VR is a Killer App for Blockchains

I spent a weekend with 10 execs of some of the largest companies working on VR to talk about how to responsibly create the “Metaverse” — the name for an immersive virtual reality world taken from Neil Stevenson’s 1992 VR novel Snow Crash. The idea is pretty simple: if people start living in VR, its rules and systems will be just as important as the “real” world’s.

To illustrate why, imagine if everyone lived in World of Warcraft or the virtual world that Facebook is building. People’s social lives, assets, and jobs will be tied up in this world. And that means that the central company running the world could take it all away on a whim should it suit them.

This is the source of a massive plot hole in the recent popular novel Ready Player One. It describes a virtual world, OASIS, where people spend most of their time. A huge corporation called Innovative Online Industries (IOI) owns and runs the OASIS. A race to find a treasure in the world ensues. Normal people end up battling employees of IOI to find it. While the book is entertaining, since IOI owns and controls the OASIS’ servers and databases, they could do whatever they want: delete other people, access any information, change the rules of the world, and print themselves infinite currency.

So it’s pretty clear that one company can’t control the Metaverse — otherwise it could take away everything you own, change who you are, or even delete you.

Blockchains are an answer to many of these hard problems. If your assets are on a blockchain, no single operator of a world can take them from you. If your identity lives on the blockchain, you can’t be deleted. Perhaps most interestingly, just like bitcoin provides the incentives for computers all around the world to run the most powerful computing network in the world — more than 500 Googles or 10,000 of the world’s fastest supercomputers — what if the servers running the world were similarly decentralized or all that compute power went towards running the world?

If all this sounds far fetched or too futuristic, World of Warcraft had 12 million players spend an average of 22 hours a week in their world— and that was in 2010! Once in, people go deep: 90% of players play more than 10 hours a week. For better or worse, I am speaking from experience. And these economies become very real. At one point over 100,000 people were making their living in World of Warcraft by earning and selling gold, the in-game currency.

When people think about the “Metaverse”, they usually think about an immersive visual and sensory experience. The definition proposed for the Metaverse at the beginning of the weekend retreat was “a traversable network of visually immersive, synchronously multi-user heterogeneous virtual worlds”. However, the visually immersive part is the most superfluous. The most important part — what makes these worlds traversable and connected — is the shared data layer between them. Without a shared data layer it’d be impossible to travel around seamlessly as the same virtual “you”. Since humans relate much more to crazy visual experiences than a data layer, this makes sense. However, I’d argue the shared data layer is what makes the Metaverse the Metaverse. And that data layer will be blockchain-based.

When you drill down, blockchains are really a shared version of reality everyone agrees on. So whether it’s a fully immersive VR experience, augmented reality, or even Bitcoin or Ethereum in the physical world as a shared ledger for our “real world”, we’ll increasingly trust blockchains as our basis for reality. The lines between these virtual worlds and the “real world” will blur quickly. If someone builds a peer to peer lending app on top of a blockchain so that people can lend money from the US to Brazil, that exact same app is immediately available in every virtual world because it all runs on the same blockchain.

It will be interesting to see how virtual worlds develop. It wouldn’t surprise me if people start by building closed worlds, especially the large incumbents (ex: Facebook) who have big private databases and entrenched network effects around them to defend. Just like the walled gardens of AOL and CompuServe at the beginning of the internet, that could work well for a few years, but eventually will get steamrolled by open worlds the same way AOL and Compuserve got steamrolled by the open internet. If that’s the case, there’s a huge opportunity to start by building with an open mindset.

I suspect a successful business model to create these worlds will be the blockchain-based token model. The second largest crowdfund in history was for a virtual world — Star Citizen — for over $140m. Over $250m has been crowdfunded on the blockchain in the last year. Developers can fund the creation of their worlds this way, give people incentives to join their world through the token of the world, and use that native token for governance.

I walked away from the weekend realizing virtual worlds are going to be one of the first killer apps for blockchains and perhaps the deepest users of them. I’d guess blockchains will be the full blown backbone of virtual worlds — the system for currency, assets, identity, even governance — before doing the same in the “real world”. Which is where I think we will end up in the real world eventually; it’s just a matter of which goes first and how long until it’s the case for both.

Thanks to Brian Armstrong, Barry Schuler, Mike Capps, and others for contributing to ideas in this article.