What ever happened to the metaverse?
What ever happened to the metaverse?
Ready Player ... what now?
It’s Glitch o’clock, so let’s get to it. Of late we have learned: XRP now exists in a state of quantum flux (it both IS and ISN’T a security) and Europe is the future where they have Web 4.0. And we report on the probability that Improbable has figured out the metaverse (TL;DR: probably).
In this issue:
Stuff that has us like 👀
the Ripple decision
blame it on Blur
web 4.0
The once and future metaverse
1. Three things that have us like 👀
The duality of XRP
Crypto enthusiasts are still doing the Dougie over a decision handed down last week by a federal judge regarding the legal fight between the US Securities and Exchange Commission and the cryptocurrency firm Ripple. The judgment, which is likely to be appealed, made one of the most tedious and confusing arguments in crypto even more confusing and tedious. For the moment, though, it also seems like a huge break for crypto in the US.
Let’s start at the beginning. A decade ago, Ripple was a startup building a platform it said would be like Bitcoin for banks. As part of that product, it also created a cryptocurrency, called XRP. Over the next several years, according to the SEC, Ripple brought in nearly $1.5 billion by selling its made-up currency to investors and the general public. Meanwhile, two of the company’s executives, Brad Garlinghouse and Chris Larsen, made $450 million selling their own personal stakes, also according to the SEC. In December 2020, the SEC sued Ripple along with Garlinghouse and Larsen, accusing them of selling unregistered securities.
Not many things are more tedious than the back and forth over whether XRP (or any crypto-token, for that matter) is a security. It hinges on a standard established in the 1940s, called the Howey test, which defines a security as “a contract, transaction or scheme whereby a person invests his money in a common enterprise and is led to expect profits solely from the efforts of the promoter or a third party.”
But few on either side of the argument over XRP expected last week’s galaxy brain take from Judge Analisa Torres: sometimes it’s a security, she said, while other times it isn’t. 🤔
So far in this debate, it’s been common for people to work from the model that a given token either is or is not a security. But the question is whether a given transaction is a securities transaction. In her reading of the Howey test, Ripple’s sales to institutional investors were securities transactions, because Ripple led investors to expect profits, whereas its “programmatic” sales, executed via a trading algorithm on crypto exchanges, were not, essentially because the people on the other side of those transactions didn’t know they were buying from Ripple, so they couldn’t have been led to expect profits. (Here’s the decision in case you’d like to do your own homework.)
Torres’s ruling sure seems like an uppercut to SEC, which has taken an aggressive stance toward crypto exchanges. Last month, the agency sued Coinbase for allegedly operating as an unregistered securities exchange—and in the process the agency argued that 13 of the tokens the exchange lists should be regulated as securities. (Coinbase had previously stopped selling XRP in light of the Ripple case.)
Naturally, much of the pro-crypto crowd is on Coinbase’s side. But many of the same folks would have acknowledged, before this ruling, that the SEC seemed to have a case against Ripple. Well, forget that! Though Torres only said Ripple’s sales via exchanges were not securities transactions, Coinbase and other exchanges apparently took that to mean all sales via exchanges are in the clear—and quickly relisted XRP. It would stand to reason that Coinbase is also a lot less worried about those other 13 tokens.
A Blurry blame game
Before recovering slightly on the Ripple news, the NFT market spent much of July crashing again. What’s unique about this downturn is that a single NFT marketplace is catching the blame.
Blur, which has been the most popular NFT trading venue for months, launched in October 2022 as a challenger to OpenSea. What sets it apart is the way it rewards people for using the platform: it gives users tradeable tokens for doing things like listing and bidding on NFTs. As NFT prices have dipped, and Blur’s token rewards have gone up, in some cases that has enticed people to sell their NFTs for less than what they paid for them because they can make up for that loss in tokens. Some say this mechanism accelerated the aforementioned market meltdown.
The indisputable fact, however, is that many people have deserted the NFT market since its heyday, and these days supply and demand aren’t matching. Sentiment has turned—hardly anyone wants these ugly, worthless jpegs right now—and it’s unclear if or when they’ll be desirable again.
Web 4.0? The EU is on it
While we were busy trying to figure out what web3 is, the European Commission upped the ante. Last week it unveiled its new “strategy on Web 4.0 and virtual worlds.” The Commission appears to be operating on a whole different timeline of web generations than most folks (or put another way, Web 3.0 =/= web3). The commission’s idea of the web’s third generation—what some have called the Semantic Web—is already here and features “smarter search engines, social networks, and recommender systems,” according to the authors of the commission’s new research report. They say the next generation will feature “virtual worlds,” loosely-defined phenomena that will spring from the integration of virtual reality, augmented reality, blockchains, and AI, among other technologies.
While “virtual worlds” sounds a lot like “video games,” the European Commission is at least partly grounded in the real world here. Thanks to new regulations governing online platforms and content, and proposed regulations focused on AI, data sharing, and cryptocurrencies, the EU will likely be regulating many of the technologies and platforms that could make virtual worlds much more immersive and complete than normal games. To have the best opportunity to benefit from these digital spaces, the EU should anticipate the potential for discrimination, and the risks to privacy and safety they may present, the report’s authors argue. “Early assessment will be crucial, with equal emphasis on technological advancements and ethical considerations.”
2. The once and future metaverse
What ever happened to the metaverse? It was an inescapable buzzword until it all but disappeared from popular culture. In reality, it is more complicated than most people imagine, says Herman Narula, CEO of Improbable.
“The metaverse is dead. The metaverse is alive. Facebook is the metaverse. Facebook is in the metaverse. It's getting to a place where this communication is so binary, so simplistic, and so incapable of conveying nuance that it is just confusing companies and consumers,” he says.
The problem, now, is that the idea of the metaverse that got so much hype last year can’t really be until certain fundamental technical challenges are solved at a large scale. Narula should know: he’s spent more than a decade trying to make it real through Improbable, which calls itself “the metaverse technology company.”
In 2012, Narula and two co-founders set out to build a multiplayer online game. By 2017, the company had managed to raise what was the biggest-ever funding round for a British startup—$500 million from Softbank.
From the beginning, the prize has been realistic, immersive virtual worlds. Early on, Improbable built something it called SpatialOS, a technology platform that could simulate real-world systems like transportation infrastructure, telecoms networks, and the behavior of autonomous vehicles. (It resulted in the creation of a military training simulation business that was recently split out and sold.)
Fast forward to April 2022, and it had pivoted to establish a new idea: M², or MSquared, raising yet another $150 million to fund the plan. Like Improbable’s previous systems, MSquared is aimed squarely at virtual worlds—specifically, ones that actually have people in them.
While MSquared was built on code that already existed for Improbable’s games, new components have been designed specifically for high-density worlds. The platform consists of a network and the so-called metaverse markup language (MML)—a set of tools to create digital assets and experiences within online worlds.
The main problem MSquared addresses is one of population. As Improbable co-founder and chief product officer Rob Whitehead explained on Twitter last fall, virtual worlds conventionally have a technical cap of about 50 people gathering at one time. This is due to a critical limit in the server's ability to figure out what every player needs to see in the world and send player updates fast enough.
The required data grows quadratically as you scale up the number of people in a virtual world (so, 10x people means 100x more data). This is because of the more complex way in which players interact with each other. Whether it’s the way players perceive online worlds on screen, or the way sound is engineered to travel in online crowds of people, sensory experiences are designed to be higher fidelity, and much more nuanced than your average deathmatch.
By using AI to optimize bandwidth and advanced distributed networking techniques to process data, among other approaches, Improbable says it has made it possible for billions of operations per second to occur within a virtual world, as opposed to the mere thousands possible in “most current virtual experiences.”
MSquared opens the door to crowded experiences like virtual concerts and sporting events—in addition to game worlds. The firm’s online events can now comfortably host up to 20,000 people—stretching to 30,000 with some modifications, says Narula. This is substantively bigger than other multiplayer games on the market. For example, Epic Games limits the number of players in private sessions in Fortnite to 100 (scaling this number has not so far been a public ambition for the gaming giant).
Just this month, Improbable worked with Major League Baseball to create a “virtual ballpark.” The tech has also been tested with MSquared’s own events where players could meet Arsenal footballer Alex Zinchenko. Meanwhile, back in crypto land, it is being used as the base for NFT darlings Yuga Labs much-hyped Bored Ape Yacht Club game, the Otherside.
Besides his technical mission, Narula, who last year published a book about the metaverse called Virtual Society, is also full of philosophical ideas about what people want from technology shaping the metaverse. He is convinced, for example, that people naturally long to gather in large groups, and that’s part of the reason he’s determined to make such gatherings more realistic online. To foster this, Improbable recently allowed open access to MSquared and open-sourced its MML to encourage independent creations.
Improbable wants the technology to serve as a foundation for an “open metaverse,” meaning users can create and port elements from different online worlds to others, and have ownership over those creations across worlds. So, if you want to buy your avatar an Ed Sheeran T-shirt at a metaverse gig, you could also wear that to fight a multiplayer battle or visit an art gallery in other online worlds, among tens of thousands of other people.
Open virtual worlds represent an opportunity for users to create unlimited value, Narula says. With traditional closed gaming platforms, “there's a cap on how much value those businesses can ever be worth,” he says.
Even as development continues, and Narula weaves his story about the promise of a new way to experience the internet, there is work left to do. Part of that is convincing people that the metaverse, the way he sees it, is not just a fad.
“The economic system we build, the openness of the network, the openness of the languages. Those are all to serve, enabling more and more of those experiences, which is the ultimate value-creating point, I think, in all of this. And if we get that right, great. If we don't get that right, it's not going to work.” —Lucy Harley-McKeown