Virtual worlds or 'metaverses' are the culmination of individual elements β€” people, places, things and systems, collaboratively developed by creators and users. However, the development of engaging and valuable metaverses has faced challenges due to the following limitations and inefficiencies:

Economically Inefficient Approaches

Developing a successful metaverse requires a delicate balance between innovation and economic feasibility. Despite the potential rewards, many attempts at creating metaverses have faced considerable economic challenges due to conventional, inefficient methodologies, including:

  • High development cost: Most Massively Multiplayer Online (MMO) games, which are entirely centralised, demand high development costs and often fail.

  • Long gestation periods for platforms: Platforms like Roblox require at least a decade to generate substantial usage.

To resolve this, we believe that enabling creators to build on each other's work (composability) is needed to facilitate the creation of a valuable metaverse.

The Economic Reality of Composability

Creating a successful metaverse is extremely expensive, and is complicated by unpredictable market demands. The complexity and risks associated with developing the technology necessary for multiplayer and interoperable experiences further adds to the economic challenges, including high costs in time, money, and expertise. Once you overcome these barriers and if your metaverse gains popularity, allowing others to build upon it and potentially "steal" its value is unattractive to many developers. This, combined with the fact that the technical infrastructure of most metaverses do not support the level of shared state, rules, and data necessary for a compositional world, makes it even more challenging to develop an online experience.

This problem could be solved with a centralised solution, but we believe that this would create the wrong incentives and set up a structure for a metaverse where value doesn’t flow to the participants

Central Platforms Are In Control

While it's conceivable to address these challenges through a centralised solution, such an approach often leads to misaligned incentives and an unfavourable structure for a system intended to create value for its participants. By their very nature, centralised platforms curtail economic freedom by imposing high take rates, absorbing the value that the participants should ideally generate. This stifles economic benefits for users and creators and dampens the spirit of innovation.

In essence, though a centralised solution might seem like a quick fix, it is not aligned with the ethos of a free and open metaverse. Such an approach often leads to a restrictive and unbalanced environment, where the platform's gain is the participants' loss. Instead, the focus should be on a more open and decentralised metaverse with a dynamic ecosystem that promotes innovation, collaboration, and shared economic prosperity.

Blockchain is an obvious solution as a foundational technology for the metaverse, but there are limitations with the blockchains available today.

Limitations of Web3

While blockchain and Web3 infrastructure promise decentralisation, shared state and rule-based systems, they fall short in practice for metaverse applications in the following ways:

  • Inadequate infrastructure: These systems are designed to support financial transactions and cannot support a large-scale virtual world. This requires a significantly higher level of performance and off-chain infrastructure to support millions of users all over the world transacting.

  • Lack of a protocol to define things: There is no existing protocol that can define the rules of a composable world or allow for the creation of new primitives, making extensibility difficult.

  • Connecting virtual worlds to on-chain systems is challenging. Most 'web3 games' are traditional games with token or on-chain ownership rules, sacrificing the potential for independent extensibility of their game worlds.

Creating an open and valuable metaverse requires overcoming significant economic, technical, and infrastructural challenges. Current platforms and approaches have not been able to effectively address these issues, leading to a lack of truly compositional and engaging virtual worlds. A metaverse that third parties can independently expand in a way that incentivizes participation is still a major challenge.

To overcome these challenges, we need to address the following key issues:

  • Performance of current blockchains: To move the logic of things on-chain requires an order of magnitude step up.

  • A protocol to define the people, places, and things of the metaverse and explain how they function. Enabling them to be interoperable and composable.

  • Standards to define the things of the metaverse.

  • An incentive structure that encourages sharing and ensures value flows to all participants of the ecosystem.

Combining these elements can enable more actors to participate, faster creation, and ensure all participants are appropriately incentivised without central control. This is the pathway to unlocking a truly valuable metaverse.

Last updated