Metaverses - SleepWalking Into Digital Dystopia?
The subtitle of my book 'The Programmer's Odyssey' is 'A Journey Through The Digital Age' but since the book's publication in 2016 the Digital Age has continued to develop at an ever increasing pace. My blogposts are therefore an attempt to continue the book's journey by posting content that was not available, to me at least, in 2016. At the same time it is impossible not to occasionally slip in the occasional comment that no doubt results from me learning my trade in technology's Jurassic Age.
Now, in late 2021, the latest phase of the journey through the digital age is the appearance of metaverses at the end of a year involving much discussion of cryptocurrencies and NFTs. These can all be seen as steps taking us towards what could be the end game of the Digital Age, the Digital Universe, or maybe the Digital Dystopia?
Throughout the digital age the physical world, or reality as we still think of it, has often proved to be an annoying constraint holding back digital developments, especially in the financial world. In the mid-1980s the groundbreaking Instinet real time trading system, one of the major disruptive fintechs of its day, executed trades in less than a second. But to settle those trades in the back office took at least 3 days, maybe more. This caused huge problems with the large numbers of uncleared trades persisting in the Instinet system.
Trade settlement then was a very paper based system involving physical objects like stock and bond certificates being shuffled around. The infrastructure to manage and regulate trade execution and settlement included government regulatory bodies, paper based stock exchanges, stock depositories and much more. With predictable push-back from all of those involved these processes have been slowly dragged into the digital age as demand for electronic trading, particularly programmed trading, became overwhelming. Since this largely involved replacing physical paper objects with digital objects it meant that in the larger scheme of things it was not too technically difficult to achieve. But the resulting digital processes are still highly regulated and often tied to the world of physical objects.
Cryptocurrencies are a major attempt to break free from the regulated physical financial world by creating digital currencies based on blockchain databases that have no associated physical counterparts and are free from regulatory control. Some have been very successful as speculative digital assets and as a result there are now many whales out there, these are skilled traders who have amassed vast amounts of crypto via speculation. But what use is a currency that you can't really buy anything with? Can it really be called a currency? When the whales got tired of using it for speculation and wanted to use it for buying things, i.e. as a real currency, what could they buy with it in the digital world? At best perhaps a few video games but none of the high value luxury physical objects that appeal to the rich. If you were a luxury car or superyacht dealer would you be crazy enough to accept payment in a digital currency whose value in fiat currency could halve overnight? Hardly.
Once again the physical financial world was constraining the digital financial world. Could this constraint be overcome by creating high value digital products on which the whales could seamlessly spend their vast reserves of cryptos? But what might such products be? How about the speculator's long time favourite marketplace, art works?
Non Fungible Tokens (NFTs)
So NFTs were invented that grant ownership of digital 'works of art' and NFTs exist purely in the digital world as blockchain based digital tokens which are purchased with crypto. So a digital currency buys a digital NFT which grants ownership of a digital work of art. Perfect. NFTs achieved global fame in March 2021 when the NFT for the digital artwork "Everydays - The First 5,000 Days", a digital JPEG file, by an artist called Beeple was sold at Christies for $69,000,000. This is it. Enjoy.
The price beat existing auction records for physical paintings by the likes of J.M.W. Turner, Georges Seurat and Francisco Goya and later in the year a world record for a Van Gogh water colour was sold for $35,850,000 at Christies. How such an astronomical price was achieved by Beeple, effectively elevating him above artistic has-beens such as Goya and Van Gogh, is beyond the scope of this discussion. It's an interesting question though. But however the price was achieved it established, which was perhaps the intention, that two features of NFTs makes them custom built for the international art market. These might be called 'The Emperor's New Clothes' principles.
The point of owning a digital NFT is the personal, or corporate, status achieved through ownership of the linked art object. It's the bragging rights that are the selling point, just like in the international art market.
The commercial value of an NFT is determined speculatively in the NFT market not by the intrinsic quality of the object it grants ownership of. Just like in the art market where values are determined in the art market itself and not by the quality of the art, or in the crypto world where values are determined by speculators not by any underlying economic performance.
Now the whales were able to seamlessly spend vast amounts of digital crypto on NFTs which bestowed high social status on them through the ownership of digital art works that come with the bragging rights beloved by the status conscious rich. Some eye-watering amounts have been paid for these NFTs.
But yet again the physical world with all its regulations, laws and institutions is a problem. What does 'owning' a digital work of art associated with a digital NFT mean? What rights does the NFT's owner have over the work of art? What legal framework exists to enforce those rights? To establish what rights the ownership of an NFT gives you over its linked work of art then the NFT's sales agreement will ideally include a detailed real world legal description of the rights you are purchasing and equally what rights you are not purchasing. This includes copyright, trademark, intellectual property rights, title, etc.. With NFTs the devil is very much in the details and they require real world legal expertise to review them. In fact Beeple himself had to go on record to explain to the world that the $69,000,000 that the purchaser paid for his art work had not bought them the copyright.
How is this somewhat confusing market place working out so far in the real world? Well consider an article in the Financial Times on 13th December 2021 concerning Hermes opening shots in a battle over some NFTs because they "infringe upon the intellectual property and trademark rights of Hermès".
It contains the following statements:
"The decentralised nature of the NFT world means anyone can easily sell an image for thousands and claim it is theirs, a problem that has triggered widespread accusations of copyright infringement."
“Disputes like this are a reflection of the ‘wild west’ nature of NFT collections at the moment,” said Kostyantyn Lobov, partner at Harbottle & Lewis."
"OpenSea, the online marketplace, has been the focus of complaints from other NFT marketplaces such as Nifty’s and artists, who claim work has been lifted and displayed on the platform by illegitimate sellers."
“The people who bought those [NFTs], they can’t get that money back,” Rothschild said. “The blockchain is pretty relentless — you can’t call your credit card company and get it returned, once a transaction goes through, it’s a done deal.”
Similar cases are proliferating throughout the unregulated 'NFT marketplaces' and this really tells you all you need to know about NFTs.
They exist in the Wild West and were originally created to help the whales purchase high status works of art in the digital art market and that has been a lucrative market so far. But nevertheless it is a limited market and is increasingly becoming mired in controversy with law suits now appearing on the horizon that could put a serious dent in it. Therefore there are ongoing efforts to extend the NFT market into the mass market by selling all manner of physical objects through NFTs and allowing NFTs to be purchased using credit cards or funds transfers. But so far this seems to be exacerbating rather than solving the problems and it's hard to see why anyone would buy an NFT with a credit card to give them ownership of something they could have bought directly.
What would be free from all these irritating problems would be a completely unregulated digital 'universe' totally independent of the physical world and its constraints. Digital everything. A metaverse.
Metaverses - Digital Dystopia?
Mark Zuckerberg's Facebook (now Meta) appears to be leading the race to develop the first metaverse which would give it the advantage of setting the de facto standards for operating within a metaverse and for interacting with one from the outside, even from another metaverse. A proliferation of APIs.
Metaverses aim to be complete digital universes that users 'experience' and spend their money in while interacting socially with other users. They will do this via the use of personal digital avatars, similar to the characters in high quality video games. In fact in a real sense a metaverse IS a video game with everyone as players. It will be as if social media and video games have taken steroids together.
Metaverses will contain digital shops selling digital products to your digital avatar and at first there may only be a few such products available but rapidly more digital products will be created and sold in metaverses by new digital businesses. Your avatar will need to wear the latest digital fashions, have the latest digital cosmetic surgery, own a digital Porsche to drive around the metaverse, furnish their digital house with the most fashionable digital furniture chosen by the best of the digital interior designers, and on and on. Already digital land in metaverses is being sold for considerable amounts of money so that digital entrepreneurs have somewhere to set up their shops. Digital products and services will be created by the new kinds of businesses that will underlie the digital economy. How will users pay for their digital purchases? Presumably the favoured option will be a cryptocurrency that's easier to use than the current cryptos, perhaps Meta's Diem (formerly Libra). How will personal and business relations between avatars be controlled, and by whom, in an unregulated digital metaverse? Will your avatar be able to suffer from, or inflict upon other avatars, activities such as digital rape, fraud, GBH, paedophilia, slander, discrimination, insurance claims, assault with lethal digital weapons, stalking, and so on? How will the endless controversies about, for instance, gender identity, be resolved in the metaverse? Will furries finally be able to have avatars with the (digital) bodies they desire? The list is endless and as long as no action is taken the Digital Dystopia gets ever nearer.
The Big Questions
Will metaverses be another unregulated Wild West like NFTs or will they be regulated and operate under the rule of law?
Are we sleepwalking into a Digital Dystopia?
Will enough of the global population become addicted to living in metaverses to ensure their commercial success?
Or will enough people reject them in favour of physical reality like in Iceland?