Tag: Web3

  • Generative AI and the Games Industry

    Generative AI and the Games Industry

    This post looks at applications of generative AI in the context of the games industry, but much of the same logic can be applied elsewhere.

    Adapting to technological evolution

    With every new technology revolution – web3 most recently, and now AI – there follows a large herd of true believers. It can do all things, solve all ills, and life will never again be the same again. Enamoured by possibility, they follow with a true sense of opportunity.

    Loudest amongst this herd (and most critical of nay-sayers) are the wolves in sheeps’ clothing. The rent-seeking charlatans.

    This was explicit in the get-rich-quick era of web3, and much of the same problem has transferred over the AI as techno-pilgrims flee one sinking ship to pile into another.

    Secondly, on the other side of the coin, are the cynics. People who were raised on 56k modems and bulletin boards, who feel a deep discomfort as technology moves beyond their grasp. They felt like the rational resistance to web3, and so have little hesitation about weighing in on AI.

    We have to be conscious of both groups, and our own place on that spectrum.

    Why the games industry?

    There are three main reasons I’m keen to address the games industry as the case-study for this post:

    1. As with web3, AI is being shoved down people’s throats without due concern for why.
    2. It is largely focused on a young audience who are absent from these conversations.
    3. It connects with my personal experience in the games industry.

    If you want to read about the potential use cases for AI in banking, you’ll find a thousand thought-leader think-pieces. It was well-covered ground without much original thought even before ChatGPT came along.

    If you want to talk about the potential use cases of AI in the games industry, you’ll find some ex-crypto VCs and technologists trying desperately to pivot their brief experience. Insubstantial waffle.

    Perfection is the enemy of good

    Dealing with the more exciteable technophiles, you’ll probably notice they don’t show a lot of interest in the complex applications. Their interest is in the most extreme examples of movies, games or books being entirely generated by AI (or entirely decentralized, yada yada).

    Their point is simple: if AI can do these things crudely today, then tomorrow it will be able to do them well – and at that point we’ll be forced to embrace the bold new future. Right?

    This fallacy can be observed in every parent watching their child smear paint on paper for the first time: something inside them says ‘they could be a great artist’. It’s true: the ability to manifest art can be that simple, and the child has huge potential for improvement… Yet it’s still not going to happen for all but a miniscule few.

    In both cases, the AI model and the child, there cannot merely be push, there must also be pull. There must be a need being met. An appetite being satisfied. And 99% of the time, there isn’t. Once the novelty has worn off, nobody has any interest in watching an AI-generated movie, reading an AI-generated novel, playing an AI-generated game, or looking at your child’s paintings. There just isn’t a call for it.

    Instead of putting AI on the pedestal of a godlike creator, we should look at where it can be a tool to solve a problem.

    Merchants of fun

    You can get side-tracked in talking about experiences, socailising, adventuring, exploration, curiosity, challenge, status… Ultimately, games are vehicles for fun. That’s bedrock.

    Is an AI-generated game likely to be more fun than the alternative? No, of course not, and if you suspect otherwise then you’ve not spent enough time with the wonderful and wacky people who make games. They are true creatives.1

    Any application of generative AI to the games industry must have either enhance fun, or enhance the developers ability to deliver it.

    Exploration

    If you look at games like Minecraft or 7 Days to Die where you can explore a proceedurally generated world, it’s easy to see how generative AI might be able to supercharge that environment building.

    It’s worth considering, though, that this is a specific approach for a specific type of game. As good as these engines have gotten, most of the time games will require a more ‘designed’ world, with geography or features which play into gameplay mechanics, story elements or IP. Generative AI may offer tools to make this more efficient (as many proceedural tools already do), but is unlikely to replace it entirely.

    Socialization

    Imagine walking around a Skyrim or Cyberpunk style sandbox-world, full of NPC characters with their own unique look, voice, and personality. Each able to hold a conversation with you, flavoured with their own specific personality and knowledge. Not merely giving canned responses to pre-defined prompts, but able to interact fluidly with you and amongst themselves.

    Again, this is unlikely to ever be all a game needs. Stories still require specifcally designed characters with particular roles which need to be shaped by the intention of writers and a design team, but it is still a tremendous opportunity to solve the social component of virtual worlds.

    These are two quickly-sketched examples of how generative AI could enable a leap forward in the experience provided by games devleopers – and I am sure there are many more to be found.2

    Tapping into the market

    I wanted to do this in a more subtle manner, but it’s just more practical to break down Andrew Chen’s Twitter thread:

    Games can take 3+ years to build, and technology adoption happens at specific windows of time

    If your generative AI tool is a plugin (for the Unreal Engine, for example) then a studio can pick it up at any time and add it to their development stack.3

    You shouldn’t be limited to thinking in terms of ideas that are ‘disruptive’ to how games are made, and indeed most of the opportunity may be in ideas which are complimentary.

    indie games make little $. There’s only a few scaled players, who will always push on pricing

    If you were going to target indie developers it would have to be with a very specific value proposition and business model (e.g. Unity in 2004). There’s no reason to worry about this otherwise; there are enough larger studios.

    the games ecosystem is insular, with its own conferences, luminaries, and networks / networking” in the games industry often involves, well, gaming. Are you good at Valorant? 🙂

    Can you tell me an industry which doesn’t have its own conferences, luminaries and networks?

    The games industry is not insular, and it is comical to characterize it as a bunch of nerds playing games together. It’s a wonderfully open, social and diverse community.4

    a large % of game cos have artists and creative people. Many are threatened by, and oppose, AI tech

    I don’t know of anyone in the games industry, artist or designer, who isn’t starry-eyed at the possibilities of what AI can enable.

    They are also familiar enough with how games work to recognise that human input is always going to be required to shape and polish the human experience which emerges on the other side.

    you need to generate editable, riggable, high-quality art assets. Right now assets are idiosyncratic and hard to edit

    Generative AI has not yet proven that it can generate useable assets, never mind well-optimised thematic assets. That problem can probably be solved, but to what end?

    Will a world created by a generative AI ever truly feel interesting, coherent, beautiful? Maybe there are better things for it to do?

    large publishers often provide tech to their internal studios. They’ll partner to learn about AI, but will try to build in-house. Is your tech defensible?

    That might have been the case 15 years ago, but the vast improvement in game engines and tools has meant that developers are much more likely to build on existing platforms.

    If a publisher believes that a tool would make development cheaper and faster then they’ll support it without blinking.

    large gaming cos care a lot about their models and data not being shared across the industry. How do you guarantee that? / they also care that their models are trained on data that’s safe from a copyright perspective. There’s lots of hoops to jump through

    Stretching a bit here, but: You train your tools on an open set of data to the point where they are useable, and allow developers to provide additional training based on data from their own IP. In that scenario there is no reason for crossover between studios.

    It’s unlikely that training from one game would ever be useful to the application of the AI in another. It is probably more likely to produce undesirable results.

    Conclusion

    Some years ago an associate of mine went to interview for a job at a games company in Seattle. The interviewer had previously been the lead designer on Starcraft, and naturally expected the candidate to play a match against him while fielding questions about the role.

    The games industry is full of these amusing anecdotes of quirky behavior, and there is a pronounced culture associated with that. However, it is condescending to think that culture stands in the way of progress, or that games studios can’t engage with business and technology partners in a perfectly competent manner.

    If you make a useful tool which solves a problem for the games industry, you will be able to access the right people to make a sale. I’d go so far as to say it’s probably easier and faster moving than many other industries.

    If that is your aim, make sure you are spending enough time talking to games developers, learning about how games are made, understanding the player mentality, and the problems that you might be able to address. As always, finding product:market fit can require a lot of learning and iteration.

    Most of all, ignore the false prophets who were reading from the web3 gospel just a few months ago. They will just ride this trend until something else comes along.

    1. Yes, throughout this article I am drawing a deliberate and passive-aggresive distinction between ‘creating’ and ‘generating’. [↩]
    2. It bothers me that I covered Explorers and Socializers, but didn’t have the time to identify anything for Achievers and Killers. [↩]
    3. And in most mid-large studios there are usually multiple teams running in parallel focused on different projects at different stages of development. [↩]
    4. The irony of a venture capitalist calling the games industry ‘insular’ is not lost on me. [↩]
  • 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. [↩]
  • Ticketing – the model for consumer tokens

    Ticketing – the model for consumer tokens

    I’ve been labelled a ‘Web3 skeptic’. If you’ve read any of my other content here, you’re probably just confused about how I feel. So, let me clarify:

    Much of the capital that has been poured into Web3, to date, has been wasted. Too many get-rich-quick schemes and half-baked ideas. We need to do better. Specifically in demonstrating the practical, tangible benefits of the technology.

    It’s difficult (as Marc Andreessen will attest) to pin down a solid Web3 use-case. That doesn’t mean we’re wrong, it just means we are early.

    In the 90s, it was so fun to play with the internet. The online chat rooms and messaging boards. Email. Browsing the internet. Audio files. Much of this tech was half-baked back then, so it was hard to see what they’d be used for. This is where I think we are with Web3.

    Elizabeth Yin

    If a person believes that Web3 really is the future of the internet, then they should be able to articulate the (theoretical) gains, right?

    That hasn’t really been the case up to now. So let’s try, beginning with a use-case I discussed with someone in the thread linked to Elizabeth Yin’s quote:

    The Ticketing Use-Case

    You cant suggest reinventing an industry without looking at the pros and cons of how it operates today. Too many suggested Web3 use-cases fly in the face of reality because the fundamental research hasn’t been done.

    And let’s face it, for this example that means one thing:

    Ticketing in Web2 with Ticketmaster

    There are a number of well written articles1 which cover why Ticketmaster is a behemoth. They are worth reading, particularly for perspective on how many competitors Ticketmaster has crushed over the years.

    I’ll attempt to summarise the key points here. First the strengths:

    Venues love it

    Ticketmaster was the first ticketing platform to revenue-share with venues that adopted their solution, offering a percentage of their service charge. They also make sure that venues are paid promptly, if not in advance, reliably.

    Artists love it

    When you are the defacto platform for ticket sales, you build up an incredible database of customers, and a wealth of data about their preferences and demographics. If you want to make sure an event is sold out, Ticketmaster is the way to get that done.

    Consumers tolerate it

    Tickets going on sale for a major performance are an IT nightmare: a huge number of users, all at once, trying to complete a relatively complex transaction. The ability to scale capacity to accomodate for demand is key, and Ticketmaster has proven it does that well.

    Now the weaknesses:

    Venues suspect they could do better

    If you are reliably selling out your venue, because it’s the best in the area and you’ve built something great, you might start to wonder if you really need Ticketmaster.

    You may get a fraction of their service charge, but if you ticketed your own events you would secure a bigger percentage and build up your own customer database.

    Artists could absolutely do better

    Let’s say you are a tremendously popular musical artist with a global fanbase.

    Wouldn’t you LOVE to be able to own all of the data related to your fans? Wouldn’t you like to own all of that traffic? Maybe build a ticketing system that made sure die-hard fans were looked after, and scalpers had a harder time? Offer them a fairer price, from which you extract a bigger percentage?

    Customers deserve better

    We could focus on the massive legacy tech stack, and how slowly Ticketmaster moves with updating their platform to provider a better experience, but the obvious choice here is the service charge. As a consumer you are quite frequently paying double the actual ticket price for a sub-par service.

    So, with all of that in mind, how can Web3 offer a clear improvement on the ticketing experience – for all three stakeholders in the process?

    Ticketing in Web3

    It seems clear to me that no Web3 solution can compete with Ticketmaster on its own terms. It is too well embedded in the industry, and offers the lowest-risk outcome for the major stakeholders: venues and artists.

    The only way forward is to present an entirely new model for ticketing, focused on the key values offered by Web3 technology: decentralisation, privacy, security.

    An open protocol for all stakeholders

    It seems reasonable to start by assuming that neither the venue or the artist should ‘own’ ticketing, nevermind an external corporation. There is too much value that is being controlled by just one party in a multi-party transaction.

    We can imagine that a Web3 implementation of ticketing would begin in a fairly standard manner: a user signs up by connecting with (or setting up) their wallet, adding as much additional information (name, email, etc) in that flow as they are comfortable sharing.

    This registration could happen at the point of sale when buying a ticket, or earlier, when joining a band’s official fan club or a local venue’s online community – with the usual membership incentives.

    The created/connected wallet would then serve as that individual’s identity for any band, venue or ticket seller which was built on this technology.

    I want to go see Metallica

    To play out a scenario, let’s say this user wants to attend the 2024 Metallica tour at the Birmingham NEC Arena.

    A) They could visit the Metallica website and connect their wallet on the tour page, which would highlight the tour dates in their area, and allow them to purchase directly.

    B) They could visit the Birmingham NEC website and connect their wallet on the event calendar page, which would higlight events which fit their preferences and history.

    C) They could visit any number of other websites that have this platform integrated – be they local event pages, Metallica fan groups, niche metal communities, or big national event agencies.

    In each scenario, a small percentage of the ticket price is awarded to the originator of the sale.

    The next part of the transaction will be based on whatever terms have been agreed between Metallica and the NEC.

    • The NEC get 100% of ticket revenue until the venue rental is paid off.
    • The NEC gets a percentage of revenue until their costs are covered.
    • The NEC gets a fixed percentage of total revenue.
    • The NEC rental is financed in advance, against the future revenue of ticket sales, based on historical sales performance.2

    The remaining ticket revenue is sent to Metallica, with the option of doing a further division to secondary stakeholders such as logistics companies, catering agencies, supporting acts, charities etc.

    Crucially, both the NEC and Metallica are able to capture data from the transactions, monitor how well an event is selling in real-time, own their own part of that promotion and the revenue it yields, have optimal cashflow, and build a better understanding of their audience.

    Long term, the NEC could reward some of their most regular event attendees with early access to ticket sales, discounted tickets, or perks in the venue like free drinks or VIP section access.

    Metallica could build a database of its fans worldwide. Which fans always come to see them when they are in town? Which fans have travelled the most to see them around the world? Which fans have been following them for the longest? Again, there are obvious opportunities here for Metallica to reward true fans with early access to sales, discounts, exclusive merchandise, meet and greets… etc.

    From the perspective of the user, they build a closer relationship with the NEC, being rewarded for their patronage, and they enjoy a sense of recognition from Metallica for their loyalty. They also get much more fairly and transparently priced tickets, and a super experience as a buyer/consumer.

    Conclusion

    A system like this would need to build significant momentum to compete with the incredible momentum of Ticketmaster, but there are enough network effects (and existing incentives to provide a better, more fairly priced alternative) that it certainly has the potential.

    There are also much deeper and more thought-provoking possibilities when you start to consider how else this platform could be integrated into other platforms and services, or where else it could be relevant in its application.

    1. https://slate.com/human-interest/2015/05/ticketmaster-why-do-so-many-music-venues-use-it-when-everyone-hates-it.html, https://www.wired.com/2010/11/mf-ticketmaster/ [↩]
    2. Indeed, the entire cost of the event, band, venue, logistics, support, could be financed on historical data. [↩]
  • 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. [↩]

  • Making the case for Web3

    The Web3 market seems to move in waves of enthusiasm. A surge of ideas and optimism, followed by a slowdown, and then the cynics and skeptics beat it back.

    This happened first in fintech, where blockchain cut its teeth on DLT and cryptocurrencies. Decentralisation would sink the banks, smart contracts would make regulation irrelevant, and crypto would displace fiat.

    Except it didn’t, it isn’t, and it wont.

    Fintech moved on from decentralised finance to embedded finance. The new unicorns on the block were utterly dull consumer lending propositions. Life returned to normal.

    Left in the sand, as the water washed back out, were a few companies who had figured out how to apply this technology to a real problem: cross-border transactions in low-infrastructure environments like Africa. Eversend, Kotani Pay, Chipper Cash, and AZA Finance are a few examples.

    To this day, those companies are my go-to example when someone asks that all-too-easy question: “So, what’s a real world application of blockchain technology which actually makes sense?”

    Fortunately, not many people ask me for a second example, because that seems tricky.

    Those companies were left on the retreating edge of the fintech wave, and we’re now deep in yet another wave with NFTs.

    Again the sand is starting to slip out beneath our feet.

    The question is, which way is the tide heading? Which companies will survive the cycle? What’s left when it’s over?

    the tide is coming in

    Provided more progress is made than is lost, as long as the surviving companies have more impact than the lost capital, we can say that the tide still appears to be coming in. The momentum will sustain, and there will be another wave – even if it’s a little slower, and goes a little less far.

    Anh-Tho Chuong Degroote thinks that the next place to look is infrastructure. The ‘AWS and Microsofts’ of Web3, the Polygons and Alechemys. These are, theoritically, the platforms which may make Web3 a more accessible and fruitful environment for future entrepreneurs.

    I suspect she’s right, but it’s a bit of a ‘double or nothing’ bet.

    Do we pump capital into infrastructure in the hope that it solves the issues holding Web3 back? Or do we just discover that there were no problems to be solved in the first place?

    Is Web3 a land of solutions in search of problems?

    Let’s presume that the next wave for Web3 is infrastructure. It would unfortunate timing for NFTs, which would have benefitted from the infrastructure existing, but also they’ve helped to spur a significant amount innovation and new capital.

    In the most likely scenario, we end this wave with a few well-funded technology companies who have made building and operating on blockchain technology much easier. That’s not a bad outcome, but I don’t think it’s going to drive much energy back into the market either.

    There’s still the sword of Damoclese hanging over Web 3.

    the tide goes out again

    The more you pay attention to this ecosystem through the lens of value for end users, the clearer the problem seems: It is the macrocosm of a startup which has neglected product-market fit in favour of building exciting technology. The pursuit of traction through features and performance, with the blind-refusal of nay-sayers and false prophets.

    Each new major advance produces that dopamine hit. Companies are born, funded, and die. Millions are made and lost. But each time, the water goes back out, and takes all but a few with it.

    The truth is simple: Web3 needs to make sure that the tide keeps rising, and the only way to do that is to look at the lasting success stories – and produce more of them. The companies with sustainable, growing revenue, who are building their audience outside of the Web3 tent.

    Those companies all have one thing in common: they have adequetely identified and addressed a real-world customer need. The promotion and sale of their solution had everything to do with the outcome for the user, and nothing to do with the underlying technology.

    Something to consider, when evaluating Web3 projects: if you strip out all mentions of the technology, does it still seem attractive? Does it solve a problem?

    Through answering this question more often, with better answers, the case can start to be made for Web3.

    Eliminate the hype.

    Lucrative ideas are not always good ideas.

  • NFTs – The Web3 startup investment vehicle

    Consider NFT/Web3 projects as startup investments, except the only fundraising mechanism is equity crowdfunding and we’re ALSO the customers.

    It incentivises piling into the biggest project, as investors, users and advocates, because ‘making money’ beats ‘better ideas’.

     Of course in typical startup investment, incentives are better aligned to the point that seeking out smaller, more innovative companies can be more profitable than backing the obvious picks.

    That is not the case in Web3, yet. Smaller, better projects are dying of starvation. The giants in Web3 are all promising that they will generate money for their investors, yet their only source of capital is those investors.

    If you’re scratching your head right now, don’t feel bad.

    @swombat explained it brilliantly:

    So what’s the solution?

    Fairly simple. Web3 projects need to consider two things:

    1) Providing a way for investors to eventually cash out which doesn’t kill the project.

    2) A way to replace those investors with customers which offer the project sustainable growth. This creates and recycles capital in the ecosystem which can then be deployed elsewhere, supporting other projects.

    Investors would be more likely to take smaller bets, rather than piling all of their capital into the frontrunner.

    A virtuous cycle that supports innovation. There aren’t many Web3 projects I can find which have this « investors ♻️ customers » conversion figured out.

    @fringedrifters is a frontrunner – I’m excited about what they are working on, and the use-case for NFTs they are building.