Tag: metaverse

  • Growth incentives – web3’s failure

    Growth incentives – web3’s failure

    Web3 has largely failed, and we should talk about it

    There’s an elephant in the room.

    In the space of just a few months, NFT PFPs have vanished from Twitter, .eth usernames have fallen out of vogue, and a whole category of social media celebrities has vanished.

    The tech world went from frothing at the mouth about the future of the internet, how life would be different in the metaverse, to “oh hey, is that AI I see over there?” and wandering off.

    I’m not surprised. I’ve spent a good amount of time writing about how web3 products have ignored consumer interests, and perhaps even more writing about how web3 has had to ignore the past in order to fake progress the present.

    I don’t mind that we’ve moved on. But we should talk about why. There should be some accountability and humility from those who were the most bullish.

    I asked on Twitter whether anyone had dared write a web3 post-mortem:

    The comparison is apt, and I suggest reading the linked article to better understand why. To summarise: the technology was cool but awkward to use, and ultimately consumers didn’t care that much.1

    So what does any of this have to do with referral programs?2

    The above explains fairly well, I think, why web3 failed to cross the chasm. There was technology, and there was money, but it was not being used to solve real problems. And yet, for a period of time, it had us all capitvated – if not actually invested. Why?

    Web3 had a monumental referral program

    One curiosity to look back upon, in all of this, is that hype for NFTs was front-running interest in ‘web3’ or ‘metaverse’.

    In Feb 2021 we were keen to learn more about these magical jpgs, but it wasn’t until April that metaverse reared its head, and only by December was interest in web3 picking up steam.

    But… weren’t web3 and metaverse concepts the use case for NFTs? How could the interest preceed the use case?

    In the beginning, people were hoodwinked into thinking this was a ‘digital art’ revolution and – thanks to a few exceptional examples – a lucrative one at that.

    ‘Digital art’ seems quaint in comparison to the grand promises of an internet revolution which came later. It doesn’t matter; it was enough. Our interest was captured, and money started to flow into the ecosystem. Consider, at this point, the old gold rush analogy about selling picks and shovels.

    NFTs provided a sufficient level of interest and capital for creative (and ethically questionable) people to invent new ways to sell more NFTs. Most metaverse ideas were borne out of this NFT gold rush, as well as much of what drives ‘web3’.

    The more ambitious these ideas became, the more we talked about it, the more celebrities and brands got involved, the more certain it all seemed. We’d share interesting projects as ‘alpha’ in exclusive chat groups, and we’d proudly represent our NFT project of choice on social media.

    The noise created was incredible, and the message was clear: join us in getting rich, or miss the train.

    This fundamentally optimised web3 adoption for those who wanted to get rich, not those who were interested in building the next interation of the internet.

    Trust, privacy and decentralisation? Nowhere to be seen.

    Much like crypto, and for similar reasons, it became cannibalistic. People backing one project would lash out at others. All competition was a threat. There was no spirit of collaboration. All motivation was pointed toward increasing the (perceived) value of a project.

    That’s a fine motivation if you are an investor, but it’s fatal when your investors are also your ‘users’. Much like a startup focusing efforts on increasing valuation rather than increasing value to users, it’s going to end with a bang.

    In conclusion…

    The collapse of web3 can be attributed entirely to the perversion of its growth.

    The ecosystem created was built around a bubble, without any incentives for long term growth. No reason to spend time identifying and solving real problems.

    It’s a shame, because buried deep in there were some people genuinely trying to build a better future, but it is incredibly difficult to maintain that focus if ‘financialization’ happens too early.

    Additional reading:

    Why you should rethink referral programs

    About a month ago, Mobolaji Olorisade and Grillo Adebiyi, of African Fintech giant Cowrywise, released a retrospective on their experimentation with referral programs for customer acquisition.

    It’s a supremely interesting read, and I reccomend checking it out, but I’ll provide a brief summary below.

    In short: referral programs are a perverse sign-up incentive, which lead to all kinds of unintended consequences. Rather than calibrating your focus on your ideal customer profile, it drags you in other directions – towards those that see an opportunity to exploit the program.

    Of all of the users of your product, it is the ones that found you organically, because you’re a perfect fit for their needs, which will sign up most readily and have have the greatest loyalty. In practical terms: the strongest LTV/CAC.

    1. If you imagine that 3D TVs had developed a similar rabidly absolutist mentality to web3 enthusiasts, demanding 3D content be exclusive to 3D TVs – and 3D TVs ONLY support 3D content, the parallels are perhaps even more vivid. [↩]
    2. Paid referral programs are a common growth strategy in the Fintech world, particularly in the ‘growth at all costs’ era. Startups would spend VC money on paying new users to onboard, depositing $10 or $25 in their new digital wallet, because all that mattered was rate of acquisition. [↩]
  • Metaverse – Reinventing the wheel

    Metaverse – Reinventing the wheel

    Earlier this week, web3 Studios released their ‘Digital Identities Report‘, sharing a variety of opinions and predictions on the future of identity and social interaction in a ‘metaverse’ environment.

    There is more than fifteen years worth of fascinating sociological research on virtual worlds and digital identity. You would not know that from reading this report.

    It simultaneously presents web3 worlds as an entirely new concept that is being shaped by a new generation of ‘web3 thinkers’, while also positioning Roblox as an example of a metaverse.1

    I’ve written about this before. Specifically in regard to web3 enthusiasts ignoring the incredible groundwork down in science fiction and games, and more recently on how metaverses are fundamentally a non-technical social proposition.

    Mostly those arguments have addressed the general web3 discourse on Twitter, wishing it was better informed about the existing groundwork in this field.

    It’s a deeper issue when companies (selling web3 products) collaborate with web3 influencers (mostly NFT shills) to produce a report that is essentially a sales catalogue – but frame it as some insightful look at the social aspects of virtual worlds.

    We’re all supposed to rub our chins, and ponder this brave new world of identity in a digital environment. Once we buy one of their avatars, of course.

    So, here (and in the corresponding Twitter thread) I wanted to share a few genuinely good papers on the sociology of virtual world and digital identity:

    If you are genuinely interested in building the future of social interaction online, there is an absolute wealth of information available to you. It is well covered ground – thanks to genuine experts, who often spent years immersed in virtual worlds as a part of their research.

    Stretch your legs, take a wander outside of the web3 bubble.

    1. Roblox is an online game released in 2006, enjoyed by an audience that is mostly under 12 years old. Did you know that Gucci have a ‘metaverse’ installation there? [↩]
  • Virtual Worlds – a social, not technological, phenomenon

    Virtual Worlds – a social, not technological, phenomenon

    To begin, a quote from Tom Boellstorff, Professor of Anthropology at UC Irvine:

    The metaverse’s history indicates that social immersion is the metaverse’s foundation.

    Tom Boellstorff

    Tom is a bona fide expert in virtual worlds, and I recommend reading the whole article.1

    Through his work, he has spent a tremendous amount of time in Second Life, the most notorious of the non-game virtual worlds, including two years doing field-work for the book ‘Coming of Age in Second Life‘.

    The bottom line in his article for Fast Company is that meaningful immersion is achieved socially, rather than technologically. It is not about VR headsets, it is about networks of relationships.

    Put another way:

    Humans are at the centre of it. Not technology.

    Web3 – learning from science fiction

    If you have spent any time at all in environments like Second Life, or close equivelents in the MMO genre like Utima Online, World of Warcraft or EVE, that sentiment should ring true.

    None of those games have cutting-edge graphics or VR capability, but they do have immensely strong social dynamics. They are compelling, immersive experiences because you are in a living world, populated by real people. That they act like real people is important, whether they look like real people is not.

    Put yet another way:

    A cyberspace is defined more by the interactions among the actors within it than by the technology with which it is implemented.

    The Lessons of Lucasfilm’s Habitat

    The social environment of virtual worlds stands in stark contrast to platforms like Facebook. Virtual worlds enable authentic relationships, whereas what we refer to as ‘social media’ today largely trivialises relationships by reducing them to basic forms of engagement.2

    That social element is the mainstay of retention for games like World of Warcraft. It is not uncommon for an individual will maintain their subscription because of the community (their circle of friends, their guild or clan mates) and the strength of their identity (recognition, reputation, notoriety) they have built in relation to the story of the world.3

    Three pillars for virtual worlds

    If you examine the social dynamics which drive virtual worlds, there are three critical factors:

    • Identity – Individual expression.
    • Community – Relationships.
    • Story – Context and purpose.

    That trio ecompass absolutely everything required in a successful virtual world. Not graphical prowess. Not VR. Not financial incentives. Not elaborate mechanics. Importantly, while all three factors are critical, both community and story are dependent on identity.

    It is difficult to overstate just how important that concept of identity has become in the relatively narrow context of virtual worlds. How crucial it is to their success, and how much it contributes to a rewarding player experience.

    There’s no reason for it to stop there. If you were able to design your personal identity from the ground up, in a more expressive (or more discreet) format, ignoring norms and conventions, why wouldn’t you? This concept is destined to spread further, as our online life diverges from our offline life and we gravitate towards the format which best fits the context.4

    What we’re circling back to is the question of identity in ‘the metaverse’; how these principles for individual virtual worlds apply to our entire virtual existence: what will identity look like in a Web3 world?

    Put another way: what do the concepts of Identity, Community and Story look like at a meta level which spans multiple projects, platforms and mediums?

    How can a ‘metaidentity’ enable a new model for the web?

    What form does a ‘metacommunity’ take for Web3?

    Could there be a ‘metanarrative’ for this new context?

    1. There’s an interesting semantic argument here, about whether metaverses are virtual worlds. I’m personally of the opinion that ‘the metaverse’ is a more nebulous description for whole digital aspect to our existence, centered around our digital identity. Virtual worlds are more specific sandbox environments for exploration and socialising in a digital environment. [↩]
    2. Anecdotally, I know at least 3 couples who married after meeting in an MMO. I’ve never heard of anyone getting married after meeting on Facebook. [↩]
    3. It is also not uncommon for that virtual identity to persist outside of the game, both across other mediums and also for many years after the game servers my close. [↩]
    4. For people whose status, credibility or legacy is rooted in their real identity, they may choose to continue using their real identity as their digital avatar. For others, there is an increasing trend to invest in a cross-platform virtual identity. It was evident in the gaming communities of the early 2000s, and it is perhaps even more common today amonst Web3 enthusiasts. [↩]
  • Metaverse – the hunger for digital industry

    Metaverse – the hunger for digital industry

    What is a metaverse? Is it a metaverse, or the Metaverse?

    Ask most people these questions and they’ll picture ‘Lawnmower Man’ style scenes of people strapped into virtual reality rigs, flying through digital 3D environments.1

    That has very little to do with what a metaverse is.

    The term metaverse simply applies to the digital mirror of our non-digital lives. Our digital social networks, our digital assets, digital communities we participate in, etc. Right now this reprsents a fairly heavily fragmented set of services, but one of the goals of metaverse is to tie these together with a unified and decentralised approach to identity (and, through the associated wallet, finance).

    This is where we start to look at what a metaverse could be, and the direction that is likely to take. The first phase of this is the intense competition that is beginning to emerge around who provides that identity service.

    Mark Zuckerberg expects 1 billion users on his metaverse offering, each spending hundreds of dollars a year on virtual goods.

    But what are these virtual goods that he projects will be making hundreds of billions in gross revenue for Meta? What is it that has driven such interest in this space from VCs?

    This is the bottom line:

    The metaverse, as we go deeper into digital identity, digital communities, and digital spaces, has an ever-incresing potential to host digital representations of existing industries.

    Metaverse fashion brands. Metaverse real estate. Metaverse banking. Metaverse celebrities. Metaverse tourism. Metaverse consumer goods. Metaverse employment. Some of these exist in some form already. Many more will exist soon.

    On its own, that is very obviously a MASSIVE opportunity for industrial growth beyond current parameters and understanding.

    Then you consider that in this world, where everything is digital, there is a cost of goods which is close to zero. There are not the normal forces at work which influence price. In fact, indications are (from our primitive experiments in Web3) that price is even more closely connected with status than it is in the real world. Even then, the cost of a product failing due to being overpriced will be negligable.

    It could well become a sea of gamified microtransactions which would make something like the Diablo Immortal controversy seem utterly benign.

    This is what is at stake: the future of our digital economy. The digital mirror of the real world, which has its hooks in us through every I/O in our envionment – which are already countless, and increasing.

    It is incredibly easy to imagine this as a paper-thin veneer of decentralisation and ‘creator economy’ hype over the top of a behemoth of corporate ownership and private interests.

    The only way to avoid this is for Web3 to stop obsessing about the price of monkey jpgs, and to start building decentralised products and services which are resistent to the powerful gravity of centralisation.

    To revisit Moxie Marlinspike’s widely circulated essay:

    Given the history of why web1 became web2, what seems strange to me about web3 is that technologies like ethereum have been built with many of the same implicit trappings as web1. To make these technologies usable, the space is consolidating around… platforms. Again. People who will run servers for you, and iterate on the new functionality that emerges. Infura, OpenSea, Coinbase, Etherscan.

    Moxie Marlinspike
    1. I suspect VR headsets will go the way of the 3D television: it’s just not a user-friendly technology. [↩]
  • Yuga Labs vs Bungie – finding the Web3 delta

    Yuga Labs vs Bungie – finding the Web3 delta

    If the endgame for Yuga Labs (creators of the notorious Bored Ape Yacht Club) is essentially a Web3 videogame, and that does appear to be what signs point towards, it seems like an opportunity to examine the closest Web2 equivalent and see what can be learned.

    Bungie, who were acquired by Sony at a $3.6B valuation in February, seem like a reasonable comparison; not too far off Yuga’s $4B valuation from their Andreessen Horowitz-led raise in March.

    Bungie are responsible for building a few monster IPs. The most well known is Halo, established in 2001 and owned until 2010.

    Halo: Reach, their last title in the series – and not even their best seller, sold roughly 10 million units. However, while Halo helps illustrate the great legacy of Bungie, and the depth of their portfolio, it’s not that title that provides the interesting comparison. 

    Their more recent IP, Destiny, is a better example – as a ‘virtual world’ online role-playing game.

    Destiny 1 had around 30 million account holders. Destiny 2 has around 38 million, and the annual revenue from that title alone is estimated at $100-500 million.

    Yuga Labs has…

    • BAYC: 10,000
    • MAYC: 20,000
    • BAKC: 10,000
    • Otherland: 200,000

    That’s a theoretical maximum of 240 thousand account holders (people who own NFTs, though some may own multiple) producing a gross revenue of $138 million in 2021.

    You have to be incredibly bullish about Web3 to believe that Yuga Labs has earned a higher valuation than Bungie – based on those numbers. Or perhaps that Yuga is capable of doing something, thanks to NFTs, which Bungie is not?

    Where can we look for an answer to this? 

    Is it the fact that Yuga Labs is able to ‘leverage their Web3 brand’ to build a ‘transmedia IP’ spanning games, TV series and movies, etc?

    Unlikely. Bungie is also doing that with the Destiny IP.

    So what is it that drives the Yuga Labs valuation to such lofty heights, in such short a time? They have certainly yet to prove that they can provide value beyond their core audience of NFT holders. In fact, most of that value is stored in the theoretical value of those NFTs. 

    Beyond that, what is Yuga Labs offering? A wealth-gated community of crypto bros?

    I’m sure it’s a valuable network, and the events they host are wild, but does it indicate a scalable business model? Not so much.

    So is Otherside a virtual world designed exclusively for Yuga Lab’s community of NFT holders? Or is it for everyone? 

    If it’s for everyone they are competing on Bungie’s terms as a more traditional video game experience, and it seems like might struggle to be competitive there – even with the vast treasury.

    If it’s just for NFT holders, even if that pool grows in future, it isn’t clear how well that idea scales or what kind of further monetisation it will allow.

    Puzzling. 

  • Web3 – learning from science fiction

    Web3 – learning from science fiction

    You cannot call yourself a futurist if you aren’t also a student of other great futurists. The best of them, in my opinion, are science fiction writers.

    The inspiration for much of my writing lies in science fiction, and how it connects back from the future to today’s innovation. It is a thread which connects my professional and personal interests in how technology and capital interact.

    credstick1

    A credstick is a small pen-like device which can be inserted into various machines to transfer funds, much like a credit card. In 2070, credsticks are a primary method of transferring funds with no paper trail.

    Shadowrun Wiki

    Shadowrun is a video game franchise that dates back to 1989. An original science fiction IP set in 2050 and beyond.

    Credsticks are used as the primary economic tool in the game, storing and tranferring digital currency. There are certified (tradeable) and non-certified (personal use) credsticks. There are grades which reflect the maximum credit level. There is detail about how they are used in a spectrum of cases and transaction types.2

    The way these devices fit into the world, the role the play in the economy, and the manner in which they influence behaviour, is fascinating. It’s a fleshed-out, believable and practical vision for what money might look like in the future.

    I’ve spent a lot of time listening to people in the financial technology industry (former bankers, consultants, cryptocurrency enthusiasts) talk about their vision for the future of money. It’s not usually quite as thought-provoking, or perhaps even as realistic, as the alternatives presented in fictional worlds like Shadowrun.

    Their vision tends to be constrained by the idea that today’s conditions (financial regulation, technical limitations, human preferences) will persist. Or that today’s agendas (promoting blockchain, disintermediation, globalism) will be tomorrow’s.

    We always overestimate the change that will occur in the next two years and underestimate the change that will occur in the next ten.

    Bill Gates

    Sometimes you need to wipe the board clean and reimagine these systems and structures from scratch, to see what the future may hold. Change your context entirely.

    Start from somewhere else, with a different perspective.

    This is where science fiction comes in.

    It isn’t obvious if you look around at the moment, but the important conceptual work on what a metaverse might be, and how it may function, has been quietly going on for more than fifty years.

    If you read Tad William’s Otherland series, first published in 1996, you are likely to find the ideas profound, if not prophetic. Particularly on the cultural, social and personal influence of virtual worlds.

    The technology involved in Tad’s vision may seem a bit far-fetched, but ultimately that doesn’t really matter.

    In the end, if [science fiction] is any good, it’s never about the machine. It’s always about the human relationship with it.

    Simon Ings

    What matters is the people. What does their life look like? What’s the cost of this future to them personally, and to society, in contrast with our here-and-now?

    That focus on the human consequence over the specifics of the technology is precisely why there is so much we can learn from science fiction. It doesn’t matter if it’s a blockchain or a computer powered by ants3, what matters is the impact on people.

    Good science fiction is an incredibly powerful tool for making bets on what the future could look like4, by allowing you to step into the mind of a person whose day-job is to focus their creative energies on exactly that question. Free of agendas and preconceptions.

    It was of great interest to me when the Web3 and metaverse enthusiasm started to spin up. It’s a topic with mind-bending potential, and likely represents the next great technological leap we will take. Fertile ground for science fiction.

    Looking around at how people in adjacent industries were conceiving this new virtual world potential, two things became clear:

    1. There is very little familiarity with the history of the games industry. MUDs, MMOs, virtual worlds, etc. People are taking fairly routine ideas and presenting them as ‘the next big thing’.
    2. There is even less familiarity with what has been written about these ideas before. Virtual worlds, “metaverses”, have starred in science fiction IPs since around 1964.

    Both of these points are frustrating.

    The first represents the reality of the technology behind virtual worlds today, and our capability in the near future.5 It also covers the history, and the most sophsticated examples of online communities. Most of the great case-studies, and much of the learning about human behaviour online.

    The second represents the potential, and the consequences. The fully thought-through visions for what a virtual world might look like, how people might interact with it, the dangers, the opportunities, the broader consequences for society… everything. How people are likely to respond, long term, to the emergence of a genuine metaverse.

    In my previous entry I talked about the need for Web3 to find product-market fit. 90% of that work is understanding the human component. The needs and the priorities.

    The disregard of science fiction and the games industry feels like another example of Web3 enthusiasm bypassing the crucial human factors in the fervor for technological advance.

    What better way to design the internet of the future, and everything it entails, than to use great works of science fiction to look back on the present?

    Don’t forget that humans are at the centre of it. Not technology.

    1. If you’ve been wondering about the name of this blog, this is the connection – at the intersection of fintech, web3 and science fiction. [↩]
    2. There is even a comical difference, in this fictional world, between US credsticks and the European implementation, the Europäisches Bargeldloses Zahlungsmittel. [↩]
    3. I’ll give Sir Terry a nod wherever I can [↩]
    4. I have a long-term investment thesis which is basically ‘which of these companies would thrive in Otherland‘s vision of the 2080s’, which boils down to Meta, Apple, NVIDIA and Disney. [↩]
    5. Whether or not it exists on a blockchain is irrelevant, and any immersive, 3D virtual world certainly wont. [↩]