Musings on the Metaverse: What Facebook’s Rebrand May Mean For the Future of the Decentralised Web
Facebook’s move signals positive momentum for the Metaverse, but users should consider how design choices today may shape the course of the platform’s future evolution
Key takeaways
- The Metaverse describes a live, synchronous virtual reality that is linked to — and interoperable with — physical space, in which billions of people can transact and interact.
- It seeks to become the next major iteration of the Internet, transposing content from flat, two-dimensional screens into three-dimensional, shared virtual spaces.
- The Metaverse has the potential to provide Facebook (now Meta) with new models of user engagement and revenue capture. It may be exactly the ‘Second Act’ that the company needs to reexert its market leadership.
- Two competing approaches to the Metaverse are now emerging: one centralised at the hands of Meta (and other companies like it), and another based on an open source and interoperable set of protocols, emphasising the decentralised creation and ownership of content.
- That said, Facebook has an opportunity to embrace open source principles and work with the wider community to build a truly open Metaverse.
- While the Metaverse may seem far off, design decisions made early on in the development of complex systems are often persistent and difficult to reverse. Choices made today as to its governance structure will likely shape the course of its development far into the future.
In a bold move this week, Facebook announced a rebrand of its company to ‘Meta’, casting the company’s vision for the future in new focus. The announcement comes shortly after earlier news that the company would be hiring 10,000 employees in Europe alone to build out its Metaverse ambitions.
What is the Metaverse?
The Metaverse describes a live, synchronous virtual reality that is linked to — and interoperable with — physical space, and in which billions of people can interact and transact. Coined originally in the novel Snow Crash by Neal Stephenson, it has since been portrayed in cinema and television, for example in Stephen Spielberg’s Ready Player One and Charlie Brooker’s Black Mirror.
Here’s the idea: put on a pair of virtual reality (VR) goggles, and you will be instantly transported to a virtual world with unlimited potential for invention and interactivity. Go play golf with your dad from halfway across the world; shop for clothes virtually and get them shipped to your house; tour the new apartment you’ve been interested in, all without leaving your seat.
The Metaverse may not be here yet, but fiction could be closer to reality than we believe. In a video released alongside Facebook’s announcement, Mark Zuckerberg demoed his vision for what these new models of social interactivity could look like. Facebook is mobilising significant capital to bring its plans to fruition, with plans to invest over $10 billion in the technology over the next decade — a measure of its tall ambitions for the space.
Facebook’s ‘Second Act’: a renewed model for value creation and value capture
Why is Facebook racing to build out the Metaverse and to become the leading operator in the space? To understand its potential value, it is helpful to see the Metaverse through the dual lenses of value creation and value capture.
The Metaverse seeks to create value by serving as the next major iteration of the Internet. The original Internet facilitated an evolution from physical books to web pages, allowing content to be stitched together through digital hyperlinks, made indexed and searchable, profoundly changing the way we consume content. The advent of mobile technology and cloud computing has further enabled the instantaneous sharing and consumption of photos, videos and other rich content. 2.5 quintillion ($2.5 x 10¹⁸) bytes of data are now created every single day, yet all of this content remains bound to flat, two-dimensional screens.
The Metaverse proposes to carve out a new paradigm for the distribution and consumption of content: by transposing the web onto three-dimensional virtual space, it seeks to bring user immersion to a whole different level, fundamentally redefining the meaning of digital experiences and of virtual interactivity.
For Facebook, the Metaverse — as a new content medium and computing platform, will likely create significant new avenue for value creation and capture. Just as the Internet created a new class of unicorns and decacorns (6 of the 10 most valuable companies in the world today are now Internet companies), the Metaverse will mint a new generation of business leaders.
The Metaverse is likely to create significant value for companies like Facebook in at least four ways, by:
- enabling new ways to engage users: Facebook’s users have been spending less and less time on its platform as other services have increasingly competed for user attention. Porting its significant user base to the Metaverse could be exactly the ‘Second Act’ that the company needs to re-engage its users, and re-exert itself as the leading social network.
- creating new categories of products and services: just as video games are increasingly generating revenue through in-game microtransactions, the Metaverse unlocks potential for new categories of virtual goods and services (as well as new business models to bring them to market). Adjacent to this is the new class of service applications (ranging from digital authentication to payments processing) that will need to be introduced to support the growth of the ecosystem.
- providing new opportunities for monetisation and revenue capture: Facebook and other social media companies have historically monetised their user base through advertising, but in the Metaverse, they could earn revenues by offering digital experiences, curating exclusive content or providing platforms for the transaction of rare digital goods. As the Metaverse grows, so too will its avenues for revenue generation, allowing Facebook to dramatically diversify and grow its top line.
- unlocking new channels for economic transaction: digital experiences, in the form of video games, are already providing unprecedented avenues for trade and the allocation of capital. As an example, Axie Infinity, a crypto-based video game, allows individuals to breed ‘Axies’, compete in PvP battles, and earn prizes in Ethereum (which can then be traded for dollars or other fiat currencies). This is an early glimpse at the types of economic systems that could become possible with the Metaverse.
Competing models of governance: centralised versus decentralised Metaverses
While it seems inevitable that Facebook (now Meta) will play a major role in shaping and building the Metaverse, it is worth taking a step back to consider the following question:
If Facebook (or another company like it) is allowed to architect and exert unilateral control over such a vital platform as the Metaverse, what will be the downstream implications for users and other ecosystem players?
The Internet today can be broadly understood as a set of protocols governing how data is transmitted between peers on a decentralised network. The topology and flow of data itself is maintained by millions of independent actors, meaning the network does not belong to any single party. As the potential successor to the Internet — the Metaverse, too, ought to be built on the same principle of decentralisation. After all, one only needs to look at China’s version of the Internet to realise that centralised systems often resolve to censorship, mass surveillance and unilateral control.
Matthew Ball, an influential venture capitalist who first wrote about the Metaverse in 2018, defines seven core features for (his vision of) the Metaverse. Of these, the last two are particularly pertinent. He posits that:
- the Metaverse will be populated by content and experiences created and operated by an incredibly wide range of contributors, including individuals, informally organised communities and commercially-minded enterprises
- the Metaverse will offer unprecedented interoperability of data, digital items / assets, content and so on across different experiences, rather than be bound to a particular game (e.g. Fortnite) or platform (e.g. Facebook).
The first of these features is important because it subverts the creator-consumer model of content distribution popularised by massively multiplayer video games, the closest available comparison to the Metaverse today. Matthew’s vision of the Metaverse envisions, differently, a widely distributed set of actors that will both create and consume content. Companies like Roblox are already creating ways for regular users to easily produce 3D interactive content. The point is, in a truly decentralised Metaverse, anyone can become a creator if they want — unlike in platform ecosystems, content does not pass through a centralised moderator or gatekeeper.
The second point is more subtle and addresses the ownership of data. In order for digital assets to be truly interoperable and transactable across different platforms and experiences, their ownership must be defined independently of the platforms in which they exist.
For example, if I were to create an account with Riot Games (developer of League of Legends) and buy a skin for my favourite champion, under the open Metaverse paradigm, I should be able to bring that skin elsewhere, use it in other virtual settings, or even trade it for other digital assets. This is not currently possible because my account, along with the skins tied to it, live on servers controlled and moderated by Riot. Making my skin truly portable would require an accounting system for ownership that is seperate from Riot, or any other central platform.
That is precisely the use case for NFTs (and why the crypto community is so excited by it). By creating a distributed ledger for ownership that does not live or rely on any particular company’s servers, we can start to create new models of ownership and interoperability, and eventually circumvent platforms entirely.
Decentralising the creation and ownership of content is hugely important, because in their absence, platforms are left with the ability to arbitrarily censor users over their (often subjective) interpretations of published content. Facebook and other social media platforms have been in the press a lot lately over this exact issue (see my related article here). In a centralised Metaverse, many of these same concerns could carry over in magnified proportion.
Facebook’s opportunity to chart a new course
That is not to say, however, that a Metaverse built and maintained by Facebook cannot be consistent with the principle of decentralisation.
If Facebook were to work with the wider community to develop open source protocols that vest ownership toward users rather than platforms, it could be an influential and hugely positive driver of a truly open Metaverse. The React / React Native libraries developed by Facebook are great examples of the company’s efforts in working with developer communities to build open source technologies. Porting these design principles over to the Metaverse could be extremely positive for the space and simultaneously allow Facebook to regain trust from users and the wider community.
Closing thoughts
Facebook’s bet on the Metaverse has generated significant positive momentum in building this new future into reality. Yet, users should remain cautious of the company’s ambitions and constantly reassess the downstream implications of its design choices in building the Metaverse.
Decisions made early on in the development of complex systems are often persistent and difficult to reverse. While the Metaverse may seem far off, choices made today as to its governance and architecture will likely shape the course of its evolution far into the future.
Subscribe to the blog
Hi, I’m Park!
Open Source Finance is a blog to document my journey into the complex and fast-moving world of fintech. In this blog, I share ideas, insights and key learnings about companies, technology, entrepreneurship, innovation and more.
Finance is better when it’s open source. If you enjoy Open Source Finance, please consider subscribing and sharing it with your social network to help me build my profile!
Originally published at https://opensourcefinance.substack.com.
