Just where, if anywhere, is the intersection between the metaverse concept and crypto? That might be a key question for a number of reasons, but as usual the answer will depend a lot on how we define two very fuzzy concepts. Whatever the truth is, we can also expect hype to fuzz up the results, particularly since Meta’s reporting of an objectively very bad quarter virtually assures that they’ll be looking at the metaverse to restore their opportunity. Some of what they do will surely involve crypto, and I’ll blog next week about what I think will happen, but today I want to look at the broader question of the metaverse/crypto relationship.
If you read my blog from yesterday you’ll get a sense of the multiple missions that the concept of a metaverse could serve, and also my own definition of what a metaverse is. The prevailing definition, to quote, is that a metaverse is “an artificial reality community where avatars representing people interact.” On LinkedIn, I was told that Wikipedia says that a metaverse is a collection of virtual worlds created for social connection. My thinking is that we need to broaden that to say that a metaverse is an enhanced or alternative framework representing a real-world environment or community. The second, broader, definition is a superset of the others.
A metaverse’s fundamental requirement is the ability to create a digital twin of a set of real-world things, and an alternative framework in which to represent them. That framework can be designed to create a realistic virtual community, a game, or even a representation of a factory or transportation system. Humans may or may not be represented in it, and inanimate things might be generated or twinned. There is, in my view, absolutely nothing about this broad process that demands any crypto technology.
Whether it admits to or benefits from crypto depends on how that concept is defined. There are two general definitions out there. First, “crypto” can be a shorthand term for “cryptocurrency”, and that appears to me to be the most broadly used definition of the term. Think Bitcoin, in other words. The second definition is that crypto is short for a cryptographic, blockchain-oriented, mechanism for creating an authoritative record of something. The first of the definitions would make crypto an adjunct to the metaverse, but the second might make it a very important feature of its implementation.
Obviously, you can’t pass around real money in a virtual reality. If a metaverse has to support real commerce, meaning payments and receipts, in any way, then we have to be able to translate real-world financial value into the virtual world (the metaverse) and back. Even the ability to buy a weapon or a drink in a game, if the right is backed up by something like a credit card, means that you have to be able to represent the transaction in the metaverse, perhaps with a “local currency”. If payment between players is possible, then that currency has to be convertible to real money, and that means that if you could counterfeit it, you would be effectively creating real money. Cryptocurrency, or a blockchain-authenticated local currency, could be the solution to that. There could be other solutions too, of course.
That’s not the end of it. If you pay for a sword in a game, you “have” it. Could players counterfeit swords, and sell them within the game? Perhaps, depending on the rules. If they could, then you also need to be able to represent a virtual element in an authoritative way, which essentially means that things that are “real” in the metaverse might have to be represented as non-fungible tokens (NFTs). An NFT is, in a sense, a cryptocurrency, but in another sense it reflects our second definition, which is that it’s simply a validation that something is a representation of something else.
That’s a pretty broad definition, so we can say that the second crypto definition and application of “crypto” is a lot more nuanced. The most obvious application of that definition is the authentication of the relationship between a “digital twin” and the real-world counterpart. If we’re talking about people and avatars, that would mean assuring the metaverse that a given avatar was what they represented to be. Whether that assurance to the metaverse meant assurance to everyone in it would depend on whether the rules of the metaverse allowed someone or something to misrepresent itself. Can I don a disguise? If so, then my identity (the twin-to-reality association) has to be flexible. However, when I buy a sword, I need the metaverse to be as sure of who I am as a clerk in a store would be sure of my identity if the real “me” used a credit card.
The ability of crypto to validate identity is fundamental to many current crypto/blockchain applications, and particularly to Web3 stuff. But it’s not just “human identity” that we have to worry about. In a metaverse-of-things (MoT) IoT application, we might digitally twin a manufacturing process to allow for computer simulation of production control. It would be awkward to say the least if some foreign element could be introduced into the MoT, where it could either bollix up the works or even steal something. A twin of a truck, introduced into a transportation MoT, could end up being loaded with real goods.
In both these applications, there are implications that only add to the potential complexity. Just as you need a wallet for real money, you need a wallet for cryptocurrency, and you need perhaps a virtual backpack or scabbard to hold your virtual possessions. The elements of an MoT need a “locale” that holds the process, and we need a way of moving things into and out of their repositories, ways that might or might not involve a transfer of ownership. Drawing my sword isn’t the same as giving it to you, or throwing it on the ground, and changes to the ownership relationships have to be made appropriately. Through it, the properties of the sword remain.
Except that I could “process” the twin element, which in MoT would reflect real manufacturing steps. Those have to be recorded. If I throw down my sword and it breaks, that has to be reflected in the properties of the sword, and so would having it repaired. Staying with manufacturing/transportation, there are changes of ownership that have to be managed. Crypto/blockchain isn’t the only way to do that, but it’s a logical way given that we have blockchain-based initiatives that accomplish much the same sorts of things today.
What this all leaves us is that there is definitely a role for blockchain in what may turn out to be all of the possible metaverse missions. There may also be a role for cryptocurrency and NFTs. However, and to me this is the big “however” point, there are a lot of things we need to have before either blockchains or cryptocurrency/NFTs have to be addressed. The risk of doing without them in the metaverse is silos based around identity and authenticity assurance, but every metaverse implementation could end up being a silo at the architectural level, and that’s a much greater risk.
If anyone is doing the right thing here, with the architecture and with “crypto” in combination, I’d sure like to hear about it. Takers?