The metaverse is edging ever nearer. Just days following Facebook’s high-profile name change to “Meta” this past October, Microsoft publicly disclosed plans to begin offering web conferencing services in virtual reality. Fuelled by greater connectivity and data from IOT devices, B2B firms are also investing heavily into visualization tools that use 3D renderings of real-world objects, which hold diverse applications across factory production, logistics and public security. Meanwhile, a host of “otherworld” building games already offer glimpses into new forms of online interactions. For instance, Epic Game’s Fortnite held a virtual musical performance by Ariana Grandein August that, while pre-recorded, drew over 12 million concurrent users who could watch and interact with one another in their outfitted avatars.
Bloomberg Intelligence estimates metaverse projects such as these represent a global market opportunity that could reach as high as $800 billion by 2024. As a result, tech companies are jockeying for position in VR and augmented reality (AR) hardware and software businesses. For emerging tech companies, the metaverse poses an opportunity to circumvent existing barriers in the form of app stores and closed ecosystems. For incumbents, it is being touted as essential for their future relevance. The last twenty years have shown that a dominant position for services distribution and access can be lucrative.
"Creating digital scarcity and assigning immutable ownership to creative work or R&D-related resources will ultimately be required to incentivize participants to create in the larger metaverse"
So what is the metaverse? For all of the kerfuffle, one might expect a straightforward answer. But ask any two people what the metaverse actually represents and diverging opinions quickly arise. Naturally, pop culture references and gaming anecdotes conjure an immediate sense of the metaverse; however, the essays of Michael Ball and other industry experts have emphasized that the VR- or AR-enhanced visual space is but one dimension to view what is ahead. Rather, we should focus on the future development of interoperable systems, standards, and computing power needed to create a truly persistent and synchronous experience across metaverse services.
Building the technical infrastructure and protocols to achieve such a fluid state of digital services is a tall order. “Web 3.0” could be the necessary infrastructure upon which the metaverse will work. Whereas the early 2000s through to today marked a shift in productivity toward developing large tech platforms in what we now know as web 2.0, web 3.0promises to disintermediate these businesses by building self-sustaining, decentralizing services. Technologies like blockchain offer built-in trust and protocols between participants, solving two challenges of which platforms originally solved. If developed extensively enough, content and service creators could gain unfettered access to their target users, reaping a greater share of the benefits in the process.
In the context of financial services, this narrative rings familiar. The disintermediation of financial institutions has long been espoused, first with alternative finance, then open banking, and now DeFi. Despite considerable growth in public interest and adoption of these services, a shift toward individual-led financial and privacy protection is marked with challenges. Firstly, accountability mechanisms for ensuring these protections are closely linked to existing governance structures. If an individual fails to protect his or her assets due to human error or a piece of poorly written code, then questions remain on what action could be taken, if any. Secondly, consolidating standards and protocols to allow for a wide variety of systems and data formats to interoperate with one another will take years to develop at scale. To this end, some ponder if future metaverses will truly be decentralized.
With so much undecided, it can be difficult for businesses and public institutions to decide on what infrastructure investments hold the most promise. In somewhat relief, decentralized identifiers or DIDs offer at least one option that satisfies the interests of multiple parties. DIDs do this in two ways: creating digital identities and enabling digital scarcity.
Currently our online identities are largely relegated to major providers under a federated identity framework (i.e. we log onto online services using only a small handful of IDs or accounts issued by tech companies who then store and process this data). Instead, individuals should be able to establish a digital identity wallet that would not only be used to manage their e-ID and credentials but also associate to data created by various online activities. By enabling consumers to gain greater access to their personal data, several objectives are achieved: consumers can build reputation, which in turn, improves access to financial services; sophisticated social and commercial interactions can be conducted cross-border with trust; and users will be able to traverse across metaverses more seamlessly.
Centralizing this data poses substantial risks, however. As more and more of our lives move toward virtual and augmented mediums, the rate of data creation is growing exponentially, and with it, associated security risks. For this reason, it is essential that the design of such digital identity work off of decentralized data networks. Organizations such as W3C have widely accepted standards for creating decentralized identifiers which can be used tocreate digital identity schemes. This meets the aims of both metaverse and web 3.0 proponents, while also achieving greater levels of protection that global data protection regulations are now purporting.
Secondly, DIDs can be used to support digital ownership and enable digital scarcity. Non-fungible tokens or NFTs have come into the public eye this past year due to their ability to establish unique asset ownership on the blockchain; however, at present, the creation of such unique assets is most often tied to one platform or blockchain. For a metaverse and future contributors to succeed, a more durable means to associate unique digital asset ownership is needed. In addition to storing personal data and credentials, DIDs can be used to associate ownership of virtual properties, such as software IP, as well as other virtual assets.
Creating a fully functioning digital economy must support complex human behaviour and allow for efficient resource allocation. Creating digital scarcity and assigning immutable ownership to creative work or R&D-related resources will ultimately be required to incentivize participants to create in the larger metaverse. Building toward a DID-enabled futurescape can put us one step ahead.
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