Crypto and the metaverse drive this newsletter for a reason: Their relationship will matter a lot to how our next digital landscapes get built, and who oversees them. Already, crypto is a huge asset class with growing attention from Washington. The metaverse, so far, is not like that. It’s a piecemeal virtual landscape that looks more like a bunch of experiments than a full economy. Almost everyone agrees, however, that their futures are interlinked. To a certain type of metaverse enthusiast, our virtual future is inseparable from blockchain technology — not just for practical reasons, but almost for moral ones. One key question is something called interoperability . In layman’s terms, that’s the idea that your avatar and virtual possessions could be ported between different virtual worlds seamlessly and securely — you buy a shirt at a virtual mall in let’s say, I don’t know, the H&M-verse, and then enter the world of “Fortnite” and your avatar is wearing it. There’s no specific reason this has to be done on the blockchain. Meta and Roblox and other virtual world-builders could just agree on some norms and make property interoperable between those platforms, or not. But a lot of metaverse idealists want to see virtual worlds built more like the original internet — not controlled by any one company, and with value firmly resting in the hands of the users, rather than the world-builders. These people view blockchain technology as a necessary backbone of the metaverse. Blockchains are decentralized ledgers that exist outside of any one company, so anything of value stored on the blockchain will be really yours, not Mark Zuckerberg’s or Bill Gates’s. A blockchain-based metaverse would look very different from one built by the modern tech giants. There are already nascent examples of both kinds. There’s Roblox, with its in-game currency, or Facebook’s Horizon Worlds, both essentially walled gardens controlled by one company’s platform. A counterpoint is the popular online world Decentraland, an Ethereum-based virtual world in which virtual “real estate” deals are reported regularly. Buyers there have spent millions of dollars in cryptocurrency on virtual “land” authenticated by NFTs . It sounds great, in principle. But that idea also comes with complications. I talked about this with Yonatan Raz-Fridman, the founder and CEO of metaverse games company SuperSocial, and co-host of Bloomberg’s “Enter the Metaverse” podcast. He described how as natural a solution as blockchain might be for interoperability, it also opens an entirely new vista of potential uncertainty and complication. “Can you imagine a world where the entire internet is programmable money, and people need to deal with, ‘Oh my God, my virtual avatar asset just declined by 70 percent in value? What does that mean?’” Raz-Fridman said. Raz-Fridman believes that the future of the metaverse will likely be a hybrid of the two models, with the big established platforms making concessions to interoperability that might be enabled by blockchain technology. “If you think about companies like Apple, and Snapchat, and Meta, they understand that there's something going on with blockchain and decentralized technology,” Raz-Fridman said. “Each of them are going to work on finding a way to integrate that school of thought.” A hybrid virtual future would be pretty weak tea for Web3 enthusiasts who view blockchain technology as a revolutionary force that could supplant corporate tech giants, the financial system and even current methods of governance. As with most pioneering technologies, that culture has an obviously libertarian bent. Regulators worry about the potential for anonymized criminal transactions and financial fraud in an economy meant to evade centralized oversight. But just as they purport to be looking out for the “little guy,” so do the Web3 cowboys — the premise of decentralization being it’s guaranteeing users’ rights and autonomy from corporate tech-world power. It’s still not clear which of these philosophies will win out, but the metaverse is a high-profile arena in which they’ll both be tested.
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