The Metaverse: transforming modes of production
By Dr S.G. Anjara and K.A.F Röhrig, PhD.
This is a follow-up of our inaugural article, The Metaverse: what you need to know.
In our previous article, we argued that the metaverse is not merely an application of cutting edge extended reality technologies on the internet of today. The full potential of the metaverse is made possible by the evolution of the internet into Web3 via the inception of digital property rights.
Sean Stein Smith argues, “In order to realize the true potential of this space there will need to be a transparent and traceable method to 1) conduct transactions, and 2) interact with each other; blockchain and cryptoassets provide a potential answer to this need.”
Without the realisation that decentralisation and transparency are key features of Web3, it is easy to assume that the metaverse will be plagued by the same issues that makes Web2, the internet of 2020, problematic. The natural ramification of this assumption is an external locus of control — the belief that it is the responsibility of regulators to do something, and ‘web giants’ to comply. Mentioned much less often is the perhaps subconscious belief that ‘I’ (the average individual human) can’t do anything about it.
It’s a well known effect that chronic powerlessness may result in learned helplessness. This learned helplessness is ultimately the Orwellian mechanism by which Meta & co have been keeping users on their platforms. The argument goes that “everything I care about, friends, people I follow, etc, is here, and we’ll never manage to move all at once, so a new network can’t succeed.”
We hear arguments of this sort often in private and public conversations; it’s always a variation on the theme of “the big powerful guys are always going to be big and powerful because, look, they’ve been big and powerful so far and what can we do?.” And given what we know about how the human brain uses heuristics to emulate rationality, it’s not surprising that many people think this way. After all, if the status quo is encoded in our heuristics, what could make us believe that an alternative is at all possible?
Using heuristics is at the heart of various cognitive biases and fallacies. When we use heuristics, however, there is a danger that we ignore valuable information that seems contrary to our beliefs, and conversely overvalue less relevant information.
History tells us that this pessimistic view is not justified. So we submit to you the opposing proposition:
Incumbent power is always vulnerable. And especially so in times when a revolutionary new technology is on the rise.
The revolutionary new technology we’re talking about is, of course, digital property rights.
To explore this proposition, we will discuss how the ramifications of digital property rights in the metaverse could transform how value is created in the economy, aka the modes of production. After all, we believe that those who control the modes of production ultimately own society. And we follow Marx in the observation that the history of revolutions is a history of changes of modes of production.
We’ll highlight a recent shift in the philosophy of employment, powered by Web3, which transforms modes of production and will likely shape our lives in the future. A word of caution: Web3 is still in its infancy and therefore prone to teething issues, corruption and failures. What we say here is the likely path we see going forward but by no means set in stone.
To set the scene, it is worthwhile returning to Jenna Burrell and Marion Fourcade’s paper, The Society of Algorithms. Burrell and Fourcade argue that a new occupational class, the coding elite, has consolidated power in the last two decades through controlling the digital means of production. Labour (or rather, data,) has been extracted from a newly marginalized workforce: the cybertariat.
Jon Radoff further alluded to the duality in his article on Jobs in the Metaverse. Radoff acknowledged that there is a great multitude who will be involved in building the metaverse, but he distinctly focused on what the cybertariat would do in the metaverse. The recently released Fjord Trends paraphrased Radoff: “creators will make assets; performers will create real-time content; bridgers will connect the physical to the digital world; participants will learn, explore and enhance; builders will design and organize experiences; the community will help, attract and engage.”
Against this backdrop, we discuss how modifications in modes of production are core to why jobs in the metaverse differ to the jobs of 2020. We begin by shining a light on how the coding elite have started organizing themselves in decentralized autonomous organizations, pulling the cybertariat into these organizations as they mature.
The Philosophy of Employment
Have you ever volunteered for a cause you believe in? Animal rights, global warming, systemic racism, perhaps. What if you could do what you are extremely good at, for a cause you believe in, and in doing so earn tokens which allows you to vote to shape the direction of that campaign or cash out and splurge?
Your reaction to this is likely one of two: Either, this sounds utopian to you… unrealistic… too good to be true. Or, you know that this describes the work culture already present today in the small but fast growing digitally native economy, aka the metaverse.
The metaverse is expected to dramatically alter the nature of employment throughout the entire economy via the pivot towards Decentralized Autonomous Organizations (DAOs).
DAOs are fluid collections of like-minded individuals with shared vision, who work together to make progress towards their personal and collective goals, without geographical constraints. Strictly opt-in, the workforce powering DAOs are individuals with intrinsic motivations for being there.
They are member-owned communities without centralized power of leadership, yet provide a safe way to collaborate with strangers and commit funds to a specific cause. Members move between DAOs, or may be part of several at the same time, wherever their skills fit and where there is alignment with the goals. Individual members contribute work based on interests, rewards, or a combination of both. Some might argue that this is really a return of society to its natural anarchic origins before society stratified into workers and owners.
Of course, this fluidity is not exclusively positive. The fluid society is a well studied phenomenon in the social sciences, and it comes with many negative side effects for some people. Characteristics of working in a DAO: inherently lower job security, echoes of the gig economy, more personal responsibility, lower societal cohesion all have well documented negative effects on mental health. While we don’t want to downplay these negatives, we also want to emphasise that they are part of a century-spanning structural trend that started with the enlightenment, and not a specific flaw of the metaverse, or even digital technologies in general. (It is interesting to compare and contrast the adoption of digital technologies in the West to say China, which is on a very different cultural trajectory despite being exposed to the same technological trends.) Ultimately we deeply believe that:
- new empowering technologies are massively net-positive for our society;
- there are always people who are unintentionally left behind or missing out in societal transitions, and we have to pay attention to them and do our best to let them share in the benefits.
From pull to push
The core paradigm change that comes with DAOs is the transition of employment from a “pull” to a “push” model of work. In the “pull” model a company says “we need to hire someone to do X”. In the “push” model, an individual says “I can contribute an idea / work to this DAO, so I’ll write a proposal and submit it for vote.”
The question that comes up the most when talking about how DAOs work is:
“Why would a business decide to give up all control and ownership over its assets to its users?”
Indeed, this seems to go against everything in the traditional rationale of business, which is about protecting one’s competitive advantage, know-how and building a moat.
The quick and naive answer to this is simply: it works. It has become a fact of life in Web3 that projects which embrace the values of transparency, community ownership and decentralization attract more users and more talent. Consequently they grow faster than their Web2-style traditional competitors. This is true for Web3 native projects (think Uniswap or Maker) but also for traditional companies moving into the space (think Nike NFTs or Christie’s auctions). The virtuous cycle of more adoption and more builders for Web3 platforms is what has been crushing Web2-style projects left right and center over the past months. This is the continuation of the open source trend in traditional software. We already cited Microsoft as a (perhaps surprising) flag bearer of this new business logic with Github and Minecraft.
Another often cited reason is regulatory arbitrage: DAOs try to escape the red tape that comes with the traditional system. We think of it like a self-made regulatory sandbox. (The sector has been calling for a sandbox approach for a long time, but that’s a topic for another article.) The jury is still out on whether this self-made sandbox will actually offer the protection from prosecution it promises, as regulators have adopted the DINO meme to frame the accelerating crack-down. But in the meantime it’s clear that the sandbox has enabled insane amounts of creativity, ingenuity and progress (at the cost of allowing people to make bad investment choices).
Capital and Labour
While the two reasons above are certainly valid, there is a deeper level of reasoning behind the wild success of DAOs: To get there, first consider the dual role traditional companies play in our economy: companies are vehicles for coordinating capital and labour. They coordinate capital by owning, accumulating and distributing assets. They coordinate labour by hiring and firing, training and deploying human resources through the internal chain of command and remuneration. All of the above is supported by the law which entitles companies to its own rights, and the enforcement of those rights by the state.
It may seem odd at first to mentally disentangle the coordination of capital and coordination of labour. Modern companies are powerful precisely because they merge the two. But bear with us, because this is an important step to make when understanding what makes DAOs different. (On the side: the dynamics between capital and labour is famously discussed by Marx, and we think that Web3 actually has the capacity to solve some of the long-standing issues his work raised.)
You can probably already guess — given that the main theme here is digital property rights — how DAOs fit into this story: They provide a real world mechanism for disentangling labour coordination from capital coordination by lifting both into the digital realm, thus turbo-charging the labour productivity as well as removing the nasty exploitative and consumerist undercurrent that always plagued traditional capitalism. This is made possible by the immutability of the blockchain.
For a concrete example take again Uniswap. The app was developed by a handful of coders, became insanely popular and then at some point turned itself into a DAO by gifting governance tokens to their users. The core team behind it is still driving most of the development and has a strong voice in strategic decisions. But the protocol is now owned by the users, who already have made decisions against the core developers’ opinions. At the end of the day, the developers now work for the users.
Governance + Identity = Ownership ?
With blockchain technologies, DAOs can utilize financial incentives through the exchange of tokens. Tokens can be traded, but DAO members earn tokens in exchange for their work. All activities are transparent and fully public. Members can set the ‘price’ of their output in a bidding system, effectively opening up the free market.
Curiously however, we have observed that individuals who are strongly aligned with the core goals of the DAO often offer to do work at very little cost… compensated instead in a different kind of currency: social clout (mediated through community tokens). We believe this is not merely a coincidence or a passing fad; instead, there’s a deep connection here, operating through to the confluence of two powerful underlying forces:
- social clout is the purest, innate human proto-currency;
- the digitalisation of society into the metaverse removes the practical need for a single currency.
We’ll expound on these points in a subsequent article on the future of society.
Beyond remuneration, in most current DAOs, token ownership enables individuals to vote on strategic decisions in the form of proposals. This is not without challenges of its own and needs to improve over time, but the main, irrefutable win of mathematically guaranteed transparency and accountability is a historic achievement in and of itself. DAOs are bottom-up organisations, where the vision of the collective drives their strategy rather than the decisions of leaders in a traditional hierarchy. Any member can write a proposal to be voted on by other members.
How are DAOs relevant to the metaverse? The various layers of the metaverse will be built by DAOs, operating on two modes. Those with coding and programming skills (Burrell and Fourcade’s coding elite) develop the base infrastructure of the metaverse. This is the infrastructure that enables interoperability and transparency in the metaverse, and makes transactions or exchanges immutable. The second mode consists of DAOs which extends the features of the metaverse to users directly, thereby hosting a different kind of workforce — the cybertariat or those who contribute data and/or earn an income through engaging in activities on various softwares.
GameFi
Let’s examine a peculiar phenomenon that is gaining a lot of attention recently: It has been touted that wealth creation has moved to the digital realm through “Play-to-Earn” games which have replaced 9–5 jobs and even exceeded average incomes.
Axie Infinity, which is at the forefront of GameFi, has generated more than $2.5 billion in trading volume. Players start by buying at least three NFTs known as ‘Axies’ in the game, at the cost of about $300-$500 each (fluctuating as per market demand, of course), paid for in ETH. Skilled players earn Smooth Love Potion in the game, which could be converted into real money. The value of each NFT could rise, as each Axie has its own powers and privileges, like how Mario’s go-kart is always faster than Luigi’s.
With an enormous upfront cost, some cannot afford to play independently. Aspiring players could apply to join a guild where they could obtain a scholarship (capital for their upfront costs) in exchange for 50–90% of their Smooth Love Potion earnings. To some, this is an echo of feudalism and fiefdom. But, many lives have been transformed for the better. In the Philippines, where Axie boomed, migrant workers have returned home to play-to-earn in the comfort of their homes, enabling them to once again live with their children and elderly parents. Indeed, 40% of its 1.8 million users are based in the Philippines.
Axie Infinity is made by a Vietnam-based company named Sky Mavis, founded in 2018 and worth $3 billion today. Sky Mavis stated that 25% of Axie Infinity players have never had a bank account before. Axie wallets are the first financial service that these players could access! Further, some players are using their tokens to pay for rent. This is the leap-frog effect — that’s so well known yet poorly understood — playing out in the digital realm. Stories abound on how a person who lost their job and turned to Axie Infinity was able to double their original income, or how playing Axie Infinity has helped a player buy a home.
With exponential economic growth comes also the danger of exponential collapse. In this scenario, too many players earning too much money could crash a game’s economy. Future metaverse economies may find themselves being managed just like the real economy of today. This has already started in MMORPGs to a certain degree, but Web2 in-game economies are still too much driven by developer interference to be reasonably compared to the real world economy. Web3 changes that. Will there be jobs in NFT Games development for people with economics degrees? You bet.
Digital hairdressers?
Now, to be clear, we’re not proposing that all jobs in today’s economy will transition to the DAO model. Just like not all the jobs of the 1800’s are now done in an office. Rather it’s the composition of the economy and where the value is created that will shift towards work in/around DAOs. Jobs that employ lots of people today will fade away, and be replaced by new digitally native job categories. Some jobs will always stay analog (cook, hairdresser, etc) but their relevance for society will continue to diminish as more of the value chain moves digital. It’s perfectly reasonable to expect that “hairdressers” for bespoke digital avatars will be more important to our lives than physical hairdressers some day.
At this point you might interject: How can digital hairstyles for avatars ever be valuable enough to make a living off? Since they’re digital, can one not just infinitely copy-paste and re-distribute them? This is the digital piracy argument applied to individual craftspeople. And before the invention of the blockchain technology, this was indeed true. The only entities that were able to enforce (intellectual) property rights in the digital realm were big corporations… and even they often struggle and fail.
So here we reiterate again the core thesis on which our analysis rests:
Blockchain brings true digital property rights to everyone, thus unlocking a digitally native economy outside the realm of techno-feudalism for the first time.
Digital Creativity
Creativity in the internet of today is essentially concentrated in three main sectors:
- Large corporations making software or digital entertainment (think Epic, Disney, Microsoft).
- Platforms for user generated, but centrally monetised, content (think YouTube, Instagram).
- commodified code and commercial artwork (think Fiver.com).
While in Web2 ownership of properties are limited to platform owners (who actually owns your recently uploaded TikTok video?), a Web3-powered metaverse will alter the future of entertainment and creative industries through shifting the production of, access to, and ownership of creative outputs to the digital realm. The layers of the metaverse serve as tools which enable novel ways of releasing creative outputs. The Web3 infrastructure (base layer) powers the trustless ownership and related financial exchange, while the software layers host the experience. Devices such as the Neuralink could be geared towards making the digital experience tactile.
A clear signal pointing towards the future of creative industries is Stoner Cats, a non-fungible token (NFT) project by Mila Kunis, actress and producer. Stoner Cats is an animated series, with the twist that access is exclusive to NFT holders. Over 10,000 NFTs were sold on release day, with more to be made available as the series progresses. Aside from providing access privileges to current and future contents, the NFTs also indicate ownership of unique artworks (pictures of cats from the animated series in this case). Stoner Cats NFT owners purchased each token at 0.35 ETH (over $800), but some of the popular artworks are selling for 35,000 ETH in the secondary market.
This groundbreaking approach to ‘selling art’ allows Stoner Cats creators to earn 2.5% of the resale price tag of each NFT for every sale that follows the original. Traditionally, creators receive no financial reward from the resale of their artworks. The new model of royalty payment allows creators to remain as investors in each NFT released. Creators are incentivized to produce better content as higher resale price means larger commissions.
Restricting the number of NFTs released in the market plays to the psychology of scarcity. Praveen Agarwal and colleagues evaluated the impact of scarcity messaging on consumer behavior. They found that “limited quantity” messages (e.g. only one left) are more effective than “limited time” messages (e.g. Boxing Day Sale). If something is only available in limited quantities, and is unique, individuals make a mental shortcut and assume it is valuable, driving up the desirability of the NFTs.
We anticipate that the metaverse would allow the paying public to experience these scarce and exclusive artworks, much like current museums allow the public to view priceless artefacts. The ownership of exclusive NFTs and the ability to experience them exclusively will denote prestige in the metaverse. There could be a Jurassic Park metaverse experience where individual billionaires own unique dinosaurs.
Web3 and Decentralized Clinical Trials
It is easy to assume that digital property rights are irrelevant to those who currently do not earn an income in the creative industries. As an example of how Web3 can transform even seemingly unrelated industries, consider the large-scale clinical trials that the modern pharma industry relies on.
Clinical trials are not digitally native, but the COVID-19 pandemic has supercharged the adoption of decentralized trials: increasing the proportion of trial activities which patients could do remotely, at home. Enabled by the recent development of internet-of-things devices, consent procedures are conducted digitally by healthcare professionals who could answer patients’ questions through teleconsultations, guiding patients on the set-up of remote monitoring procedures for electronic clinical outcome assessments (eCOAs).
As clinical trials data are increasingly in digital format, DAOs have become relevant for R&D. On a more socialist front, any research IP could be turned to an NFT and therefore be owned by an individual or a DAO.
VitaDAO is the world’s first DAO which funds early stage longevity research. It combines novel governance (DAOs), digital assets (NFTs) and financial market frameworks (automated market makers, AMMs). Anyone can join VitaDAO’s membership by purchasing VITA tokens or by earning tokens through contributing work or intellectual property.
In early August 2021, VitaDAO token holders voted on the proposal “VDP-5 Scheibye-Knudsen Lab Funding” with 2.1 million token votes and 88% support for the proposal. The Scheibye-Knudsen Lab in Copenhagen receives US$250,000 for the first 12 months of laboratory research into FDA-approved therapeutics which have been linked to longer life-span in long life populations. Success in this phase would secure additional US$250,000 for the next phase. Under the agreement, the research IP is fully the property of VitaDAO and any financial profits from the research findings will be shared among token holders.
In trials involving patients, converting digital health data into NFTs would allow patients to partake in the ownership of the research. Today, volunteering to participate in clinical research will typically give you negligible financial compensation, if any at all. On the other hand, those studies could be developing treatments that are eventually monetized to the tune of billions of dollars. Incentivizing participation with equity promises to turbocharge medical research by giving research participants a share in the upside. Common ownership and the promise of return on investment will motivate patients and researchers to work hand-in-hand to achieve the DAO’s objectives.
The evolution of R&D as a result of digitalization and Web3 is still in its infancy, and certainly much less developed than the other aspects we talked about before. There are probably many reasons for this, but the most obvious one is that R&D requires an extremely high concentration of expertise and capital. It’s nonetheless clear that the space is ripe for disruption, and we’re excited to watch this unfold over the coming years.
The last word
“We don’t see the world as it is, we see it as we are.”
— Anaïs Nin
To us, the metaverse is exciting as it is the convergence of what we have known in the last decade as emerging technologies. Our views have been shaped by our epistemological backgrounds, the information we consumed in the last two years, and interactions in crypto communities.
What about you?
Here is where we insert a call to action: let’s inspect our assumptions, observations, and biases and blind spots. Let’s consider reasons we may be wrong — as suggested by philosopher Erik Angner. He quotes Darwin, who in 1871 said “Ignorance more frequently begets confidence than does knowledge.”
Click on the sources and further readings. Appraise them on your own. We caution against believing wholesale what anonymous forums say about any topic, without conducting your own due diligence.
Get in touch with thoughts, feedback, criticism and praise!
Further readings:
