With new technologies related to the development of computers, graphics, and hardware, the virtual world has become a reality. As COVID-19 spreads around the world, the demand for virtual reality increases, and the industry represented by the Metaverse is developing. In the Metaverse, a virtual world that transcends reality, artificial intelligence and blockchain technology are being combined. This chapter explains how artificial intelligence and blockchain can affect the Metaverse.
The term “Metaverse” is a combination of ‘meta’ meaning ‘virtual, transcendence’ and ‘verse’ a backformation from ‘universe’. The Acceleration Studies Foundation (ASF), a non-profit technology research organization, classified the Metaverse into the following four categories: a virtual world that experiences a flawless virtual story, a mirror world that reflects the current real world, an augmented reality that shows a mixture of augmented information in the real world and life logging, which captures and stores everyday information about people and things . With the development of technology, the number of people who use the Metaverse increases, and as activities at the same level as reality are performed, various and a lot of data are being generated. Data generated in the metaverse has value in itself. In the Metaverse, the amount of data increases, the value increases, and the importance of reliability and security is increasing. Blockchain technology is required to guarantee the reliability of data in the Metaverse, and artificial intelligence is used to secure the diversity and rich content of the Metaverse. The contents will be developed in the following order. In this chapter, under the theme of the Metaverse, we will look into the issues of human instinct for creation in the virtual world, the phenomenon in which the real and the virtual are combined in the virtual world, and the reliability of data in this virtual world. Blockchain and NFT technologies are described as trust technologies. And the Metaverse platform built on the basis of this technology will be described. Basically, we will understand the interface between blockchain and artificial intelligence, and look at how a better world is created by combining blockchain and artificial intelligence in Metaverse.
Virtual world and desire of creation
Human desire for creation
Humans have an instinct for creation, and this creativity is an important factor that distinguishes humans from other animals. The creativity of human beings has been creating the culture. The paper published in 2004 described the SeaCircle as the new concept of the culture, and it regarded the SeaCircle as human cultural activities for creating. In the concept of the SeaCircle, humans are the spiritual beings, and only humans constitute a culture. It explains the elements of insight of culture. According to the SeaCircle theory, creativity is explained as an element of Open Mind and Spirit.
On the SeaCircle concept, the Metaverse can be interpreted as a space that allows people to be more immersed in creative activities by resolving some of the constraints on space and resources.
Connection between the virtual world and the real world
Recently, the virtual world and the real world have been developed in convergence. The First and Second Industrial Revolutions were the process of maximizing efficiency through division of labor, so the production of materials and the consumption of materials were separated. In the Third Industrial Revolution, as online transactions are actively conducted, data has become an important commodity, and offline transactions are gradually being replaced by online. In the Firth Industrial Revolution, an intelligent revolution is occurring as things and humans become hyper-connected. There is a convergence phenomenon in which production and consumption occur at the same time, such as social customization or digital DIY(Design It Yourself). The offline world composed of materials is dominated by Pareto’s law, which attempts to own and concentrate on the core of 20% due to limited resources. On the other hand, in the online world of information, the Long Tail theory is applied to share and find opportunities from the marginalized 80% of customers. The Forth Industrial Revolution is creating a convergence world where offline and online meet. This convergence is being created in manufacturing, logistics, finance, automotive, sports, healthcare, education, food and everyday life. In addition, as the problems of material production and supply were solved in the First, Second, and the Third Industrial Revolutions, and interest in human personal desire and spirit increased in the Forth Industrial Revolution stage, a new convergence between offline world and online world are being created.
Combination of virtual and real in Metaverse
Political, economic, social, and cultural interactions appear in the Metaverse, which seems to mimic the real world. Figure below shows the process of interworking and convergence between the real world and the Metaverse. The Metaverse expresses an alternative world that cannot be achieved well in the real world.
Figure: Metaverse relationship: Relationship between the real world and the Metaverse.
In Minecraft, a virtual reality game platform representing Metaverse, as it became difficult to go to school due to COVID-19, UC Berkeley students created a campus inside the Minecraft game and held an event to hold a virtual graduation ceremony. The president, guest speakers, and graduates all participated as Minecraft characters, and even the tradition of throwing hats after graduation was re-enacted in Minecraft.
Roblox allows game developers to create games on the Roblox virtual platform instead of commuting to an offline office. In Roblox, tokens are obtained in return for labor, and the tokens obtained in the game can be brought to the outside to be cashed.
In Metaverse, numerous users can freely trade goods and services according to the currency and transaction method provided by the platform. Both the virtual asset SAND of The Sandbox and the virtual asset MANA in Digital Land are listed on the exchange and are actively traded. This means that money in the virtual world in units of bits can replace money in the real world. Co-creating a game in the space of the virtual world means replacing the space in the space of the real world. This means that activities in the real world are data in bits in the virtual space, and the importance and reliability of these data are emphasized.
Data trust in the virtual world
After the 4th industrial revolution, the virtual world has grown rapidly. The real thing has been converted into data from the virtual world, and the virtual world has even played a role in leading the real world. Here, we have a question about the reliability of data about whether the real thing is becoming data accurately in the virtual world. In the virtual world, trust technology is emerging as an important issue. We can think of blockchain as one of these trust technologies.
Blockchain was first proposed in 2008 in Satoshi Nakamoto’s paper “Bitcoin: P2P Electronic Money System”. Blockchain can be said to be a technology that gives trust in transactions between individuals. A blockchain consists of blocks containing data and a chain that connects them. It is a blockchain to create and connect blocks, and consensus algorithms are used in this process. Any of the nodes participating in the network can create blocks, but not all generated blocks are connected, and only one block is recognized and connected. Since only one block among many blocks is connected to the previous block and the remaining blocks are discarded, consensus among participating nodes to select one block is essential. As a method of reaching consensus, consensus algorithms such as Proof of Work (PoW) and Proof of Stake (PoS) are used. If it is recognized as a unique block by all nodes, the node that created the block will receive cryptocurrency as a reward. This action is called mining, and a blockchain connected only with blocks created by mining is called a Canonical Chain.
Blockchain is developing and evolving as shown in Table below. Blockchain 1.0 was a period of innovation in the financial system with the advent of Bitcoin. Bitcoin is meaningful in that it attempts a single global financial system based on decentralization and decentralization, which are the core values of blockchain. Blockchain 2.0 is a period of contract automation centered on Ethereum smart contracts. It made it possible to execute contracts with legal effect online only with computer code without a transaction intermediary. It is a period that showed the potential for development as an online trading platform. Blockchain 3.0 is the stage in which blockchain technology is spread and applied to various industries. In order to solve the problems of the previous blockchain, technological improvements such as changes in consensus algorithms, improvement of transaction processing speed, and in-house decision-making functions are being made . While it is expected that artificial intelligence will be applied to more expanded fields in Blockchain 3.0, more various applications of blockchain and artificial intelligence are expected to appear in the Metaverse environment.
Blockchain paradigm evolution direction.
Ethereum is a platform network designed to operate various decentralized applications (DApps), based on its own blockchain. Just as the basic framework and details of Internet standards were documented as RFCs, Ethereum Request for Comment (ERC) documents the details of Ethereum. In DApps using the Ethereum network, the basic protocol for issuing tokens is expressed as ERC-number as shown in Table below. ERC-number is a protocol to follow when issuing tokens from DApps using the Ethereum network. Ethereum standard documents start with ERC-20, ERC-165, ERC-223, ERC-621, ERC-721, ERC-777, ERC-827, ERC-884, ERC-998, ERC-1155, ERC-1404 etc.
Table: ERC(Ethereum request for comment)-number.
Among them, ERC-20 is a protocol related to replaceable tokens, and ERC-20 tokens have the same value and function and can be exchanged with each other. The Ethereum project is issuing tokens based on ERC-20 and allowing investment and various businesses to take place.
ERC-721 is a protocol for NFT (Non-Fungible Tokens). NFT guarantees uniqueness by keeping encrypted transaction history permanently on the blockchain. Each token has a unique recognition value, authenticating the ownership of digital assets and assigning a value to the transaction. NFT has been mainly used to commemorate special moments or to collect digital assets, and recently it is creating a new digital content business by combining it with Metaverse.
The Metaverse is a three-dimensional virtual space where social and economic activities are commonly used just like the real world. NFT plays a role of mediating interaction and proving private property within the Metaverse world. An example of NFT application is the CryptoKitties. It is a blockchain-based cat reproduction game. CryptoKitties is an Ethereum ERC-721 token-based DApp. Game users are given only one cat in the world in CryptoKitties. Cat digital assets have a rarity because they contain a separate unique recognition value, unlike existing virtual assets. In general online games, when the service is terminated, there is a problem that the character developed in the game can no longer be owned. However, digital assets with NFT technology can be distributed and stored by individual participants connected to the network to prove ownership.
Decentraland implemented the concept of real estate in the Metaverse by combining virtual reality and blockchain technology. Decentraland made it possible to purchase land, a virtual real estate, using MANA, an ERC-20 token. Users can freely place buildings on land purchased from Decentraland, earn income by attaching billboards to buildings, or open exhibitions by collecting rare digital content. Land ownership and other collectible items are ERC-721 non-fungible tokens. These unique assets are made through Ethereum smart contracts and allow owners to prove ownership on the blockchain ledger. Cryptocurrency MANA can be purchased on exchanges and can also be used to purchase digital goods and services around the world.
Enjin Coin is a cryptocurrency project created for game item trading, and is an integrated platform for creating blockchain-based games. Enjin is a smart contract platform based on the Ethereum blockchain, and is a protocol and cryptocurrency that supports the crypto needed to create, manage, and implement virtual goods for game developers, content creators, and game communities. Ethereum-based ERC-20, ERC-721, and ERC-1155 token items can be stored and managed in a mobile cryptocurrency wallet. Enjin Coin guarantees the ownership and currency value of game items used in all games. When Enjincoin is applied as a currency in Metaverse, it can be used not only as a currency in Metaverse, but also in the real world with the value of currency.
Complementary point of Blockchain and artificial intelligence
Artificial intelligence and blockchain
Through the cognitive revolution, the agricultural revolution, and the scientific revolution, humans have entered the stage of connected intelligence, which uses the combined intelligence of humans and machines. As in the movie The Matrix, a symbiotic relationship between humans and machines has begun, and artificial intelligence and blockchain technology are accelerating this.
Artificial intelligence is reaching a stage where prediction and creation are possible through pattern recognition and learning using large amounts of data. And artificial intelligence is helping people to reduce repetitive tasks and human errors. Blockchain technology has deeply entered our society as a digital asset and is developing into a safe and reliable transaction through decentralization. Artificial intelligence is the core of the Forth industrial revolution, and it can be integrated with blockchain technology to make both artificial intelligence and blockchain more powerful . Artificial intelligence and blockchain can change business models and have a transformative impact on society.
Blockchain for artificial intelligence
Artificial intelligence has a centralized nature where data is centrally managed and stored, making it a target for hacking and manipulation, which can lead to data tampering. In addition, since the source and reliability of the source for generating data are not guaranteed, there are many errors and risks. The blockchain capabilities of immutability, origin and control mechanisms have the potential to address the shortcomings of artificial intelligence and improve the accountability of trust, privacy issues and decisions. The combination of blockchain and artificial intelligence can help enable trusted digital analysis and decision-making on vast amounts of data. And it can be used to create secure data sharing and make artificial intelligence explainable, as well as regulating trust between devices that cannot trust each other.
Artificial intelligence for blockchain
Integrity of blockchain data is guaranteed. However, the security of applications built on top of the blockchain platform is not secure. Also, when a new block is added to the blockchain and consensus of all nodes is required, a problem arises that it cannot be used efficiently in fields that require high speed. When an error or vulnerability is found in the script of a smart contract and needs to be corrected, the irreversibility of the blockchain can hinder it. The case of hacking tens of millions of dollars in crypto currencies using vulnerabilities in smart contract algorithms reminds us of the need for agents that can immediately compensate for imperfect algorithms. In such cases, machine learning systems of artificial intelligence can improve the security of blockchain applications, adjust dynamic parameters for scalability, and provide effective personalization and governance mechanisms.
Netflix provides a list of related movies related to your favorite movies, but this is the result of Netflix’s central server analyzing personal information. If you do not provide personal information to Netflix, your personal information will be protected, but you will not be provided with personal taste analysis. Instead of collecting data on a central server, you might consider making use of data stored on a decentralized blockchain. However, in the case of a public blockchain, anyone can look into the transaction ledger, so there may be a risk of invasion of privacy as well. Although it is possible to allow individuals to directly control personal information in the blockchain, there is a risk of incurring a lot of cost. Artificial intelligence can provide customized services to individuals without violating personal information. Artificial intelligence can perform analysis on the user’s local device and not perform analysis that is not permitted in advance. Artificial intelligence can realize decentralization so that real individuals have control over personal information.
Blockchain and artificial intelligence encounter in the Metaverse
Blockchain plays an important role in implementing the economic system in Metaverse. The economy of Metaverse without blockchain will eventually be controlled by someone. If the blockchain is not supported, it is difficult for resources or goods used in the Metaverse world to be recognized for their value or to have economic interactions equivalent to the real economy. NFT-based blockchain technology further activated the Metaverse. With the advent of WEB 3.0 and Blockchain 3.0, Metaverse becomes the world to realize it.
In the Metaverse, people appear by scanning themselves in 3D or transforming them into avatar characters. Characters in the Metaverse are recognized as beings like clones in real life, not just game characters. In the Metaverse, besides their own avatars, they create things that can express their uniqueness. And to prove this, the NFT technology of the blockchain is used.
High quality learning data
In the real world, the problem of people’s time, labor, and cost is easily replaced by using artificial intelligence in Metaverse. In the real world, when delivering news, you have to go through a lot of work, such as recruiting an announcer, shooting in a studio, and editing video. However, in the virtual space, by utilizing an artificial intelligence announcer, it is possible to deliver urgent and important news quickly and continuously for a long time. In order to deliver news in the Metaverse, it is necessary to learn the facial expressions, muscle movements, voices, nuances, and gestures of real announcers. When learning by receiving a long-time news video from a broadcaster to make an artificial intelligence announcer video, we extract only the part where the voice of another reporter and noise-free data, and the announcer’s face and voice come out clearly toward the camera, and only detect a specific person techniques must be applied. If you use blockchain meta-information when searching for various data like this, you can select only the pure data necessary for learning and induce high-quality learning. Metadata stored within the blockchain block makes the necessary high-quality data selectively available. It is created as reliable data in the Metaverse, which increases the number of users who use the Metaverse.
Recently, creative activities in Metaverse are often developed using artificial intelligence instead of real people. When artificial intelligence artists creates works, they learn about the trends and styles of the works, and then express what they learned for creation. In the past, a lot of data was used for style analysis. Now, artificial intelligence artists store the data in the distributed ledger so that it can be easily selected and reused. Acquiring more data and practicing iteratively reduces the chance of selecting the wrong data and shortens validation time.
Stable decentralized network
Metaverse is a virtual 3D environment that requires a large amount of data and server capacity. However, controlling through a central server can incur a lot of cost. By utilizing the distributed environment system of blockchain, it is necessary to have a network system that can use the Metaverse environment with each individual’s PC computing. When individuals control the Metaverse environment they want to use or view, the burden of centrally managing vast amounts of data can be reduced. It can also prevent some big tech companies from monopolizing the Metaverse environment.
There is a need for a system that can govern so that ethical problems do not arise with respect to persons belonging to the Metaverse. Only the publicly available information about real and virtual people should be made known. And a personal information security system should be applied to prevent any damage to privacy. However, digital virtual people have no legal basis, so they are easier to manipulate or transform photos than real people, and there is a concern that the wrong algorithm may be applied, which may lead to serious racial and gender discrimination. With regard to personal information, it can be safely protected with blockchain to prevent external attacks. If personal information is erroneously altered, it can be managed responsibly with a clear path that can be traced based on the time of occurrence.
Distinguishing between virtual and real
In order to create a stable environment in which users are not confused in the Metaverse, a device that can distinguish between artificial intelligence and real people is needed. The fictional characters used in the Metaverse have now reached a level where it is difficult to distinguish the real from the fake from the human point of view. A reliable data construction system is needed to inform the comparison and judgment between real and fictional people. Data should be transparent and descriptive so that fake news and fake photos can be identified. Data content should be stored in a blockchain so that people can accurately know and understand the data generated by artificial intelligence and know the detailed history if desired. Blockchain technology can be used as a data to explain the data generated by artificial intelligence.
We are using artificial intelligence technology as a way to imitate human behavior and replace it. Artificial intelligence analyzes the user’s behavioral patterns such as words and messages in the Metaverse to predict the user’s personality, intellectual level, and economic level. Metaverse uses artificial intelligence to create human-like voices and unique content. These data can be automatically converted into games, YouTube, news, advertisements, and lecture materials by simply inputting simple information. It is possible to create vast pattern content that imitates human behavior by using artificial intelligence technology with the vast data needed for the Metaverse world. With blockchain, personal information can be safely protected and various types of content can be created more abundantly.
Economic virtuous cycle
In investment and business, artificial intelligence can be used to make decisions about which data to use. It is important to have more reliable data in changing forecasts. If blockchain data is used, more reliability can be guaranteed through history management, thereby increasing the reliability of business predictions. In addition, the Metaverse Marketplace can be further activated through the payment of tokens and coins based on blockchain technology.
In the Metaverse, various and large amounts of secondary and tertiary data are generated due to the activities of many users. In the blockchain-based Metaverse, this data has a unique identification tag and is used as traceable data. Such data is becoming a good material for artificial intelligence in the Metaverse. Metaverse uses artificial intelligence and blockchain technology to create a digital virtual world where you can safely and freely engage in social and economic activities that transcend the limits of the real world, and the application of these latest technologies will be accelerated. Artificial intelligence and blockchain technology are expected to play an essential role in the ever-expanding world of the Metaverse.
METAVERSE FROM A NON-BLOCKCHAIN PERSPECTIVE
Metaverse is a broad term. It is generally `refers’ to shared 3D Virtural word environment which people can access via Internet. Metaverse is where the real world meets the virtual world. It focuses will be to bring the Metaverse to life and help people connect, find communication and grow businesses. According to CEO Mark Zukerberg: The Metaverse, which he sees as the next generation of the internet, as a virtual environment that will allow people to be present with each other in digital spaces. It brings together their Apps /Technology under new company brand. Faacebook’s, Meta’s recent rebrand and investments, triggered a new wage of interest in the metaverse. It’s all over headlines, corporate news, memes, gaming platforms, and social media. The word’s increased ubiquity is creating an impending sense of doom, as if, at any moment, our physical lives will be engulfed in corporate pixels and paywalled interactions.
METAVERSE: The word `Meta’ comes from the Greek language. The suffix Meta – means “Behind or beyond” and means `beyond’ indicating the futuristic motive. It can also mean “More comprehensive” and even transformative. The word verse derived from the word “Universe” and describe the concept, area or fictional world. As the whole world “Metaverse” generally refers to a virtual world that lies beyond, on top of or is an Extension of the physical world. Verse: Universe, the term is typically used to describe the concept. Metaverse ‘refers’ to a second version of the Internet. The term `Metaverse’ is the latest buzzword to capture the Tech Industry is imagination-so that one of the best known internet platforms is rebranding to signal its embrace of the futuristic idea. It is mixture of Virtual Reality and Augmented Reality.
Virtual Reality (VR)
It is a perception of being physically present in a non-physical world. It is created by surrounding the user of the VR system in images sound or other stimuli that provide an engrossing total environment. VR is a simulated experiences that can be similar to or completely different from the real world.
Application of Virtual world.
2. Entertainment (Video Games)
1. Augmented Reality
2. Mixed Reality or Extended Reality
Advantages of Virtual Reality
1. Virtual reality creates a realistic world.
2. Virtual reality make the Education more easily and comfort.
3. Through VR user can experiment with an artificial environment.
4. Innovative and enjoyable.
Disadvantages of Virtual Reality
1. Lack of flexibility
2. Functionality issues
3. Addiction to the Virtual World.
4. Ethical issues.
5. Health effects
6. Quite Expensive
Augmented Reality (AR)
Augmented Reality (AR) is enhanced version of the real physical world that is achieved through the use of digital visual elements, sound or other sensory stimuli delivered via Technology.
AR involves ever laying visual auditory or other sensory information onto, the world in order to enhance one’s experience. It was first used for navigation in NASA’s X-38 spacecraft. AR is technology that presents us with virtual objects and information in our field of vision . Examples- Google skymap, Layer, Pokemongo and spotcrime etc.
Providing Information or Stimulation for a number of senses, providing 3D image that seems to surround uses, making someone feel completely involved and engaged.
Origin of Metaverse
In the Iingo, this imaginary place is known as the Metaverse, Etymologically, meta meant “after” in Greek, so Metaverse, a word or conception that requires the `real’ world in order to move beyond it and acknowledge another realm. The word `Metaverse’ was coined in Neal Stephenson 1992 Science fiction novel `SNOW CRASH’ presenting a 3D virtual world in which people/ where human as Avatars interact with each other software agents in 3D Dimensions / Virtual space that uses the Metaphor of the real world. Stephenson used the term to describe a Virtual reality bases successor to the Internet.
Aims of Metaverse
Virtual platform is the main aim of Metaverse, where family, friends gathering schooling, Higher Education and Business development through Virtual platform.
Metaverse is a boundless place where you can live your life on-line or interconnected Virtual communities. Where people can meet , get together with friends and family, work, learn, play ,shop create as well as entirely new categories using Virtual reality headsets, augmented reality glasses, smartphones, apps or other devices. Metaverse is a digital reality that includes or combined of social media, Virtual reality (VR), augmented reality (AR), On-line gaming and cryptocurrencies to allow users to interact virtually.
Metaverse: It is fully immersive online realm that looks similar to the real world but it is actual in Computer generated. Example: In Metaverse, You attend work meetings as an avatar using Quest VR headset and use a device on your wrist to secretly text friends. When you go outside, you will wear smart glasses that offer an augmented reality as well as record what you see and hear. The Metaverse will be accessible through phones /computers wearable tech and headsets and it will be where you work, shop, Exercise, socialize, games and watch movies etc. Metaverse is a decentralised application on Binance smart chain that is for from Uniswap and Pancakeswap. It will not be created by one company. It will be built by creators developers making new experiences and digital items that are interoperable and unlock a massively larges creative economy that the one constraing by today’s platform and then policies.
According to Ball, The Metaverse is “an expansive network of Persistent, real time centered 3D worlds and simulations. “Ball’s metaverse should be able to maintain the continuity of identify objects, payments and can be experienced by an unlimited number of people at the same time, in which everyone will have their own sense of presence. Here, the Metaverse is an immersive virtual reality that allows users to be present, it’s a persistent space where blockehain technology could be used to pay for items we can bring with us through different experiences: Imagine being able to wear the Sandy Liang fleece you got in Animal Crossing on your Twitter and Instagram Profile Pictures
On October 28, 2021, Facebook CEO Mark Zukerberg announced that the company known as Facebook would be changing its name. The company now known as `Meta’ will still have Facebook, Instagram , Whatsapp and Oculus VR under its control.
Important Features Expected In Metaverse
6. Privacy safety
7. Natual interfaces
Who will build the METAVERSE?
The Metaverse is not confined to a single company and each of us in necessary to make it happen. It is especially aimed at small developers who will enrich the world of Meta with immersive experience. (Trade/Commerce, Tourism, Cultural and Entertainment) in the same way that start- ups have multiplied the services available on smartphone in the late 2000’s.
Companies involved in the METAVERSE
META holdings include a wide range of companies that are part of building blocks of the Metaverse. They include graphic processing unity (GPU) companies like Nvidia. Virtual platform providers like Tencent and Roblox, cloud computing services like fastly and gaming engines like Unity software Inc (U.N) Snapchat owner Snap INC (SNAP N) has long been building custom Avatars and augmented reality filters to overlay digital features on the real world
Metaverse: pros and cons. Or positive & negative effects on human
Pros And Positive Effect of Metaverse
1. Bring people together.
2. Create lots of fun.
3. Make everything more enjoyable/more interest.
4. Can increases engagement in the classroom.
5. More Immersive Digital Communication.
6. Consumers can test products before purchasing.
7. Upgrading social Media platforms.
8. Applications in businesses and Education/Learning.
9. Electronic Commerce and Virtual Economy.
Cons. & negative effects on human of metaverse
1. Separation will be happen people and reality.
2. Addiction of Metaverse or generate addiction
3. Make you lose track of time.
4. Separate you from the real nature and real world.
5. Overstimulate your senses.
6. Existing problems with the Internet.
7. Social and cultural Impacts.
Metaverse is the next mega phase of the internet, a merging of the physical world with Augmented Reality and Virtual Reality that is just beginning to revolutionize the way we interact work and live. As the `Metaverse’ grows, it will create On-line spaces where user interactions are more multidimensional than current technology supports, instead of just viewing digital content, users in the Metaverse will be able to immerse themselves in space where the digital and physical world converge. Mark Zuckerburg’s version conjures an image of virtual everything: You attend work meetings as an avatar using the Quest VR headset and use a device on your wrist to secretly text friends. When you go outside, you will wear smart glasses that offer an augmented reality as well as record what you see and hear. The metaverse will be accessible through phones, computers, wearable tech and headsets (or a combination of these) and it will be where you work, shop, exercise, socialize, and watch movies and game.
The emergence of metaverse can be tracked around eight categories that are as follows:
1. Hardware: The sale and support of physical technologies and devices used to access, interact with, or develop the Metaverse. This includes, but is not limited to, consumer-facing hardware (such as VR headsets, mobile phones, and haptic gloves) as well as enterprise hardware (such as those used to operate or create virtual or AR-based environments, e.g. industrial cameras, projection and tracking systems, and scanning sensors). This category does not include compute-specific hardware, such as GPU chips and servers, as well as networking-specific hardware, such as fiber optic cabling or wireless chipsets.
2. Networking: The provisioning of persistent, real-time connections, high bandwidth, and decentralized data transmission by backbone providers, the networks, exchange centers, and services that route amongst them, as well as those managing ‘last mile’ data to consumers.
3. Compute: The enablement and supply of computing power to support the Metaverse, supporting such diverse and demanding functions as physics calculation, rendering, data reconciliation and synchronization, artificial intelligence, projection, motion capture and translation.
4. Virtual Platforms: The development and operation of immersive digital and often three-dimensional simulations, environments, and worlds wherein users and businesses can explore, create, socialize, and participate in a wide variety of experiences (e.g. race a car, paint a painting, attend a class, listen to music), and engage in economic activity. These businesses are differentiated from traditional online experiences and multiplayer video games by the existence of a large ecosystem of developers and content creators which generate the majority of content on and/or collect the majority of revenues built on top of the underlying platform.
5. Interchange Tools and Standards: The tools, protocols, formats, services, and engines which serve as actual or de facto standards for interoperability, and enable the creation, operation and ongoing improvements to the Metaverse. These standards support activities such as rendering, physics, and AI, as well as asset formats and their import/export from experience to experience, forward compatibility management and updating, tooling, and authoring activities, and information management.
6. Payments: The support of digital payment processes, platforms, and operations, which includes fiat on-ramps (a form of digital currency exchange) to pure-play digital currencies and financial services, including cryptocurrencies, such as bitcoin and ether, and other blockchain technologies.
7. Metaverse Content, Services, and Assets: The design/creation, sale, re-sale, storage, secure protection and financial management of digital assets, such as virtual goods and currencies, as connected to user data and identity. This contains all business and services “built on top of” and/or which “service” the Metaverse, and which are not vertically integrated into a virtual platform by the platform owner, including content which is built specifically for the Metaverse, independent of virtual platforms.
8. User Behaviors: Observable changes in consumer and business behaviors (including spend and investment, time and attention, decision-making and capability) which are either directly associated with the Metaverse, or otherwise enable it or reflect its principles and philosophy. These behaviors almost always seem like ‘trends’ (or, more pejoratively, ‘fads’) when they initially appear, but later show enduring global social significance.
The details regarding the 8 categories can be found in-depth on https://www.matthewball.vc/the-metaverse-primer.
Based on precedent, however, we can guess that the Metaverse will revolutionize nearly every industry and function. From healthcare to payments, consumer products, entertainment, hourly labor, and even sex work. In addition, altogether new industries, marketplaces and resources will be created to enable this future, as will novel types of skills, professions, and certifications. The collective value of these changes will be in the trillions.
The economy of metaverse- perspective from Tim Sweeney
Full Interview Transcript:
“JK: Well, everybody, today, we are super excited to have a really amazing guest with us. Likely no introduction needed, but we are joined by Tim Sweeney, the CEO of Epic Games. We’ll be talking about the Metaverse. And certainly Fortnite is being held up by many people as an indication of what the Metaverse may eventually look like.
However, the specific focus of what we will discuss isn’t so much what the potential incarnation of the Metaverse could possibly become, but instead, if the Metaverse is the next frontier, if this is the next big platform, then how do we build an efficient and fair economy for this new platform?
So just to kick things off, Tim and by the way, thanks again for being here. And just to get straight into it. Could you talk to us about what you mean when you talk about building the Metaverse as an economic sphere?
Tim Sweeney: Sure. You know, first of all, nobody knows exactly what the Metaverse will be. We have a lot of fictional references on it. Some parts of it. Most of it was written before social networks even existed. And so we’re really improvising and guessing about this.
But the Metaverse is going to be some sort of real time 3D social medium where instead of sending messages and pictures to each other asynchronously, you’re together with them and in a virtual world and interacting and having fun experiences which might span anything from purely games to purely social experiences.
The other critical element of the Metaverse is it’s not just built by one mega corporation, right? It’s gonna be the work, the creative work of millions of people who can each add their own elements to it through content creation and programing and design. And the other way of adding value.
So it will be a massively participatory medium of a type that we really haven’t seen yet. And even though you have Fortnite and Minecraft and Roblox each manifest some aspects of it, I think we’re still pretty far from having the thing. But yet the talk about this thing is it’s not just the work of one company. It’s not just one company’s product or revenue stream. Right. We’re talking about a mass participatory media, which needs to be an economy if there’s not an economy underlying this thing.
And companies will be able to form to create content that builds out this world. People won’t be able to profit from the work and would just be another big tech company extracting money from yet another business.
And so the critical thing with this effort is to build out not just a 3D platform and to have technical standards, but also a fair economy in which all creators can participate, make money and be rewarded in an economy with both the principles ensuring that customers are treated fairly, that there is not, you know, massive fraud or scheming or scams. But also one in which companies have the freedom to release their own content and to profit from it.
You know, they say something is only a platform when the majority of the profit is made by creators rather than the company that built the thing right? Windows is a platform. Gee, is iOS a platform? Not sure. Actually, it’s looking more and more like Apple’s old contraption. Android is certainly a platform. There’s dozens of app stores of different things.
But the goal is to go about this thing as a platform. Right? And figure out rules in an economy that protect consumers participating in the media, but also ensure that there’s robust competition in all spheres, so that the best creators can succeed and they can really profit from their work and they can grow businesses around it.
JK: And Tim, when you think about the economy, should we be most concerned that there’s just enough economics for the different people in the value chain that are delivering the service and for creators, or is there something else about the economy that we should be worrying about?
Tim Sweeney: When you’re talking about something like the Metaverse, the economy should actually be fairly complex and robust. But you have a lot of different companies who can provide services to play a role in this. If you look at the Web economy, the economy is just around the World Wide Web. You have some Web sites, there are commercial businesses, you have an advertising economy, you have a payments processing economy. And there is a big supply chain behind this. Right? If you have a website that takes money, then you can work with PayPal.
And, you know, there is a really competitive infrastructure there where all the payment processors compete to earn clients’ business and there’s many of them and some very robust systems to enable that.
In the case of the Metaverse, you’re also talking about huge shared online experiences that mean somebody is going to be hosting millions of servers that are running all of the simulations that contribute to these Metaverse experiences, whether they’re games like Fortnite or social experiences or streaming video or anything else.
And, you know, that’s going to require a huge cost. Somebody is going to have to spend billions of dollars building data centers on these, you know, just for all of this activity or using existing data centers along this line. And so, you know, there will be consumers spending a lot of money to buy great items and purchase great consumer experiences they can enjoy. But there will also be a lot of companies and a lot of costs behind it all.
And so. Yes. As opposed to creating something artificial that’s just entirely managed by one company. Like, you know, Facebook is artificial. Facebook makes all the money from Facebook ads. You create a Facebook page. Facebook might make millions of dollars from ads from your page. You won’t get a penny.
Then there are things in between. YouTube has ads. Creators can earn some money from ads. But still, the economics are wildly tilted towards YouTube. But I would hope that the Metaverse as a future medium can be a much greater engine for economic efficiency than any of the closed systems that exist today. And that we’d ultimately get to a point where a much higher percentage of the profits go to creators than with any of these other platforms that currently exist. And that when money is going to people who are not creators, it’s really done through competitive dynamics to ensure that their costs and their profits are very, very reasonable relative to the service they’re performing.
You know, like MasterCard and Visa processing payments, charging two and a half percent. You know, they probably make one percent or half a percent of profit from that. And good for them. They deserved that as opposed to, you know, a platform like iOS or Android taking 30 percent and probably pocketing 28 percent of that as profit for themselves. Right. So economic efficiency is going to be a key driver it. Economic efficiency is essential for this thing to really work and to grow.
Wherever you’ve had any form of commerce dominated by a single company that monopolizes and controls the flow of revenue and access to customers, we just use it to extract their, you know, their profit. And other companies don’t grow. And I think the Metaverse as an open platform, could ultimately be an order of magnitude larger than any one company, including Epic, built entirely on our own as our own proprietary piping.
JK: So in terms of this point about the platform not being owned by a single company then, is there anything that we need to be doing now so that because when we do look at some of the big platforms, whether it’s Apple or Google or Amazon, that because they kind of built the platform that they kind of own it, how do we collaborate or what do you think should be done so that it doesn’t become owned by a single mega corporation, to your point?
Tim Sweeney: Developers… We’ve learned a big lesson over the past 15 years. We were scammed, right? We bought into a lot of things: platforms run by big companies on the expectation that they are open and that we’d be able to participate fairly in it. And it just turned out that in a lot of cases that’s not true.
You know, brands that put their page on Facebook and were able to post messages that all of their followers could read suddenly found that: Oh, now brands have to pay money in order to post messages. The people who decided to follow them wanted to read. Right? And so you have these intermediaries playing this big trick. And they played it over and over and over saying sign up a platform with really loose rules like when Google Play first launched as a service for installing software. You didn’t have to use Google payments. Lots of companies implemented their own payment systems and then they came in and they changed the rules. Google said from now on, if you have a game or any sort of digital purchase, Google has to process your payments. And they took that 30 percent.
You know, Apple did that from the beginning. But, you know, Apple, many years into the platform after Developer’s thought that they had signed up for this thing and that they knew the rules. Apple started putting ads in front of everybody’s searches. Search for Fortnite, the first thing that pops up is not Fortnite, might be PUBG, might be Minecraft, it’s whoever paid for that ad, they’re putting some random ad ahead of the actual thing the actual customer is searching for. It’s super anti-customer, anti-consumer, and it’s also against the interests and the partnership with all the partners that participate in the ecosystem.
And so I think as developers, all of us, all million of us developers, large and small, need to resist and refuse to continue cooperating with these platforms, which intermediate and obstruct this and are basically holding our businesses hostages to larger and larger ransom over time. That’s one thing. We also have to work proactively to define new standards and also connect all of our systems. Right?
I think the most plausible way the Metaverse is going to rise isn’t from one company even Epic building this thing and forcing everybody to use it. It’s going to be from more and more companies and brands connecting their products and services until you have a much, much more open thing that everybody participates in. You know, like the Epic Games store, the store we launched. And one of the things we’ve done is we’ve supported purchasing integration with every other PC game store if its willing. Now we also support third party stores like GOG, accessing the Epic library and being able to be an alternative launcher for the store.
We’re trying to work with more and more partners to connect our social systems and our account systems so that Epic friends system that you build up through buying Fortnite connects with other services’ friend system that you have all of your friends everywhere you go.
I think interconnecting systems is a great way to to to move forward with this. I think, you know, a lot of the big game companies and even many of the ecosystem companies have come to the realization that they’re never going to be the one monopoly that dominates the whole thing. And so it’s in everybody’s interest to really interconnect and standardize over time. And to build this more connected world and to all benefit from it side by side with no one company dominating.
And on the technical side, I think what I’m really arguing for is for a series of incremental improvements we make every month, month over month until over the course of several year they accumulate and then leave us with something that does resemble the Metaverse. Right? Interconnection of social systems. You know, we have the game social system. We have XBOX Live, we have Steam, there’s Nintendo switch, there’s the PlayStation Network. There are a bunch of these disconnected systems. We should start connecting them together.
We have several different game engines, each competing really robustly. But we need standards that we can start agreeing on. And there are already some really great ones, like the Pixar USD scene format for interchanging 3D scenes. That’s one of your standards for materials. We need standards for networking so you can have a multiplayer game in which some people participating are using a client on Unreal engine and some people participating are using a client that’s built in Unity. Like really being able to create standards for an interoperability so that everybody can have access to this. And the future is going to be very interesting.
JK: So Tim, speaking about you personally, because it’s not lost on me that you’re actually a conservationist. It’s been publicly announced that you’ve salvaged a lot of forest land and things like that. And so is it fair to say that you probably, as a conservationist, think more about ecosystems and the environment more than the typical person?
And so from a personal perspective, is it fair to say that perhaps your personal focus in terms of Metaverse will be more around the environment, the ecosystem, making sure that it’s a fair and vibrant sort sort of place to be?
Tim Sweeney: Yeah, absolutely. You know, an ecologist will tell you something quite different about ecosystems, right? Wolves always eat deer. A deer never eats a wolf. Right? It’s a very unfair place in the real world. It’s a very harsh, you know, survival of the fittest environment. And it’s the law of the jungle that rules out there. And I think mankind does better. Right?
We have laws and principles that we operate under. You know, going back to ancient Greek philosophers and the renaissance thinkers and the enlightenment thinkers who formed a large body of modern human rights that governs most of the Western world. And I think we have the ability to create ecosystems built on principles they’re enduring and fair and lead to much greater efficiency.
Economic efficiency not only means a better environment for companies to do business, but also means a much fairer environment for consumers. Where everybody is competing to offer you the best product at the best price and lots of robust actions to foster that. As opposed to a monopolized system where one company just dictates the rules to everybody else.
It’s like, remember the cable TV industry. I guess it still exists, right? I haven’t had one for a decade. Cable TV signal coming into my house. But an old industry like that where the business terms are set by essentially oligarchs or oligopolies dealing with each other to screw the smaller players. Just think of how much more robust like the PC software economy is then that and how much better even still, we could build the Metaverse as an environment. Not just where everybody is running a common operating system, but everybody is in a shared 3D environment in which all of these different software components can interoperate in one scene together in real time 3D to create entertainment experiences that go far beyond anything we have now.
JK: In speaking of the Metaverse, it is probably going to be some form of creator platform. You talked about making sure that creator economics are viable. How should things be architected to make sure that creators do have viable economics? Is it really the platform fee or are there other things that we need to be thinking about?
Tim Sweeney: Well you know there are a lot of components to it. A key realization here is that there’s actually a lot of operating cost in this. You can’t compare it to… Like Epic knows the operating cost of a store. You have payment processing costs two and a half to three and half percent, you have CDN bandwidth, which you buy from Akamai or Amazon or others. About one percent of revenue goes to that. You have customer service and one or one and a half percent revenue goes to that. So a store can operate with a cost of five to seven percent. And anything that they charge, they make above that, is profit.
We charge twelve percent. But when you’re talking about something like the Metaverse, you’re talking about hosting farms of millions of servers, serving user content and doing real time 3D simulations involving potentially realistic physics simulations and things like that. So, you’re talking about entirely new components of cost. And I think what’s most important there is transparency and competition. Right?
We have to also be comfortable getting to this destination incrementally. Right? Because Fortnite, Minecraft, ROBLOX aren’t these open platforms built entirely on standards. And I think our best hope to get there is to adopt more and more standards and open up the economy more and more to get to this open state, as opposed to trying to throw this all out and start from scratch and then invent some block chain thing or whatever it is. Right?
We have some really great products that are already heading in this Metaverse direction. We should just support steering them in the direction we want them to go. I think ensuring that everybody who is a potential supplier of critical components in operating this thing should have a fair chance to compete for everybody’s business.
If you look at like much of the game industry other than the supply side, the Apple App Store and Google Play, you have actually a very, very robust economic competition. If you want an engine, you can choose Unity, with a one business model. It’s based on a per seat license cost. Or you can choose Epic, which is free to use but carries a royalty on profit or you can use like the Godot Engine, which is free and open source. And you can use it for anything you want, not pay a penny, and you can contribute your changes back to the community. So you have great, great competition in the engine sphere and then you have online services. There’s a huge variety. Microsoft offers some. Amazon offers some: Gamelift and Gamesparks. And then you have Steam and then you have Epic Online Services where we’re also competing. Great thing about this whole market is as a game developer, you can go around and you can choose the best of all these different components. You can use Epic Online Services or Gamesparks or whatever you want. You can use Unreal or Unity. And there are no unnatural barriers saying, “Well, if you use Unreal, then you have to use our online services and you have to ship on our store. We don’t say anything like that.
Every one of Epic Services is open to interoperate with every competing service. And it imposes no licensing, technical or business restrictions against that happening. And I think it’s really critical as we build out the Metaverse and build more and more open platforms out of what are currently just one company’s game, that we should ensure that we’re opening up all parts of it to competition, ensuring that the best competitors can survive and win. Even if they’re competing directly with some core business of Epic or others.
JK: Right. So it kind of sounds like when we look at the current creator platform like ROBLOX, which is kind of a closed system. It sounds like the vision that you’re kind of supporting is one in which the basic ecosystem is defined in some standardized way. And you just want to see competition at every point in the value chain, where every component of the value chain that there’s a healthy competition there. Is essentially… Is that what you’re advocating for?
Tim Sweeney: Yeah, exactly. Healthy competition at every point and facilitated by technical interoperability standards. Right. Unreal and Unity compete. But what you’re really doing is you’re licensing one or the other and you’re building your game in it. And your game is either based on Unreal or Unity. And they’re totally different APIs.
You can’t just move your Unity game to Unreal or vice versa. But, you know, as we talk about the Metaverse as an open platform, we have to evolve to the point where we have portability of assets and eventually code, you know, between any engine that could run the thing. We’re talking about different tweets of creation software for 3-D modeling. You need file format standards for exchanging data so that you have the same data moving back and forth. It’s not just enough to have competition, but you have to have enough interoperability that developers are actually pretty seamlessly moved from one supplier to another without losing all their work.
JK: Right. So maybe we can actually talk about the dangers of not having that, which is the dangers of having more of a company that does become that mega corporation and has monopolistic power.
And, you know, it’s no secret that you’ve been a critic of App store taxes and the potential for that kind of of of monopolistic organization to create restraints on trade, potential for new ideas to flourish, potential for new business models to emerge. So maybe you could talk a little bit more about that in terms of if we don’t have these open standards, then what’s the danger? What could potentially happen to the Metaverse?
Tim Sweeney: Well, you know, I think that the real risk is that these creator based platforms are hijacked for the benefit of a corporation, and the corporation ends up automatically extracting more profit from creators work than the creators make themselves. And the Apple and Google story is one warning from history of the perils of that.
Apple is really particularly interesting. You have one of the best businesses and most honest businesses in the world, which is selling people phones. They sell phones. They don’t profit from your data or surveillance or any adversarial practices towards users when they’re selling you a phone. They are competing by selling premium priced phones, which are awesome value, and they succeed on their merits. You go into a store and you can choose between an Android smartphone and an Apple iPhone and Apple gets an awful lot of that business. That’s completely earned by them and deserved by them because it’s 100 percent Apple engineers and hardware makers and the suppliers that they contracted to make their platform.
But they also run the like, you know, one of the most manipulative businesses in the world, which is hosting a store that prevents all other stores from existing on their platform and it’s tracked a 30 percent tax from all commerce. Demands that you cannot process payments in games other than through us. And. You know, that 30 percent is a killer for most game companies. Apple is making a lot more profit from their game then they are making themselves. Apple’s 30 percent tax is almost entirely profit to Apple.
I bet their underlying costs are in the 5 to 7 percent range. The other 25. 23 percent all goes to profit. And that’s money that’s not being reinvested into making better games. It’s money that doesn’t need to be reinvested in building the hardware because they are already funding that from I think the most profitable hardware business that’s ever existed in history, which is the iPhone business. Right?
And so it’s interesting to see that bundle of contradictions. You know, one company with two businesses and one is so extractive from other people’s work and the other is so entirely customer focused and well-deserved. It’s a warning from history and, I think, the really critical thing is, as developers are making decisions about what platform to support… basically what kind of game you’re building, and what you’re building it for?
Right now, your decisions are you’re building a mobile game for Google Play and the App Store or you’re building a PC game for Steam and the Epic Game Store, or you’re building a console game and maybe you’re doing PC and console together, right? I think the world needs a plethora of additional options. You should be able to build a game within Fortnite. And that should be such an attractive prospect financially that a lot of developers consider it. A lot of highly acclaimed developers who can make a lot of money from the App Store or from console, which is instead to make their game in Fortnite.
And that need to be facilitated by us voting on an economy to achieve that. And same thing with Minecraft and Roblox and, you know, the other upstart efforts to build games as platforms.
JK: Right. And so when you talked about how you determine the kind of revenue share for Epic’s store, it sounded like you just determined the costs and determine a fair markup. It’s kind of like a cost plus model.
And so is that, in your opinion, what Apple and Google should be doing? Should Apple and Google’s platform fee be like 12 percent as well?
Tim Sweeney: First and foremost, these platforms should be truly open to competition. You can come in and say the revenue sharing should be X or Y.
But really, the core problem here is that the revenue sharing is not determined by free market competition. If the revenue sharing is determined by free market competition, then maybe Apple and Google can charge a premium if their services warrant it. But right now, rates are completely disconnected from any competitive barometer. And so they’re not honest rates and they’re distorted and for different reasons. Right?
You know, Apple says you can’t have any other stores on iOS and you can’t process payments other than through us. And so it’s very clear on Apple that the only way to do business on iOS as a game developer is through them and their app store, unless you’re building a website or something, which is nowhere near competitive in capabilities.
Google is in a different position because they built Android as an open platform. But then they built a kind of maze of business dealings with carriers and with OEMs, which make it de facto closed. It’s kind of a fake open platform. The Android software is an open platform. The Google services suite that everybody has to take in order to use any of Google’s services. They’re all forced bundle it together in one massive package. You have to take it or leave it. It really locks down the platform so that you can’t install a third party store and have it operate on par with Google Play.
And you can use a Fortnite installation experience as a comparison, right? To buy an app on Google Play, you click the Google Play icon type the name search. Maybe scroll past an ad that they put in front of you and then click one button. You’re playing the game. Fortnite, it’s something like twelve steps and 12 to 20 taps on your screen to get there. You go to our website. You search for Fortnite. You go to our Web site. You click the Get Fortnite button. And if this were windows, there would be two more buttons and then it would be installed in your machine and you could play.
Windows is an open platform. It has good user protections to prevent malware. But it’s easy to install. Whereas on Android, you have to go through this incredibly complicated series of screens, some Epic explaining what to do on the next screen and then some designed by… Google has awesome UX designers. And so when there’s a really bad user experience or UI screen in a Google product, you know it’s intentional, right? Because they’re better than that. And you just have to click through a whole bunch of these screens to give it permission to go to the permissions. Finally, it downloads Fortnite. And then every time we have an update, you know, there’s potentially more obstruction screens. And if we try to open up the Epic Games store on Android, then every time you store a new app, go through another series of scary dialogs. Each one of which is designed to scare the user off. Right?
So, on an open platform like Android should be. And it was advertised as being… All stores should operate at parity. Right? Once you’ve decided to install another store like the Epic Games store, it should have equal access the system software, as Google’s own store has, so that it should be able to install and update software as seamlessly as Google Play does. I mean, this is just a basic principle of competition. If you allow other stores but you make them really, really suck, then that’s just fake competition they’re creating. And there’s no questioning they do this.
All stores operate at a slight disadvantage to Apple Store, but not much. Windows is totally store parity. Steam, Epic Games store operate just as well. And actually in a lot of cases better than Microsoft’s own store. The Microsoft store in Windows. And we need to get to that point on all these platforms. There’s no question every platform needs real open platform supporting stores side by side. But also even in the in these stores which have, you know, ninety nine percent plus market share. Ninety five percent or whatever. And excluding China at least.
These stores need to be opened up. Open to let each developer choose which components to use in their software. They want to use Epic’s friends system, they can use Epic’s friend system and they want to use PayPal instead of Apple payment service. They should be free to use that. So you really have two principles. Number one is real open platforms where users can install software and developers can release software without permission of a mega corp. And number two is just the ability for apps from any source to be able to use services of their choosing and not be forced through compulsion and tying to to use, you know, especially use noncompetitive services like the iOS App Store.
Your original question was about what, OK, thirty percent is too high. What should the number be?
I think that number should be set by competition. I think if competition settles in, it’s going to be set somewhere in the 7 to 12 percent range. Epic’s able to operate our store on a 12 percent fee. We’re doing a lot of marketing and things and other forward investments that make the store dis-economic. As long as we’re paying, you know, hundreds of millions of dollars for various rights and things and marketing campaigns. However, the core economics of the store, the transactional economics, are profitable. Right now. We make about 5 percent profit from each transaction, we process at the 12 percent fee. And that’s without huge economies of scale. I think Epic has processed, it’s more than a billion dollars of direct transactions with customers so far, but far less than Apple and Google. And with massive economies of scale like they have… who knows what the numbers could be.
JK: So given that you guys are in the driver’s seat for delivering a Metaverse, so is it fair to say that we could expect Metaverse platform fees from you guys if you guys were doing it to be in the 7 to 12 percent range?
Tim Sweeney: Well, I think what we need is a component economy, because you can’t compare this directly to an app store. It might cost us more than seven, eight percent just to run the servers. And so I think we also have to approach this gradually because we have this game that works called Fortnite. We need to turn it into an into a much more open system that still works. So we need to do that without ever breaking it. Right?
If we do something that causes all of the Fortnite users to leave, then by the time we build the best, the new system we’ll have lost them and the whole effort will have been for naught. And maybe some other company, maybe Facebook will take over the space. And so we have to transition from where we are to where we’re going. I think my point is, as we do this, we need to do it in a way that ensures that all major cost centers of the equation are opened up in due course to competition. So that. There is complete transparency for your costs are going and users, developers have the right to choose among the different components.
If you look at ROBLOX, I heard from a ROBLOX creator who was complaining that ROBLOX only pays creators 20 percent of revenue. I was getting really mad about that. And I actually backed up and thought, what is their revenue? What’s their operating cost for building out their game and their toolset? And what’s their cost of operating servers? I don’t know. But I’m not sure that their economics are wrong. Right?
But there’s no transparency, so you can’t really know. Right? But if if it turns out that a low monetizing game that has a huge number of users might have operating costs that are, you know, leave it with a 20 percent profit margin. If that’s the case, then I think the key is that the economics be completely transparent, but also that, you know, if some super highly efficient game has low server costs and high monetization, is able to, you know, make an 80 percent profit margin, then that’s great, too. But I think transparency and open competition there, are the critical elements of it.
JK: And just speaking about cost. Now, we’ve seen that with new platforms like Google Stadia, for example, costs and business models seem to be stymieing the potential, you know, proliferation and the popularity of that service. When you think about cost and business model for the Metaverse, are there any specific concerns you have in terms of cost categories or business model?
Tim Sweeney: You know, I think if you itemize all costs associated with operating a game, you get a big list and it has a lot of items. There are small costs, but when they add when you add them all up, they’re pretty high. Right? You have everything from download bandwidth for updates to server hosting costs. The database costs we’re operating within. And you have a customer support team. You have operations teams that make sure the servers are running. You have payment processing.
And if you just look at the agreements you sign when you become a Visa or MasterCard merchant, you don’t actually sign with just one vendor. You have a whole repertoire of different services that are all part of that processing credit card transaction, this little insurance component that might take zero point two percent to insure against fraud. And there’s, you know, lots and lots of different services pertaining to accounting and bookkeeping and tax and everything else.
And I think the key is setting up a market where developers can choose among components with full awareness of their costs and competitors can provide their own components that compete on cost is the key thing that keeps businesses honest, right? Whether you’re running an oil refinery or a vegetable stand, knowing the costs of all of the different components going into the business are key to ensuring that operates smoothly.
JK: So one question I actually want to ask you about. When we’re talking about the dangers of monopoly and something that’s actually kind of relevant in the news today is really around this issue about information and data. And so one of the big dangers of monopoly ownership of the platform has been the potential abuse of platform owners to compete against participants of their platform using customer data.
So the game industry: we’ve seen ad networks compete against their customers, potentially having used customer ad and user acquisition data. Amazon’s been in the news also reportedly having used customer data to compete both from its sort of corporate venture fund as well as using seller data to compete against those sellers on Amazon.com and to some degree there’s a potential — I don’t think it happens but — with Epic as well. With Unreal Engine, Epic publishing, and Epic store, whether there’s that danger of misusing data to compete against customers as a risk.
And so in terms of the Metaverse and information and data — or even even in terms of the current industry and market — could you speak to how we should be thinking about the potential of information and data as a risk?
Tim Sweeney: Yeah, you know, this is another area where the big platform companies fooled us.
You know, they got game developers to sign up for Facebook and ship Facebook’s plugin, in their apps, and Google’s plugin, in their apps, because it provided some nominal service to developers. But it turns out what they’re really doing with these plug ins is tracking everybody using your app and then selling access to your customers, to your competitors. And not paying you anything. Right?
That’s the core of their business model as intermediaries. I think everybody’s wised up to that. Right? You see more and more game developers removing all of these nefarious plugins from their software and recognizing the extent of the data leaks when you use, you know, Google or Facebook components on your Web page or in your mobile app. And it’s actually what they’re doing and exactly how it’s against their customers’ rights and also against your rights as a game developer.
But everybody is wising up and I think the really critical thing is for companies to have principles on data security and really clearly state them. Apple does a great job of that in terms of customer privacy and where they explicitly tell you. We are not in the data business. We don’t want your data. We are never in a position to profit from accessing or selling your private data. And you know, they have a business that is based on profiting by selling smartphones, which they markup awesomely and they deserve too. So they don’t need it. And Google is in a different position. And Facebook’s in a different one still.
I think especially when a supplier — Facebook, Google, Apple, Epic — is in a position of serving multiple customer bases and is in some cases in a business that’s competing with customers like we have an engine business, but we also make games. Our customers make games. And so our games are competing with other customers games to the extent that all games are competing with each other. I think it’s really, really important to have not just publicly stated policies, but binding agreements governing data privacy.
For example, we have Epic online services that we’ve launched recently that hosted two kinds of data. There’s Epic accounts and friends which are Epic data. Like if you use our friend’s system, then you have access to all the friends’ connections. The more than two billion friend connections that have been built up through Fortnite. And when your players add their own friend connections, they go into the system and Epic and all of the developers using the framework have access to that and benefit from it. So that’s one part of the service. The other part of the service is data that we host on behalf of game developers. That data is owned by the game developers. Epic has only has the contractual right to access it for the purpose of providing these service to them. And so all the metrics data associated with all of these games using the Epic online services are off limits to Epic to use for any company purposes. We can only use… We can only serve Ubisoft data to Ubisoft. And we’re barred contractually from using using data for for other purposes, and those kinds of agreements are critical.
Amazon is a good example. If different parts of Amazon… Amazon Web Services is absolutely operating in that role as a trustworthy data provider, where they provide services and Amazon does not rummage through your data stored on AWS to analyze your customers behavior. Right? They do not have access to it. And, you know, if somebody at Amazon accesses that, they’d probably be in jail. Right? So, having those sorts of agreements more pervasively throughout the other parts of the business they expect it, is going to be really critical.
I think that’s an area where companies need to do a better job, especially these big tech companies that are in lots of different markets in explaining and contractually committing to firewalls between different parts of their business and where there is no firewall, being really explicit about that and what they might do with the data.
JK: So I have one last question for you, Tim, which is in terms of other companies that could potentially deliver the Metaverse besides Epic. Who do you think about as potential leaders in terms of that opportunity? And then also, when do you think the Metaverse could potentially be delivered in an economic and commercially viable way.
Tim Sweeney: You know, there’s a really wide spectrum. There’s Fortnite, Minecraft, and ROBLOX are pretty widely recognized as the big contenders, each in a different way. Each is strong in a different area. I think ROBLOX has the best extant economy, or the most robust extant economy of all the games. And that there’s a big market of creators building content and earning a living from it. Minecraft has done the most with user generated content. And with all these worlds that users have built up Fortnite creative is interesting in that respect to. And then Fortnite is the most compelling core game experience, which is a really critical element. Keeping people coming back, but really entertaining them while they’re in this thing, because just pure 3D social doesn’t really work. Right? You need fun to frame your social experiences. You know, those are the big contenders right now.
There are a lot of upstarts, probably a dozen, each working on their own takes on creatorr economies and platforms. I think they’re going to be very interesting. You know, they don’t all necessarily have to be these massive 3D experiences. I think there’s like probably a 2D Sprite based version of this with retro graphics. There could be a 100 million user ecosystem in the future. I think there are really endless possibilities there. There’s also the prospect of new startups that we don’t even know about, haven’t heard of, haven’t seen their games and what they might do in the future.
But, you know, I think we’re gonna really see a gradual move in the direction of views becoming more, less and less standalone games and more and more platforms for user content and more and more economies and competition, forcing these economies to be really fair and robust and competitive. So I don’t think, you know, it’s like… I go way back. In the 1990s, all the politicians were talking about the information superhighway. And how it was going to connect people and they didn’t really put one and two together and realize that we already had this Internet thing, this weird Unix platform that had been existing for about 20 years, was actually going to become that thing because we didn’t have the Web, we didn’t have video. It was a pretty goofy nerd technology at the time. You know, in the end, the Internet became that thing.
And I think when we talk about the Metaverse, what we’re going to see is something that’s not quite what we’re talking about now, but it has many elements of it. And we don’t even know what it is until a more and more parts of it have emerged. I think that’s gonna be the really exciting part of it over the next five and 10 years is watching this medium take shape and seeing how it evolves and how it comports with the science fiction from the nineteen eighties and how it totally diverges and does unexpected things. So I think that the rules of this whole new medium have only partially been written so far.
JK: All right. Well, thank you very much for joining us today, Tim. I just wanted to ask if you have a final message for our audience at all?
Tim Sweeney: Well, thanks. You know, I think as game developers and game players, you know, we’re all going to play a part in creating this thing in the future. I think we should all be advocates for the world that we want. If we aren’t forceful and fighting for the world that we want as gamers and games developers, then we’re going to get a very different world. And by the time it’s set in stone, it’s going to be too late to change it.
And so I think now is a really critical time. It’s all conversation about open platforms and app stores. Ironically, largely taking place in the context of this 15 or 20 year old store platforms. While there is the advent of a new medium that’s just starting to shape up now. What happened in this previous generation of platforms that everybody’s working desperately to undo is a foreshadowing of what could go wrong here. And so be vigilant. And don’t be afraid to speak up and speak your mind in transforming the world into a better place. It’s the only way we’re going to succeed in this together.
JK: Actually, I do have one last question for you, Tim. When do we see Epic’s version of Adventure? I saw that you had actually… That’s one of the few games you completed and you were working on that when you were younger.
Tim Sweeney: Well, you know, actually, this game that I released in 1991 called ZZT. It was a… I started out to build a text editor, and I got bored by that, and so I turned the cursor into a smiley face and turned the characters you can type in into walls and you built this world out of it. Right? But it’s kind of the original Atari Adventure style of simple, iconic graphical exploration of the world.
And it’s amazing playing a game like that with such low fidelity graphics like ZZT or Zork or anything else. Like your mind projects into the dreams and memories you have, which have nothing to do with what’s actually on the screen. But, you know, I think. Even then, even in 1991, and even in 1985, we saw the potential for virtual worlds. Everybody who was developing games or playing them saw that: Oh wow, when you connect a bunch of players together into a multiplayer experience, it’s a 3D world and users can contribute their own content to it. As the early MUDS pioneered and other games have done. Then you kind of get something magical that goes way, way beyond a bulletin board or a social network or traditional game. And I tell you that, gosh, thirty five years later, we’re still working on it. But we’re so close now. It’s really uncanny how close we are.
JK: Well, that’s it. Tim, thank you again for your time and thank you for being so ambitious with Epic and for supporting small indie developers. I think everyone in the industry definitely has a lot to thank you for.”
How Zuckerberg perceives metaverse
To get Meta’s (formerly Facebook’s) take on metaverse, below is the transcript of an interview given by Mark Zuckerberg, CEO of Meta, to Vergecast
“Mark Zuckerberg, welcome to The Vergecast.
Thanks, Casey. It’s good to be here. We’ve got a lot to go through.
As always, there’s a lot to discuss with you — and the White House is demanding Facebook do more to remove vaccine misinformation, which I know is on a lot of people’s minds right now. I want to get to that, but I want to start with this talk you gave internally at Facebook a few weeks ago, which I recently had a chance to watch. You told your employees that your future vision of Facebook is not the two-dimensional version of it that we’re using today, but something called the metaverse. So what is a metaverse and what parts of it does Facebook plan to build?
This is a big topic. The metaverse is a vision that spans many companies — the whole industry. You can think about it as the successor to the mobile internet. And it’s certainly not something that any one company is going to build, but I think a big part of our next chapter is going to hopefully be contributing to building that, in partnership with a lot of other companies and creators and developers. But you can think about the metaverse as an embodied internet, where instead of just viewing content — you are in it. And you feel present with other people as if you were in other places, having different experiences that you couldn’t necessarily do on a 2D app or webpage, like dancing, for example, or different types of fitness.
I think a lot of people, when they think about the metaverse, they think about just virtual reality — which I think is going to be an important part of that. And that’s clearly a part that we’re very invested in, because it’s the technology that delivers the clearest form of presence. But the metaverse isn’t just virtual reality. It’s going to be accessible across all of our different computing platforms; VR and AR, but also PC, and also mobile devices and game consoles. Speaking of which, a lot of people also think about the metaverse as primarily something that’s about gaming. And I think entertainment is clearly going to be a big part of it, but I don’t think that this is just gaming. I think that this is a persistent, synchronous environment where we can be together, which I think is probably going to resemble some kind of a hybrid between the social platforms that we see today, but an environment where you’re embodied in it.
So that can be 3D — it doesn’t have to be. You might be able to jump into an experience, like a 3D concert or something, from your phone, so you can get elements that are 2D or elements that are 3D. I’d love to go through a bunch of the use cases in more detail, but overall, I think that this is going to be a really big part of the next chapter for the technology industry, and it’s something that we’re very excited about.
It just touches a lot of the biggest themes that we’re working on. Think about things like community and creators as one, or digital commerce as a second, or building out the next set of computing platforms, like virtual and augmented reality, to give people that sense of presence. I think all of these different initiatives that we have at Facebook today will basically ladder up together to contribute to helping to build this metaverse vision.
And my hope, if we do this well, I think over the next five years or so, in this next chapter of our company, I think we will effectively transition from people seeing us as primarily being a social media company to being a metaverse company. And obviously, all of the work that we’re doing across the apps that people use today contribute directly to this vision in terms of building community and creators. So there’s a lot to jump into here. I’m curious what direction you want to take this in. But this is something that I’m spending a lot of time on, thinking a lot about, we’re working on a ton. And I think it’s just a big part of the next chapter for the work that we’re going to do in the whole industry.
This feels like a fairly far-future vision, even though parts of it are visible now and coming together. I think overall, it feels like a very maximalist version of what the internet could be. You talk to employees about, “from the moment we wake up to the moment we go to bed, being able to jump into the metaverse to do almost anything you can imagine.” And probably some of us are using the internet that way already.
But this description feels more like the metaverse that might be familiar to us from books like Ready Player One or Snow Crash, or maybe like Fortnite today, where some of the most important aspects of our lives, including our work, are being lived and done inside these virtual spaces. Are those good analogs for the kind of world that you’re talking about?
Well, what I’m excited about is helping people deliver and experience a much stronger sense of presence with the people they care about, the people they work with, the places they want to be. And the reality is that today with the mobile internet, we already have something that a lot of people access from the moment they wake up to when they go to bed. I don’t know about you, but a lot of mornings, I reach for my phone by my bedside before I even put on my glasses, just to make sure, get whatever text messages I got during the middle of the night and make sure that nothing has gone wrong that I need to jump into immediately upon waking up. So I don’t think that this is primarily about being engaged with the internet more. I think it’s about being engaged more naturally.
And today, I think about the computing platforms that we have. We have these phones. They’re relatively small. A lot of the time that we’re spending, we’re basically mediating our lives and our communication through these small, glowing rectangles. I think that that’s not really how people are made to interact. A lot of the meetings that we have today, you’re looking at a grid of faces on a screen. That’s not how we process things either. We’re used to being in a room with people and having a sense of space where if you’re sitting to my right, then that means I’m also sitting to your left, so we have some shared sense of space in common. When you speak, it’s coming from my right. It’s not just all coming from the same place in front of me.
I don’t know how much you’ve had this experience, but I have a bunch, in work meetings over the last year, where I sometimes find it hard to remember what meeting someone said something in because they all look the same and they all blend together. And I think part of that is because we don’t have this sense of presence in space. What virtual and augmented reality can do, and what the metaverse broadly is going to help people experience, is a sense of presence that I think is just much more natural in the way that we’re made to interact. And I think it will be more comfortable. The interactions that we have will be a lot richer, they’ll feel real. In the future, instead of just doing this over a phone call, you’ll be able to sit as a hologram on my couch, or I’ll be able to sit as a hologram on your couch, and it’ll actually feel like we’re in the same place, even if we’re in different states or hundreds of miles apart. So I think that that is really powerful.
I’ve been thinking about some of this stuff since I was in middle school and just starting to code. I remember when I was in math class, I would have my notebook and I’d basically just sit there and write code and ideas for things I wanted to go code when I got home from school that day. And some of them I was able to do back then, but one of the things that I really wanted to build was basically the sense of an embodied internet where you could be in the environment and teleport to different places and be with friends.
I think some combination of the fact that I probably didn’t know enough math to pull it off then, and just the technology was decades away from really being ready to do that in a good way — that wasn’t the direction that I gravitated in originally, in terms of building different social experiences. But this is something that I’ve been excited about. I’ve thought that this would be the holy grail of social interactions from well before when I started Facebook. And it’s really exciting to me that now the next set of platforms are going to be able to do this.
One of the reasons why we’re investing so much in augmented and virtual reality is mobile phones kind of came around at the same time as Facebook, so we didn’t really get to play a big role in shaping the development of those platforms. So they didn’t really develop in a very natural way, from my perspective. People aren’t meant to navigate things in terms of a grid of apps. I think we interact much more naturally when we think about being present with other people. We orient ourselves and think about the world through people and the interactions we have with people and what we do with them. And I think if we can help build the next set of computing platforms and experiences across that in a way that’s more natural and lets us feel more present with people, I think that’ll be a very positive thing.
I’m not sure that people would necessarily find it more natural to work all day wearing a VR helmet, but maybe it’s something we get used to. But I am really interested in some of the things that you’ve said about the way a metaverse could create jobs that don’t exist today, like whole economies springing up inside of this metaverse. What novel new forms of work do you see happening in this world you want to build?
So, let me get to that in a second. But just to go back to your comment about people not working in [a VR helmet] all day long — there’s clearly an evolution, or multiple, in the technology that are going to need to be possible, that will need to happen before this is the main way that people work. But I think we’re going to be there by the end of this decade. Today, the VR headsets, they’re still kind of a bit clunky, they may be a bit heavier than you would ideally like them to be. There need to be advances in being able to express yourself and having higher resolution, being able to read text better, a number of things like that. But we’re getting there, and each version is better and better. And Quest 2 has been a real hit so far in terms of how people are using it. I’ve been surprised.
We planned on it mostly being used for games and thought that a lot of these social interactions or things around work wouldn’t come until later, but a lot of the biggest experiences on Quest 2, that people spend the most time in, are already just hanging out socially. And there are a number of things around work and productivity. There are even experiences that I really hadn’t thought about, things like fitness. These apps like Supernatural and FitXR, which you can kind of think about it like Peloton, but instead of having a bike or a treadmill, the device is your VR headset and you’re basically taking a class in there, where you’re boxing or dancing. And it’s really fun. I think if you haven’t tried it out, it’s something that a lot of people are enjoying.
But going back to your point about work, and how this is going to work, I also don’t think this is going to be all VR. I think it’s going to be AR too. And part of the reason why VR is available, and why you have things like the Quest 2 years before you’re going to have AR glasses is because it’s a little more socially acceptable to wear something like a VR headset in the comfort of your own home. But I think to get AR glasses that we wear around throughout the day, they have to be normal-looking glasses, right? So you’re basically cramming all of these materials to build what we would’ve thought of as a supercomputer 10 years ago into the frame of glasses that are about five millimeters thick — you have computer chips, and networking chips, and holographic wave guides, and things for sensing and mapping out the world, and batteries and speakers, all this stuff, and it just needs to fit into these glasses — so that is a real challenge.
And I actually would go so far as to say that I think that might be one of, if not the biggest technological challenge that our industry will face in the next decade. We tend to really celebrate things that are big, right? But I actually think miniaturizing things and getting a supercomputer to fit into a pair of glasses is actually one of the bigger challenges. But once you have that, so you have those glasses and you have your VR headset, I think that’s going to enable a bunch of really interesting use cases.
So, one is you will be able to, with basically a snap of your fingers, pull up your perfect workstation. So anywhere you go, you can walk into a Starbucks, you can sit down, you can be drinking your coffee and kind of wave your hands and you can have basically as many monitors as you want, all set up, whatever size you want them to be, all preconfigured to the way you had it when you were at your home before. And you can just bring that with you wherever you want.
If you want to talk to someone, you’re working through a problem, instead of just calling them on the phone, they can teleport in, and then they can see all the context that you have. They can see your five monitors, or whatever it is, and the documents or all the windows of code that you have, or a 3D model that you’re working on. And they can stand next to you and interact, and then in a blink they can teleport back to where they were and kind of be in a separate place.
So I think for focus time and individual productivity, I think being able to have your ideal setup, we call this “infinite office.” We already have a version of this for our VR headsets, and it’s improving very quickly. I think it’s going to be great for multitasking and for getting your environment set up everywhere. There’ve been a lot of studies that show that people are more effective when they can pull up multiple of the things that they’re working on that are related to each other at once. If you’re coding, having multiple windows open rather than single-tasking, that’s a big deal. So I think that that’s going to be one.
The other area that I think is going to be pretty exciting is basically doing meetings. And I already do a bunch of meetings in VR. Even though the avatars aren’t as realistic today as they will be in a few years, in a lot of ways it already feels almost more real, and more like you have a sense of space, than a Zoom call, because you have the shared sense of space. So if someone is sitting to your right, you’re sitting to their left. If you’re sitting in a circle, everyone can kind of remember what order people were in. There’s spatial audio. You look over to the head of the table and there could be a screen there, where people who can’t be in VR or AR can videoconference in and be a part of your meeting from outside. You can project and different people can share as many documents as they want. So it’s no more of this, “Oh, I can only share one document at a time,” because everyone, you presume, only has one screen. And in VR, people can pull up as many screens as they want so you can share as much context as you want during a meeting. You have a whiteboard, people can draw. It’s pretty wild.
And we’re clearly just at the beginning of this. So I think that that’s going to be very exciting and people can customize their office space, and have it feel like what their physical office is and just be a digital continuation of that. So I think that’s pretty neat.
But then I think what you were also asking about is, aside from doing the kind of knowledge work that we would typically do in offices today, but instead doing it in the metaverse, I do think that there will be entirely new types of work too. So in terms of designing places where people hang out, this is going to be a massive part of the creator economy, I think. You’ll have individual creators designing experiences and places. You’ll have artists doing things, whether it’s a comedy show ... We did this comedy show on our team in Horizon the other day and it was just kind of funny, you feel like you’re there with other people, and there’s something to it that’s a little more engaging than just all looking at a screen independently and watching it yourself. There’s just something to the energy.
What was this show? Did you tell jokes during the show?
I was not the comedian, fortunately for the other participants who were there. But no, the team that’s developing Horizon, which is a big part of our internal efforts in this space, they try to do fun things like this, just to kind of build out and test how the development of the work is going. And I thought that that was pretty funny. But you’d get concerts in there. You have this whole set of creators who are building out different experiences, ranging from an individual creator to teams of dozens of people building AAA games, where you can have your avatar and you can go across these experiences. You can teleport instantaneously. You can bring your outfits and your digital objects with you. So I think that there’s going to be a whole economy around this.
And I guess one broader point that I’d make here is, one lesson that I’ve taken from running Facebook over the last five years is that I used to think about our job as building products that people love to use. But you know, now I think we just need to have a more holistic view of this. It’s not enough to just build something that people like to use. It has to create opportunity and broadly be a positive thing for society in terms of economic opportunity, in terms of being something that, socially, everyone can participate in, that it can be inclusive. So we’re really designing the work that we’re doing in the space with those principles from the ground up. This isn’t just a product that we’re building. It needs to be an ecosystem. So the creators who we work with, the developers, they all need to be able to not only sustain themselves, but hire a lot of folks.
And this is something that I hope eventually millions of people will be working in and creating content for — whether it’s experiences, or spaces, or virtual goods, or virtual clothing, or doing work helping to curate and introduce people to spaces and keep it safe. I just think this is going to be a huge economy and frankly, I think that that needs to exist. This needs to be a rising tide that lifts a lot of boats. We can’t just think about this as a product that we’re building.
Yeah, so let’s talk about some of those principles that you’re going to use to build this. Because I know some people are going to hear this vision for the metaverse and just reflexively wish that you wouldn’t build it. They’ll say, Facebook wasn’t governed effectively when it was in two dimensions, and trying to build it in three dimensions is pure hubris. And people feel that way for different reasons. But one that has come up a lot over the past couple of weeks is misinformation. President Biden has since walked this back, but on Friday he was talking about misinformation related to COVID vaccines. And he said, “Facebook is killing people.” How do you respond to the idea that Facebook has played a role in making people hesitant about getting vaccinated?
Well, I think that our basic role here — and I appreciate you mentioning the fullness of the context there, because I do think that the president offered more context on that after his original comment. There’s multiple prongs here. One part of it is we need to basically help push out authoritative information. We do that. We’ve helped, I think it’s more than 2 billion people around the world, access authoritative information about COVID over the course of the pandemic by putting it at the top of Facebook and Instagram. We’ve helped millions of people, including here in the US, basically go use our vaccine finder tool to actually go get their vaccine. So I’m quite confident, just looking at the analytics and the net impact, that we’ve been a positive force here.
And in fact, if you look at vaccine acceptance amongst people who use our products, it has increased quite a bit over the last few months. So to the extent that there are pockets of the population for which hesitancy is growing, that hasn’t been the trend of what we’ve seen overall on Facebook. And I also think that broadly, when you’re looking at what’s going on in any given country, it’s useful to look at this from the perspective that Facebook and Instagram and all these tools are widely used in almost every country in the world. So if one country is not reaching its vaccine goal, but other countries that all these same social media tools are in are doing just fine, then I think that that should lead you to conclude that the social media platforms are not the decisive element in terms of what is going on there.
But nonetheless, I do think we have a big role and we have a range of strategies that we employ. We take down content that could lead to imminent harm, and we flag and decrease the distribution of content that our fact checkers flag as misinformation, but that is not going to lead to imminent harm. So we treat those two differently, and I think that’s the right thing to do. So overall, I think we’ve taken a lot of efforts on this. I think our company has made a lot of progress in this space over the last five years since the 2016 election. It’s tough to say that anyone was well-prepared for the pandemic, but I think we’d built a lot of systems that I think could really come in handy on this. And overall I’m quite proud of how we’ve shown up and what I think our net impact has been here.
But managing the integrity of these communities, whether you’re talking about misinformation on Facebook or other types of harm — we track about 20 different types of harm, everything from terrorism to child exploitation to incitement of violence. There are lots of different types of harm. You need to build specific systems to handle them. We have, I think at this point it’s more than 1,000 people working on building the AI and technical systems. And I think it’s more than 30,000 or 35,000 people helping to review the content. And that kind of apparatus that we built up I think will carry naturally to all the work that we’ll do going forward.
But when you think about the integrity of a system like this, it’s a little bit like fighting crime in a city. No one expects that you’re ever going to fully solve crime in a city. The police department’s goal is not to make it so that if there’s any crime that happens, that you say that the police department is failing. That’s not reasonable. I think, instead, what we generally expect is that the integrity systems, the police departments, if you will, will do a good job of helping to deter and catch the bad thing when it happens and keep it at a minimum, and keep driving the trend in a positive direction and be in front of other issues too. So we’re going to do that here.
And for the metaverse, I think that there are different types of integrity questions. One of the big issues that I think people need to think through is right now there’s a pretty meaningful gender skew, at least in virtual reality, where there’s a lot more men than women. And in some cases that leads to harassment. And I think one of the things that we’ve been able to do better in some of our experiences than some of the other games and things out there is give people easier tools to block people, just be able to have a sense of when there might be harassment going on, to keep it a safe space that can be inclusive for everyone, that everyone wants to be a part of.
Because ultimately, you’re not going to have a healthy and vibrant community if it skews so much towards one gender or the other, or a whole part of the population just doesn’t feel safe. So this stuff is going to be critical. It’s not just critical for having a good social impact, it’s critical for building good products. And it’s something that we’re focused on from the beginning here.
One of the things I’ve been thinking about as I’ve been reading more about the metaverse is that it seems to me that it promises to host much more information, generally, than social networks do today. This isn’t a network where I’m spending 20 or 30 minutes a day scrolling through a feed. Potentially, I’m spending eight-plus hours here working. And, as you noted, it’s not just text or voice communications, you’re also virtually moving through these spaces; it’s an office, it’s a performance space. So do you think that the systems that you have now to work on making spaces safe and healthy extend naturally? Or are we going to have to rethink this, just given the volume of information that is contained here?
Well, there will clearly be new challenges. Even in just the 2D world of the social media apps that we work on, there are going to be new challenges. So this is not a thing that you’re ever done with. But when we started working on a lot of these problems in a much bigger way, through the middle of the 2010s leading up to the 2016 election, and really turbocharged it a lot after that, we just knew that if you’re going to go and try to build these AI systems to be able to proactively identify harmful content — that’s not something that you can stand up in six months. We basically put together a roadmap that was a three- or four-year roadmap to get through all of the work that we needed to get to a good place.
And sometimes when you’re working on long-term projects, it can be a little painful because you realize, “Hey, we want this today.” But it’s going to take a few years to get there. But I do think the reality is that now that we’ve built up a lot of that AI work and we’ve hired a lot of the content moderators, I think it will be easier to add new use cases and be able to adapt the systems that we’ve built to different types of harms. So it’s something that we’re thinking about from the beginning. For example, the gender skew that I just mentioned, the feeling that a number of women have around being harassed in the space, those are somewhat more acute problems, potentially, in gaming and in VR. Obviously that’s a thing that exists in the other platforms as well. But I think that the mix of the problems that we see may vary, and I’m sure there’ll be new ones too. So this is just something that we’ll need to keep focused on.
I want to ask one more question about responsibility. I was talking to Nilay, who runs The Verge, about all this. And he asked me the question, “Who gets to augment reality?” And he talked about a world where we’re all wearing our headsets, and we’re looking at the US Capitol building. And most of us might have an overlay that says, “This is the building where Congress works.” And then some people might see an overlay that says, “On January 6, 2021, our glorious revolution began.” And then maybe some other people see an overlay that says, “Lizard people are inside doing experiments on humans.” And I think the real question in there is: does this metaverse further splinter our sense of shared reality? Does it let us sort ourselves into a bunch of unrelated bubbles? Should we be worried about that?
Well, this, I think, is one of the central questions of our time. And I think there are clear pros and cons of this. I think the positive version of this is that if you go back 20 or 30 years, a lot of people’s individual opportunities and experience was dictated by their physical proximity. Right?
So [when] I grew up, I played Little League baseball in my town, not because I am made to be a baseball player, but because that was one of the few activities that was available. There was, I think, one other kid in the town who was interested in computers — I was lucky that there was one other kid. And that was my world. If I wanted to call someone who I met when I was at camp or something and wanted to stay in touch with a friend, I would have to pay a lot more because long-distance calls cost more than talking to people nearby.
I think one of the things that is most magical about the present, and that I think is going to get even more so, is that flattening out distance creates a lot more opportunities for people. Not just in the sense that a version of me growing up today wouldn’t be stuck playing Little League, that I’d get to find people who are interested in the same things, so I could explore coding and have a much more vibrant community around that, or surfing, or whatever the thing is that you’re interested in. I think that that’s probably quite compelling and positive. I also think it is really important for economic opportunity. One of the big issues today in society is inequality. And one of the people I think has done the most interesting research on this is this guy, Raj Chetty, I think he’s at Harvard now. And basically some of the research that he’s done shows that the zip code in which you were born and raised is highly correlated with your future mobility and what your income is going to be. And I think that that just goes against the sense that we have in this country that people should have equal opportunity.
But in a world where there can be more remote work, I don’t know what The Verge is doing, but I can tell you at Facebook, since we knew that this pandemic was going to be going on for a while, and we probably weren’t going be in offices, pretty early on, I basically just told our team, “Okay, look, stop just constraining ourselves from hiring people who are physically close to an office that they can’t go into anyway. Remote work is going to be a bigger part of the future. I think within five to 10 years, probably about half the company is going to be remote. Let’s double down on that now and hire people in all these different places, which I think is going to create more opportunity.” But then you have this question, which is, now that we’re going back and you have this hybrid world, there are all these cultural questions of, “Okay, will the people who are working remotely really be able to have exactly the same opportunities as the people who are physically there with each other?”
And I think when you have technologies like holograms from augmented and virtual reality, the answer gets closer to “yes” than it would have been before. When those people were just videoconferencing in on a flat screen or doing phone calls or not seeing each other as often. The better that this technology for presence gets, the more you can live where you want, be a part of the communities that you want to. And I think that that’s more positive in terms of creating more opportunity for people. Now, obviously, you also have the downsides of that that need to get managed. In order to have a cohesive society, you want to have a shared foundation of values and some understanding of the world and the problems that we all face together.
And I think part of what we’re all trying to figure out now is, how do you build that in a world where people have so much freedom and opportunity to go explore the things that are interesting to them and get different opportunities, but are less anchored physically? But I think we’re probably just going to go more in that direction. I think we will solve, or at least figure out how to come to an equilibrium on, the cohesion point. But I think overall, we should be celebrating the fact that this is going to, I believe, create more opportunity for people, not just in all places in the US but around the world.
How do you think about how the metaverse will be governed? If it’s a consortium of different companies, who’s going to be responsible for shaping these policies?
Well, I think that there will be a number of different layers to this. I think a good vision for the metaverse is not one that a specific company builds, but it has to have the sense of interoperability and portability. You have your avatar and your digital goods, and you want to be able to teleport anywhere. You don’t want to just be stuck within one company’s stuff. So for our part, for example, we’re building out the Quest headsets for VR, we’re working on AR headsets. But the software that we build, for people to work in or hang out in and build these different worlds, that’s going to go across anything. So other companies build out VR or AR platforms, our software will be everywhere. Just like Facebook or Instagram is today.
So I think part of this is, I think it’ll be good if companies build stuff that can work together and go across lines rather than just being locked into a specific platform. But I do think that, just like you have the W3C that helps set standards around a bunch of the important internet protocols and how people build the web, I think there will need to be some of that here, too, for defining how developers and creators can build experiences that allow someone to take their avatar and their digital goods and their friends, and be able to teleport seamlessly between all these different experiences.
So we’re already starting to do some of this. There’s an XR consortium that we are in with Microsoft and a bunch of other companies that are working on some of this as well. But I think that that’s going to be one of the big questions. I don’t think every company is going to have exactly the same vision here. I think some are going to have more siloed visions, and I, at least, believe that in order for this to work really well, you want it to be very portable and interconnected.
There’s this great essay that the venture capitalist Matthew Ball wrote last year about the metaverse. I imagine you’ve read it, but he talks about “unprecedented interoperability” as one of the defining features of this metaverse. And we live at this time when the biggest tech platforms are barely interoperable; at most, they might let you share some contact data or export some photos. So it sounds like you’re saying that you’re preparing to build systems that are much more interoperable than the ones we have today, at least on Facebook’s end.
Yeah. I think that that aligns with our mission and worldview. We’re generally not trying to serve a smaller number of people but have them pay us a large premium. That’s not our business model. We’re here to serve as many people as possible and to help people connect. And when you’re building social systems primarily, you want everyone to be able to be a part of the same systems. So we want to make them as affordable as possible, we want to make them as unified as possible, and part of that is making sure that things can run everywhere, can run across different platforms, can talk to each other. There are a bunch of big questions about how you do that. There will be privacy questions, there’ll be intellectual property questions.
I thought Matthew Ball’s essays, by the way, were great, and anyone who’s trying to learn about this, I think he wrote a nine-part piece on a bunch of the different aspects of what the metaverse could be, and I highly recommend all of them. But I’d say that, I think sometimes people may be a little idealistic about assuming that this will develop in a certain way. I think the vision that Matthew lays out, for example, of being extremely interoperable, is the vision that I hope comes about. But I think we’ve seen from modern computing that there are different companies that push in different directions. So I think from my perspective, without a doubt, you’re going to have some companies that are trying to build incredibly siloed things, and then some that are trying to build more open and interoperable ones.
And I don’t even think it’s a question of, is one going to win over the other? I mean, has open-source won over closed-source? There were just multiple things at different times, some are expressed more in the technology industry than others, but we’re going to be contributing to trying to build a more open and interoperable one, and that’s kind of our goal here. But even within that, there’s a lot of questions about how that works. Is it interoperable because it’s decentralized, in the way that a bunch of the crypto work is being designed now, so there’s kind of no central dependency? It’s not just interoperable, but there’s no centralized control points? Or is it interoperable because there are some bodies that set standards and enable a bunch of these experiences to work together? And I think you’ll probably see multiple approaches on that too. So I think this is going to be one of the big questions in terms of how this evolves.
I think I have time for two more questions. So one of them is a little bit nerdy, but when you read books and watch movies about the metaverse, the fact that these spaces are owned by giant corporations are often the subject of satire. Do you see any room here for public, government-owned spaces in the metaverse? Something like, I don’t know, libraries, parks, and is this something that governments should start thinking about so that they have a role to play as this stuff gets built?
I certainly think that there should be public spaces. I think that’s important for having healthy communities and a healthy sphere. And I think that those spaces range from things that are government-built or administered, to nonprofits, which I guess are technically private, but are operating in the public interest without a profit goal. So you think about things like Wikipedia, which I think is really like a public good, even though it’s run by a nonprofit, not a government.
One of the things that I’ve been thinking about a lot is: there are a set of big technology problems today that, it’s almost like 50 years ago the government, I guess I’m talking about the US government here specifically, would have invested a ton in building out these things. But now in this country, that’s not quite how it’s working. Instead, you have a number of Big Tech companies or big companies that are investing in building out this infrastructure. And I don’t know, maybe that’s the right way for it to work. When 5G is rolled out, it’s tough for a startup to really go fund the tens of billions of dollars of infrastructure to go do that. So, you have Verizon and AT&T and T-Mobile do it, and that’s pretty good, I guess.
But there are a bunch of big technology problems, [like] defining augmented and virtual reality in this overall metaverse vision. I think that that’s going to be a problem that is going to require tens of billions of dollars of research, but should unlock hundreds of billions of dollars of value or more. I think that there are things like self-driving cars, which seems like it’s turning out to be pretty close to AI-complete; needing to almost solve a lot of different aspects of AI to really fully solve that. So that’s just a massive problem in terms of investment. And some of the aspects around space exploration. Disease research is still one that our government does a lot in.
But I do wonder, especially when we look at China, for example, which does invest a lot directly in these spaces, how that is kind of setting this up to go over time. But look, in the absence of that, yeah, I do think having public spaces is a healthy part of communities. And you’re going to have creators and developers with all different motivations, even on the mobile internet and internet today, you have a lot of people who are interested in doing public-good work. Even if they’re not directly funded by the government to do that. And I think that certainly, you’re going to have a lot of that here as well.
But yeah, I do think that there is this long-term question where, as a society, we should want a very large amount of capital and our most talented technical people working on these futuristic problems, to lead and innovate in these spaces. And I think that there probably is a little bit more of a balance of space, where some of this could come from government, but I think startups and the open-source community and the creator economy is going to fill in a huge amount of this as well.
Last question: If you succeed in building a metaverse, will you at least consider giving it all away to the first person who solves a scavenger hunt?
I appreciate the Ready Player One reference.
I mean, just to nitpick on something here for a second, I don’t think in the future, people are going to call the work that individual companies do a metaverse. Hopefully, if we’re successful collectively in building a system that’s more interoperable, and where you can teleport between things, it should all be the metaverse, each company should not have its own metaverse. Hopefully in the future, asking if a company is building a metaverse will sound as ridiculous as asking a company how their internet is going. So I think just in terms of giving a sense of sort of where this should go, but within that ... now I’ve lost track of what your question was.
It was a joke question. But look, as always, there’s a lot to think about here and I appreciate you coming on and sharing some of the vision.
I mean, this is an exciting area. It’s going to be a big focus, and I think that this is just going to be a big part of the next chapter for the way that the internet evolves after the mobile internet. And I think it’s going to be the next big chapter for our company too, really doubling down in this area. For the last 17 years, we’ve worked a lot on building different apps for people to connect, and the main way that they’ve done that is on phones. And I think if we’re successful, then maybe five years from now, or seven years from now, people will primarily think about us as a metaverse company, rather than a mobile internet company, that’s kind of helping to build these kinds of experiences. And I think it’s just going to span so much.
People will hang out, you’ll be able to really feel like you’re present with other people, you’ll be able to do all kinds of different work, there’ll be new jobs, new forms of entertainment. Whether it’s gaming or incredibly complex scavenger hunts like you’re talking about, or more and more enjoyable ways of doing fitness or concerts, or getting together at the comedy show that we talked about. I just think that there’s a ton here, and I think we can do this in a way that creates a lot of economic opportunity where millions of people around the world can be doing creative work that they really enjoy, building experiences or virtual items or art or different things that are more inspiring to them than whatever the jobs are that they may feel like they can do today. So I’m really looking forward to helping to play some role in building out this next chapter for the internet. And I’m sure over the years, we’re going to have many conversations about this, Casey.
For sure. I’m looking forward to writing about all of the unanticipated problems that come about as a result of the metaverse! But the good things, too. Mark, thank you for coming on The Vergecast.
Happy to do it. All right. Talk soon.”
Now that we have understood the idea of the metaverse, we can delve into it’s legal implications.
LEGAL IMPLICATIONS OF METAVERSE
Pre-covid, thinking for a metaverse could have been considered out of the box but nowadays where meetings, convocations, functions, classrooms, and other activities have gone online, reaching out for Metaverse can be considered a more intricate, technically complex, but seemingly fair advancement. It was not an instant development; rather, its evolution can be traced to two to three decades back. With the execution of Liquidation, Privatisation, and Globalisation, India during the 1990’s witnessed development in the realm of digitalization, and the arrival of the digital age brought in different perspectives. Meanwhile, in the year 1992, Neal Stephenson, in the Science fiction “Snow Crash” visualized what virtual reality, the next thing in line to the internet, would look like in the near future and, while writing about it, tossed the term Metaverse.1 The term Metaverse consists of the prefix Meta, which means ‘beyond’, and suffix verse which means ‘universe.’ The Metaverse is a hypothesized iteration of the internet, supporting persistent online 3-D virtual environments through conventional personal computing, as well as virtual and augmented reality headsets.2 It is an alternate world to the real world and a dream for many students, gamers, technicians, Fashionistas and various other professionals. Metaverse has been in conversations, especially after the lockdown enforced by the governments worldwide. People already have witnessed Ariana Grande performing live on Fortnite3 or buying Virtual Gucci for the Roblox Avatars,4 which takes them a step closer to this concept.
The arrival of a new era requires updated regulations to control the misuse of the latest technologies. Metaverse is an alternative digital space whose creation requires the consumption of personal data for rendering services, a large number ofsensors, and an absurd amount ofsoftware which will further lead to further complexities. With proper regulations and guidelines, Metaverse and the digital world can be put to great use, but lack of regulation at the same time can be the heart of the problem. Proper regulation for the facial data, body language, biometric data, searches, or other personal data is essential to protect the users from data breaches and fill the lacuna in the regulatory laws. If the data is not protected then the companies may grab the data and use it to deliver targeted ads and increase profitsthrough effective ad delivery. On the other hand, social media apps may use the data to reshape our thoughts to trigger our emotions, and in this way, they can control our thought processes.
This article tries to examine what India must prepare for its technological and regulatory advancementsto ensure the development of new virtual environments as Metaverse. While examining the situation and the much-needed laws, this article shall inspect and investigate the material facts and the implication of the Metaverse and further gazing out the current Indian laws governing the Metaverse and, at last, would conclude with a few suggestions.
2. Metaverse and the Legal System
There are various instances where this concept has been taken to the next level. Games’ working on Fortnite, Microsoft working on Minecraft, Facebook working on Horizon, or be it Live Maps or Magic leap, every time the work has left the world astonished. As for the consumer brands, the ‘next big thing deciding how brands will interact with customers is the Metaverse. In the Metaverse, everything will be virtual and imaginary, including the brands and branded products. The ultimate Metaverse would be a series of interoperable worlds.
The three pillars or the main aspects of Metaverse are first presence, second interoperability, and lastly, standardization.5 Presence here means a sense of embodiment or one’s presence with others in a virtual world, and interoperability means seamlessly and effortlessly traveling in the digital space and among the virtual objects. Interoperability isn’t a new concept rather, nowadays, it is common since we see avatars being used in Zoom meetings or virtual goods such as cryptocurrencies. Standardization, the final pillar, is the enabling of interoperability of platforms and services across the Metaverse.
For example, Roblox was launched in 2006 but is way ahead of its time. It is mostly like a virtual platform where users by way of creating their own game can virtually earn real money through the exchange of virtual currencies called Robux. It is now more than just a game and a significant development in the realm of Metaverse. The main step was Nike announcing its partnership and opening a virtual store called ‘Nikeland’6 in Roblox or announcement of NFL (National Football League) Store7 in the virtual space of Roblox. In 2003, Linden Lab, launched Second Life, which allowed its users to create an avatar which can do almost anything that a person does in the real world. People in Second Life can interact with each other virtually, express themselves through music and art, attend concerts, organize meetings and even open embassy. Maldives was the first country which opened a virtual embassy in Second Life.8
However, there are certain standards issued by the Central Government in order to control the data collected by the community from the users. The current Data Protection System is governed by Information Technology (Reasonable security practices and procedures and sensitive personal data or information) Rules, 2011 notified under the Information Technology Act, 2000.9 The Act suggests that the organization may demonstrate compliance with the code through having documented security programs, and information security policies must contain technical, operational, and physical security measures. It prescribes international standard IS/ISO/IEC 27001 on “Information Technology Security Techniques, Information Security Management System, Requirements” that it deems compliant to its suggested standards. The Act aims to protect those data of users from being shared whose sharing was not consented to by the user. The Bureau of Indian Standards issued the IS 1742810 to provide policy assurance and to ensure that the organizations that are collecting data are assuring their customers of proper privacy practices and Data Privacy Management System. The IS 17428 has been divided into two parts, one of which is mandatory and the other suggestive. The IS 17428, has narrowed down the definition of personal information, 11 sensitive personal information12 , and consent13 in order to clarify the data type so that the organizations further process it accordingly. The standard mandates the organization to incorporate certain engineering and design requirements as to meet the requirements laid down on data accuracy, choice, consent, disclosure, portability, and security. The organization must also establish those privacy management systems to implement privacy policies, preserve obsolete policies and implement the guidelines that complement the level of detail involved. Unless they successfully demonstrate that the organization is out of the jurisdiction of the concerned sub-clause, they will be liable to meet the recommended guidelines. The concerned standards don’t particularly specify if it applies to foreign organizations in India or Indian organizations abroad; however, if the organization doesn’t comply with proper data privacy standards, the organization may be held liable to pay damages under the IT Act. The standard mandates the organizations to conduct periodic audits and allocate resources to the group which is competent in data privacy. The organizations also need to establish, document, and maintain mechanisms to reduce the risk of data breaches and protect data privacy.
In order to control standardization, the government, through its notification dated 25 February 2021, enacted The Information Technology (Intermediary Guidelines and Digital Media Ethics Code) Rules, 2021 with the main objective to govern and protect the users from various contents that can be pernicious for them. For example, the government, through the mentioned Act, has made it an obligation for any social media platform with more than 5 million registered users to keep tools and mechanisms which can proactively identify and remove content that is detrimental to the mental health of the user. It is a step in furtherance of providing users assurance of data accuracy in light of existing and currently most extensive Information Technology Act, 2000 and IT (Reasonable Security Practices and Procedures and Sensitive Personal Data or Information) Rules, 2011. On the one hand, the law is creating a safe, secure environment; on the other, it is stifling between freedom of speech and expression. The content which may have been removed needs to be specified under a separate category. If the segregation of content has not been done correctly, it may create a debate and be considered gross abuse of the process of law. Therefore, the presence of law is great guidance for the universe of Metaverse; however, there still remain some problems whose solution is much needed to carry on this digital era to the next level.
3. Problems in the Metaverse Environment
Article 19 of the Indian Constitution guarantees every citizen Right to freedom of speech and expression; however, it is the same article that provides certain reasonable restrictions that can be considered to curtail the right. The law has given the power to organizations to prohibit spreading fake news, speech against public policy, morality, decency, and security of the state. Now it is up to the moral code and code of ethics of companies to decide whether the content is hateful, false, or threatening the security of the state. Section 69 of the IT Act, 2000 authorizes the Central Government and State Government with power to issue directions or interception or decryption of any information in interest in the security of the state, sovereignty, and integrity of India. The data in the Metaverse environment similarly will and should be under surveillance of the government, and if found against public policy or security of the state, it may be removed, and the organization may be penalized accordingly for the provisions under. Legal evolution for the metaverse era would entail law injecting itself into a manner that balances fundamental rights, such as the freedom of expression, with the protection of public interest.
Unfair trade practices or unfair competition in India is governed by the Competition Act, 2002.14 The above-mentioned Act enforces antitrust laws and outlaws “every contract, combination, or conspiracy in restraint of trade” and any “monopolization, attempted monopolization, or conspiracy or combination to monopolize.” However, only the restraints which are unreasonable have been prevented by the Act. Therefore, if numerous apps participate in the market and one of them unfairly dominates all or tries to establish a monopoly, it may be tried under the Competition Act, 2002. Now, suppose there have been some unfair competition issues in the Virtual World, then under what authority will it be governed? For example, we know Nike has opened a store, and there is an NFL store as well and consider that if few more stores open and there is a dispute regarding act of NikeLand establishing Monopoly or NFL involved in some unfair trade practices. What will be the law commanding trial and justice in those spaces? What should be the procedure or the penalty, and who will it be decided by?
The issue related to Intellectual Property Rights will also be a considerable issue to wipe off. As we know, the Metaverse will consist of proprietary Digital spaces, and in those digital spaces, there will be Intellectual property of various brands, people, etc. Those Intellectual properties need to be protected. Suppose there is a digital space; now, various brands will open their virtual stores to sell virtual accessories, as was seen in the case of Nike opening NikeLand or opening of NFL store or performance of Ariana Grande. Here forth, the question arises as to how licensing, trademark, copyright issues for those will be dealt? Secondly, people, in those digital spaces, will create their homes, their own infrastructures, etc., so with whom will the right be vested, since the homes or things created will not entirely be of the user as the programming and design of the developer was also involved with the creation? Also, if the right will be vested on both the developer as well as the user, another question that arises is, what will be the ratio, and under what authority will it be governed?
Now, suppose the Metaverse is being used by people of different origin, different nation and at different places. In that case, the question arises that laws of which nation shall govern the digital space and the metaverse environment? The stance on this question is still very unclear, and there is no direct answer to it. The amalgamation and development of laws is the only practical answer. The laws need to evolve with changing dynamics and accordingly need to incorporate various clauses to deal with the new situational problems and give the world a proper solution accordingly.
4. Probable Steps
Intellectual Property Licensing agreements are going to be a critical factor in driving the rights in the world of Metaverse. The absence of IP Licensing agreements may result in chaos. Any brand or product that exists in the Metaverse universe shall have its IP license, and in case of dispute, the same shall be used. If supposedly any brand has created a T-shirt for a particular game in the Metaverse, and if it wants to use its T-shirt elsewhere, it will have to take proper IP rights that are necessary and require IP Licensing Agreements for the same. Also, in a case where a Metaverse vendor wants to create content with a brand, the absence of combined IP rights may result in a situation where the rights are given to the vendor for a particular digital product, but leverage is taken from the vendor for future use. The basic use of a trademark to protect unauthorized use and obtaining rights may not be sufficient in all situations. For example, if a company ‘X’ has its Jackets in the Metaverse for sale, however, it doesn’t want to show its Jackets where violence against females is depicted. In such a case, since brand ‘X’ will want to escape unwanted brand associations, it will limit its use at the outset to prevent disputes down the lane. This will be reflected in the terms of service and end-user agreement and ensure what can be done with the jackets and what can not. This way, if the brand has complete IP rights over the property, it may limit and control the use of its products. These will also be helpful in censoring for the bad, and the primary line of distinction between acceptable and unacceptable will be created in the Metaverse Universe.
The creation of counterfeit digital goods which resemble goods of various brands may also be an issue in the Metaverse. User-Generated content in this scenario will not only be ubiquitous but essential for the growth of Metaverse. In such instances, protecting their creation with proper IP rights will be a top priority for the brands. Further, embedded perks and signifiers for authentic items may be a discouraging act for those infringing user-generated content. These extras may also grant potential utility to the goods; however, it will work only in cases of the same platform. If the protection is desired across all platforms, Non-Fungible Tokens would be suggested.
What NFT’s do is that, when product is purchased, parties are instructed on the do’s and do not’s of the product. Now Tokenizing the product will further show the instructions related to the product during the entire life cycle of the product. This way, if the product is even taken beyond one platform of Metaverse, the instructions and the embedded IP Rights regarding the concerned product will still tag along. This will create strict directions regarding a product and assurance of originality for their entire lifetime.
While some ideas of Metaverse can’t delve into reality yet, Metaverse is not completely fictional, and work is being done upon the realm to bring it into its complete existence. We witness Virtual Reality, which lets us drown in the virtual world, Augmented Reality, which pulls the internet from our Physical World, meanwhile virtual products have refined the fiduciary relationship for us. The law needs to strengthen itself to govern the codes on which the Metaverse will be based. The law will soon wholly prevail over the principles upon which Metaverse will be based. The most ensuring and effective way of governing the behavior in Metaverse through regulations is by ensuring that the elements and components of mixed reality certainly meet mandatory standards that shall be agreed mutually. Adapting the code of Metaverse may, however, remain a challenge for the developers since they will be under pressure to develop new products with various advancements but under certain restrictions.
We are watching celebrities building their villas and showing their NFTs and performing live. The metaverse is coming, whether you agree or don’t. Don’t feel like going out tonight in the real world? Why not stay “in” and catch a show or meet people/avatars/smart bots in the metaverse?
The metaverse, or "Web 3.0," as it is currently envisioned, would have a synchronous environment that would provide users with a seamless experience across different worlds, even if such distinct sections of the virtual world are run by different developers. It would have its own economy, with users and their avatars interacting socially and using digital assets based in both virtual and physical reality, and a place where decentralised finance, or DeFi, would probably play a large role in commerce. The metaverse would be run by numerous entities in a decentralised fashion (probably on some open source metaverse OS) and work across different computing platforms, rather than by a single corporation or platform. The metaverse would begin as a virtual environment with enhanced experiences interfaced through virtual reality headsets, mobile devices, gaming consoles, and haptic gear that allows you to "feel" virtual objects. User preferences and monetary considerations would later define the metaverse's contours.
In short, the vision is for multiple companies, developers, and creators to collaborate to create a single metaverse (as opposed to proprietary, closed platforms) that will evolve into an embodied mobile internet that is open and interoperable and encompasses many aspects of life (such as work, social interactions, and entertainment) in a single hybrid space. Even beyond the hardware, software, and integration concerns, numerous challenges must be solved in order for the metaverse to become a reality, that is, successfully linking current gaming and communications platforms with other emerging technologies into a large new online destination. The legal issues are prominently displayed. Indeed, the metaverse notion contains enough legal questions to fill a law school final exam. Meanwhile, we're still attempting to resolve the plethora of legal issues raised by "Web 2.0," or the modern Internet. Adding the metaverse to the picture will certainly make things even more complicated.
The challenge at hand is what legal foundations we'll need for the metaverse architecture, which will allow various developers and studios, e-commerce markets, platforms, and service providers to coexist in one virtual reality. To add to the appeal, it is planned to be an interoperable, seamless experience for shops, gamers, social media users, or simply curious internet users with wallets full of cryptocurrency to spend and virtual assets to showcase. We currently have some well-established closed digital communities and other growing open platforms, each with its own set of business models that will need to be converted to the metaverse in some fashion. Simply put, the more immersive the experience, features, and interactions are, the more complicated the legal issues that arise.
“Contemplating the metaverse, these are just a few of the legal issues that come to mind:
· Personal Data, Privacy and Cybersecurity – Privacy and data security lawyers are already challenged with addressing the global concerns presented by varying international approaches to privacy and growing threats to data security. If the metaverse fulfills the hype and develops into a 3D web-based hub for our day-to-day lives, the volume of data that will be collected will be exponentially greater than the realms of data already collected, and the threats to that data will expand as well. Questions to consider will include:
o Cybersecurity: How will cybersecurity be managed in the metaverse? What requirements will apply with respect to keeping data secure? How will regulation or site policies evolve to address deep fakes, avatar impersonation, trolling, stolen biometric data, digital wallet hacks and all of the other cyberthreats that we already face today and are likely to be exacerbated in the metaverse? What laws will apply and how will the various players collaborate in addressing this issue?
· Technology Infrastructure: The metaverse will be a robust computing-intensive experience, highlighting the importance of strong contractual agreements concerning cloud computing, IoT, web hosting, and APIs, as well as software licenses and hardware agreements, and technology service agreements with developers, providers and platform operators involved in the metaverse stack. Performance commitments and service levels will take on heightened importance in light of the real-time interactions that users will expect. What is a meaningful remedy for a service level failure when the metaverse (or a part of the metaverse) freezes? A credit or other traditional remedy? Lawyers and technologists will have to think creatively to find appropriate and practical approaches to this issue. And while SaaS and other “as a service” arrangements will grow in importance, perhaps the entire process will spawn MaaS, or “Metaverse as a Service.”
· Open Source – Open source, already ubiquitous, promises to play a huge role in metaverse development by allowing developers to improve on what has come before. Whether or not the obligations of common open source licenses will be triggered will depend on the technical details of implementation. It is also possible that new open source licenses will be created to contemplate development for the metaverse.
· Quantum Computing – Quantum computing has dramatically increased the capabilities of computers and is likely to continue to do over the coming years. It will certainly be one of the technologies deployed to provide the computing speed to allow the metaverse to function. However, with the awesome power of quantum computing comes threats to certain legacy protections we use today. Passwords and traditional security protocols may be meaningless (requiring the development of post-quantum cryptography that is secure against both quantum and traditional computers). With raw, unchecked quantum computing power, the metaverse may be subject to manipulation and misuse. Regulation of quantum computing, as applied to the metaverse and elsewhere, may be needed.
· Antitrust: Collaboration is a key to the success of the metaverse, as it is, by definition, a multi-tenant environment. Of course collaboration amongst competitors may invoke antitrust concerns. Also, to the extent that larger technology companies may be perceived as leveraging their position to assert unfair control in any virtual world, there may be additional concerns.
· Intellectual Property Issues: A host of IP issues will certainly arise, including infringement, licensing (and breaches thereof), IP protection and anti-piracy efforts, patent issues, joint ownership concerns, safe harbors, potential formation of patent cross-licensing organizations (which also may invoke antitrust concerns), trademark and advertising issues, and entertaining new brand licensing opportunities. The scope of content and technology licenses will have to be delicately negotiated with forethought to the potential breadth of the metaverse (e.g., it’s easy to limit a licensee’s rights based on territory, for example, but what about for a virtual world with no borders or some borders that haven’t been drawn yet?). Rightsholders must also determine their particular tolerance level for unauthorized digital goods or creations. One can envision a need for a DMCA-like safe harbor and takedown process for the metaverse. Also, akin to the litigation that sprouted from the use of athletes’ or celebrities’ likenesses (and their tattoos) in videogames, it’s likely that IP issues and rights of publicity disputes will go way up as people’s virtual avatars take on commercial value in ways that their real human selves never did.
· Content Moderation. Section 292-294 of the Indian Penal Code (IPC) has been the target of bipartisan criticism for several years now, yet it remains in effect despite its application in some distasteful ways. How will the IPC be applied to the metaverse, where the exchange of third party content is likely to be even more robust than what we see today on social media? How will “bad actors” be treated, and what does an account termination look like in the metaverse? Much like the legal issues surrounding offensive content present on today’s social media platforms, and barring a change in the law, the same kinds of issues surrounding user-generated content will persist and the same defenses under platform immunity will be raised. How do you stop children from accessing such content?
· Blockchain, DAOs, Smart Contract and Digital Assets: Since the metaverse is planned as a single forum with disparate operators and users, the use of a blockchain (or blockchains) would seem to be one solution to act as a trusted, immutable ledger of virtual goods, in-world currencies and identity authentication, particularly when interactions may be somewhat anonymous or between individuals who may or may not trust each other and in the absence of a centralized clearinghouse or administrator for transactions. The use of smart contracts may be pervasive in the metaverse. Investors or developers may also decide that DAOs (decentralized autonomous organizations) can be useful to crowdsource and fund opportunities within that environment as well. Overall, a decentralized metaverse with its own discrete economy would feature the creation, sale and holding of sovereign digital assets (and their free use, display and exchange using blockchain-based payment networks within the metaverse). This would presumably give NFTs a role beyond mere digital collectibles and investment opportunities as well as a role for other forms of digital currency (e.g., cryptocurrency, utility tokens, stablecoins, e-money, virtual “in game” money as found in some videogames, or a system of micropayments for virtual goods, services or experiences). How else will our avatars be able to build a new virtual wardrobe for what is to come?”
· Taxation/ GST: How do you categorize the objects and things that are made in metaverse. As they will have an intrinsic value attached to them, how do governments tax them. Would new creations inside the metaverse be subject to GST or capital gains tax. How do you tax them and keep track of them. The easiest way to do those would be to get the taxes paid in the native tokens/currency inside the metaverse or digital economy in general. But would this mean finally expanding the definition of legal tender and would this mean the mass adoption of digital assets in general with more regulations and more certainty? How would foreign exchange laws play out?
· Gambling and regulatory scrutiny: Gaming, wagering, and tournaments would play an intrinsic role in metaverse ecosystem. India has distinction between ‘game of skill’ and ‘game of chance’. Many states in India do not allow any kind of wagering even in ‘game of skill’ and although it is debateable whether these laws are valid, there is no mechanism to regulate gaming and gambling inside the metaverse ecosystem. This is going to be a parallel economy and the rules would have to be formed by the state to benefit or counter regulate these parallel economies. States will have to come up with mechanism to have control inside the metaverse so that they do not lose out on the taxes.
· Advertising Laws: The Advertising Standards Council of India (ASCI), established in 1985, is committed to the cause of Self-Regulation in Advertising, ensuring the protection of the interests of consumers. ASCI was formed with the support of all four sectors connected with Advertising, viz. Advertisers, Advertising Agencies, Media (including Broadcasters and the Press) and others like PR Agencies, Market Research Companies etc. The Consumer Complaints Council is ASCI's heart and soul. It is the dedicated work put in by this group of highly respected people that has given tremendous impetus to the work of ASCI and the movement of self- regulation in the advertising. But how does it control advertisements, especially in decentralized metaverses. How do you stop some advertisement inside this space?
· Identity theft: Your avatar or footprint would be analogous to your email ID or mobile number. If someone were to steal your id, more complex issues would arise in metaverse as there currently are problems regarding the same in the real world as well. How do you control theft? Valve has been coming out with policies to regulate trading inside games like DOTA 2, but how do you do that inside the metaverse which is a world on its own.
· Contractual relationships and jurisdictional issues: The contracts would be enforced through smart contract mechanisms and they have an inherent problem, that they are not human. They can’t understand anything but the code. If a bunch of machines are running as a node for a decentralized metaverse, how do you solve the jurisdictional issues? Which courts or legal systems will have jurisdictions inside the metaverse ecosystems? To whom shall such regulatory powers be granted inside the metaverse ecosystem?
· Many overlapping issues relating to blockchain technology- They have been discussed in the ‘Blockchain’ section.
· Problems relating to pseudonymous economies and content censorship: When we do not know the identity of the person that we are trading with, how are we supposed to follow Know Your Customer and Anti-Terrorist Financing guidelines? How do we ensure resources and assets are not used by bad people in the economy.
· Sexual harassment: “Meta (the umbrella company formerly known as Facebook) opened up access to its virtual-reality social media platform, Horizon Worlds. Early descriptions of the platform make it seem fun and wholesome, drawing comparisons to Minecraft. In Horizon Worlds, up to 20 avatars can get together at a time to explore, hang out, and build within the virtual space.
But not everything has been warm and fuzzy. According to Meta, on November 26, a beta tester reported something deeply troubling: she had been groped by a stranger on Horizon Worlds. On December 1, Meta revealed that she’d posted her experience in the Horizon Worlds beta testing group on Facebook.
Meta’s internal review of the incident found that the beta tester should have used a tool called “Safe Zone” that’s part of a suite of safety features built into Horizon Worlds. Safe Zone is a protective bubble users can activate when feeling threatened. Within it, no one can touch them, talk to them, or interact in any way until they signal that they would like the Safe Zone lifted.
Vivek Sharma, the vice president of Horizon, called the groping incident “absolutely unfortunate,” telling The Verge, “That’s good feedback still for us because I want to make [the blocking feature] trivially easy and findable.”
It’s not the first time a user has been groped in VR—nor, unfortunately, will it be the last. But the incident shows that until companies work out how to protect participants, the metaverse can never be a safe place.
In the letter, Belamire described entering a multiplayer mode, where all characters were exactly the same save for their voices. “In between a wave of zombies and demons to shoot down, I was hanging out next to BigBro442, waiting for our next attack. Suddenly, BigBro442’s disembodied helmet faced me dead-on. His floating hand approached my body, and he started to virtually rub my chest. ‘Stop!’ I cried … This goaded him on, and even when I turned away from him, he chased me around, making grabbing and pinching motions near my chest. Emboldened, he even shoved his hand toward my virtual crotch and began rubbing.
“There I was, being virtually groped in a snowy fortress with my brother-in-law and husband watching.”
Stanton and his cofounder, Jonathan Schenker, immediately responded with an apology and an in-game fix. Avatars would be able to stretch their arms into a V gesture, which would automatically push any offenders away.
Stanton, who today leads the VR Institute for Health and Exercise, says Quivr didn’t track data about that feature, “nor do I think it was used much.” But Stanton thinks about Belamire often and wonders if he could have done more in 2016 to prevent the incident that occurred in Horizon Worlds a few weeks ago. “There’s so much more to be done here,” he says. “No one should ever have to flee from a VR experience to escape feeling powerless.”
A constant topic of debate on message boards after Belamire’s Medium article was whether or not what she had experienced was actually groping if her body wasn’t physically touched.
Katherine Cross, who researches online harassment at the University of Washington, says that when virtual reality is immersive and real, toxic behavior that occurs in that environment is real as well. “At the end of the day, the nature of virtual-reality spaces is such that it is designed to trick the user into thinking they are physically in a certain space, that their every bodily action is occurring in a 3D environment,” she says. “It’s part of the reason why emotional reactions can be stronger in that space, and why VR triggers the same internal nervous system and psychological responses.”
That was true in the case of the woman who was groped on Horizon Worlds. According to The Verge, her post read: “Sexual harassment is no joke on the regular internet, but being in VR adds another layer that makes the event more intense. Not only was I groped last night, but there were other people there who supported this behavior which made me feel isolated in the Plaza [the virtual environment’s central gathering space].”
Sexual assault and harassment in virtual worlds is not new, nor is it realistic to expect a world in which these issues will completely disappear. So long as there are people who will hide behind their computer screens to evade moral responsibility, they will continue to occur.
The real problem, perhaps, has to do with the perception that when you play a game or participate in a virtual world, there’s what Stanton describes as a “contract between developer and player.” “As a player, I’m agreeing to being able to do what I want in the developer’s world according to their rules,” he says. “But as soon as that contract is broken and I’m not feeling comfortable anymore, the obligation of the company is to return the player to wherever they want to be and back to being comfortable.”
The question is: Whose responsibility is it to make sure users are comfortable? Meta, for example, says it gives users access to tools to keep themselves safe, effectively shifting the onus onto them.
“We want everyone in Horizon Worlds to have a positive experience with safety tools that are easy to find—and it’s never a user's fault if they don’t use all the features we offer,” Meta spokesperson Kristina Milian said. “We will continue to improve our UI and to better understand how people use our tools so that users are able to report things easily and reliably. Our goal is to make Horizon Worlds safe, and we are committed to doing that work.”
Milian said that users must undergo an onboarding process prior to joining Horizon Worlds that teaches them how to launch Safe Zone. She also said regular reminders are loaded into screens and posters within Horizon Worlds.
But the fact that the Meta groping victim either did not think to use Safe Zone or could not access it is precisely the problem, says Cross. “The structural question is the big issue for me,” she says. “Generally speaking, when companies address online abuse, their solution is to outsource it to the user and say, ‘Here, we give you the power to take care of yourselves.’”
And that is unfair and doesn’t work. Safety should be easy and accessible, and there are lots of ideas for making this possible. To Stanton, all it would take is some sort of universal signal in virtual reality—perhaps Quivr’s V gesture—that could relay to moderators that something was amiss. Fox wonders if an automatic personal distance unless two people mutually agreed to be closer would help. And Cross believes it would be useful for training sessions to explicitly lay out norms mirroring those that prevail in ordinary life: “In the real world, you wouldn’t randomly grope someone, and you should carry that over to the virtual world.”
Until we figure out whose job it is to protect users, one major step toward a safer virtual world is disciplining aggressors, who often go scot-free and remain eligible to participate online even after their behavior becomes known. “We need deterrents,” Fox says. That means making sure bad actors are found and suspended or banned. (Milian said Meta “[doesn’t] share specifics about individual cases” when asked about what happened to the alleged groper.)
Stanton regrets not pushing more for industry-wide adoption of the power gesture and failing to talk more about Belamire’s groping incident. “It was a lost opportunity,” he says. “We could have avoided that incident at Meta.”
If anything is clear, it’s this: There is no body that’s plainly responsible for the rights and safety of those who participate anywhere online, let alone in virtual worlds. Until something changes, the metaverse will remain a dangerous, problematic space.”
· Asset declaration and ownership: In real world, it is easy to track assets and for the governments to keep a check on ownership. But how will government keep check of the ‘tokenized’ economy? The tokenization of everything is inevitable. And, in my opinion, we cannot even consider the real problems with non asset declaration at this point in time.
With this shift to blockchain-based economic structures comes the potential regulatory issues behind digital currencies. How will securities laws view digital assets that retain and form value in the metaverse? Also, as in life today, visitors to the metaverse must be wary of digital currency schemes and meme coin scams, with regulators not too far behind policing the fraudsters and unlawful actors that will seek opportunities in the metaverse. While regulators and lawmakers are struggling to keep up with the current crop of issues, and despite any progress they may make in that regard, many open issues will remain and new issues will be of concern as digital tokens and currency (and the contracts underlying them) take on new relevance in a virtual world.
Big ideas are always exciting. Watching the metaverse come together is no different, particularly as it all is happening alongside additional innovations surrounding the web, blockchain and cryptocurrency (and, more than likely, updated laws and regulations). However, it’s still early. And we’ll have to see if the current vision of the metaverse will translate into long-term, concrete commercial and civic-minded opportunities for businesses, service providers, developers and individual artists and creators. Ultimately, these parties will need to sort through many legal issues, both novel and commonplace, before creating and participating in a new virtual world concept that goes beyond the massive multi-user videogame platforms and virtual worlds we have today.
The StartUp Sherpa
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