Metaverse Standards

Headline:

Body:  OK, let’s close our eyes and imagine a scenario, both wonderful, and daunting.   Here we go.  You are running a very successful manufacturing plant in the U.S.   You make heavy pieces of railway infrastructure, and your business is booming.    On a vacation with your family, as you are desperately trying to remember their names, you are  taking in the sites of  Poland., and you see a manufacturing plant doing the same type of work, only better and it turns out cheaper.  You do some investigating with your legal team, and come to find out that there is a new owner, the grandson of the founder, and he wants OUT!!    So, he agrees to license to you for very little, the technology that made his family so fabulously wealthy, and you happily nap later, dreaming about the stacks of cash you will have to find homes for.   Only, there are 2 snags.   First, you forgot that European rails are of one gauge, and the U.S. rails are of a slightly different gauge.  You shrug, figure that your shop foreman can translate, and roll in your slumber.   But then the other shoe drops.   All of their apparatus, tools, procedures, protocols, everything are denoted in metric measurement,   Your people are all trained on U.S. measures.  Your  dreams of profitability might’ve been de-railed.

The different metaverses are somewhat similar.  The local currencies function differently, the character development is very different, and the ability to develop new items are at very different levels of difficulty.  This is why the question of interoperability is so important, so that the currency, characters and items can be ported from one metaverse to another.   But, to do this, there needs to be a common infrastructure underlying all of these items.  Developing this common infrastructure is why the Metaverse Standards Forum exists.  Let’s chug along and  perhaps see the end of the line.  (OK, I’ll stop with the train jokes, but, I really am rolling.)

So, OK, what IS the metaverse?

Simple answer is nobody can really define it: In point of fact, the members of MSF have a very active debate raging on this very elementary principle.  It should be a fully immersive space where one can see and hear (and eventually smell?) things that are not physically in the room with them.  Currently, the environments are not totally immersive but instead, are on a continuum, but each one is very siloed off from one another.   The Internet became so engrained in our lives because it was not walled off from one app to another, so to reach their imagined endpoint, the perfect world would all emanate from one point, and be freely navigated from world to world.  This runs counter to some visions of the future, so, we shall see  (and feel, and smell?)

What is the Metaverse Standards Forum?

OK, just a little reminder.  In this case, Metaverse Standards Forum (MSF) is what we’re talking about, not Medcins sans Frontiers (Translated Doctors Without Borders).   This is important to understand because this very generous organization is also abbreviated MSF.     Our MSF is an organization (of private companies, chiefly) that work together to institute a common infrastructure of code and  protocol, with the aim of accelerating the development of the whole gamut of metaverses.  Activities are sponsored by the Khronos Group.     I won’t bore you with the entire list of projects, but, when it becomes obvious that some standard has to be set for something, MSF starts a project on that area.  For example,  MSF might decide that common protocols have to be set up to take care of Digital Asset Management.    MSF puts together a Working Group to investigate that process, with the end result is a recommended common  protocol.    In their efforts to understand this process, the Working Group might sponsor hackathons to learn about what works and doesn’t work, on an accelerated timeline.  There are some truly HUGE companies supplying talent to MSF, but oddly, Apple has decided not to participate.  But, there must be a reason because, a few other suspects (Roblox and Decentraland among them) have made a similar decision.

All this sounds great!  Where’s the controversy?

Well, it does sound good, but there is politics to consider.   One of the companies to participate in MSF is Huweiwei, the Chinese company that makes 5G components for the Internet, probably really important to the future of metaverses.   But, some think that the company is part and parcel of the Communist government in China, and will not want to participate for that reason.

So, who’s getting the most right, right now?  Who is lagging, right now?

It would appear that, right now, the most immersive environment is the Omniverse, which is an environment designed by Nvidia.  Currently, it is being used to program autonomous vehicles, and will hopefully help to predict weather patterns, especially as they relate to global warming.     Meta, (f.k.a. Facebook)   has made a lot of vague promises, but not too much has come to fruition.

The Verdict

When we first got the “Internet” it was filtered thru the lens of an ISP, either AOL, or one of the other providers.  Unsurprisingly, some of the details of how things were presented were different from network to network, each one was its own “walled garden.”   As the Internet evolved, the different views of it began to be more uniform.  I think the metaverse will likely follow a similar model.   Right now, each one is a siloed area, which is somewhat OK (in many cases) presenting information to the user.   But, in the future, I think that all of these individual metaverses will begin to speak with each other, and the environment of the place will begin to be more and more immersive.  The question I think we have to ask is how immersive do we really want to have this metaverse?  Could it grow and develop to be so convincing ( and attractive) that people don’t want to leave, and eventually forget to eat, or drink water?  Sounds kind of ridiculous, but these are valid questions that we must ask ourselves.  The MSF will likely not approach these very difficult subjects, but they will hopefully, provide us with a language with which we can all better communicate during the intense debates.

REFERENCES

Microsoft, Meta, and others are founding a metaverse open standards group – The Verge

Meta and other tech giants form metaverse standards body, without Apple | Reuters

The Critical Importance of the Metaverse Standards Forum (technewsworld.com)

Editor’s Note: Please note that the information contained herein is meant only for general education: This should not be construed as Tax Advice.   Personal attributes could make a material difference in the advice given, so, before taking action, please consult your tax advisor or CPA.

 

Metaversus?

Competition is fierce.    In the natural world, the hyena clans clash with prides of lions, and only the strongest survive.   In a similar vein, the world of gaming has seen a lot of innovation and competitors have come on the scene to knock too-comfortable champions off of their thrones.   Atari competed with Colecovision, in the next generation, Nintendo is in an intense competition with Sony PlayStation.  So, we should probably not be surprised to see that when it comes to online social-gaming, the same competition would be keenly felt.  And, you would be right.

In the beginning, there was Second Life, owned by Linden Labs.  This was a rather clunky, though immersive platform, and it was only 2020 when Linden Labs sold this franchise to other investors.   Other newer, shinier toys beckon from the over-stuffed toy box.    I have done some research and these seem to the largest competitors to Second Life.  For fairness, I am presenting them in alphabetical order.

Avakin Life

Avakin Life is a social game after the example of Second Life, but with more complex functionality.  It was created by Lockwood Publishing (which has a large investment from Tencent.    There are over 200 million users of this platform.  Its success seems to stem largely from the developers’ focus on the phone and mobile computing.   This is the 4^th generation of games from the company, and this seems to be the biggest hit they have had.  It is written up in any variety of websites and other publications.

The game was launched in 2013 on Google Play  and was a hit because of the gameplay, but mostly as a result of the social interaction.  It seems that one of the largest hurdles was designing a system for people to pay for things that they could use in-game.    One of the unusual features of this game is that the designers provide everything: There is no user-generated content in the immersive Star Trek and Tron-inspired world.  And, the company seems to be in the space for the long term.   Said one of the co-founders:

We saw how long it takes to develop a world and for the community to form,” Bjornsson said. “We saw how important social is. But we fell into this. Our style has been steady organic growth.”

Club Cooee

Club Cooee was started by a German startup, and recently added a 3D instant messaging service that combines avatars (with changing facial expressions with the ability to send videos and pictures.  These 3D avatars can be highly specialized, and clothing and accessories can be purchased in-game for “Club Cooee credits.”   In addition to gameplay, they can now converse in duos or groups, selecting a venue using in-game items.  The person can pay extra, and get access to premium services.    The founder, Alexander Jorias hinted that the platform was looking to make money with B2B partners.   The advertising will be non-standard making me think that there will be signs up in the game or sponsored activities that occur in-game to promote these partners.

To monetize, the site will allow users to buy extra credits to purchase virtual goods, and will also offer premium services for a fee. Founder Alexander Jorias says that the service is also planning to generate revenue with a number of B2B partners, and that little, if any money will come from standard advertising.

Garry’s Mod

Garry’s Mod (GMod) is a program made by Garry Newman that allows you to change the game of Half Life to your specifications . If you’ve ever searched “Half-Life” on YouTube, you probably have seen a Garry’s mod video, and many people seem quite excited by both the videos and the gameplay.  Besides being a social game, Garry’s Mod also appears to be a wonderful “sandbox” which allows players to create tools that will build spaceships.   There is also a “tool gun” which can help one manufacture vehicles or change the facial expressions of your avatar

Just to be fair, I should warn you that Garry’s Mod (GMod) does contain some blood and gore, so, be mindful.  It does require download of a Source engine game first, but this doesn’t seem like an onerous task.

GoJiyo

GoJiyo was developed by an Indian firm, and the idea is that you (either solo or with a group) can go on quests.  At the completion of these quests, you get points that can be used to buy in-game merchandise or real-world items.   You can do an awful lot, (e.g. greatly customize your character and meet new friends), but there is an impressive list of things that you cannot.  Interestingly, this game too strictly does  not allow for user-generated content.

Jios and Mios are the currencies of this system, and if you collect enough of them, you can earn a real-world trip to Mt. Kilimanjaro.   Users agree, though, that to earn these real-world inducements takes a very long time.

IMVU

This application does a lot of different things.   It has a 3D chat feature where you can have your avatar chatting with friends, and allows the person to shop at many different vendors.  It also allows you to have your own website and customize it to a very high degree.  Credits are the coin of the realm and you can use them to customize the appearance of your avatar.  There are a lot of ways to get credits including getting your friends to sign up for IMVU.  The truly unique thing about this program is the content is 100% user-created.  For an additional fee, you can be in the VIP club which gives you a special badge and removes third party ads.  There is also an Access Pass that is used to ensure that only adults are granted access to the areas that are geared toward adults.

Also unusual among these sites, there is a variety of ways to earn credits while contributing to the community.   There is a peer review function and these people perform a quality control function.   There is also a group for creators, who design new functions and products for the community.

The Sims 4

For 20 years now, we have had multiple editions of The Sims, wherein you create characters with their own life stories, and control them as they interact with your environment.   Up to now, this as been a single-player game.   But, with Sims 4, there seems to be an expansion module that will allow you to in some ways interact with a group of friends.  This is not really meant as an immersive social game, and seems to be a way for the manufacturer to dip their toes into the waters of social play.   But, there are rumors that The Sims 5 will be coming out soon, and combine the ability to control multiple characters and still interact with others.    Currently, this platform does not really fit with the others, but the title is well-known and came up in research again and again.

Twinity

Twinity was developed by Metaversum and run by ExitReality since 2012, and allows its citizens to run around 3-D renderings of historical versions of real-world cities.  Recently, Twinity has been introducing more fantasy-related worlds, probably thanks to its large amount of user-created content.  Twinity allows users to upload pictures of their own face, which is used to create a personalized, identifiable avatar.  (If a different avatar is desired, this is easy to accomplish too.)

The currency of the world is the Global, which can be used to pay for apartments and accessories for their avatar.   Globals can be purchased on their homepage with any major credit card or PayPal.   Globals can be earned by attending virtual events or completing the post-registration “welcome tour.”

Twinity has an interesting mix of professional and user-generated content.  Once a user creates a new piece of content, they can sell this content to other users and earn Globals in this way.  Though the citizens are given a starter apartment, there is a real estate agent who can be used to find other possible real estate for their avatar.   With some noteworthy in-game accomplishments, there are badges that people can display on their profile.

The Verdict

Each game mentioned has its good points and bad.   The point being that there are a plethora of possibilities.   Plus, in the future, I think there will be multiple ways to make these games interoperable.  Said another way, you could build a character in one metaverse and port it to another.  This has the potential to be very exciting

Have You Met a Metaverse

Decentraland was the first metaverse to be built on the blockchain architecture and the Ethereum-based economy and is the fastest-growing crypto-based virtual world. created in 2016 by a group of developers in Argentina, it is largely based upon a Second Life and Minecraft, two of the most popular multiplayer games in the world.  What distinguishes Decentraland from predecessor virtual worlds is that all of the spaces (called LAND in the game) are easily transferable within the infrastructure of the blockchain.   This is important as the blockchain makes a secondary market for LAND sales very credible.   This credibility makes the digital real estate quite valuable.  Within this LAND, the owner can create 3D products for avatars (e.g., t-shirts or hats) or any other kind of virtual art or games.

Decentraland began as a proof of concept. The experiment was entitled Decentraland’s Stone Age and in this incarnation, as people acquired LAND it was color-coded to denote owner.  In 2016, the team started developing the Bronze Age, a 3D virtual world.   This introduced different textures and made the LAND pieces truly unique.  The next incarnation of Decentraland, the Iron Age, will create a social experience with an economy driven by the existing layers of land ownership and content distribution.    In this new version, peer-to-peer communications will become a vital component, leading to faster transactions.

Decentraland

A key portion of this title is the LAND.   Decentraland is a metaverse meaning it is set up to be a self-contained virtual environment of its own, where LAND is limited and must be travelled through.  People can set up avatars for themselves and interact with this environment in a myriad of ways.   People might gather at a virtual outdoor café and have a chat among a small group, or, they could go to a larger venue and congregate in groups of hundreds or even thousands.   The thing to remember  is that people are, for various reasons, traversing this virtual world, and as they go from place to place, they will pass other destinations.  If these destinations are created attractively enough, players could be persuaded to loiter there.

For instance, somebody might create an art gallery where various digital artists will be able to exhibit their designs.  If this art gallery can obtain digital art that is exciting enough, the foot traffic to that venue will increase.   This allows them to charge artists more, and perhaps offer other advertising opportunities to others.    Because this foot traffic can then be monetized, based upon the uniqueness of that piece of LAND, some of these plots can become very valuable.   It is becoming even more valuable now because congregating in the real world in large groups, can be very dangerous; In the metaverse, social distancing is not required.

This would appear to be a new kind of store of value, and is very interesting because it seems uncorrelated to other investments.     Even though stocks and bonds are completely different types of securities, as a general rule, the markets often rise and fall in tandem.  Investments in digital real estate seem to be uncorrelated with the performance of these other types of securities, and this is important.  If the stock and bond markets are both going down, it could be a very good time to purchase digital real estate.   They could do this by purchasing cryptocurrencies.

What is the relationship between ETH and MANA?

Decentraland is an Ethereum-based system, and the coin of the realm is MANA.    An investor would set up a virtual wallet where they would store Ethereum and other cryptocurrency.   They would then go to the bank within the metaverse and trade the Ethereum for MANA.  With this MANA, the person can buy items for their avatar, and most importantly, purchase a piece of virtual real estate.   Once purchased, the real estate can be developed to be whatever type of setting the investor would like to set up.  Generally speaking, the objective is to build a venue that is very interesting and will both burnish the neighborhood by adding another destination, and attract local foot traffic.   The higher the foot traffic, the more that the developer can then sell the venue for, in the secondary market.

The important thing to understand here is how exciting the investment opportunities are here.   As a general matter, Ethereum has been increasing in value against the USD.  MANA have been increasing in value compared to Ethereum.   This makes an investment in MANA a prospectively very good deal for an investor.  It is important to know, however, exactly what each investment represents.   Ethereum is much like an investment in USD.   Each unit is exactly like every other unit; MANA is different.   MANA is a non-fungible token (NFT) and it is known as an NFT because each usage of MANA is for a specific purpose, and once used for that purpose, it is gone.   Each usage of MANA is tracked within the blockchain architecture, which is open for all to see, and each usage is distinct.   For instance, a set of MANA could be used to purchase a piece of land.   Once done, the MANA used for that transaction don’t exist anymore.

As a result of this feature of one-time use, the NFT market has exploded.  The one-time use makes these NFTs safer than other types of cryptocurrency, and the safety represented by the blockchain, has encouraged many people to invest in NFTs.  Now, these digital goods are gaining in value quickly.

This one-time use feature does not mean that exchange is impossible; To the contrary, already, secondary exchanges have sprung up to exchange pieces of land for MANA.  These transactions, once again, are all stored within the blockchain, so the chances of a fraudulent transfer are virtually nil.    NFT transactions are made even more enticing because of low interest rates in real-world investment options.  Meanwhile, the developing secondary market would seem to suggest increasing liquidity.

Even more enticing than the increasing liquidity, the number of people encountered during a visit is relatively low.   This suggests that is still early days for this metaverse, and there is significant room left for development and appreciation of your investment.

Is this market really a big deal?

Yes, the use of NFTs links back very directly to USD.   In fact, over a recent 30-day period alone, there were over $12.7 million worth of NFTs being traded.   That is real money, and can easily lead to even more real money.  When speaking only of Decentraland, over the same period, there was over $636,000 of MANA related transactions completed.    In addition to pieces of LAND, these MANA can be traded for all kinds of digital art ranging from digital wearables to games that can be used at your location.

In the first week of 2021, alone, MANA increased in value 68%.  MANA seems poised for even more explosive growth as the user base increases, and this potential is highlighted by the $368 million of MANA denominated trades in only a 30-day period.  Interestingly, this MANA infrastructure allows holders to vote on governance issues, very directly tying government and finance.

As Decentraland continues to evolve, it will add different functionalities that will attract more and more users.   Recently they added a functionality to allow for peer-to-peer communication. Because of these improvements, the user base will be increasing, and the value of MANA should increase in a like manner.

Conclusion

This whole discussion focuses on decentralized finance, often abbreviated DeFi.   DeFi is any attempt to use a combination of cryptocurrency and a blockchain infrastructure to disrupt the monopoly of standard financial intermediaries. Each intermediary added adds a layer of fees and a delay in processing the transaction, but it also adds a level of security, so it seems to me, the question is how much security are we willing to give up to achieve greater efficiency? This is partially why I view cryptocurrency as a financial laboratory experiment. Without such experiments, we would not have microwaves: Neither would we have atomic weapons. Choose wisely.