The restaurant at the end of the Metaverse - part2

In the last issue we took a definitive first-principles look at the world of web3 - the building blocks like Blockchain and Cryptocurrencies. Now we are ready for the deep end of the pool, right? So let us tackle the two most fuzzy and controversial terms - Web3 and (drum roll please) Metaverse...

3. Web3:

The term Web3 was coined by Gavin Wood, Ethereum co-founder and the developer of Solidity language, to describe a trustless web. To some that may sound utopian but many, including Tim Berners Lee (in an ironic twist), think this is what the internet should have been in the first place. Trustless implies a few things - distributed data and applications, decentralised governance to start with. And ideally also implies multi-currency, open identity and digital ownership enabling it. Are these important, and why does the internet, aka Web2 not achieve it?

Internet was supposed to be a global equaliser. It was intended to be uncensorable enabling democratic access - as even laws acknowledge. But with everything from network infrastructure to content consumption now being controlled by private players, who often can be coerced or incentivised by (potentially) malicious forces. This makes decentralisation essential. Something a good public blockchain architecture achieves.

2010s was the decade when web2 turned ugly. Walled gardens greedily usurped personal information peddling them for monopolistic profits creating the first Decacorns ($10Billion+ startups). A vast ad-fueled empire that ran on 'free' business model led Tim O'Reilly to make the famous tweet referring to an online thread -

“If you?are?not paying?for it,?you're not?the customer;?you're the?product?being sold.” - blue beetle

Distributed data and applications could enable bazaar-like structure that create more open and secure systems like what OSS/Linux achieved while great tech leaders like Bill Gates treated it with disdain. Growing demands for secure apps and transparent business models have seen the duapoly Hectocorns rattled.

One of the biggest failings of web2 - the TCP/IP based internet - is that creators, owners and incentives were not aligned. Hence the invisible hand of markets that web2 was built on was a pipe dream. Private organisations and perverse algorithms arbitrated the value of everyone's work and content. Ownership was questionable. And incentives was an opaque attribution process. The Web3 aims to solve for these with an on-chain, multi-currency linked, property rights preserving backbone. When content (supply), consumption (demand) and compensation (on-chain payment guaranteed via smart crypto-contracts) are transparent - the market economy functions more efficiently.

Having worked in fintech for over a decade I cringe at how inefficient just the payment process is even now. Forget rest of the economic activities. For comparison, the flow above is a typical cross-border transfer, a simple 3-day settlement cycle that is often optimistic in many parts of the world. Compare that to the crypto payments below! Alice's wallet, Bob's wallet settle in a few seconds to minutes anywhere in the world over something like a Lightning network or Ripple based payment systems.

While traditional finance (Trad-fi) costs 1-5% of transaction value, decentralised finance (de-Fi) usually costs a fraction of that. Heck a crypto protocol like Uniswap clears a billion dollars with 40 employees while a centralised exchange takes 50x the people and cost and settles slower.

Despite all these advantages there are some significant challenges that web3 needs to solve. For example, some purported thought leaders have questioned this utopia that web3 is made out to be with arguments typically falling into one of two camps - 1. Those that conflate web3 with the technicalities of a blockchain; the cost and security implications that come with this. 2. Those arguments that critique the fail fast mentality, incomplete decentralisation or harshly judge the inadequacies of a fledgling industry in early stages of evolution. While many talented early adopters have taken a bold lead, web3 needs to address the skepticism with better PR to attract a lot more top talent. There is too much at stake and a lot of work to be done to fix the web2.

4. Metaverse

n the previous article we saw Neal Stephenson coined metaverse in his 1992 sci-fi novel, Snowcrash. He actually did a lot more than just term it. He painted a beautifully complex picture of this parallel world taking the cyberpunk genre that Neuromancer created to a new level.

Arguably Asimov foresaw this even earlier, in his 1954 Naked Sun. These original metaverses were virtual, 3D worlds where digital versions of us can enjoy engaging programming like the 1990s TV shows - a pragmatic version of the Wall-e dystopia.

As with most good ideas the metaverse has now grown larger and more vivid. Though some nostalgically and bit pedantically cling to the restricted notion of metaverse, I believe the metaverse will encompass all digital footprints we have - be it Live digital experiences of all kinds - 2D/3D/AR/VR/Audio/Text/currency and the vast content we intentionally and involuntarily leave behind. In that sense it will be 4D at least - a meta-time-space. It will have some or all of these elements - persistent custom identities/avatars, social network, virtual worlds/simulations, property rights, creator economies, gamification economies, immersive experiences, hardware & network infrastructure, synchornisation/rendering elements, intelligent interlocutors/agents/bots. This definition by Matthew Ball comes closest to my belief and a universal definition.

While tech behemoths (like Meta - VR, Apple-AR, Nvidia-Network, Epic-games) have their own pet view of the elephant in the room, it is evident that we are in the early days of defining it. Left to their own devices the older structures would likely want some form of controlled metaverses - perhaps a multiverse of interoperable metaverses. The experts and creators tend to dislike that and believe the summation of all possible synthetic reality, a common unified experience is The Metaverse. The 2D-internet took more than two decades to (awkwardly) mature. A multi-dimensional, intelligent/sentient, all-encompassing alternate universe will likely take much longer. Meanwhile efforts like the metaverse forum launched this June are the first steps in this direction.

Where is the metaverse now - is it all just fantasy?

“Today's science fiction is tomorrow's science fact" - Isaac Asimov

Metaverse is already much more than legless cartoonish characters sitting around a meeting room or waving across a reception area. Developments and use cases have been exploding across every industry where experience and interaction matters.

The OGs of multi-player gaming perhaps were the first to create early forms of the metaverse - Minecraft, Fortnite, Roblox etc. With highly scalable virtual worlds allowing people to almost lead alternate lives, these will be the stepping stones on which the future metaverse is going to be built. But these were all close ended storylines, not open ended as reality is.

The decentral-lands of web3 has many elements making it a great sandbox for the next metaverse evolution - more open ended, supporting many economies and with immutable property rights. And Axie infinity created a new genre of "play2earn" economics. Currently many of these have simple arcade-game like experience and have seen a drop in usage. That is a good reason for innovations - with platforms like Somnium space to develop an open metaverse with more real rendering at scale.

Progressive governments have embraced it for seoul-mates to soulmates - Dubai has a national strategy for it. South Korea has?invested 4.2 million dollars?into a “Seoul Metaverse”. Even a crypto-critical Beijing has laid out a metaverse plan. While Singapore has decided to legalise matches made in the metaverse.

Big brands have engaged audience - ?Nike has seen 7Million people engaging in a few months. While Adidas made an experimental ape-ing entry and walked away with a $21Million ROI! Gucci, Balenciaga, Coca-cola, Samsung, Pepsi, Louis Vuitton, Ferrari, and 100s of others have found greater engagement, immersive interactions and ways to promote loyalty for the customers. Lego partnered in an Epic partnership that will bring some meta-fun into the best childhood experiences.

Shopping has gone meta - IKEA joined the metaverse mix in 2017 showcasing what AR and design can do to transform homes. Walmart's recent launch, followed by its Indian kid Flipkart, though sparsely attended, could very likely be seen in retrospect as an inflection point in metaverse adoption.

Artists, creators and entertainers are a natural in the metaverse - especially digital artists. With creator economies facilitated for better content distribution and NFTs for fan engagement metaverse is a melting pot for art. Justin Beiber, Ariana Grande, Travis Scott, Daler Mehndi... have done virtual concerts. Snoop Dogg shot an entire music video in his metaverse. And some like Webb are creating a metaverse. Disney and Animoca are bringing Hollywood to metaverse, with its limitless possibilities of engaging directly with the audience, and being able to have rich and non-linear narratives. Geography and travel are no barriers in the metaverse - imagine having the entire world in a virtual Times square or Vegas strip, welcoming 2023! And there is Time square, a place that the 100-year old iconic magazine is creating for itself.

Even Healthcare and Banking have gone meta now - Telemedicine accelerated many times over after Covid. With better VR/AR/AI assisted healthcare metaverse is a natural ecosystem for it. Dubai, once again, leads the way in moving over their heatlhcare customer service. ?And many early adopters like Aster DM Healthcare?have created the first medical facility in the metaverse. JP Morgan became the first bank to enter metaverse - even as Jamie blew hot and cold on web3 even recently calling decentralised finance a Ponzi while paving way for his company to be part of it in every way. As the wise say, "follow the money", don't listen to it! DBS Bank, once recognised as the best digital bank has joined Sandbox as well.

Perhaps the best applications of metaverse would yet be in education - want to learn astrophysics and go wherever Hubble takes you, Edverse has you covered. Or want to learn physics straight from Richard Feynman as his lectures are brought live with AI in metaverse. Or if you were one of the lost kids or tired parents of the pandemic times, meta-schools in this South Korean city would have made life much better. This is a field ripe for disruption and massive positive impact to the planet bringing the best of learning to the remotest corners of the earth.

One of the biggest challenges in mass adoption of the metaverse has been the ability to scale hyper-real experiences. But in the past year we have seen amazing advances in graphics optimisations and real-time rendering across hardware and tech capabilities. Improbable, Unreal Engine, Hadean, Unity etc have achieved massive breakthroughs allowing highly scaled hyperreal interactions with reasonable consumer-grade hardware.

What's in it for the rest of us?

If you are a creator/builder: the metaverse could be the promised land; open markets where you can engage directly with your consumers and fans without middlemen and monopolistic rent-seekers. Better engagement. True value creation and price discovery. Commiserate royalties with potentially life long fair commissions.

If you are a consumer/player - Metaverse could be the great equaliser. You get to be whoever you want to be. Without being boxed by prejudices of gender, race, appearance, physical abilities etc. You create your own reality. You could wed in Vegas or party in Paris or get nirvana in Nepal - on the same day - even as you turn 100 and check off the last item in your wishlist. You could play-to-earn, learn-to-earn..

If you are an investor/futurist - the metaverse is expected be a $10 trillion economy within a few years. It is currently just over $50Billion. Who wouldn't want to have a 50% CAGR for the next decade? Much of these estimations don't even consider all the forces driving this growth -

“We tend to overestimate the effect of a technology in the short run and underestimate the effect in the long run.” -Roy Amara

In the last three decades working in tech, I have come to strongly believe in Amara's law which could be a paraphrase and corollary to Moore's law. And now, while it has not been easy entering the web3 and metaverse world, it has been immensely rewarding. The privilege of starting life with every challenge is one learns - to both, accept reality and bend it to one's will. Ready to make your own Metaverse?

Coming in next edition(s) -

1. De-fi - the child prodigy stage of web3 evolution
2. NFTs - branding and retail reinvented
3. Economic foundations of web3 - tokenomics, decentralised governance, smart contracts