CHAPTER 2
What Is the Metaverse?

Given enough time, technology imagined in science fiction will eventually become science fact. We've witnessed it time and time again. These phenomena are a mix of incredible visionaries and storytellers literally imagining the future, but also of creators and technologists being inspired by the science-fiction entertainment of their youth.

Jules Verne's 1865 novel From the Earth to the Moon mentions a light-propelled spacecraft nearly four decades before flight was achieved and just shy of a century before the first spacecraft left our atmosphere. In 2010, Japan's IKAROS spacecraft was the first to successfully demonstrate a propulsion method called solar sails that use radiation pressure exerted by sunlight on large mirrors to propel the spacecraft.

Throughout the early 1900s, Edward Stratemeyer dazzled young readers with the tales of Tom Swift—a teenage inventor who routinely had to stave off evildoers from stealing his inventions. One such story published in 1911 was Tom Swift and His Electric Rifle, which featured a stun-gun-like invention Swift wielded throughout the story. When former NASA engineer Jack Cover invented the first stun gun in 1970, he aptly named it TSER after the “Tom Swift Electric Rifle.” The A was later added to help the invention roll off the tongue. After all, “taser” does sound better than “tser.”

Following the 1964 World's Fair, Isaac Asimov wrote an article for The New York Times predicting what inventions would be on display in 50 years. One of his prescient takes was the idea of “robot-brain cars,” which would be capable of self-driving. Today, Tesla is worth nearly a trillion dollars by market cap, largely building its brand and cult following with its innovations in self-driving car technology.

In 2002, the precrime unit imagined in the film adaptation of Philip K. Dick's Minority Report showed us a future when predictive analytics might allow our police force to stop crimes before they happened. Today, Palantir's Gotham software is an AI-powered operating system for making sense of large swaths of data, helping (mostly) government agencies make better decisions. Although Palantir was named from a different story, namely, the “seeing stone” in The Lord of the Rings, Palantir is far and above the leader in predictive analytics and the only company we'd currently bet on to bring the idea of a precrime unit to life.

And then there's Star Trek, a show featuring countless technologies that they envisioned ahead of their time, giving brainiacs and science-fiction nerds enough mental fodder to invent for decades, possibly centuries, to come. There's the Replicator, which could materialize almost any object out of thin air. Today, 3D printers can create everything from jewelry to food to houses. The PADD, or Personal Access Display Device, featured in the 1980s iteration of Star Trek utilized a smooth, touch-screen interface that bears a strong resemblance to the tablet computers of today. There's Star Trek's medical tricorder, which inspired a $10 million USD competition called the Qualcomm Tricorder XPRIZE to push this Star Trek device into existence. We cannot forget about the Communicator, which not only showcased a mobile communication device but also looked like the flip phones we eventually would all carry around in our pockets for a period of time. While the cell phone's inventor, Martin Cooper, publicly credits Dick Tracy's wrist radio as the inspiration, it's widely shared that it was actually Captain James T. Kirk's use of the Communicator that inspired the Motorola cell phone unit to create the device.

What most of these science-fiction predictions all had in common was that the futuristic technology was a byline in the story. These visionary devices enabled the characters to act in uncanny ways, but the characters didn't gawk at how impressive the technology was. No different than how we take smartphones and Amazon's overnight delivery for granted, the devices were an afterthought, an assumption, for the characters. Ultimately, the devices didn't change the characters. They still acted in familiar human ways. However, the technology always changed the environment in which these characters operated.

That brings us to the Metaverse.

From Snow Crash to Meta

Like the aforementioned technologies, the Metaverse also traces its roots back to a novelist. Neal Stephenson, in his book Snow Crash, envisions a number of technologies ahead of their time including mobile computing, virtual reality, wireless Internet, digital currency, smartphones, and augmented-reality headsets. But it's the book's setting, the Metaverse, that takes the cake as his most prescient vision.

The Metaverse in Snow Crash offers society an escape from a dystopian world overrun by corporate mafias and extreme class inequalities. Users access the Metaverse through personal virtual reality goggles or public ports and present themselves as avatars. Class systems manifest around avatars, where public port users have noticeably lower-quality avatars (which is oddly familiar to the current situation with profile-picture NFTs—namely, Bored Apes and CryptoPunks, which designate a higher digital class).

Stephenson's Metaverse is a single hundred-meter-wide road called the Street, which extends for 65,536 km around the circumference of a featureless, perfectly spherical planet. Users can spend their encrypted electronic currency at shops, amusement parks, offices, and a variety of other virtual businesses. They can also purchase virtual estates from the real estate overlord, Global Multimedia Protocol Group.

The book's main character, Hiro Protagonist, leads a drab physical existence in a shipping container, but in the Metaverse, he owns high-end real estate that he purchased before the Metaverse became popular. However, Hiro doesn't concern himself with enjoying the Metaverse's economies. Rather, the plot revolves around his mission to stop a computer virus called Snow Crash that causes Metaverse users to suffer real-world brain damage.

Aside from the numerous examples of Neal Stephenson being a sort of technology Nostradamus, his work on Snow Crash can count two objective claims to fame. One, he coined the term Metaverse. Two, he popularized the Hindu concept of “avatar” for describing digital representation. But in addition to the objective wins, it's the subjective impact of his novel that continues to influence people today.

The designer of Google Earth, Avi Bar-Zeev, stated that Stephenson's ideas in Snow Crash largely inspired him to create Google's mapping technology. Two decades after his book was published, Neal Stephenson became the chief futurist at Magic Leap, one of the leading companies creating augmented reality headsets. But perhaps his largest influence will be on Meta, the company formerly known as Facebook.

For starters, Meta takes its name from the term that Stephenson created. But the influence runs much deeper. One former Facebook data scientist, Dean Eckles, wrote on his blog in 2014 that “at least for a time, product managers at Facebook were required to read Snow Crash as part of their internal training.” Of course, 2014 was also the year that Facebook purchased Oculus and its proprietary virtual reality headset technology. So it's clear that “the Zuck” was preparing his employees for this company-wide shift to the Metaverse for quite some time.

Oh, and by the way, they aren't calling them employees anymore. Now, they're called Metamates.

Meta is going headfirst into this Metaverse vision. They've changed their internal values from past sayings like “Be bold” and “Focus on impact” to Metaverse-minded values like “Live in the future,” “Build awesome things,” and “Focus on long-term impact.” Additionally, they've announced plans to hire 10,000 high-skilled workers in the EU over the next five years to help build this successor to the Internet. Lastly, in 2021 they committed more than $10B USD to their Metaverse division, Facebook Reality Labs, which they expect to continue investing $10B USD into, at the minimum, for the next several years.

But what exactly is Meta's vision for building the Metaverse?

At the core of Meta's plans are the Oculus VR headsets. While Meta shares the common vision that accessing the Metaverse won't rely on VR headsets, it's clearly a major part of their plans to own the hardware on which the Metaverse is largely experienced. Qualcomm CEO Cristiano Amon mentioned in November 2021 that Meta had already sold 10 million Oculus Quest 2 headsets. Since the devices run on Qualcomm's Snapdragon XR2 chipset, it's a figure that we believe to be true.

Still, the Oculus hardware is just one part of their plan. The real Metaverse-building will take place on Horizon Worlds. This is their social VR experience that allows users to explore public Worlds created by the community, in addition to offering tools for anyone to build their own Worlds and deploy their experiences to the public. Since Horizon Worlds was unveiled to all Quest users in the United States and Canada back in December 2021, the company reports that its monthly user base has grown by a factor of 10x to 300,000 people experiencing and building on the Horizon Worlds platform.

The website XR Today outlines the key functionalities when users enter Build Mode on Horizon Worlds.

  • Code blocks: Code blocks are a collection of ready-to-use code snippets and scripts that allow you to define automated events in VR. For example, users can trigger an event to take place when they first enter a VR world.
  • Gizmos: Gizmos are prebuilt object and avatar properties that users can associate with the different elements of a VR world. Users have a Spawn Point gizmo to control where they first land or “spawn,” a Text gizmo to superimpose text on VR objects, a Portal gizmo to define spots where they can teleport, and much more.
  • Sounds: Meta Horizon Worlds includes three types of prebuilt sound effects—event-specific effects, background sounds, and music. Creators can define specific properties to customize the sound experience such as the pitch and the distance at which a sound will be heard.
  • VR physics: Physics effects in Meta Horizon Worlds allow users to create objects that behave like real-world items. These features let you define gravity, object density, bounciness, friction, the ability to grab objects, and other such naturalized interactions. You can also select materials with physics properties like hardwood, ice, and others.
  • Animation effects: Using the tools in Meta Horizon Worlds, you can make an object move around and record the movement as a custom animation. The animation effects can be slowed down, accelerated, and controlled in other ways.

Although there are hundreds of third-party VR apps on the Oculus platform, Meta wants people to build the Metaverse through their Horizon Worlds platform. They want people to experience live events like concerts and conferences on Horizon Venues. And they want people to collaborate professionally in dedicated workspaces on Horizon Workrooms.

Ultimately, Meta's vision is to create the next great communication tool. They're building the Spatial Internet—a successor to today's digital experiences where we are fully immersed in our entertainment, digitally present with our work teams, and “phygitally” next to the people we spend time with online.

The idea that the Metaverse will take over the current iteration of the Internet is a belief shared by many. This bold vision is gaining steam because sales of mobile phones have plateaued and total addressable market (TAM) has been reached. New iPhone releases have become predictable. That's why Apple has been working on an XR device for years. We haven't had a revolutionary app come out in a while because app innovation is dead. That's why creators are now opting to build NFT-based projects, blockchain apps, and DAOs (more on that later in the “Changes to Digital Identity” section). Lastly, our social communication channels are widely believed to be corrupted. That's why Facebook is now Meta and focusing on the Metaverse as the new social communication tool.

We are ready for the next big consumer tech product as devices that fit in your palm aren't providing that novel experience anymore. However, these XR devices that sit on your face and give you access to this promising place called the Metaverse are offering up something completely new.

Before we get into describing all of the nuances that the Metaverse may offer, we would like to leave you with one prefacing statement from Neal Stephenson, whose ideation of this place called the Metaverse sparked the hype for all of this.

In an interview with Vanity Fair, Stephenson summed up his prescient storytelling that is now seen as tech gospel as “just me making shit up.” Innovation comes from human tenacity aiming to turn dreams into realities. Science-fiction writing, on the other hand, isn't limited by rules or engineering boundaries. It is a forbearer for the future of what humans can only dream of until technology catches up.

We want to remind you that the Metaverse is a fictional concept written in a book from 1992. Before the Internet bubble was even a fear in the hearts of Silicon Valley. Before consumer-grade virtual reality headsets were anywhere in sight. Before the movie Avatar showed us just how realistic computer graphics could be. Even before social media and texting dominated our attention.

Even though the Metaverse is a fictional place imagined long before our current consumer tech obsessions, the idea has manifested into real progress. The term Metaverse owns real estate in the heads of every single technologist, future-thinker, and CNBC-watcher who wants to understand how to capitalize on the next phase of the Internet.

While the Metaverse is far from a finished destination, there are thousands of people building it every second of every day. Regardless of how we label the creation of the Metaverse or Spatial Internet, there are innovations happening that we simply cannot call Internet companies because they are so different from anything we're used to seeing. From scarce digital assets to decentralized autonomous organizations to Web3 identities, these are all tech concepts that don't fit into a normal Internet bucket.

Meta's vision of the Metaverse is significant and not to be ignored. But as we address throughout this chapter, the answer to the question of “what is the Metaverse” is a fiction that we all are writing as we go along.

Defining the Metaverse

The Metaverse is the buzzword of 2022 in the same way that NFT was the buzzword of 2021. Facebook changed its entire brand to Meta and is defining the Metaverse as a VR world with social and professional experiences accessed through Oculus headsets. Microsoft followed suit with a more professional-focused vision of the Metaverse, one that starts with the ability to change your video feed to an animated avatar of yourself in Microsoft Teams. And on the off-chance that you're deep into NFTs, then you've probably invested in some NFT projects that promise a Metaverse gaming experience in the future.

Clearly, something is happening “in the Metaverse,” and many people have no idea what it is or what it is supposed to be. The definitions seem all over the place. The use cases are vague. And who in the world wants to live life through a VR headset?

Let me clear the air and first tell you what the Metaverse is not.

The Metaverse is not a single technology. It's not just a place we'll visit in VR. It's not something that can be created and claimed by the next Bezos or Gates.

In fact, the Metaverse is about as boundless and unownable as the Internet, if not more so. Sure, there are entities that have contributed more to the Internet than others. Of course, there are innovations that steered the course of the Internet and influenced the experience of the Web. But we didn't wake up one day with the Internet we see now. It was an ever-evolving thing.

In that sense, the Metaverse is not a destination. The Metaverse is a movement—a movement toward the digital-first livelihood we've slowly been adopting year over year, app by app. The Metaverse becomes more real every time we replace a physical habit with a digital equivalent. We, the digital citizens of the Internet, are manifesting the Metaverse by trading time in meatspace (the physical world) for time online.

I'm particularly drawn to how Shaan Puri described the Metaverse on Twitter (https://twitter.com/ShaanVP/status/1454151237650112512). Puri said that “the Metaverse is the moment in time where our digital life is worth more to us than our physical life.” Puri pointed out that for the past 20 years our work, social life, recreation, sense of identity, and practically every aspect of our lives has become increasingly digital. He points out that people are trading in their Rolex watches and skinny jeans for Bored Apes and Fortnite skins. More kids are playing Fortnite than both football and basketball combined. In another 10–20 years, we will be existing more in the Metaverse than the physical world. According to Puri, “Our attention has been sucked from physical to digital. And where attention goes, energy flows.”

While Shaan's description is a little conceptual for my taste, he is absolutely right that the Metaverse is a metaphorical digital ecosystem that grows and becomes more real every day. Furthermore, it becomes more important to us with every single technology that makes digital life more appealing than its physical counterpart.

There are many digital behaviors that have become nearly ubiquitous in their usage. We find love through apps like Tinder. We file our taxes online with TurboTax. We follow the opinions of complete strangers when choosing our next meal on Yelp. We ask for answers to all of our questions on Quora and blogs. We trust our most precious pictorial memories to be secured by digital giants.

The Internet's foundation is the relationship between creator and community. At every turn, this relationship is what drives its growth. It dictates how, where, and on what we choose to spend our time. The idea of the Metaverse extends beyond this simple view of the Internet to the belief that digital life will continue to outpace physical life.

So how does one prepare for the Metaverse?

Ultimately, being ready for the Metaverse comes down to being ready for the next major changes to the Web. These changes iterate on where we are today but will eventually be the de facto experience in the future.

The Metaverse Represents the Next Digital Shifts

By now, I hope I've made it abundantly clear that we are already living in a fragmented and basic version of the Metaverse. Think of it as a continuum, where on one end is an encapsulation of life without the Internet and on the other end is the Metaverse. These arrows stretch to infinity in both directions. As a society, we're pushing the collective needle toward the Metaverse side—one where we're more connected and reliant on digital escapes, digital solutions, and digital communities.

The invention of Google, which brought us a better way of parsing through digitized information, pushed the needle toward the Metaverse. The invention of Facebook, which invited us all to digitize our identities, pushed the needle toward the Metaverse. By contrast, the rising popularity of digital detoxes, programs that ask us to put down the tech and find better lifestyle practices, pulls the needle away from the Metaverse. On the other hand, apps like Calm, which digitize the experience of meditating and coping with our tech-stressed lives, in a subtle way pushes us more toward the Metaverse.

See what I'm getting at? The Metaverse is a culmination of many applications of technology. There is no one single thing that makes the Metaverse the Metaverse. It's a build-up of technology that makes digital life more appealing, more convenient, more effective, or better in some way.

Therefore, I'd like to outline three major changes happening to the Internet that will advance us many steps on the continuum toward the Metaverse.

  • Identity: A change to how we're identified on the Internet and thus how we experience the Web
  • Value: A change to how we perceive the value of digital assets
  • Immersion: A change to how we are immersed in Internet experiences from community to entertainment to services

These tectonic shifts have been happening for some time but are finally finding some traction in the popular discourse. It's not to say you are behind the times if you haven't already been thinking about them. In fact, you're right on time, maybe even a little ahead by picking up this book.

Understanding these three major shifts, whether as a business owner, a creator, or a consumer, puts you in a position of power, one where you may be able to reap the rewards of these changes before others do.

Changes to Digital Identity

Identity is an important part of a functioning Internet. Think about how often you have to log in to a website before you use it. That login represents who you are and collects nuggets of information on how you behave on the Internet, whether it's the articles you choose to read, the products you buy, the questions you type into a search engine, or the content you spend your time consuming. Even when you aren't logged in, cookies and tracking pixels are working in the background to fill in your profile.

However, this ever-present identity tracking is changing. The General Data Protection Regulation (GDPR) set the precedent that incessant third-party tracking would not be tolerated in the EU. Apple took a stance in 2021, giving iPhone users the ability to block apps on their phone from tracking them across other apps and websites. The advertising industry is preparing for an Internet where only first-party data (just what can be gathered on one's own website) is going to inform all ad placements.

Generally speaking, this is the transition to Web3, which represents a major shift at the identity layer of the Internet and in many cases a move away from centralized services to decentralized systems. When we discuss the history of how the Internet has progressed, we refer to three eras: Web1, Web2, and Web3.

Web1 was the “Read Era,” where most Internet users could browse and read information on the Internet, but publishing anything required a steep skillset. Web2 was the “Read, Write Era,” which brought us social media platforms like Tumblr and Facebook and thus a simple way for Internet users to contribute their own ideas and information to the Internet. Web3 will be the “Read, Write, Own Era,” giving Internet users a means to own their data, the content they create or consume, the Internet services they frequent, and thus their digital identity as an Internet citizen.

At the core of Web3 is blockchain—a trustless, self-governing, peer-to-peer network that develops its security based on the distribution of developers and users on the network. Building Web3 services on the blockchain (also known as dApps, or decentralized apps) is about rewarding the early adopters and those who contribute to growing the service.

I'll color in an example for you.

For many, Dropbox is an essential service. For a small monthly subscription fee, you can store more than a terabyte of files in the cloud and not worry about overcrowding your hard drive. Dropbox is a Web2 company that received funding to build out its own servers and thus offer data storage. As the user base grew, they bought more servers, stored more information, and continued their upward trajectory.

The Web3 equivalent of Dropbox would be Arweave—a decentralized data storage protocol that allows you to store documents and applications in perpetuity. The main difference is that the storage of Arweave is maintained by its network of miners who provide excess disk space in exchange for AR tokens (Arweave's currency). In this sense, it's a collectively owned service that incentivizes the participants.

dApps are the future of the Web. Name any company that provides a service on the Web and I'll name a decentralized competitor. Spotify's decentralized equivalent is Audius. Medium's decentralized equivalent is Mirror. GoDaddy's decentralized equivalent is Ethereum Name Service. The list goes on.

These are changes happening at the company level. While there will still be value and the need for centralized services, dApps will usher in a great amount of innovation. What about you, as a user?

In Web3, your identity is represented by your blockchain wallet address. And you use this wallet to interact with dApps. No more managing dozens of usernames and passwords. It's one login for the entire Internet. Furthermore, your wallet address (and thus your identity) is entirely anonymous, unless you decide to publicly tie your identity to your wallet.

For most people, you'll have one wallet you use across the entirety of Web3 dApps, which allows you to seamlessly carry your encrypted identity across the Internet. Your wallet is not just your login and a place to house your unified identity. It's also your bank. Because your blockchain wallet can hold cryptocurrency and other digital assets, you can transact on the Internet with the same point of access as your identity. It eliminates that need for peer-to-peer financial apps like Venmo, third-party payments through PayPal, or putting your credit card on file with services like Amazon.

In this sense, your blockchain wallet becomes the only point of access you need to interact on the Web.

One of the most fascinating things that emerges from Web3 and blockchain wallets is the concept of a decentralized autonomous organization (DAO). DAOs represent the future of organizing people on the Internet. DAOs form around a mission statement. That mission could be to build a decentralized company. That mission could be of nonprofit nature. That mission could be to create the world's best memes. It doesn't matter “what;” the importance of DAOs are “how.”

How DAOs operate is under the principle that anyone can join and participate, but you're rewarded for your participation through tokens. These tokens, in turn, represent your contributions to the DAO's mission and allow you to vote on the direction and decisions the DAO must make. The more tokens one accumulates, the more they've contributed to the DAO, and the more of a say they have in decision-making.

DAOs work because of blockchain wallets. Because the same tech that houses your identity can also house your financials (in this case the DAO's tokens), they're one and the same.

Let me describe a DAO that a friend of mine is particularly excited for.

  • My friend is an avid NBA fan. Every night of the NBA season you can find him watching games and chatting with people in Discord rooms, on Reddit, and in YouTube comments about the NBA. On multiple occasions, I've heard him talk about how he could run an NBA team better than half these “schmucks.”
  • So, it should come as no surprise that when he heard about a DAO called Krause House, which is organizing around the mission statement of “we will own an NBA team,” he jumped right in.
  • There's a lot that goes into the pursuit of this mission. More than simply raising funds, they need systems for marketing Krause House and growing the network of participants. They need to assemble pitch decks for NBA teams and current owners. They need to design systems for internal organization and how they reward participants. Thus, they have created the $KRAUSE token.
  • The $KRAUSE token is not purchasable at this time; it can be earned only by contributing to one of the many internal projects, some of which are listed earlier. Make a blog post about Krause House, earn a token. Contribute some design work to the pitch deck; earn a token.
  • One day, when they have all of their ducks in a row, they will sell off a portion of the $KRAUSE token pool to raise the funds to buy a team. And whether you purchased $KRAUSE or earned it over time, your share of $KRAUSE will represent your share of ownership in that NBA team.
  • You might be wondering how you can be sure that investing time and energy into accumulating $KRAUSE tokens can translate into worthwhile profits over time. That's a fair question, and while there are no certain answers, a variety of factors affect DAOs, tokens, and blockchain wallets. We'll examine some related aspects of this in the upcoming “Changes to Digital Value” section.

What is so fascinating about DAOs is that they align the incentives and crowdsource the efforts. Imagine if early Facebook were a DAO and every time you got more friends to join or created a post that went viral, you were rewarded with shares in Facebook. The early adopters, the ones who really grow a service, an idea, or a business, win right alongside the founders. Here are some examples:

  • PleasrDAO is a collective that acquires culturally significant NFTs that represent and fund important ideas, movements, and causes.
  • Mirror has created a platform for media DAOs, where users can vote and decide on newsletters and other media projects to fund.
  • The MetaFactory is a DAO focused on design and creating goods for virtual reality games (like the futuristic version of Peak Design).

DAOs combine the new frontier of developing the decentralized Web with this secure form of digital identity, which is why many people believe DAOs will be responsible for building Web3, creating niche communities, and much more.

I know that I just threw a lot of new ideas and jargon at you. We will clarify and color in these examples throughout this book. But I wanted to first and foremost show you the major shifts that are happening at the identity layer of the Internet and what that shift will enable.

Now, on to the value of digital files.

Changes to Digital Value

Digital files are the lifeblood of the Internet. Every time we send an email, we're sending a package of data in the form of a digital file. Every time we open a video, article, or meme, we're opening a shared digital file. Our entire existence on the Internet is an existence of creating, sharing, and opening files. However, what's the value of a digital file?

One might describe the value of a digital file as a means for passing knowledge on. Maybe the file's value is in the laugh it prompts. Or the action it inspires. There are many ways in which we place value on digital files. But one value that digital files haven't encompassed is a monetary value.

This all changed with NFTs.

The year 2021 was the year of the NFT. More than $11B USD of NFTs were bought and sold over the course of 2021, successfully bringing the concept of buying and selling scarce digital files into the public discourse.

If you're unfamiliar, NFTs use blockchain technology to issue a certificate of authenticity that tracks that file's provenance and history on the blockchain. In essence, it's a way to claim that a certain digital asset is the original, with the ability to verify that over time.

NFTs come in many forms. Some of the most popular include the following:

  • Avatars: Avatar NFT collections usually have thousands of unique avatars that vary in rarity based on their traits. In a digital world where social media and online profiles are mainstays, the avatar is a focal point.
  • Art & Media: These NFTs are one-of-one creations from artists, musicians, programmers, and creators. They're the digital equivalent of art we collect today.
  • Trading Cards: From baseball cards to Pokemon cards, trading card NFTs can either exist for collectible pleasure or be used in an actual card game.
  • Virtual Worlds: Like a next-level Minecraft or Fortnite, virtual world NFTs offer people the ability to own a piece of the world that they're existing in, whether it's virtual real estate, avatar accessories, or goods.
  • Access: Access NFTs take the concept of the backstage pass to the next level where engagement with your favorite teams, celebrities, and entertainers is limited to whoever holds the NFT. Access NFTs are also great for gating access to any type of content, experience, or community on the Web.
  • DigiPhysical Goods: This category of NFTs comprises the ability to build and customize objects that are native to or imported to shared virtual worlds, in much the same way that players can customize their character in Fortnite, except with ownership and the ability to resell items. Think of them as digital Nike apparel.
  • Gaming NFTs: Blockchain games offer players a two-pronged experience whereby they can collect their NFT game components and also compete with their owned NFT items.

To the average onlooker, NFTs may seem like a wildly speculative market where people are coughing up thousands or millions of dollars on silly digital art. In some cases, they're right. But what's important is the massive change in mindset this brought on.

People are beginning to find value in collecting digital content. They want to be the one true owner of a digital file. Whether that's for bragging rights, historical significance, or to be a part of a community, people are collecting NFTs in droves. And this means a lot to anyone who offers digital services or creates digital content.

NFTs build upon some of the Web3 concepts described in this chapter's previous “Changes to Digital Identity” section. Furthermore, it turns out that scarce digital files (NFTs) can serve many functions in the growing Metaverse.

Digital Respect and Signaling Identity

It's become quite common for people to change their Internet profile pictures to avatar NFTs. The reasons are twofold. On one hand, it's a way of signaling you are a part of a collector community. On the other hand, it can work as a way of showing off.

One of the most universally understood use cases of NFTs is the bragging rights associated with owning certain rare NFTs. In the same way that you might flex your wealth in meatspace by wearing a Rolex or driving a nice BMW, the digital world equivalent is owning and showing off your collection of rare NFTs.

For instance, one of the first collections of NFTs to ever be created in 2017 was the CryptoPunks—which are 10,000 pixelated characters with randomized traits, some traits more rare than others. Currently, you cannot purchase a CryptoPunk for less than 87 ETH (equivalent to about $400,000 USD). It's a major status symbol to own one.

A couple of prominent NFT evangelists who own CryptoPunks have changed their entire Internet identities around the Punk they own. For instance, there is punk4156, punk6529, and punk2476. These three are all huge influencers on Twitter whose identities are based on these arbitrary, rarified digital collectibles. The Twitter user @Seedphrase rose to fame as an early NFT adopter by setting a record purchasing the only seven-trait CryptoPunk for $15,000 USD in 2020. That same NFT is now valued upward of nine-figures and Seedphrase dons this CryptoPunk as their profile picture with pride.

This cool factor has bled over into the celebrity side of things. Jay Z changed his Twitter profile to the CryptoPunk he owns. Steph Curry changed his to the Bored Ape he owns.

NFTs are an identifier.

Even if you don't own an expensive NFT, an NFT can also work to show the community and beliefs you're part of. For example, many have changed their profiles to the Fame Lady Squad NFT they own. This project was founded under the principle of the first fully-female-founded NFT project. When it was later discovered that a group of men were behind it, the community seized control from them. Today, owning and showing off your Fame Lady Squad signals you're with the community of people who believe in women empowerment.

In Web3 our means of having a digital identity is changing. NFTs build upon this concept by allowing us to build communities around scarce and exclusive digital files. This is further shown in the ability for NFTs to unlock exclusive experiences.

Access to Exclusive Internet Experiences

Gating experiences on the Web is no easy feat. Whether that's content like books or movies, articles on a publication's website, or an exclusive Zoom call among professionals, the process relies heavily on the email + password combination we're all too familiar with. Furthermore, it's a one-to-one transaction where it's difficult to transfer or give these gated experiences.

As previously discussed in the “Changes to Digital Identity” section, with the emergence of digital wallets as your Internet identifier, this all changes. Because now an NFT can act as the key to unlocking these gated experiences. Here are a few examples:

  • If you own a Metaverse HQ NFT, then you have access to an exclusive Discord chat group of 1,500 active NFT traders that are all sharing their insights and strategies for investing in NFTs.
  • If you own a Bored Ape Yacht Club NFT, then you have access to the BAYC Bathroom, which is a digital bathroom that you can write graffiti on.
  • If you own a MetaKey NFT, then you are given exclusive rights to mint future NFT collaborations with other creators they have in the pipeline.

Turning NFTs into access keys works by using tools like Collab.Land or Unlock Protocol, which provide ready-made software for checking people's wallets to ensure they hold the Access NFT they require. Whether that's a private Discord chat group, an article on a website, or a private party in a virtual environment like Decentraland, these tools will “check your wallet at the door” and admit you only if you hold the NFT that unlocks that experience.

This has major implications for media companies that want to monetize their content, communities that want to keep their admissions low, or anyone who wants to build something on the Internet that requires payment. In this transitory period where usernames and passwords are being replaced by NFT access keys, we're going to continue seeing these products be over-monetized. It will feel as though everyone and everything is financializing access to their product, service, or content. However, this period won't last forever. Ultimately, the need to attract users will outweigh the need to monetize you, the consumer, and free NFT access keys will be widespread.

We think the coolest part about it is that these access keys are transferable. If you grow tired of one of the communities mentioned earlier, you can sell it on an NFT marketplace and recoup your investment. In addition, you're also the proud owner of an NFT that you can display and talk about. These are two concepts that don't hold true if you were, let's say, to purchase a digital subscription to The New York Times. There is, of course, always the option to create nontransferable NFTs, thus rendering the resale behavior impossible. However, it's simply not in the ethos of Web3 creators right now to limit the transferability of NFTs. This may change when NFTs begin being used to include personally identifiable information (PII) such as a digital health record. For the time being, though, resale transactions and transferability are a major part of what makes the NFT market possible.

Crowdfunding 2.0

Kickstarter manifested the creator economy we know to rule the Internet today. In somewhat of a nod to Muhammad Yunus (the Nobel Prize winner for his concept of microfinance), Kickstarter showed us that a good idea, product, or story should not be stifled by what your local bank manager deems as a sound business plan and a safe investment. No, creators should be empowered by a community. Furthermore, that community can consist entirely of customers who buy something before it even exists.

What we're describing is the idea of crowdfunding. For many of us, Kickstarter was the first time we were ever exposed to crowdfunding. Kickstarter showed that there were hundreds or thousands of people around the globe who experience the same problems and furthermore that there is actually a builder out there who is making a product without those problems.

Kickstarter may not get the shine or accolades it deserves, but an unfathomable number of products have been crowdfunded thanks to Kickstarter. Countless companies have been born on Kickstarter. While there isn't anything inherently wrong with crowdfunding, other than a creator who raises money and doesn't follow through with their promise, NFTs take crowdfunding to the next level. And that level is a sense of ownership in the project you help crowdfund. Effectively, this takes us from traditional crowdfunding to crowdfunding 2.0.

Take Daniel Allan, for example. He's a music producer who has been working in the industry for some time and really thinking through his next move. As opposed to signing with a label and locking himself into how the label wants to grow him, he turned to a platform called Mirror that acts as sort of a crypto-based crowdfunding platform.

Daniel sold half of the royalties to his upcoming album, titled Overstimulated, in exchange for advance funds to help him fund the project. He issued 100,000 $OVERSTIM tokens and sold half of the supply, at the convertible rate of 1 ETH = 1,000 $OVERSTIM, which at the time was around $147,000 USD. Furthermore, he created three NFT packages at the price points of 0.1 ETH, 0.25 ETH, and 1.0 ETH, each NFT being composed of a visual collectible, the royalty contract details, and the respective amount of $OVERSTIM tokens.

In just a few days, 87 people purchased an NFT from him, and he raised a total of 50 ETH for his EP. He outlined how he planned to allocate the funds, the timeline for the EP, who was going to be featured, the royalty details, and so on. In the process of crowdfunding money for his project, he simultaneously crowdfunded a community of supporters. Each of these supporters was a marketing vessel. Those NFTs were in their wallets. They'd see them every day and think about how they could help promote and make the album go further. The incentives were all aligned.

The beauty of crowdfunding via NFTs is that all the royalty details are coded into the smart contract. There's no way to cut people out of a deal or cheat anyone. It's public information.

Others have used Mirror to crowdfund e-mail newsletters, such as Dirt. One creator by the name of Emily Segal used Mirror to crowdfund her next novel. Even a documentary called Ethereum: The Infinite Garden was funded on the Mirror platform.

Not all crowdfunding efforts come with monetary royalties. In some cases, the NFT fundraising either acts as an access token to whatever is being created or is more benevolent in nature—where holding the NFT is simply a way to show that you were an early supporter.

For instance, Stoner Cats is an NFT-based animated series with a star-studded cast including Mila Kunis, Ashton Kutcher, Vitalik Buterin, and Jane Fonda. They sold Stoner Cats avatar NFTs to fund the series. And only those who own one of the NFTs can watch the episodes.

Another futuristic application of NFTs is Parallel Alpha, which is an NFT-based card game that sold NFT cards for a game that didn't yet exist. The funds raised through the NFT release funded the development of the virtual environments where the card game can take place. And naturally, you must own Parallel Alpha cards in order to play the game.

Overall, issuing NFTs as a means for crowdfunding will continue to be a dominating reason that people purchase scarce digital files. It's a more intimate and dynamic way of crowdfunding as a creator because you're aligning the interests of collectors with your project. And the NFT in your blockchain wallet acts as a continuous reminder that you're part of this crowdfunded mission.

NFTs can trace their roots back many years. As early as 2015, people were minting their digital files onto the blockchain. But it was only in the past year or so that people actually started to care to place a value on said digital assets. It was a behavioral shift.

The fact that people now care to own scarce digital files has major implications for the next evolution of the Internet. It changes how economies in video games function, allowing for players to sell their in-game assets after they've grown tired of them. It changes how we build communities, allowing us to create and reserve experiences for people who own those files. It changes how we crowdfund. It changes how we uniquely define our identities. And this is just the start.

The key here is that scarce digital file ownership builds upon the new layer of digital identity we'll have with our blockchain wallets. And that makes immersive Internet experiences more possible.

Changes to Internet Immersion

In the end, we all want to hang out in places on the Internet where our friends are. We want to connect with people around our shared interests. As those niche communities grow, brands and companies will do anything to get in front of people (their customers) in those environments.

What's become entirely evident is that the shopping mall has been replaced by Fortnite and Roblox. It's where kids go to hang out and loiter with their friends. Both video games are constantly offering new experiences and ways to upgrade and outfit one's characters. The games collaborate with brands and other media companies to merge what's cool elsewhere on the Internet with an experience in the game.

Travis Scott launched an entire Astroworld concert grounds in Fortnite. Before Travis, it was the DJ by the name of Marshmello who had a concert in Fortnite. Ariana Grande has done the same. Other brands, such as Balenciaga have launched exclusive character skins in the game. Louis Vuitton made a similar play in League of Legends. It's likely what spurred Nike to start filing a variety of patents on digital merchandise.

Let's jump over to Roblox, a game with a lot more freedom to create and play mini-games within the Roblox ecosystem. Following the worldwide success of the show Squid Games on Netflix, people began creating Squid Games experiences in Roblox. One such game counted more than 700 million people who played it. It doesn't take a genius to realize why Netflix shortly thereafter announced plans to roll out Netflix Gaming.

This is the future of Internet immersion: brands and companies showing up in cool ways where people are spending time. The experience of going to the Balenciaga website is vastly different from downloading and wearing one of their outfits in Fortnite. The impact to Balenciaga's bottom line is still substantial in both instances, but in the Fortnite example, they've created an asset that can exist in perpetuity, making it a future-proofed product.

If we want to talk about the first people who will truly experience a shared virtual world, then it's the youth today who are hanging out in Fortnite or Roblox. As they age and their tastes refine, their behaviors will still remain. Many may still prefer to socialize in virtual environments. They may prefer to work in the virtual setting. Therefore, capturing the youth is key.

That doesn't mean there aren't new immersive experiences for adults.

When it comes to networking, more connections are now made on places like Clubhouse and Twitter Spaces than on LinkedIn. These audio social experiences are a more intimate way of connecting with people than viewing someone's professional profile and messaging them.

There's the entire idea of a “corporate Metaverse” that a few companies are building. This corporate Metaverse iterates on the virtual work apps like Zoom and Slack. For example, Gather allows companies to build an 8-bit video game style office environment with desks and meeting rooms. Employees access it through their web browser, they walk around and connect with each other through their character, and it integrates live video chat as well to get your meetings done.

Both Facebook and Microsoft previewed new work-from-home features that bring the concept of avatars onto video calls. That way it offers employees a break from Zoom fatigue and also gives them a fun way to customize their avatar.

On an entirely different thread, Tinder showcased an interesting new immersive way to find potential partners. They launched a game called Singles Town, where users were represented by an avatar. They could walk up to other avatars (single people) and spark up a conversation with them.

Overall, the world is growing tired of interfacing with static websites and apps. We want to be wowed again, whether we know it or not. That's the large reason why Facebook has rebranded to Meta and doubled down on immersive environments as a way to reconnect with the people.

But the question remains: what environment will house all of these new immersive Internet experiences?

Everyone uses the example of Ready, Player One, the movie that showed us a future where people strapped on a VR headset and could do everything from explore to socialize to game to work to build and more in one discrete place. In essence, it's what a place like Decentraland is building. If you watched Mark Zuckerberg's keynote on the rebranding to Meta, you might take the hint that they're trying to build a sort of unified “Metaverse” where all social and professional opportunities take place.

However, in all likelihood, the next immersive Internet experiences will be built in silos.

It Starts with Web3 Communities

The implementation of a siloed Metaverse will likely take shape via Web3 first. This is because creating interesting virtual experiences is far more about the strength of the community you can bring to the space and less about what you do once you're there.

For example, consider The MetaKey. A company has minted NFTs that act as keys to unlocking any experience that the MetaKey team wants to create. They have nearly 5,000 people who own one of their MetaKeys. This gives them the power of creating an experience and delighting 5,000 people whenever they want. They literally get to be the guides and hold all 5,000 people's hands through “the Metaverse.” They could create an event hosted on a website and tell people, “Hey, pop up over here; we have this cool virtual event taking place.”

Another interesting Web3 community, for example, is MVHQ. The MVHQ team collaborated with another community called Royal Society of Players to create an exclusive poker tournament. Only holders of the tokens in either community were allowed to join this virtual poker night and have a chance at winning a prize. (This could've been a collaboration with a company like Heartland Poker Tour, who is still stuck in Web2.)

Immersive experiences make sense only where a community already exists. It's why Balenciaga went to Epic Games to reach the millions of gamers in Fortnite.

Web3 communities will be the curators and onboarders to the new immersive Web. Here's a hypothetical example. Take a food blog like TheSpoon. Let's say they want to begin moving away from the static blog experience to a virtual experience. As opposed to creating an entire virtual environment on their own, they can collaborate with a Web3-ready Foodverse like OneRare. OneRare is building a food-related virtual world where players can engage in all sorts of food-related games and collectibles. TheSpoon can tap into that existing user base and create the next version of their media empire in OneRare's Foodverse. And if TheSpoon wants, they can give access tokens to all of their current subscribers in order to bring them over to this new experience.

In other words, the effort that companies have made to build their current web presence isn't entirely moot. But they need to think about how they can work with future-thinkers who are creating the Web3 equivalent. Ultimately, they must work together to win together.

As I've emphasized throughout this entire chapter, the Metaverse is built in small increments. We're not going to just simply wake up to an entirely new virtual way of engaging with Google Docs, The New York Times, or Nike. These experiences will be upgraded and iterated in trial runs. We'll get a small taste here and there.

This entire concept of a shared Metaverse, like Ready, Player One, showcased where all of these immersive experiences are accessed in one location is possible, in theory—but only if we can agree on a set of open-source protocols that make this portability between competing Metaverses possible. Surely, Meta would like to be the company to make that come to fruition. But in all likelihood, we'll each get a personal Metaverse before that, in the same way everyone experiences their own personalized Internet of their Own Interests right now.

What's the Metaverse's Interface?

The question that everyone seems to be wondering is “where will the Metaverse be accessed?” Meta believes it is in their Oculus VR headsets. While that may be the unanimous place at some point, realistically the Metaverse will be device agnostic. Web browsers, mobile phones, and TV screens all work just fine to transport people into immersive experiences.

When I look at a conference like ComplexCon, which has transitioned to the virtual stage possibly better than anyone, that entire “virtual conference” can be experienced through a web browser. And it's incredibly engaging.

Decentraland—which is one of the clear front-runners of creating a virtual world for gaming and socializing—is accessed only through your web browser.

Roblox and Fortnite, which are arguably two of the greatest use cases we have of a shared virtual world, are played on TV screens, tablets, and mobile phones.

Contrary to popular opinion, a VR headset or AR glasses are not necessary to fully immerse someone in an experience.

It's important to note that Meta is making a huge bet on VR. And I don't think I could ever bet against Zuckerberg or the amount of money his company is pouring into this endeavor. This is their chance to be the thought leaders once again and introduce the masses to a new technology. They have the user base. But then again, so did BlackBerry, Yahoo, and Nokia. Each brought us a new way of using technology, but they weren't able to sustain their places as the leaders.

Ultimately, the next wave of the immersive Internet must create easy on-ramps for creators to build experiences, and they must design their products in such a way that the same kids playing Roblox today will be interested in what they have to offer in a decade.

Preparing for the Metaverse

We're moving toward a more decentralized Internet, one where cookies and tracking pixels are made obsolete by a better form of digital identity management. Big changes are happening to the Web, and you need to be prepared.

The newest buzzword to capture the imaginations of creators and businesses is the concept of “the Metaverse.” And everyone seems to be scrambling to define it, strategize for it, and create their own version of the Metaverse. But the problem remains that nobody truly knows what the Metaverse will be.

In the late 1990s everyone thought that the Internet's biggest businesses would be built on premium domains like Pets.com or Computer.com. We later found out that the true Internet giants would be built by enabling information sharing and through building bridges for niche social communities to form. Ultimately the name didn't matter if your brand and your community were strong.

Today, Starbucks' mobile app processes more than 70 million transactions per month, more than most banking apps combined. Who could've predicted that a couple of decades ago?

In all actuality, what we believe the Metaverse will be is probably not what we'll come to experience. That's just a reality of Internet innovation. The best thing you can do is to stay abreast of the changes happening to the Web. Web3 and blockchain wallets. Buying and selling digital files through NFT protocols. Designing immersive experiences atop existing games and virtual worlds. These are the main changes happening to the Internet today.

The upcoming chapters will help you better understand these tectonic shifts. We'll highlight a wide array of creators at all levels who are building the next major changes to experiencing the Web. We'll outline how innovators are thinking about the next iteration of the Internet. We'll make it clear where the gray areas, the gaps, the unknowns exist—so that you can think about how to fill them in.

Every time we replace a behavior with a digital service or experience, we make the Metaverse more real. As a decision-maker, or as someone who has invested considerable time in digital, you need to foresee how digital life is changing for consumers, businesses, and creators alike. After all, our future depends on it.

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