commerce dominated by a single company that controls the flow of revenue and access to customers, they use restrict that to extract profit and other participants can’t grow. A closed metaverse will have much of the problems we are seeing with big internet companies today: platform lock-ins, low interoperability, privacy issues, and monetisation models that make users their product.

As we build up platforms toward the Metaverse, if these platforms are locked down and controlled by proprietary companies, they are going to have far more power over our lives, our private data, and our private interactions with other people than any platform in previous history.

-- Tim Sweeney, Founder and CEO of Epic Games

The benefits of more connectivity and openness accrue to everybody, and are much stronger that any temporary gain from locking people in.

When Fortnite launched in 2017, they didn't have a cross-platform play among any of the consoles. After lengthy conversations, everybody opened up and now all the platforms (except iOS) can play together. This turned out not to be a sacrifice. Sony and Microsoft realised that they grew significantly and sold a lot of consoles as a result of people being able to play across platforms.

This doesn’t mean there won’t be dominant closed platforms in the metaverse. The companies that create and operate them will just be another participant in it alongside everybody else. Fortnite may be a Battle Royale game that is massively popular, but still in competition with other Battle Royale games developed by indie studios and individuals.

If you know where to look, you can already experience first-hand how empowering the products that operate on open metaverse principles can be. Most of these can be found in web3-native apps, which from the beginning were designed around the ethos of self-sovereignty and decentralisation. However, there are also powerful advocates for an open metaverse from the non-crypto sphere such as Tim Sweeney of Epic Games. Arguably because of their massive user base, cross-platform play, and mashing of IPs, Epic with Fortnite and Unreal Engine has done the most to push the creative, technical, and business frontiers towards a more open metaverse.

But we still have quite a ways to go. As leaders, builders, and consumers of the internet, there are fundamental design choices to consider else we replicate or exacerbate what is broken about the web today.

Key principles of an open metaverse

This is a non-exhaustive list where each item can itself be expanded into their own series of articles. Though different participants will likely have different ideas on how we get there, and what should be “open” and what should remain proprietary, I think it captures the main ideas.

1. Owned and operated by everybody who uses it, not by any one corporation pursuing its own interest

• Everybody should have a voice and outlet whether you are an individual participant, indie creator, or major corporation. Traditional companies Google and Facebook will almost certainly play a role in this future, but as participants within a much broader ecosystem instead of operators of the ecosystem itself.

• The interoperability layer needs to be be platform-neutral and not controlled by one entity. Users should have freedom to own their own data and participate in the metaverse freely without a central entity regulating the experience.

  • This does not mean a free-for-all where you can misbehave and abuse other participants. The means for escalating and penalising such violations will just be decentralised and transparent. For example, a virtual world could be operated by a DAO with nodes that runs servers to host the in-world content. If a node misbehaves, the DAO could vote to take the node off the approved list and that node would be ineligible for grants. Decentraland is an example of a world that runs on a DAO. See their governance model and proposals.

  • Individual parcels within a virtual world could be also be owned by a DAO. An NFT curation DAO could make decisions to allocate a portion of the collective funds to commission a gallery build where they can display their assets.

  • DAOs could operate at various levels of the “stack” - parcel, world, protocol level etc. There might be something like a large collective consisting of representatives from different groups within the metaverse that come together to decide on a technical interoperability standard, for example.

2. Facilitated by technical interoperability standards

Today, the digital world basically acts as though it were a mall where though every store used its own currency, required proprietary ID cards, had proprietary units of measurement for things like shoes or calories, and different dress codes, etc.

-- Matthew Ball

• Just like how web protocols allow you to visit any website regardless of whether it's Brave or Chrome or Safari. We need shared, open standards for the metaverse so that can seamlessly transition their identity, items and money across worlds and apps.

• One of the reasons the decentralized finance (DeFi) sector has grown so rapidly is because open standards allow applications to interoperate and build on each other to produce more complex use cases.

From my previous article on “money legos”:

Innovation compounds faster in this ecosystem because every protocol lays new grounds for more sophisticated products and use cases. Aavegotchi - digital collectables backed by interest-bearing assets - is only possible because of Aave, the lending protocol that backs and generates these assets. Now you can have tradable ghost avatars that derive their sentimental value from unique trait compositions, and intrinsic value from being backed by a savings account.

• Open standards like ERC-20 and ERC-721 allow for asset portability and platform agnosticism. As long as they adhere to shared standards, applications know how to create and transfer those assets. This is why your NFT art can be traded on third-party marketplaces like OpenSea and Rarible even though it was issued by SuperRare, ArtBlocks, AsyncArt, or other platforms.

3. users should own their own data which reside on platform-neutral systems

• Identity should be flexible, fragmented, and users can selectively reveal their data depending on what the platform needs to perform their service. You could have one public-facing identity that has your history and reputation you can expose to get opportunities for decentralized work, and another pseudonymous identity you use for games, art collector persona etc.

• On open blockchains, your transaction history reveals more information about what kind of contributor you are to a network than your holdings. If you've done X tasks on different crypto networks, that can be tied a reputation protocol that can be used as your resume when finding work.

  • One small example of where this is not happening right now are curators and reviewers on platforms like Amazon and Goodreads who have spent countless hours writing high-quality reviews and informing potential buyers. If their accounts were to be suspended for any reason they would lose all that history and wouldn’t be able to “plug in” their reputation on another platform.

• In this world we will exist and be known by our avatars (looks, handles), which should be recognised across platforms. Avatar interoperabilty is a technical hurdle that needs to be overcome. Ownership of your assets and data is one thing, but it should be stylistically adhere to whatever platform or world you are walking into.

4. Function on a robust, efficient economy

• Individuals and businesses should be able to create, own, invest, sell, and be rewarded for any type of work that produces value to the ecosystem.

• Every component of the value chain should have healthy competition, where each participant is able to compete on its own merits and not use its dominant or significant market power to force adoption of other things.

The markets for NFTs must be open and accessible by any application. As Uniswap demonstrated in DeFi, crypto-native assets demand crypto-native (on-chain) markets. This will become only more important as the same NFTs are integrated permissonlessly by developers across a wide array of applications. Rather than fragmenting liquidity for each NFT, every application will want to access a shared, global, and composable liquidity pool. In this world, every application inherently becomes a marketplace for the NFTs it surfaces, whether the future Instagram, Spotify, or Fortnite.

— Fred Ehrsam

5. allow for the Intersection of different IPs

Fortnite draws a massive, willing and excited audience online to engage with chaotically clashing intellectual properties. For now, it’s the only legal place on the Internet where a Netflix-approved avatar of Hopper from “Stranger Things” can twerk on a Disney-approved avatar of Rey Skywalker from Star Wars.

- Gene Park

• The metaverse will be populated by content and experiences created and curate by an incredibly wide range of contributors. Some of whom will be independent individuals while others might be online communities, DAOs, or commercially-focused enterprises.

• This will inevitably involve some negotiation and legal work at first, but different IPs should be able to co-exist and intermingle here. In Fortnite, you can walk around as Iron Man (Marvel) in Gotham City (DC). This might not seem like a big deal in the game, but it’s a huge step forward in IP-land and what content is allowed to be shown together. In a true metaverse, it will be the norm.

6. give original creators exposure to the upside of their work and the freedom to choose who to work with

• Creators should truly own their work, have the freedom to choose service providers to work with without being forced to accept a massive bundle of services in order to reach a customer base. They should have the tools to make decisions themselves and not be part of the business model of a platform that at some pivot from enabling to extracting.

From Chris Dixon’s 2018 article Why Decetralization Matters:

Centralized platforms follow a predictable life cycle. When they start out, they do everything they can to recruit users and 3rd-party complements like developers, businesses, and media organizations. They do this to make their services more valuable, as platforms (by definition) are systems with multi-sided network effects. As platforms move up the adoption S-curve, their power over users and 3rd parties steadily grows.

When they hit the top of the S-curve, their relationships with network participants change from positive-sum to zero-sum. The easiest way to continue growing lies in extracting data from users and competing with complements over audiences and profits.

• Shared, open standards for crypto-native assets give creators the freedom to choose the platforms and tools that work best for them, and truly own their work. This platform-agnosticism is crucial for their creations, brand, and communities to be persistent across different metaverse experiences.

7. Tools need to abstract away technicality at multiple levels

• Creators of all types should be able to contribute and profit from the metaverse. Web 2.0 has companies like Zoom offering SDKs for developers to integrate video communication, Facebook allowing businesses to launch a storefront, and Youtube and Instagram enabling people to upload content and build audiences without knowing how the internet works under the hood.

• Similarly, creators and businesses in the open metaverse economy should be able to offer products and services without knowing how the underlying infrastructure works. What if Procreate, Ableton Live, or Maya 3D had an "Export as NFT" option and mints your file as an NFT right from the app? You can then display it in your gallery on a virtual world like CryptoVoxels or sell it on open markets like OpenSea without having to worry about blockchains at all.

• Crypto-native platforms Zora and Foundation are platforms that allow creators to upload and sell their own NFTs with proposed % cut programmed into their next sale. Every NFT that a creator mints has an open market attached to it. The owner can pick the next buyer along with a proposed sell-on share.

• Crucible is building the “Emergence SDK” which looks to provide an easy on-ramp for game engine developers integrate with web3 technologies, allowing them to immediately tap into existing networks of players and marketplaces.

how crypto helps us get there

Blockchains are an indisputable and distributed way to express individual ownership of items. Because it is vendor- and platform-neutral, and operates on open standards at the protocol and transaction layer, it facilitates the core infrastructure for a truly open metaverse. Crypto UX has improved a lot, but we still have a ways to go before the jargon is completed abstracted away such that anybody can plug in and immediately participate. Many of the building blocks that answer the open metaverse principles are live or actively being built today.

• Self-sovereign Identity: decentralized IDs and interoperable data

• Decentralized Finance (DeFi): aggregators, oracles, data marketplaces, units of value, financial services (saving, lending, borrowing, earning)

• Sovereign virtual goods: minting platforms, marketplaces, token and metadata standards, NFTs as “internet native IP”, hybrid NFT + FT (“DeFi NFTs”), fractionalized NFTs, physically redeemable NFTs, multi-format NFTs, micro-economies for exclusive experiences with social tokens

• Decentralized Governance: DAO frameworks, staking and slashing mechanisms, voting, multi-signature wallets, community funding and audits

• Decentralized Cloud Services: storage, query & APIs, computation

Q1 has seen explosive growth and mainstream attention into NFTs as digital art or collectables. But we are only scratching the surface of the types of economic and labor opportunities that will be unlocked by crypto assets and crypto-native markets. As of January 2021, there are 4.66 billion people on the internet. The metaverse presents a world of geography-agnostic opportunities that augment our physical selves. Keeping the lessons of what’s broken about the internet today in mind, we can avoid the same mistakes to build a truly open metaverse in which everybody can live, work, and play.

Further Reading & Resources

1. Why Decentralisation Matters

2. The Metaverse: What It Is, Where to Find it, Who Will Build It, and Fortnite

3. Into The Void: Where Crypto Meets The Metaverse

4. The Open Metaverse OS

5. Into the Metaverse: Non-Fungible Tokens in 2020

6. Creators, Communities, and the Grey Space in the Middle

7. Foundation: Enter the Metaverse

8. x*y=k...An Ethereum Story

9. Avatar Interoperability