POST 15Mb after 31st October Metamoney

Way back in March 2005 at the Consult Hyperion Digital Money Forum (which Ian Grigg kindly called “an engaging show for financial cryptographers”) we had talks from Fred Piper on crypto and the potential impact of quantum computing, the Qinetiq talk on quantum cryptography and (the reason why I mention it) Richard Bartle’s wonderful presentation on virtual worlds and their economies. Rather memorably, he described these economies as being based on “people buying things that don’t exist from people who don’t own them”.

That’s the difference between the virtual worlds that we know and love and the metaverse that is about to envelop us, thanks to the evolution of the blockchain and other shared ledger technologies. The metaverse is as a collection of shared virtual worlds which are interoperable in the sense that people can navigate them while taking with them, as the Financial Times succinctly notes their digital identity and digital money.

Interesting. But how is that different from the virtual worlds that we have now? Well, think about that money point. Mark Zukerberg famously said that he wants to make sending money over the internet as easy as sending pictures of cats over the internet. But when you send a picture of a cat you are not really sending the picture: you are sending a copy. Someone gets a picture of your cat, but you still have the picture. That’s great for sending pictures of cats but not very good for sending money.

The blockchain doesn’t work that way. If I send a Bitcoin from my wallet to your wallet, I’m not sending you a copy. The blockchain makes the virtual world more like the physical world, in that it contains objects that cannot be cloned.

Now you can see why I refer back to Richard’s memorable comments. When you bring shared ledger technologies into virtual worlds, you now have virtual objects that are unique. And these objects are linked to digital identities: they cannot be sold by people who don’t own them (whether they “exist” or not is in the realm of metaphysics and I defer to the philosophers on this point).

Interesting Properties

Matthew Ball identifies a fully functioning economy – individuals and businesses will be able to create, own, invest, sell, and be rewarded for an incredibly wide range of “work” that produces “value” that is recognized by other – as a defining characteristic of a metaverse. This is spot on, and I have long been fascinated by the economic of virtual worlds. I wrote a column called “Opening a Branch in Narnia” in Financial World magazine in July 2006 in which I said that:

Some of these ideas might sound bizarre, but virtual worlds adumbrate change
beyond the world of financial services. The attraction the virtual sphere of
interaction, to communicating and earning a living in the virtual world, are
obvious once the virtual personae become economic agents.

So, how do these personae become economic agent and, more importantly, why are they becoming them now?  Well, one way to look at this is that an economy, as we know it, depends on property rights. If everything belongs to the State (or Blizzard or Electronic Arts or Sony or whoever) then you don’t have an economy: you have serfs tilling the fields for the Dear Leader. But once you have secure property rights, you have a modern society. As Richard Pipes wrote in one of my favourite books, his superb Property and Freedom (Vintage, New York: 2000), which interestingly contrasts the evolution of property rights in England and in Russia:

While property in some form is possible without liberty, the contrary is inconceivable.

As The Economist summarised nicely, property rights classically entail three elements: usus, fructus, abusus—that is, the rights to use, profit from and dispose of property. The reason why people are getting excited about the metaverse is precisely this: in virtual worlds you have a command economy run by dictators who can take your stuff away at the press of a button. In the metaverse delivers usus, fructus and abusus which is why I agree with Kayvon Tehranian, a founder of NFT marketplace “Foundation” who said in the New York Times that “Property ownership is a tool. It works. It brings financial incentives.”

There are some observers who see the metaverse as the next “epoch”, following on from the PC epoch, the internet epoch and the current mobile epoch. John Naughton, whose opinions on just about everything I take very seriously, call this wishful thinking for psychotics, but I am not so sure. The transformation of these 

Right now, the economies of these virtual worlds seem to be founded on people selling pointless JPGs of chimpanzees to each other, but I think it’s wrong to dismiss them as worthless because of this. 

Generations

Twenty years ago, Edward Castronova wrote in “Virtual Worlds: A first–hand account of market and society on the cyberian frontier” that the GNP per capita of Norrath, the imaginary world at the centre of Sony’s Everquest multiplayer online game, was somewhere between Bulgaria and Russia.

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