Welcome to the Metaverse: Exploring Centralized vs Decentralized Metaverse

The Metaverse now has the financial means to reach the masses, thanks to well over $10 billion in venture capital flowing into this sector in 2021 alone and multiple high-profile bets by Big Tech firms. Industry insiders say that this is just the beginning and that much more funding will soon be directed to firms attempting to create these dynamic virtual environments and bring them to life. There are exciting times ahead!

What is the metaverse, though? And when will this VReality actually happen?

Introducing the Metaverse

In his 1992 science fiction novel Snow Crash, Neal Stephenson coined the term metaverse as a successor to the Internet, constituting his vision of how a virtual reality–based Internet might evolve in the near future. Today, three decades later, the metaverse is moving closer and closer to his vision.

The metaverse is generally regarded by many as the next stage of the internet, where online experiences will mix to create an immersive virtual experience, much like Neal Stephenson's visions of the future. It is an accumulation of numerous recent technological advancements that have been bridging the physical and digital worlds over the past two decades, creating virtual worlds with their own shared economies and communities by combining virtual reality, augmented reality, artificial intelligence, geographic computing, creator economies, and many other technological advancements.

If you ask me, that seems like quite a lot to wrap your head around. On the other hand, if you asked someone to explain the internet in the 1990s, you probably wouldn't get a response that is even somewhat similar to the internet we use today.

The Metaverse today - Centralized vs Decentralized Metaverse

The Metaverse is currently having the same problem. Similar to how we couldn't have a complete description of the internet when it was just getting started, we can't do the same with the Metaverse because of the organic and unpredictable manner that technology develops.

No one company can own or be the Metaverse — they can only form a game or virtual world within it. Instead, the (economic) framework that links them is known as the Metaverse (thus, "meta"). Here's a simple test to tell one from the other: Can you transfer value from one "Metaverse" to another? If not, you’re dealing with a closed system.

We should expect two versions of the Metaverse to emerge as a result of these developments: a permissioned, closed one that is created, owned, and controlled by governments and Big Tech, and a permissionless, open one that is based on Web3 and crypto. Expect a battle between the centralized vs decentralized metaverse. Web3 can be thought of as an internet that users and developers jointly control and manage via the use of token incentives. We must all keep in mind that we can create a better Web and a Metaverse for our children to grow up in as pioneers and engaged participants. Without abandoning the distinctive qualities of the internet, we may regain control over our personal data. The technology is at hand. The next step is to embrace it.

The centralized Metaverse

The fact that the centralized metaverse has been around since the beginning of the Internet might surprise a lot of people. We made the decision to center the internet's architecture on a single user interface, HTML. Email programs, social media websites, news aggregators, etc.

What if we used blockchain to build email clients and social media platforms instead of HTML?

Having an immutable ledger as your foundation turns out to make a lot more sense because it ensures that users retain full control of their assets.

This draws attention to the key difference between a centralized and a decentralized/open metaverse: the absence of self-ownership of your own assets.

The fundamental problem with centralized virtual worlds is that they are run by a single person or entity. This implies that a single person or entity can assume complete authority over the metaverse and establish its laws. The centralized management structure makes it possible for malicious actors to access these worlds or databases and utilize them for purposes they weren't meant for. Giving a single for-profit organization access to all of its customer's personal information can become highly exploitative and even dystopian, as we've seen with the business models of web2 giants like Facebook, Google, and Amazon.

Besides a lack of self-ownership, censorship is a serious problem with centralized metaverses. If centralized owners so desire, they can censor information or eliminate it entirely. This shows that there are restrictions on both general freedoms of expression and freedom of speech.

Centralized organizations have the power to completely eliminate people from their environment, much to how China has been removing undesirable users from their social media platforms over the past few years.

Let's now examine the current participants in the centralized metaverse, beginning with Facebook, or as it is currently called, "Meta."

Meta

Last year, Facebook announced that it would be changing its name from "Facebook Inc." to "Meta Platforms Inc.," or simply "Meta." Facebook served as both a social networking platform and the main holding company for a number of different products, including Facebook, Messenger, WhatsApp, Instagram, Oculus, and others.

The co-founder and CEO of Facebook, Mark Zuckerberg, had a different and more expansive vision for the future. He specifically mentioned the "metaverse" as the company's future.

What would happen to your data in Mark's Meta may be a concern of yours.

And you won't be mistaken, because Facebook has a bad reputation when it comes to protecting users' personal information. Facebook has been shown to have engaged in a number of unethical behaviors, from bad data management to dubious data-sharing and monetization.

Recent patents granted to Meta show how Facebook aims to collect biometric information, including body postures and pupil movements. Examples of patented technologies include a photo analyzer that can mimic skin textures and a "magnetic sensor system" worn around the torso.

These innovations would likely increase the sense of realism of these virtual experiences, but would also be assisting the company in product sales. Hardware is not the primary source of income for the metaverse, according to Meta. Clearly, there would be many ethical and legal issues with this kind of tailored advertising.

Tencent

As the top distributor of video games in China, Tencent already possesses a wealth of software and platform knowledge in addition to its significant ownership stakes in numerous important game studios. These companies include Roblox and Epic Games, proprietors of the Roblox Studio and Unreal engines, respectively.

Chinese media outlets reported in January of last year that media juggernaut Tencent would buy Black Shark. Black Shark now produces gaming-focused mobile phones and accessories. Black Shark was founded in 2017 with funding from Chinese phone manufacturer Xiaomi. After Tencent buys Black Shark, the company will reportedly change its business strategy and invest in AR/VR headsets.

Tencent might be one of the best-positioned companies to take on the metaverse, considering its capabilities in gaming, social networking, cloud infrastructure, artificial intelligence, streaming media, and digital payments.

Roblox 

If you haven't heard of Roblox before, you're either older than 16 or don't have kids. In 2020, half of all Americans under the age of 16 played Roblox, and the user base of the company is still expanding at an explosive rate.

The fact that Roblox offers more than one game is probably a key factor in why young people continue to use it. The platform's user-friendly game development engine attracts new game developers every month. Because they can make money if their games are successful, creators have the incentive to produce more content on the platform. Roblox's Developer Exchange Program offers 25% of a game's revenue.

As you can see, the organization of this system is already somewhat decentralized. They are a strong competitor for the metaverse when their size is taken into account as well. 9.5 million creators, over 40 million games, and 47.3 million daily active users were present on the Roblox platform as of the third quarter.

Children like to play the games they make with their friends, which is another significant competitive advantage for Roblox. While certain games necessitate strong communication, cooperation, and problem-solving abilities in order to advance, Roblox focuses on socializing and connecting users with others.

The Open Metaverse

In the open, permissionless metaverse, users create their own rules and shape the story through unconstrained world-building and exploration, without a ruling business imposing their digital reality. This is the most crucial contrast between a virtual world and a game, and what could be argued as the key factor in conceptualizing virtual worlds. The user experience should be one of autonomy and free will while remaining a participant of the rules that have been established in the digital civilization he or she is in.

NFTs, which are cryptographic tokens that can act as proof of ownership of a digital object, are one of the instruments that support user autonomy in the metaverse. These tokens are essential components of the metaverse's architecture since they might serve as the electronic key to your virtual land, home, artwork, and/or entrance to a select community.

The possibilities for using a piece of land are comparable to those in the real world. Your creativity and the (current) limitations of the technology are the only boundaries. The Metaverse is already seeing the emergence of business strategies, from renting out spaces for events to generating passive income through advertising. Additionally, you may sell the land and anything built on it as an NFT on any of the NFT marketplace platforms (just as you might with the real-world property you own).

NFTs provide residents of the metaverse with a digital identity in addition to these creative and monetary services. It is a method of standing out from the crowd while navigating these virtual spaces.

The people who live in the metaverse have the freedom to explore the surroundings apart from one another, but, much like in the actual world, they are only as powerful as their involvement in the regional economy has allowed them to be. These communities' usefulness is developed through the communal aggregation of time, value, and resources. In any community, culture serves as the unifying factor, and this is also true in the Metaverse, where a world is uninhabited until it is populated. Virtual worlds create their own organic culture much like how cities and nations have their own unique traditions.

Let’s have a look at some of the current big players in the decentralized metaverse space.

Decentraland

Based on the Ethereum blockchain, Decentraland (MANA) is a metaverse platform that enables users to produce, consume, and make money from apps and content. In this virtual environment, users purchase tracts of land that they can then explore, develop, and monetize.

2017 saw the launch of Decentraland as the consequence of a $24 million initial coin offering (ICO). Following a closed beta stage in 2019, the virtual world was made available to the general public in February 2020. On their LAND parcels, users have subsequently created a wide range of interactive experiences, including games, expansive 3D scenes, and numerous other interactive activities.

A few significant corporations have already entered their realm. Samsung has a virtual store in Decentraland that was initially unveiled in January 2022 at the Consumer Electronics Show in Las Vegas. The electronics behemoth hosted a preview of its brand-new Galaxy S22 in February 2022 in a Decentraland shop called 837X at CES, live-streaming the occasion on its website as well as its Facebook, Twitch, and TikTok channels.

Sandbox

Sandbox (SAND), a community-driven and user-generated platform on the Ethereum blockchain, is comparable to Decentraland in that it enables users to build and contribute to the metaverse while also enabling producers to monetize gaming experiences and digital assets on the blockchain.

They have been around for a while, having been founded in 2011, however, they have only recently entered the blockchain/crypto market. Before the end of 2022, they intend to make the platform available on mobile devices. Additionally, they intend to introduce the platform on gaming consoles like the Xbox and Playstation. By the end of 2023, they also hope to have 5,000 games on the platform. In addition, Sandbox plans to provide in-game jobs that let players do real-world-style employment.

They are well on their way to becoming one of the biggest players in the metaverse world, having partnered with brands like Adidas, Opera, Binance, rapper Snoop Dogg and gaming brand Atari.

Bloktopia

Bloktopia is a metaverse supported by and based on Polygon. In Bloktopia, a decentralized virtual reality skyscraper with 21 stories (in recognition of 21 million Bitcoin) serves as a central hub for users to access immersive entertainment and cryptocurrency-related information in one location.

The so-called Bloktopians can play games, create networks, study more advanced cryptography, earn money by owning virtual properties, and more. Additionally, an exclusive NFT mechanism allows marketers and sponsors to monetize the platform's user base. Users can participate in an immersive world in accordance with Bloktopia's four fundamental pillars: study, earn, play, and create, by offering a VR experience for the cryptocurrency community.

Some big VC names are supporting Bloktopia. Animoca Brands, one of the largest crypto VC funds, is its lead investor and was joined by funds like AU21 Capital, Magnus Capital, Polygon, and Avalanche.

Managing Metaverses

How structure and governance change as these virtual worlds grow is still an open question for these and other metaverses: What laws are necessary to keep things in order in these universes without sacrificing originality? How do you create a vibrant and healthy metaverse culture?

Over time, these laws will probably be developed by Decentralized Autonomous Organizations (DAOs). These organizations were born online, and their members collectively control and run them. They have internal treasuries that are only open to members with their consent. The group votes on suggestions over a predetermined time period to make decisions.

As the concept matures and the legal gray area they operate in is cleared, more and more organizations may adopt a DAO model to help govern some of their activities.

When will the Metaverse be real?

As we can see, there are many exciting projects being developed to bring the metaverse to life. To fully develop the metaverse, though, a lot more investments will be required.

Hardware, networking, processing power, virtual platforms, payments, content, and assets are a few areas where the metaverse is primed for investment.

How we enhance those enduring real-time connections and high-bandwidth, low-latency experiences will be intriguing to witness. In terms of universally scalable virtual experiences for an infinite number of users, we are currently essentially in the "crawl phase."

"At a core level, the technology simply does not yet exist for there to be hundreds, much alone millions of individuals participating in a shared synchronous experience," investor Matthew Ball, co-founder of Ball Metaverse Research Partners, wrote in an essay.

This indicates that we are really early. The metaverse and the economy that surrounds it are a developing industry that is still more of a notion than anything else. Large steps (and large investments) are nonetheless being taken, indicating enormous potential and interest for the future.

Conclusion

You might be missing the point if you hear about the Metaverse and ask yourself, "Why would I want to spend my time in the Metaverse instead of real life?" Whether you like it (or even care) or not, there is a paradigm shift going on. It is indisputable that younger generations, such as Generation Z, spend more time online. Who will own and govern this landscape is the crucial topic at hand as the world becomes more digital.

This could be an illusionary dystopic metaverse by Big Tech that simply extends everything that is broken about The Web, one that is more immersive but also more intrusive, and most importantly, one that lacks digital property rights. It could also be a decentralized, "real" metaverse based on Web3 technologies like blockchains and the sovereignty of the user.

I'm more concerned that regulators will decide to promote Big Tech regardless of how dystopic it grows out of a desire to keep control when faced with the reality of a permissionless and borderless meta market.

Instead of cryptocurrency as we know them, we might see the deployment of CBDCs (Central Bank Digital Currencies). It allows for highly personalized Surveillance Capitalism, forcing compliance, has great hardware and UX and is incredibly enticing to the typical internet user. As a result, it is the duty of the web3 builders to enhance the Open Metaverse, which is its polar opposite. And quickly.

In the end, it is up to the users to choose whatever version of the Metaverse they want to use. They have the power over the battle between the centralized vs decentralized metaverse projects. The centralized versions will probably be implemented more quickly and with a better user experience, but unlike the web3 version, the economic models of the firms behind them won't be able to prioritize the needs of their customers. Users will be able to create, control, and own their own virtual worlds in the Open Metaverse, with the majority of profits going directly to the residents' pockets. This cannot and will not be supported at the same level by the corporate metaverse.

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