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Ten Commandments For The Metaverse

Ten Commandments For The Metaverse, The Author of this Article was among the many that read Snow Crash when it came out in 1992. In 1996, my company published the first Massively Multiplayer Online (MMO) game with immersive 3D graphics, Meridian 59.

Ten Commandments For The Metaverse

Many of us have been thinking about the metaverse for three decades, and we are finally, now, on the threshold. The steady march of Moore’s law, ubiquitous devices and networks, and the imminence of 5G have teed things up. The evolution of games and social media foreshadows a pivotal shift. Here are 10 Principles for the Metaverse that are coming soon.

 

1. THE SHIFT WILL LOOK STUPID

A pivotal shift looks a certain way when it begins. Product offerings are very limited and geeky, failing to inspire the mainstream. For most people, it looks like an enthusiast hobby for fans, not something for everyone. The media is skeptical to the point of sarcasm and ridicules the hoopla, making fun of the early adopters that are clearly nuts.

I remember when this applied to the basic idea of the personal computer; the first spreadsheet software; the collapse of Atari; the arrival of Nintendo; 3D graphics chips; optical disc media; network games; the dotcom bubble; mobile phones; virtual goods; virtual currency; mobile content; mobile games; mobile data; social media; online dating; and most recently, blockchain and cryptocurrency.

 

I remember a 1978 meeting in Palo Alto with Bill Draper, the founder of esteemed venture firm Sutter Hill, to talk about personal computers. He and a colleague thought it was idiotic to expect the public to come to a retail store to buy a computer, and even more absurd to expect a business person to pick up a PC that required service and carry it back to a store for repairs. I was already at Apple and we were successfully doing these things, but they just couldn’t get their heads around it. So much for venture capitalists taking risks and betting on innovators.

 

2. PROTOTYPES GET THROWN AWAY

When engineers set out to invent a new thing, they naturally don’t understand it yet — it has never been done before. They figure it out as they go along, with experiments and trial and error. Lessons are learned that inform what we ought to have done differently from the beginning.

Early product versions are essentially prototypes that get us down the learning curve, but that aren’t sufficiently perfected to go into mass manufacturing or scale to hundreds of millions of online users. A prototype is like a wooden model of a skyscraper. It may help us see what it can look like, or persuade journalists to write about it or investors to provide funding.

But wooden buildings don’t scale well; for that we need steel and concrete, on top of a perfectly architected and sturdy foundation. For this reason, prototypes may get us started and be critical for product validation, but they are often thrown away because it makes more sense to start over with what we’ve learned.

Today, Roblox and Fortnite Creative are our best prototypes of the metaverse. Each is a massive, living party to which hundreds of millions of people are always invited and often attend. Built by serious nerds, these “games” make fun of the product categories they are in. Like The LEGO Movie, they are parodies of the metaverse. Fortnite is a parody of a shooter, a game genre where the purpose is to kill all the players. Fortnite, of course, says you can look like a huge, pink bunny, have a gun that looks like a shark and do crazy dance moves; perhaps at a concert where there’s a gigantic Travis Scott rapping. Roblox is a parody of 3D games, choosing to make everything as blocky as a bunch of LEGOs. It was designed for kids, so of course one of the most popular attractions is breaking out of a high security prison, stealing a car and being chased by a police helicopter. In a parody, the kids get to pretend they’re grownups and the grownups get to pretend they’re kids.

 

These purposeful parodies focus on social value and convenience, not hardcore competition, reaching mass markets because they appeal to everyone and are approachable and accessible to all. While they don’t yet have all the features we all expect from a metaverse, their popularity and the continuous, compelling action that awaits their customers are ample evidence of both how to make a metaverse and that people will show up for one, even a prototype of one. But as indicated below, they’re not going to succeed as the metaverse in their current forms.

 

3. AS ALWAYS, EARLY ADOPTERS WILL DRIVE VALIDATION AND GROWTH

Early adopters of new technologies are able to shrug off all the rough edges, difficult consumer learning curves, high initial costs, and do their own troubleshooting and problem-solving when it comes to getting networked computer services to work at all.

They help developers survive and progress their products from prototypes to “MVPs” to success at scale. These early adopters blossomed and stepped forward to drive the pandemic economy. These are the people that did Bitcoin mining on their PC gaming rig, watch eSports and YouTube livestreamers, have Robinhood accounts, collect trading cards and are buying NFTs.

They are patient and determined, like the early pioneers that made it across the U.S. and built places like California. After they adopt the metaverse, they will explain it to their friends, many of whom are among the world’s four billion introverts, and they will explain it to everyone else.

4. IT WILL NOT BE DRIVEN BY WALLED GARDENS

The metaverse must be open to everyone, like the town square. But today, most games and social media sit on walled garden platforms controlled by Apple, Google, Sony, Facebook/Meta, Microsoft, Nintendo, or other Internet giants. They typically take 30% of all revenue off the top, a stultifying tax rate that contributes to the financial failure of the vast majority of creative content. Only the PC and the browser are open platforms, and I expect both the developers and the public to increasingly rely on the freedom, ubiquity and higher margins enabled by the open platforms to drive the growth and shape of the metaverse.

 

These walled gardens, and the popular games that sit across them, also control who their customers can play and socialize with, and generally have a bias against allowing any play outside their own devices. Sony made a rare exception in allowing PlayStation Fortnite customers to play with their friends on Xbox and other platforms; Roblox enables crossplay among mobile, PC and Xbox players. It is not surprising that we want to play with friends that own different devices than we use. True crossplay may ultimately return to the browser, with Moore’s Law driving ever more hardware power and HTML5 games looking better and better.

 

Today, Fortnite, Roblox and almost every other top 100 game, is also a walled garden of its own. They offer their own, private, corporately owned and controlled virtual currencies, and allow you to buy game assets by using real money currencies, like dollars, to get the virtual currency. But while most of these games operate with many of the features and benefits of a casino, they don’t let you take your winnings or assets to a cashier’s window to “cash out”. So these digital goods are not really assets after all, as they only have purpose or value in the context of a single walled garden game. The public is catching on, having learned about the metaverse from books, films and friends, and is beginning to vote with their dollars as we are beginning to hear new industry jargon that includes, “play to earn”, “player owned economies”, blockchain and NFTs. The entire premise of blockchain was to move away from government control and centralized banking, and an informed public will accept no other metaverse.

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Finally, I’ll just say this: NOT Facebook, or Meta, or whatever they want to call themselves (I call them unethical, and they always have been). We all remember how Microsoft monopolized the PC operating system and was a bad actor, eventually losing a major antitrust case. The mobile industry was paying attention and made a point of never letting Microsoft gain even an inch in the mobile space.

 

5. DISRUPTION WILL COME FROM THE BOTTOM

Big companies have proven business models that depend on control of the value chain. They can’t innovate because they have to put their best people on the front line to deliver, every quarter, the expected revenue from their established business model. They don’t understand new innovations because they were someone else’s idea, and it is too threatening for them to doubt their own business plans that ignore them. There is also tremendous fear about new value chains and business models, because there is no certainty of having the same command and control over revenue and profits. NFTs, for example, are downright threatening to big game publishers because they can’t see how to control or squeeze money out of something on a public blockchain.

 

The big guys have everything to lose, and are terrified to plunge in. The smaller, indie developers and startups have nothing to lose, and may gain everything in the process. These little guys are at the mercy of the big guys if they want to make a conventional game and get it published. The deal terms are terrible, or you don’t have enough capital to make it work on your own. Why not make a game around NFTs instead? Consider when mobile games began. None of the big game companies would make anything mobile because the market was too small. The industry had to be built by startups, many of which were from less developed international markets. Now the majority of game industry revenue is on mobile and the largest single game marketplace is China. Most of the billion dollar mobile games came from startups that invented new IP, many of which are based in Asia or Eastern Europe. Only 10% of today’s top grossing mobile games rely on the kind of brand license that the console games heavily depend on. That little market became the big market, hollowing out its share from inside. It will happen again with the metaverse, only bigger than ever, as the biggest game market in history.

 

Gamers and game developers will drive our evolution to the metaverse, because they know the nature of interaction and the value of play.

 

6. CURRENCIES WILL REALLY BE CURRENCIES

We think of a currency as the essential standard for commerce, such that we can trade our currency for any other kind of goods or services. Bitcoin is considered a currency, but it’s more like a gold brick. We don’t carry gold bricks around and shave off bits here and there to pay for things; this would be far too cumbersome, not to mention dangerous. Gold may be a currency, but it’s not really commercialized as such, and neither is Bitcoin, which has struggled to find stable commercial applications (just ask Valve/Steam and Tesla about volatility). Ethereum was created with more flexibility, which led to the invention of smart contracts and NFTs as protocols in the Ethereum community. They’ve spread from there, including Level 2 blockchains that are more agile, require less mining, can avoid most gas fees and shrink their impact on the environment. Voila, NFTs have quickly become the first real market for crypto commerce, as best exemplified by Beeple’s sale of an art NFT collection for $69 million and the birth of NFT trading marketplaces doing considerable volume, out of nowhere.

 

7. ASSETS WILL REALLY BE ASSETS

People will go into the metaverse to engage in commerce. Many will create, all will consume. Over time, the public will reject “private games/platforms/currencies/blockchains” and instead will roam across those product and service suppliers that are completely compatible with a broader and more democratic metaverse. Currencies will only succeed to the extent that they embrace and are compatible with all the content, creators and consumers. The public will increasingly expect currencies and NFTs to be democratized, open, with free trade of goods across marketplaces, including peer-to-peer, including transactions that convert into actual fiat currencies. The metaverse will have a legitimate cashier’s window that can buy, sell or exchange anything for anything else.

 

8. EVERYTHING WILL BE INTERCHANGEABLE

Magic: The Gathering first appeared in 1993 and quickly proved how powerful a virtual economy could be. Most of the public thought it was really weird, but Richard Garfield had invented essential new ideas that have flourished and grown enormous. MTG inspired me to author a patent that would allow digital items with core traits to transform into different things, across a portfolio of different games. Developers began to discuss and debate my idea at the Game Developers Conference two decades ago. My “DNA patent” proved difficult to commercialize because it was ahead of its time, but now that it has expired, roughly 40 newer patent applications refer to it. Many innovative developers have already embraced this core idea because it makes common sense for the metaverse. Why should you have to start over every time you start to use a new metaverse application or service? If we are going to have interchangeable currencies in a metaverse of metaverses, why not have interchangeable assets?

 

9. VIRTUAL ECONOMIES WILL BE “PLAYER OWNED”

The players will be both creators and consumers, as in the real world. This is not ground-breaking, as many Roblox creators are 11 year-old kids making more money than their parents, who hold conventional engineering jobs in Silicon Valley. But by escaping the walled garden platforms and games, our metaverse public won’t be subject to massive and arbitrary taxes on their behavior. Both creativity and consumption will flourish and, according to the original script, countless players and developers all over the world will make a living in the metaverse.

 

Some business arrangements may be startling at first, like it was when WoW gold farming sweatshops sprouted up in Asia. This year, the growth of NFT game Axie Infinity has resulted in a comparable “feudal system” in the Philippines, where early entrants that got in first could afford to buy an Axie, whose cost has since risen to a prohibitive level. This has resulted in the Axie owners renting out their Axies to laborers who play to “work” the Axie to generate profits from gameplay, later shared with the owner.

 

10. METAVERSE ANNUAL REVENUE WILL EXCEED $100 BILLION IN SEVEN YEARS

While big companies continue to cling to the past, disruptive startups and innovators will make plenty of money by making it up in volume.

In 2005, I gave a keynote speech at the mobile industry’s biggest national conference, the CTIA show in San Francisco. This was before Facebook and before the iPhone. I was saying that the mobile phone should be called, “the social computer” and was introducing a daily fantasy sports game, well before DFS became an industry. At that time, mobile voice revenue in the U.S. was more than $100 billion per year, and mobile data, including internet, app stores, games, ringtones and screensavers, was only $2 billion. The carriers were nervous because voice ARPU was declining and nobody believed a phone was useful for anything other than voice calls and triple-tapped texting for teenagers.

During my remarks, I made a joke about how tiny our content side of the industry was. I pointed out that we were in the small west hall of Moscone Center, while across the street the enormous, sprawling main hall underground was hosting the psychiatrists association, where they were learning about all the new drugs that we would be self-medicating with, because of our declining social lives. But if we could realize the content potential of the mobile phone, we could grow mobile data plan revenue to $100 billion in seven years. The next day my talk was covered in the media, who walked through the joke about the shrinks and drugs next door. There was no mention of my $100 billion forecast; it was not considered notable or newsworthy.

Exactly seven years later, mobile data plans reached $100 billion.

We’re now in a similar situation, with huge potential for a new social medium that can drive a mass market to grow quickly; and a public that is already building expectations about it and enjoying experiments with our early prototypes. The pioneering public will expect, and demand, the metaverse features noted above, and they will be delivered and built out by pioneering developers. As this unfolds, I believe the metaverse industry will reach $100 billion in annual market revenue in seven years. So will NFTs for games. You heard it here first.

 

 

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