The NFT Endgame: A path toward the Metaverse (we’ll actually want)
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You likely spend the majority of your waking life immersed in a screen. As a result, you likely can’t escape the deluge of blockbuster headlines, buzz, and hype around the notion of NFT’s (non-fungible tokens, aka: scarce and unique digital assets registered on a blockchain). Your curiosity has probably already been piqued, and you’ve likely already read at least one of the 100+ in-vogue NFT articles out there today. This one is a bit different. It’s the inaugural post in a series that will zoom out and examine the end-game of NFT’s, crypto, and the convergence of numerous other frontier technologies (Spatial Computing, AI/ML, IoT, etc). In doing so, I’ll be laying out a roadmap towards this end-game, while teasing out all of the personal and societal transformations and implications along the way. Some essays will be in a non-fiction format, while others will take the tack of science fiction. Think black-mirror type stories, but through a more optimistic lens. But for now, we begin with NFT’s…
Twitter is ablaze, The Wall Street Journal has it on the front page, and every other ‘room’ within the phenomenon that is Clubhouse is littered with NFT banter (if you don’t hint at being an ‘NFT aficionado’ in your Clubhouse profile, good luck sitting at the cool kids table). The NFT tremors can be felt across seemingly every conceivable landscape: finance, media, art, entertainment, sports, and beyond…. Beeple (who?) sold his NFT art for $69M and became the third most lucrative (living commissioned) artist in history. Kings of Leon minted their music album as an NFT, allowing them to collect perpetual royalties and cut out the middleman (Spotify). Lebron James highlights are selling for $200k+ as ‘digital sport card’ NFT’s on Top Shot, giving the NBA a new way to monetize and extend the life cycle of its media. Virtual land/homes are auctioning off for millions of dollars in virtual worlds like Decentraland (because now virtual housewarmings are a real thing). The heads of pixelated cartoon characters are selling for millions of dollars as a collectible (CrpytoPunks). In summary, this is a serious WTF moment… It’s also an inflection point worthy of deep reflection and consideration (and SNL satire, of course). Upon reflecting myself, I became obsessed and partially blacked out from excitement about the possibilities. When I came to, I found that I’d spent a silly sum of money on an NFT featuring Kobe Bryant (called ‘Forever Mamba’), hitting a fade away jumper as he evolves into an angel. Sure, anyone can screen shot it and display the pixels as they please. But I paid for it, I own the real metadata and all its provenance, and it encapsulates a special figure, embodying everything he stood for and accomplished. The ‘thing’ itself is digital and non-tangible (for now… as I later allude). But the sentimental value, collectible nature, and social signaling is real. Just like any physical sports card, art work, or record album.
This new three letter acronym has already staked its claim on meme of the year (sorry Elon). But it’s much larger than just a meme. It’s going to be a transformational undercurrent of societal change for the rest of the 2020’s and beyond. As a result, nothing in our current paradigm is safe; banks and markets, social platforms and tech behemoths, even governments and nation states; they all face massive disruption and dislocation, if not extinction. Even the very concept of what it means to be an ‘individual’ stands to be re-invented, and along with it, all the historical notions of what it means to be human… our philosophy and psychology, our happiness and purpose, our ‘raison d’être’. All will require a re-examination. In a sentence, thanks to blockchains (to store/organize data), smart contracts (to transact data), and new forms of encryption technology (to secure data), the individual is now imbued with the powers and efficacy of what we’ve historically only seen from corporations, aka: ‘the firm’, and governments, aka: the state. Let’s see if I can summarize this idea in a paragraph.
Simply stated, our civilization as we know it formed around the notion of ‘ownership’. In turn, we saw the creation of systems to protect what is owned: people’s land, huts, villages, livestock, and families. Militias and kingdoms formed around these things because the individual didn’t have the means to properly protect and defend them at scale. Militias and kingdoms evolved into governments and armies, which created rules and legal systems, which formed policies and economies, which formed education, lifestyles, and the modern-day human-experience as we know it today. What’s happening with NFT’s, and crypto at large, is disruption at the inception of this value chain; Ownership. We are moving into an era of digital ownership, and in turn, an era of individual sovereignty vs. sovereignty of the firm/nation state, revolutionizing, well, everything. This idea is fully explored in a book called ‘The Sovereign Individual’, in which the authors eerily predict the implications of the technological shifts we’re now experiencing. One of these shifts is driven by ‘digital money’, i.e. Bitcoin. With this new ‘money’ (or store of wealth), the individual is empowered with encryption technology that allows him/her to secure property/ownership in a way that is immune from ‘coercion’, or as the book calls it ‘violence’. Historically, most governments have been pretty good at protecting groups of individuals from this coercion, and as a result, a certain type of ‘business model’ and unilateral relationship formed. One in which the individual gets sent a tax bill; one that can’t be negotiated, and within a ‘contract’ that can’t be red lined. This is a relationship in which the individual is treated more like an employee (with a duty), then say, a customer (with a choice).
Sure, being an employee isn’t all that bad, and we’re empowered with a democratic mechanism for voting and voicing opinions (despite the fact that it leads to the tyranny of the majority, which is ironically obfuscated by the electoral system. But I digress). However, at the individual level, there really isn’t much optionality in how this system works and how it serves you. In a paradigm of digital ownership, any average Joe can have the ultimate offshore bank account that can’t be compromised. This creates a need to treat citizens more like customers than employees. As a customer, if you don’t like the system, you can just walk away. At the near speed of light, crypto networks will allow you to transfer your identity, wealth, and data to the ‘state’ or community that serves you best. One not defined by physical borders and archaic politics. This is a world in which if the state hopes to thrive, it will have to ‘earn your business’ and convince you to stay, breeding competition and leading to a more capitalistic form of society. This will dramatically change the behavior and definition of ‘government’ (as well as free markets), while radically empowering the individual in ways that are difficult to conceive through today’s cultural lens. The balance of power will have flipped, and the world could be unrecognizable in 75–100 year’s time. So much so that if you were to be preserved in a cryogenic chamber for the next 100 years, you might die from shock upon waking up (if you’ve not read this metaphor from Tim Urban about measuring human progress in death units, you should do so now. It’s great.)
Okay, I’ll admit, this all sounds a bit obtuse. And it might be. But I think it’s true and conceptually makes sense. Hence why I’m writing these posts; to validate my perspective and flesh out the macro and micro impact of this (effectively) new file format, that exists on a new type of protocol/network (aka: Blockchain vs. TCP/IP), that creates scarcity, ownership, provenance, and non-fungibility.
The Endgame for NFTs: The Metaverse
Before we get into the here and now of NFT’s, let’s first flash to the future and talk about the end-game. As mentioned, I’m not going to cover the technical inner workings and use cases of NFT’s, as there’s plenty of primo deep-dive content out there already, like this and this. If you already have a grasp on what an NFT is, great. Let’s jump down the first proverbial rabbit hole.
The end game is the Metaverse. You may have heard of this theoretical concept within the realm of popular sci-fi narrative, including Snowcrash, Rainbows End, and Ready Player One. Each features a persistent virtual world or real-time digital simulation in which users live, work, and play much like they do in the physical. And while pop-culture often paints this picture of humanity with lesser-versions of ourselves, strapped into a VR headset and renounced to a wheel chair, the Metaverse doesn’t always have to be a completely immersive simulation that removes us from the real world.It can also consist of virtual elements/simulations on top of and interacting with the physical world (aka: augmented /mixed reality).
In my day-to-day job at Amazon Web Services, we call this new domain ‘Spatial Computing’. Under the Spatial umbrella, we include elements of the Metaverse that already exist today, such as ‘semi-immersive’ 3D experiences that we interact with through a browser, tablet, or phone (e.g. the “View in Your Room” mobile AR feature on Amazon.com). In some ways, many of us are already living in a pseudo Metaverse. There’s a growing population of people who solely date in virtual spaces (Bumble, Hinge), play in virtual worlds (Fortnite), shop in virtual stores (Amazon.com), and communicate in virtual rooms (Zoom, Slack, etc). But these things are silo’d, fragmented, and lack interoperability. They also lack the ideal experience layer; a UX/UI that is more human, natural, and representative of how we’ve evolved to interact and consume information in the natural, 3D world. Not just flat interfaces filled with abstract symbology like digital menus, buttons, and icons (this is where a new UI/UX design paradigm will be needed for AR/VR to really take off. One based in neuroscience and a better understanding of how the human mind optimally interacts with and consumes information. If you want a teaser, check out this Facebook Reality Labs video about the future of human-computer interaction.)
‘Microverses’ are already here
While the ‘Metaverse’ has become a buzzword within the crypto community and NFT lexicon, it’s rapidly shedding its theoretical skin and showing signs of real promise and practical application. The most prominent and culturally significant example is Roblox, a mini-metaverse in its own right (or as prominent tech analyst Ben Thompson calls, a Microverse), in which users have an avatar (the new form of identity), buy and pay with ‘Robux’ (a new form of currency/medium of exchange), acquire virtual land and build virtual structures (new form of real estate), don virtual clothes, aka: skins (new forms of fashion and social expression) and new-age developers create and sell new experiences, all without having to code (new forms of creativity, entrepreneurship, and commerce, beckoning new forms of socializing and entertainment e.g. racing games, treasure hunt games, puzzle games, sport games, you name it). All of these facets make Roblox much more than a game, and investors have caught on, hence a recent IPO at a valuation of $29.5 Billion. A year ago, before COVID and the relegation to screens as our primary social outlets and form of entertainment, it was valued at $4 Billion. A wild, and noteworthy data point on the pandemic’s impact and role in accelerating our Metaverse journey.
Some additional data points to consider when looking beyond the horizon… Over 50% of kids in the US play this ‘game’. Two-thirds of all U.S. kids between 9–12 use Roblox, and a third of kids under the age of 16 play. From a cultural and psychological perspective… think about how these kids interact and behave, think about what they value. Longer term, think about what that means for how this next generation of entrepreneurs, policy makers, and leaders think and view the world.
Roblox is just one example of this trend. Fortnite has hosted tens of millions of people in virtual concerts, leading prominent brands such as Disney, Nike, and Burberry to monetize their IP within these worlds. Prominent events like Burning Man, SXSW, and the Dubai Tech Expo are creating virtual replications. With over one-fifth of their staff now working on AR/VR (10,000 people), Facebook has launched a beta version of Horizons with their own ‘Roblox’ type aspirations. The Oculus Quest 2 is smashing sales records and expectations, representing a tipping point in consumer VR. Microsoft just launched Microsoft Mesh, providing the tools and services for immersive/spatial collaboration in 3D, AR, and VR, giving us a glimpse into the future of remote communication as holographic avatars and collaborating around 3D models and digital information. Niantic has launched their Niantic Developer Platform, allowing anyone to create their own ‘Pokemon Go’; social, location based AR experiences on top of the real world. These ‘games’ are proxies by which Niantic hopes to leverage the spatial data captured by sensors on users devices to crowd source a ‘digital twin’ of the real world.
The AR Cloud: the Metaverse on top of the real world
The AR Cloud is often referred to as a ‘digital twin’ of the world ; consisting of machine-readable 1:1 scale models (or 3D maps), of places (parks, neighborhoods, cities) and things (buildings, stadiums, factories). This theoretical concept represents a brewing Big Tech battle ground that is just beginning, and that many believe is the most important developer platform since the internet itself… That in mind, worth a quick (slightly technical) primer. These 3D maps will act as anchors for interactive, digital layers on top of physical environments, accessible by AR devices based upon context (where you are, what you are doing, who you are with). A key enabler will be computer vision powered VPS (visual positioning systems), allowing devices to see and understand their environment and acting as the underlying fabric to connect applications to a precise user location, at a precise point in time. VPS will be used to create a ‘search engine’ for the physical world; connecting atoms to bits and allowing users to access digital information and services/apps associated with any place, person, or thing. Ultimately, this will allow people, as well as any autonomous system (robots, drones, cars), to draw immediate inferences about the real world based on a catalog of real-world and synthetic data. By accessing this data via API’s (similar to the Google Maps API), developers will be able to productize these 3D world maps, acting as the base layer for next-gen applications in navigation, transportation, shopping, entertainment, news, robotics, health/safety, travel, education, and virtually any app/experience that could benefit from location combined with contextual awareness. Simply stated, the AR Cloud will make digital worlds ‘discoverable’, ‘shoppable’ and ‘knowledgeable’, within the context of the real world. As you’ve likely concluded, the AR Cloud is an extension of the Metaverse into our physical reality.
This future could be quite the honey pot, hence Facebook’s acquisition of Scape.io, Google’s AR features within Google Maps (combined with Cloud Anchors), Apple releasing Spatial Anchors within Apple Maps, and Microsoft providing Spatial Anchors via Azure… All to enable AR Cloud/Metaverse type experiences. When you consider this collective momentum, and then sprinkle in the recent leaks of Apple mixed reality headset (expected to ship in the 2022/23 time frame), the 2020’s appear to be the decade in which the battle for the ‘Metaverse’ will be won or lost.
Spatial Computing + Crypto/NFT’s = The True Metaverse
But the titans of tech aren’t the only contenders. They’ll have to defeat the hive-mind of global talent that is the army of open source and Web 3.0 developers, aka: crypto, armed with Bitcoin as the tip of their spear. From the perspective of Metaverse evangelists such as Tim Sweeney (CEO of Epic Games, creators of Fortnite), this future will only be fruitful for society if the Metaverse, and it’s inevitable ‘multiverses’, are interoperable, de-centralized, and built with open standards. Traditional app stores and walled gardens be damned (a la the drama playing out now between Epic Games and Apple. We’ll explore this tension between centralization vs. decentralization later in this series)
And I have to admit, I think Tim is right… if the Metaverse is to be the next frontier, rife with economic opportunity and new found individual freedoms, it’s hard to imagine journeying towards the promise land with a Facebook ID as my primary avatar and source of identity, or with ‘Robux’ as my primary means of wealth/store of value. After all, none of these things really belong to me. They all live on a virtual machine/server owned and operated by Facebook, Epic Games, and Roblox. Most importantly, these worlds will be amassing an entirely new class of data, and in troves. Highly personal and intimate metadata of our day-to-day actions and behavior. Not to mention, when you sprinkle in a little machine learning, and add a dollop of neuroscience, that data will signal our emotions, intentions, and beliefs, and for all we know, even our subconscious… How so? These next-gen spatial computing devices will be able to monitor where we look (eye tracking sensors), how we feel (bio-metrics), and what we see (cameras). As much as I love this tech and am overall optimistic about it’s implications, like any technology improperly wielded, it could have powerful downsides and negative impact.
So how do we avoid this real-life Black Mirror episode and chart a course towards a more utopian future? It’s hard to imagine doing so without embracing Web 3.0, NFT’s, and most importantly, Bitcoin.
Digital Ownership and Empowerment
Web 3.0 represents a new type of digital economy, with all kinds of fascinating emergent properties. This is a digital economy that is open and permissionless, allowing innovation to happen anywhere and by anyone. You want to create your own decentralized exchange? Uniswap’s code and IP is out in the open for you to take and use as you please (e.g. the Sushiswap vampire attack). It’s an economy built on top of platforms that put interoperability, personal identity, and privacy at the core of the design, allowing all types of data and wealth to be truly owned and portable. Which brings me back to our initial all-powerful concept of digital ownership. Not just of your personal data and identity, but ownership of user generated content, and ownership stakes in the platforms/networks upon which your data and contributions create value. Herein lies the primary revolution amidst the crypto hype; incentivized participation for the users of the platform/network, especially the early adopters and evangelists. In the old days, user acquisition was limited to growth hacking, word of mouth, branding, and largely, timing and luck. With crypto, users (or fans) can be attracted with fractional stakes in the platform/product, turning them into owners. Artists in the early stages of their careers can tokenize their revenue streams, creating an army of evangelists and marketing nodes (I like to call it ’the marketing swarm’). Sports teams can attract fans with a token that allows for participation in the teams success (see Chiliz). Next-gen wireless networks and mapping platforms can bootstrap adoption with a token that pays for participants to install/run new types of hardware, or crowdsource location data (see Helium and FOAM).
This is in stark contrast to Facebook, Google Maps, or Amazon.com, cases in which venture capitalists captured the lions share of the value you helped them create. Now, with crypto and NFT’s, any regular Joe can get ‘equity’ at the ground floor and realize venture capital like returns. And with Bitcoin, anyone can have an ‘offshore bank’, with zero counterparts risk, impenetrable security (in storing keys in your brain, unless we invent complete mind reading). This new form of digital ownership is beckoning a new form of wealth creation. And not just for the privileged few, but for the masses. And when the masses are able to personally and digitally secure their own wealth, own their own data, and monetize their own content, it begs the question… what is the value of both ‘the state’ and ‘the firm’ in the traditional sense. Especially when considering DAO’s, Decentralized Autonomous Organizations that transform what it means to be ‘a firm’. With DOA’s, the operations, decision making, and value flow traditionally done by corporations can now be orchestrated by smart contracts, artificial intelligence, and tokens. ‘Money robots’ native to the internet. When you close your eyes and imagine out 20, 30, 50+ years… things could get really, really, interesting. And potentially, really, really, weird. I’ll be exploring these futures in both a fiction and non-fiction format, but for now, let’s bring it back to today.
NFT’s need an Experience Layer
Despite my hyperbolic tone, it’s hard to argue that the current NFT mania is not a bubble. It certainly is and it will certainly pop. But when it does, it will be a good thing. It will allow the community to take a breather, forget about price, and get into build mode sans distraction. And just like the ‘build phase’ after the 2017 bubble gave birth to dazzling amounts of innovation and adoption within DeFI, 2022/23 will likely be the same for NFTs. During this phase, I think much of the building and innovation needs to occur at the ‘experience layer’, and ultimately, within Metaverse type experiences like this Van Gogh exhibit (imagine this as an NFT within VR or AR!). Along with innovative forms of ‘experience’, the success of NFTs will also hinge on business model innovation, along with new standards, integrations, and forms of education to facilitate new transactions, security paradigms, and shifts in mindset.
Focusing on the experience layer first… The current hype is being driven by the novelty of owning and speculating on these digital assets. That, and bragging about it to your friends (21st century social signaling). But as the novelty fades, people are starting to ask an important question… “So what?” A common talk track among NFT skeptics is, “Okay great, I can own this digital art or asset… But beyond these pixels on a screen, how do I really use it? How do I show it off? It seems useless if I can’t hang this in my house, display it in a gallery, or really experience it with friends/family in all it’s glory.” The utility of NFTs is a common point of debate when trying to poke holes in their value. But you don’t see many people arguing about the utility of collectibles such as Pokemon, sports cards, Magic the Gathering, or your parents framed ticket to The Rolling Stones first concert. Or any of physical form of art for that matter (it’s just paint and paper at the end of the day). What people struggle to grasp is that the value isn’t derived from the utility (in the literal sense of the word). The value, and it’s utility for that matter, is inter-subjective. It’s derived from the experience for the owner and the assets encompassing market of like-minded individuals. The emotional experience (the memory from that concert ticket), the social experience (the Magic the Gathering tournament), the visual/aesthetic experience (the Van Gogh exhibit above as an NFT), the game/entertainment experience (blockchain games and worlds like Axie Infinity, SANDS, and Decentraland).
One common thread that can be weaved throughout all of these forms of experience is interactive 3D, spatial computing (AR/VR), and over the longer term, the Metaverse/AR Cloud. This tech stack will be one of the primary means by which we display, interact, and consume the experience of an NFT. My next post will be a deeper dive into the key components of this tech stack and the top companies/projects vying to deliver. As the layers of the Metaverse onion are peeled, I think the implications and the looming groundswell will become clear.
In conclusion… (for now)
While this future is years away, it’s important to consider these implications today, and to begin implementing the standards and architectures that will allow this world to blossom in the right and most inclusive way. It’s difficult to predict exactly when all of this will tangibly congeal, but I think it’s important to lean in now and be proactive. We can no longer afford to think about the world in static terms. We need to think in terms of ‘rate-of-change. Look around. Things are changing at a relatively blistering pace and process only seems to be accelerating. Just 5 years ago, bitcoin was viewed as a plaything for cyberpunks and criminals. VR headsets were developer kits, costing thousands of dollars and requiring all kinds of ancillary hardware. Fortnite was a failed experiment that threw a Hail Mary pivot towards the battle royal format. Today, BTC is the 6th largest asset in the world, the crypto market cap is approaching $2 trillion, there is $43B+ locked in Defi, and the NFT market is value at over $250M. The Oculus Quest is a $300 all-in-one system, selling millions of units, and finally allowing developers to make a living. Fortnite is now a playground, town hall, and concert venue for hundreds of millions of players. And this idea of players is key… as everything is quickly becoming a game. The core principals of gaming are becoming the core principles of user engagement, surfacing at the center of UI/UX in many next gen applications (i.e. the digital gamification of…. Social with TikTok, Investing with Robinhood, work/email with Superhuman, mental health with Calm/Headspace, education with Duolingo and ZipSchool, fitness with Peloton/Zombies Run).
As Marc Andreesen predicted, software has indeed eaten the world. Now games are eating the world and open-source software is eating our institutional and societal models from the inside-out. The creator and ownership economy is here, the Metaverse is where it will thrive, and our concept of the individual, the firm, and nation state will never be the same.
I look forward to taking the red-pill with you and further exploring these ideas in additional posts to come!
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