Metaverse concepts should distance themselves from NFTs | Opinion

What is the metaverse?

If you push your way past the voluminous folds of evangelist gobbledegook and recycled, half-understood Neuromancer concepts being trucked out in the hope of bilking cash from starry-eyed investors, this is a question that has a rather more prosaic and technical set of answers than anything Morpheus ever offered Neo.

Crucially, though, it's a set of answers, plural; there's no one precise definition as yet, because this concept is still a work in progress, a broad set of ideas based on a number of almost-but-not-quite-ready technologies that look set to define the first major post-smartphone paradigm shift in how we interact and communicate with the networks and data that surround our daily lives. Pick ten people working on building or promoting metaverse ideas and ask for their vision of what it will actually be in practical terms, and you'll get eleven answers -- each different from the last in fundamental ways.

Things get even fuzzier once you start talking to people one remove away from that coalface: the investors and executives who are keen to be involved in the metaverse from the outset and research the topic keenly, but may not have quite so precise a grasp on the possibilities and limitations of the technologies involved. Here, things get a little bit fuzzy and cyberpunk science fiction concepts leak into what are meant to be serious business conversations rather more often than they should. It's not even usually the good cyberpunk science fiction; if the people building metaverse technologies reference Neuromancer and Snow Crash, those funding that process are far more likely to turn to Ready Player One as a touchstone, god help us all.

Pick ten people working on building or promoting metaverse ideas and ask for their vision of what it will actually be in practical terms, and you'll get eleven answers

And in those conversations, there's a theme that's become increasingly common -- the metaverse, whatever form it takes, is going to have NFTs in it. Or maybe it's going to be all about NFTs? The details, as with so much in this sphere, are hazy, but on some deep level many people now make a conceptual link between these two things -- the metaverse and NFTs are intrinsic to one another's success, yin and yang, the twin pillars upon which the world's tech giants will build the... Well, they'll build the dystopia that all their favourite authors have been warning them not to build for decades. But they promise it'll actually be good.

This is a remarkable coup for proponents of NFTs, who seem to have successfully hitched their ideas -- which can most charitably be described as a solution in desperate search for a problem, and perhaps more realistically as a home-brewing kit for wannabe Ponzi scheme orchestrators -- onto the wagon of the metaverse, to the point where many people genuinely see these utterly separate concepts as two sides of the same coin.

About the only thing these concepts actually have in common is that there's overlap in the type of investor they appeal to: the guy determined that he's not going to miss out on being an early investor in the next Facebook, Amazon, or Tesla, even if it means throwing money after every daft tech buzzword that rears its head. Beyond that, though, the metaverse is an entirely different beast -- because at the core of most metaverse concepts is a service that's grounded in real technologies and in doing things with those technologies that consumers will actually want.

It's easy (and fun!) to snark about the more pie-in-the-sky talk about metaverses, but at heart, the evolution of existing technological and social paradigms which the "metaverse" concept tries to capture is something that's already happening, and will no doubt accelerate in future. Some blend of virtual world technology with location-based augmented reality, delivered over high-speed wireless networks to a whole spectrum of access modes ranging from immersive headsets to discreet wearables, is a pretty safe bet for how the future of accessing information and communicating online will look.

Many aspects of that future are already here, at least in their prototype forms; the diversification away from smartphones as the dominant access paradigm, the increasing richness of location-based information, the embrace of remote work systems even by relatively traditional companies, and the polishing of AR technology (not headsets as yet, but on-screen or audio-led AR systems) are all obvious trends that are bound to converge in the coming years.

The devil is in the detail, but put all those trends together with other, slower advances in things like VR/AR headsets and the roll-out of 5G networks, and you end up with metaverses of some kind; most likely, a lot of metaverses of various different kinds and serving various different needs.

Some of those metaverses will probably feature NFTs to some degree; or at least, they'll construct an in-world economy around an artificial scarcity mechanism which could be mediated through NFTs, or just through good old-fashioned database entries (which is really just cutting out the middleman, since all an NFT in a metaverse will actually do is point to an entirely developer-controlled database entry anyway).

They'll build the dystopia that all their favourite authors have been warning them not to build for decades. But they promise it'll actually be good

Major early movers in the metaverse space -- including Meta itself, The Artist Formerly Known As Facebook -- have certainly emphasised the NFT aspects of the metaverses they're building, even to the point of discussing the kinds of business models and transaction fees they expect to implement. However, the extent to which these two concepts have consequently become muddled together in the perception of many executives, and to some degree even in that of the broader public, is simply not realistic -- and it's something metaverse advocates should push back against, because it risks seriously tainting metaverse projects with negative sentiment at a formative stage in their development, and for largely unwarranted reasons.

Put bluntly, NFTs are not a stable, sensible or credible thing to hitch onto metaverse projects. They have delivered pretty much nothing but pyramid schemes and scams so far, and even the idealised future visions promoted by NFT evangelists are little more than digital rent-seeking. For all the volume of currency (well, hypothetical currency) passing through the NFT space right now, there's very little chance of this technology becoming mainstream or anything more than a passing fad -- albeit a fad that is going to see some people get rich while many, many more lose their homes and their kids' college funds.

Attaching NFTs to the metaverse conceptually is a smart play for advocates of the system, many of whom are the same people who stand to gain more the longer the NFT bandwagon keeps rolling without the wheels falling off. The metaverse actually has significant real-world value and many companies are going to pour enormous amounts of money and effort into realising that potential, a rising tide which NFT promoters hope will also float their boat.

The risk here is all on the side of metaverse companies and projects. At a basic level, it's inevitable that at some point in the future some NFT-driven Ponzi schemes are going to come crashing down; they're entirely dependent on an ongoing influx of newcomers injecting liquidity into their marketplaces, and pulling one brick from the bottom of the structure will cause a collapse in confidence and create a legion of now-penniless bagholders. If the crash is big enough, it's going to be a media frenzy -- especially if some high-profile individuals lose a shirt or two in the process -- which will only crush any possibility of a recovery further. Metaverse companies going all-in on this concept are essentially choosing to make one pillar of their future business from a pub Jenga game being played by increasingly drunk participants.

Arguably even worse, though, or at least more insidious, is the negative influence that a focus on NFTs will have on the design of metaverse systems. A lot of metaverse pitches involve a kind of in-world economy -- which is where we dive right into the realm of expertise of many experienced game designers, a lot of whom have been doing the online equivalent of holding their heads in their hands and groaning loudly at every new amateur misstep made by NFT enthusiasts with no experience of building or balancing this kind of virtual economy.

None of them actually work, for a straightforward reason: a metaverse built around an NFT structure is never going to be an actually appealing, worthwhile service for its users. Designing for NFTs, as distinct from using NFT technology to solve an existing problem with economy design (which would be fine, if such a problem could be identified -- and no, the lack of scarcity in digital economies is not a 'problem'), ultimately ends up being just some variant of designing a pyramid scheme. You're creating an economy that rewards rent-seeking behaviour, because there's pretty much nothing else NFTs are good for in the long run -- and the net effect will be that only those sitting pretty at the top of the pyramid scheme will find any reason or purpose in the service.

Damage the ability to generate rent or make income, and people just walk away, because nobody's playing the game for fun or fulfilment

This is the exact problem Axie Infinity, often touted as some kind of proof-of-concept for how NFT-based games can really work, has faced in the wake of its systems being hacked to the tune of some $600 million of virtual currency (allegedly by North Korea -- oh yeah, let's not forget the fact that both crypto and NFTs are currently a horror movie where the deeper you stick your hand in the hole, the more likely it'll be grabbed by a money launderer, drug dealer or rogue state, so look forward to those awesome headlines when it turns out people have been using your in-game transactions to sell crystal meth).

Currency values in Axie Infinity crashed to the point where 'tenant' players (cutely called 'scholars', since I guess 'serfs' would be a bit on the nose) in the developing world who were renting in-game NFTs in order to farm in-game currency could no longer justify the time spent doing so (as values dropped well below minimum wage in their countries). This leaves the rent-seeking owners of the NFTs with nobody to pay them.

Lots of people who 'invested' in Axie NFTs are upset at no longer being able to generate rental income from them -- but to be perfectly clear here, even when this system was working, precisely nothing of value was being generated; no goods, no services, no worthwhile product of the countless hours of labour put into the system -- just more and more meaningless scrip that only had value as long as there was a steady stream of newcomers arriving with actual real-world currency (or at least a more liquid form of cryptocurrency) in hand.

Damage the ability to generate rent or make income, and people just walk away, because nobody's playing the game for fun or fulfilment; the pyramid collapses and it leaves nothing but dust.

Metaverses, as they slowly come into reality around us, have to be better than this. They cannot just be giant digital pyramid schemes, where those who arrive early enough, or rich enough, get to be rent-seeking landlords, and everyone else gets to be their medieval serfs (only, you know, with an even deeper level of uncomfortable inequality thrown in since many of the latter will be people in developing countries trying to make ends meet).

They cannot be this because it just won't work in the long term; the artificial scarcity you need to enforce to make this kind of system work is anathema to digital systems from the outset, and the economy it creates will move inexorably towards collapse, as many, many game designers could easily tell you.

The metaverse needs to deliver real value, not artificial scarcity; if the latter is the only business concept a metaverse pitch relies on, it needs to go back to the drawing board -- and those working to make metaverses into a reality right now need to think carefully about which bedfellows they're allowing themselves to be associated with.