A Glance into the Future of Web 3 and Metaverse
SciEcon AMA Interview with Michael Peterer, Bochsler Groupe
About Michael Peterer
Michael Peterer is spearheading growth at the Shiku Foundation, the biggest swiss metaverse scale-up building the Shiku Metaverse platform and operating the Yumi NFT Marketplace. Michael is well-connected in Switzerland’s blockchain and metaverse industries and the Web3 startup community. He is a thought leader and expert in this space and speaks as a conference panelist. Michael previously worked as a management consultant for five years, advising clients on digital transformation. Before joining Bochsler, he was a Partner at a large international consulting firm where he successfully built up a business unit from scratch. He once advised institutions and corporations on emerging tech, digital strategy, organizational development, and digital transformation. Michael holds a Ph.D. in Quantum Computing from the University of Oxford, a Master’s degree in Physics from ETH Zürich, and is a visiting researcher at MIT.
Watch our AMA interview for Michael Peterer on our YouTube channel, SciEcon.
Read the Interview Scripts with annotations and citations.
Question 1
Evan:
Based on your LinkedIn profile, we noticed that your main academic focus was physics, and you did your doctoral research in quantum computing. What attracted you to the blockchain world and the metaverse, and what motivated you to pursue Metaverse & NFT Business Development at Bochsler Group?
Michael:
I was passionate about physics in the beginning. I guess it is a similar interest that you have also experienced when you are growing up, that is, very curious about how the world works and the universe work: where we humans come from, how we get here, how did we invent all these amazing technologies, how does this happen … For me, I get interested in physics and start to understand the magic of it. It turns out that it is extremely fun and enriching. Moreover, it is an incredible experience and privilege to learn and discover the world through physics. So that is why I did it. I was grateful to be able to do research, not just study. And then you never DO physics again, but also actually DOING physics for a while.
It was a privilege doing four years of research at Oxford during my Ph.D. in quantum computing, which is like being at the forefront of technology. Moreover, we started with an empty lab. So I came the first day, it was just an empty lab, and then I had four years to do some amazing research. We started by building the lab and then built up our experiments from scratch. And that was very exciting.
Furthermore, we were doing the development of quantum computers. I am the first one who developed and measured the first superconducting quantum in the U.K. It was done in Switzerland and the U.K. and then the Netherlands and France; those are the countries where I have done it. I was the first one to build, design, develop, and measure it in the U.K. then, during my Ph.D., I invented a new design for superconducting qubits, which I then initiated, and I launched Oxford Quantum Circuits [1], raising thirty million British pounds in an investor round. It has become Europe’s leading quantum computing company, where I am quite proud, thanks to this new design I invented. I should have stayed in that field there and grown with that company. However, even though I was extremely excited about it, I decided to go back to Switzerland and work on real-world tech instead of quantum computing, which was still far away at the time but now they have made tremendous progress.
What is extremely exciting now is that we can talk about quantum computers at the beginning because you will see a link with the blockchain at the end. What is extremely exciting is that building a quantum computer has become humanity’s most difficult challenge from a technological point of view. It is like the biggest human endeavor at the moment. All the governments want to be the first because it is so powerful. And over the past ten years, there has been tremendous progress in developing these quantum processors with the most advanced groups in the world, achieving now quantum processes with about 120 quantum bits. That is like state-of-the-art. So we are far from a universal quantum computer because if you want to build one with an advantage over the classical world, you need one with hundreds of thousands of quantum bits. However, the progress is so exponentially fast that in ten to fifteen years, we may reach a universal quantum computer that can solve problems that classical computers cannot. Companies like IBM, Google, Rigetti, some startups, and especially governments (mainly the US Government, UK Government, Dutch Government, and Chinese Government) are pouring billions into this new technology because they know how powerful it is and what kind of edge that it is going to give them. It is so powerful with what you can do with it if you are the first one with a quantum computer. So it is a very exciting time that we as humans can control the quantum world and harness its power to our advantage. And this, of course, also brings dangers like every technology. In ten or twenty years, when we have a true quantum computer, then the danger is that all the cryptographic protocols that we know today are not safe anymore.
Today everything you do is based on encryption and cryptography. Your bank ID, logins, passwords, Internet identity, payments, and credit card are all based on today’s cryptographic protocol for encryption. And if we have a true quantum computer, whoever, you can easily crack everything. So in the future, society in general, all companies, all individuals, and everybody will need quantum resistance cryptography [2] to secure all that we need. It poses a huge challenge also for blockchains and internet identities for Web 3, so we are now building all this new stuff with blockchain and Web 3. But in the future, this needs to be quantum resistant. I understand this because the passwords, logins, crypto seed phrases, and all these current security mechanisms can easily be cracked with the quantum computer.
Therefore, biometric data will be the only way to go in the future. All credentials and logins will be based on biometric sensors. So your eyes, your fingerprints for your Internet identity, you will not use passwords anymore, and logins will be only biometric stuff. And when you give away your biometric data. That is bad, right? And then you are kind of victim to the Government and those companies. You want to be the owners of this data, so you want to embrace the Web 3 philosophy where you own your data, which is very important. Until now, I have been willing to give away my credentials to big companies like Facebook, Google, and the Government because I did not mind. It is just passwords, and you can change them. But once it is the biometric data, then this is irreversible. I want to be the owner of this data, which is why the next-generation version of the Internet has to be based on Web 3 philosophy, which means you are the owner of your data. You are in control of your data and your digital assets.
Moreover, this can only be done with blockchain technology. That is why I am such a strong believer in blockchain. Not just you know, most people talk about Bitcoin when they think about blockchain, but I see it much more as the technological basis that we need in the future for controlling our own identities, especially with the event of these quantum computers. It is just a very big idea and a whole new era. And today, we still live in this world where you mostly do not own your data. We all know that data is the new gold, But you do not own it. Your online data is valuable, but you are giving it to the big tech giants. They make billions of dollars off your data because they sell it to online advertisers. You do not get anything of it. So it all goes to the pockets of Mark Zuckerberg, among others. But in the future, when using biometric data to protect against quantum computers, you will better be the owner of your data and not the big tech giants. This is why we need this shift from Web 2 to Web 3 globally and at scale. What this means is that your data is going to have to be on the chain. You need to be in control and decide who gets access to it and how.
In this sense, privacy and security are becoming increasingly important to people and companies worldwide. They have started to realize, understand, and get it over the past few years. All of this has only been possible thanks to blockchain. So, blockchain has brought a deep revolution, super profound disruption, to the fabric of society. It will have a much bigger, disruptive impact on all aspects of life and business in the coming years. So this is so fascinating to me, and I have also been privately passionate about this new world and technology for many years. Blockchain and Web 3 are here to stay and will exponentially grow the importance and adoption in the coming years. And that is why I decided to dedicate myself professionally to this space. As I was saying, I built quantum computers at the forefront of humanity, then decided to work a few years in the real world as a technological consultant and later as a partner at a leading global information technology consulting company. And now, I decided to go back to the future and work in blockchain, and of these Web 3, Metaverse, back to the future, at the cutting edge of the evolution of society. And this is extremely exciting, stimulating, and meaningful, and I truly believe in it. And that is why I decided to contribute as much as possible.
Question 2
Evan:
There is a lot of speculation regarding how Web3 will meet the metaverse. For example, according to Forbes, some have envisioned cryptocurrencies as the monetary foundation for the metaverse. What are the future development paths for Web3 and the metaverse, and will they eventually meet?
Michael:
As you mentioned, cryptocurrencies are the monetary foundation for the metaverse. It’s a big part of it. It’s useful if we first talk about words like Metaverse and Web 3 because everyone talks about them right now. And you know, metaverse has become a buzzword that has become so popular and widespread worldwide. When you see the past year only, seven of the eleven biggest companies in the world have either rebranded themselves like Meta, reorganized entire departments to new product launches around the metaverse, or they have reoriented their strategy completely, or they have made the biggest tech acquisitions in history for the metaverse. When you think of Apple and Microsoft acquiring augmented reality (AR), metaverse, and gaming startups, it’s crazy; therefore, it’s been very hyped, and it’s become so fast for such a big buzzword. But there’s a reason for it when you look at these seven big companies. Because we also confuse metaverse over the Web 3. What’s the difference? Is it the same, right? So Let’s first look at Web 3.
Web 3 is a general term that describes the next-generation version of the internet. If we look back, the beginning of the Internet was Web 1, the first version of the web, which was very static, where we just had websites with information. You, as a user, go there and just read. So Web 1 is just reading. The user consumes information, which is why we call it the information economy, a revolution. But it’s static with only used case information economy. Then from 2000 to 2020, this second generation of the internet came, which we call Web 2, where you can read and write, meaning that the internet and websites are interactive. Users can upload content, interact with each other, and everything is connected. So Web 2 over the past twenty years is what gave rise to social media, mobile, the big tech giants like Facebook, Google, and Tencent in China, and the apps like Instagram, TikTok, Whatsapp, WeChat, and so forth, which have these network effects become giant applications that everybody is using, and it’s very interactive. They sell your data there for advertising and take all the billions of profits they make for themselves. And this is why we call it the platform economy. This Web 2 is the world we live in now. It’s the platform economy where it’s all centralized and owned by the big techs. And we also attribute Web 2 to today’s predominantly mobile and cloud era.
And so now everybody talks about Web 3. What is it? Well, it’s the natural successor era to this Web 2. Web 3 is now what we call the creator economy, where not only you read and write, but you also own, as opposed to Web 2 platform economy, where you only read and write. Now you can own a piece of the network. This can only be possible thanks to blockchain and NFTs. These enable you to hold your data and digital assets, like a part of the internet. And then this way, the internet becomes like a decentralized creator economy. This is what you can call it, where the creators and users are in control, as opposed to the centralized platforms and tech giants there in total control today. As a user and creator, you own a piece of this network via NFTs, tokens, or other cryptocurrency coins. So you own a piece of the internet, which users today miss out on because it all goes to the pockets of a few. So you participate in the value creation of the networks because these networks grow exponentially due to the network effect. So Facebook, Amazon, and TikTok all have network effects. The more people use it, the more value it gains. But it gains exponential value, and it grows exponentially. That’s why they’re so valuable. And now you can get a piece of this value creation. That’s what we also refer to sometimes as an economy of value. So Web 3 referred to this generic version of the internet, decentralized, open, secure, permissionless, private, and owned by the users and creators.
Now let’s look at the term metaverse and see how we can combine these two. So the metaverse is a combination of these two words, meta, which means beyond, and the universe. So the metaverse means beyond the universe. It refers to the boundless possibilities you can have in virtual worlds because the limits of the real world do not constrain you. So you can go beyond the limits of physics and the limits of money. Yeah. And today, this metaverse needs to be better defined, and people have different understandings of it. Everybody agrees that there are few metaverses, just the metaverse, like the internet. You will say there are only a few internets. It’s just the internet. So everybody agrees it is just the metaverse with different universes and worlds. And time will tell how society deals with this concept. There are, however, some very influential people who are trying to define what the metaverse is. Matthew Ball is one of these. He’s one of the most influential and thoughtful leaders today on the metaverse. He describes it in the following way, which is quite encompassing and interesting. He defines it as
a massively scaled and interoperable network of the real-time rendered 3D world that can be experienced synchronously and persistently by an effectively unlimited number of users, with an individual sense of presence and with continuity of data such as identity, history, entitlements, objects, communications, and payments
It’s pretty neat. However, we are still determining how it will evolve. And over time, everybody will have different understandings of it. But we know that the metaverse is more than just the virtual 3D world. It amounts to far more than just the flashing and rebranding of virtual reality (VR).
Let’s link Web 3 and metaverse. The metaverse is a 3D virtual world or just augmented reality. But then, it doesn’t have to be based on blockchain or Web 3. You can imagine today, like roadblocks, Minecraft, and Fortnite, you could call these metaverse, but in fact, we don’t want to call these metaverse because we believe that, or at least, the metaverse needs to have these Web 3 components, or else it is just a 3D virtual world. And what it means is that you have to be able to own your data and your digital assets in the metaverse. This is an essential component because if you think about it, we know that everything happens more and more virtually in the digital society. We know that everything is happening more and more in all aspects of life. But now we have this once-in-a-lifetime opportunity for humanity to make this next era in the metaverse into a more equitable, diverse, inclusive, open, and democratic society. This is a unique opportunity for our community to leave the autocratic systems we live in today, and we want to take advantage of this opportunity. It’s only possible with Web 3. So we want to take advantage of this opportunity as a society, and that’s why we should be building the metaverse with a Web 3 philosophy. And that’s why our team is making the Shiku Metaverse.
It’s so important that we’re building it with a truly Web 3 focus. For a bit of context, we’re the largest, in fact, Web 3-based metaverse startup and also the first metaverse foundation in Switzerland. Having it as a foundation allows you to be credible when you say that you don’t own it, as decentralized, with the Web 3 Philosophy, just as Ethereum Foundation, DFINITY Foundation, and many more. As a foundation, you’re just a contributor to the network without directly controlling it. Shiku is the first large-scale general-purpose Metaverse platform that empowers people and companies to collaborate, communicate, and connect to the metaverse, offering a real Web 3 experience with full ownership of your data. As a creator or user, you can build, create, own, share, discover, and govern in this immersive digital environment. You can control your land, assets, content, and activities, which is too good to be true. But it is possible to do this in a true Web 3 way because there are today new blockchain platforms or technologies that enable you to do this at scale and with web speed fast and low cost. One of these is called the Internet Computer [3]. So it’s a revolutionary and disruptive technology that allows you to have a large-scale Web 3 experience in the metaverse. It’s also convenient for the users. It’s low-cost, secure, stoppable, and censorship-resistant. And this was only possible after you have, like, even two years ago. But since last year, there have been new technologies like the Internet Computer, opening a whole new world of capabilities in contrast to the limited possibilities you have today with traditional blockchains like Ethereum, Solona, etc. Internet Computer has become possible because it’s the world’s largest research and development organization in blockchain, taking the best cryptography professors and cryptographic engineers from IBM, Google, etc. They’ve built an enormous team of two hundred people. Over five years, they developed this new cryptographic mechanism and developed the Internet Computer, which now allows you to do true Web 3, next-generation blockchain at scale. In the next market upturn, the mass adoption, we’ll move on to the Internet Computer and be the first metaverse there. We’re extremely excited to be building for the next era.
Eventually, all sectors, from art, fashion, luxury, education, gaming, finances, marketing, advertising, legal, and e-commerce, will enter the metaverse and operate more and more new business models. You guys are also working for SciEcon, which is a very interesting approach to open and global education. I admire what you’re doing, bringing education to the masses in a Web 3 philosophical way, and I embrace it. I’d also like to share one example, teaching in the metaverse, to explain why we need Web 3 and what is Web 3 metaverse.
So if you look today at universities, organizations, companies, and individuals, everybody is providing some education. And this is happening more and more virtually. Companies are doing internal education for their employees via teams and more and more 3D virtual worlds. Universities are doing everything remotely online. COVID-19 has accelerated this trend, and another trend is that for young people today, a large part of their education comes from individual YouTubers. Previously you were only educated in schools and universities. But now, even I learned it from the internet, like YouTube, because individuals outside universities and organizations so much produce great quality content. I see it this way, universities and schools teach you to distinguish the good from the bad content. But then, for the real stuff about life, you learn it by listening to individuals via YouTube or some other platform. Now we’re at this turning point where society is within the transition from this platform economy to a creator economy. So all these individual creators creating this incredibly worthy educational content as individuals are entirely dependent on platforms like YouTube, these Web 2 centralized platforms. These platforms are monetizing this educational content but not the creators themselves. The problem is that you can get censored.
This reminds me of one of my friends. He is a TV producer. He even got death threads for revealing stories, got censored from YouTube, and lost all his viewers. This isn’t good because you might lose what you’ve built for over a decade. You have countless examples of individual creators or companies that have spent years creating valuable good educational content. But from one day to the other, they get censored, losing their entire audience. If you think about it, where is the real value for you as an individual or company? It’s your community that has value, not content. It’s the community that you’ve built. What if you have millions of subscribers on your YouTube Channel? You don’t own that community because YouTube shuts you down, and you lose all of your community. That’s why you see a trend like companies building their platforms. For example, there’s an online education platform for crypto and blockchain education called Collective Shift [4]. They’ve recognized this risk, so they just built their platform because they didn’t want to take the chance that YouTube shut them down. So that’s why these centralized platforms are not the future. Also, for the education platforms like EdX and Coursera, it is a different future. We want to have the creator economy and Web 3, where those who produced the content also own and control that content. This is why society, for global open education, which is what we want, needs Web 3 metaverses. And it also gives you lots of new possibilities: you can raise money via tokens, you can incentivize people to produce good content, and people get rewarded without middlemen. It’s just so much better world. This is happening very fast, and it’s only possible with blockchain.
Now, of course, there are other reasons why you want blockchain. Let’s think about the diplomas and certificates of attendance. You can use this with NFTs or tokens where you get rewarded for your education. If you spend the money, you get rewarded more for further instruction. A whole new world of possibilities! When we think about all these aspects, it makes us realize more and more that we need truly decentralized, open, secure, censorship-resistant, unstoppable blockchain-based platforms for hosting, providing, and monetizing good educational content. This is really what I believe is necessary.
So what does that give you? It means you need to build one of these metaverses. You need to make a metaverse that fulfills these criteria, and until now, it has not been possible at scale. But now, thanks to technology like the Internet Computer, you can do that, and that’s what we’re doing. For example, we can have a partnership in the future with Duke to build the metaversity where we can offer this kind of education in this new Web 3 way. And it’s very exciting, and education is one of the top five categories we focus on for Shiku Metaverse. Please also offer some content in the Metaversity on Shiku!
Question 3
Evan:
NFTs have developed rapidly over the past years, and there is a lot of excitement about the potential of this technology in the Web 3 space. Vitalik Buterin recently even proposed the “Soulbound Token”, an NFT that would be associated with each individual and become the building block of a decentralized society (Weyl, Ohlhaver, and Buterin 2022). What are some of the most potent applications of NFT, and how could NFT impact businesses?
Michael:
I think it’s a fascinating concept, the “Soulbound Token”, to study and understand. In our team, we only touch a little upon this currently because we’re just building. But I know Vitalik when he talks about the “Soulbound Token” being associated with each individual, becoming a building block. It’s an exciting concept, and this is the concept that enables this decentralized society. It’s possible, but there are also other ways of doing it. It’s just one out of several ways to do it. In the end, it might be the one that grasps hold in society and gets used at large. But you don’t have to have it. For example, on the Internet Computer, you already have the concept of an Internet identity that is unique. It’s not officially a “Soulbound Token”, but it’s similar. You have your Internet identity, like a unique NFT that allows you to surf the Web 3 and do everything on the chain. You don’t have to have several logins, and it’s already secure and smart contract-based on the Internet Computer. So it’s a different concept, but the idea is the same. In general, NFT will significantly impact businesses, and people need to realize how much it’s transformative.
Let’s have a look at a few areas. NFT can allow any digital item to be unique, verifiably owned, and tradable. We live in this digital Internet world where we produce and have all this digital stuff, but you can never have something digital be unique, verifiably owned, and tradable. But now you can do this, which has opened up a whole new world of possibilities, and all sectors from art, fashion, education, gaming, finance, marketing, etc. In many cases, this has enabled new disruptive business models. So the companies’ operations suddenly change because they need new ways of reaching their clients, audience, or processes. We need to realize all the possible impacts it has on businesses. You can see now that all the big companies are experimenting with it and discovering that the more they find out, the more they realize that this will change the way we do business, not even mention the metaverse. And there is a tremendous positive impact that it’s going to have. The concept of NFTs has existed since 2013, but it only became popularized to the mass media in 2021 through digital art. Surprisingly, art brought the idea to the world with pictures of the CryptoPunks [5] and the board apes.
It’s interesting to look at this category first, i.e., let’s look at what NFTs have brought for capabilities in art, and then we can extrapolate that to what it has an impact on other businesses. So if you look at the art world and digital art, what NFTs have specifically enabled, or three things right, you can summarize into these three. First, it empowers artists and their communities. They get rid of the middleman for artists. This applies to the music industry and gives them new ways of monetizing their work. It gives them unique and more effective methods and possibilities to build and reach the global community, which they didn’t have before, and it also enables them to like build projects with the utility on top of an NFT collection or a digital art collection, rewarding the communities along the way. So it’s all about this, like empowering the artists to engage in new ways with their community. This is extremely powerful, and it gives them a lot of new possibilities. The second point is collectability and investment. Only now can you collect digital artworks, verifiably yours, because digital is common. So now, thanks to NFT, an item can be unique, and you can collect it, which was not possible before, and it’s a new form of investment. For instance, people speculate on a Picasso, where they want to invest in a Picasso because they believe it will take value over time. And now you can do this for digital art so that you can support, for example, CryptoPunk, and you believe that this will keep its value, and it’s just like the Picasso of digital art because it was more of the first ones, and how it takes deal over time. So when you invest, it allows you to invest in digital arts just like you would invest it in the traditional art market now. Then the third capability that it enables is the fractionalization of physical objects and to give them digital certificates of co-ownership and identification. So you can now all co-own through a fractionalized NFT. Thus you can co-own a physical object. Well, there are also many intellectual properties and regulatory hurdles around it. But there are platforms and technologies like the ORIGYN Foundation [6], where you can publicly buy co-ownership with NFTs of a physical object. So it’s fascinating to see the new capabilities that were not possible before. And then there are many more we don’t need to get into. But one possibility is, for example, confidential NFTs. You can imagine you have a low-resolution image that you show the public, like an NFT. And then, the high-resolution image is only for the owner who has the NFT. This allows you to prevent theft or copyright infringements, and it also enhances the privacy of valuable art and can create a kind of exclusiveness and value. So these confidential NFTs can enable you to show it if you have the NFT, but you only could get access to the real one with credentials. So those are the main capabilities of entities, especially now for the art market. If you extrapolate this to other sectors like gaming, entertainment, and retail, it’s mainly the capability community aspect. It gives you new ways of either tokenizing or engaging with the community, which was impossible before.
We can also talk about some limitations. For NFTs today, there are mainly three. The first and most important one is that today when we speak about NFTs and everybody talks about them, the problem is that the item itself is not actually on the chain, but just the NFT is on the chain. So if you want to prove that you have this digital art piece, but now on the blockchain, it only has the URL and a description of where your actual image is. So the item itself, the digital item, is not on the chain, but only the pointer, towards where it’s stored on the chain. The digital item is typically stored on a centralized web server or Internet. But it needs to be decentralized and permanent, so you can lose it anytime. It’s kind of weird when you say I bought this NFT, and I now own this digital item, but actually, it’s only a piece of proof that you own this while you do not own the real thing because the real thing is on a centralized server which is run and controlled by somebody else. And now, thanks to the Internet Computer, you can store them on the chain. Only now, the problem is the storage cost needs to be lowered, so on Ethereum or Solana, these blockchains that everybody knows, the cost of storing a digital item is just so expensive. I think storing one gigabyte for a year on Ethereum would cost a hundred million dollars, which is insane! And so that’s why everything is stored off the chain, and only the link and the ownership are on the chain. But now, thanks to these new revolutionary and next-generation blockchains like the Internet Computer, the storage costs are super low. You can store a file with five gigabytes on the chain for only five dollars per year. So now, when I buy my CryptoPunk, I store it on the Internet Computer, and they don’t want to cost me five dollars. Then I know that I own it and will always be found. When you buy digital art for like a million dollars, you may want that to be on the chain, and make sure you never lose it now.
The second limitation is interoperability between the chains. So now, when I buy an NFT. I can’t move that from Ethereum to another blockchain like Solana. Only with these bridges, but these bridges need to be more secure. Luckily the new generation blockchains, like the Internet Computer, in the coming months, will be integrated with Bitcoin and Ethereum. Thanks to the consensus mechanism of the Internet Computer, you can send Bitcoin or Ether onto an intelligent contract or wallet on the Internet Computer without a bridge. And then you can do whatever you want with it on the Internet Computer, which means that you can then start storing it. You can then buy an NFT on OpenSea [7] for Ethereum and then store it on the Internet Computer. So this problem can be solved in the future.
Then the third limitation is the royalty fees [8]. It still needs to work because it’s not programmed into the smart contract. So when you’re an artist, you want to get every time your digital art gets restored. You want the royalty percentage. You want the royalty fee, but it’s not programmed into the smart contract, which means that when you move from marketplace to marketplace, it always depends on the market implementing your royalty fee. So you have to individually, as an artist or creator, make sure that every time one of your items gets sold on a different marketplace, you need to tell the marketplace and make sure the royalty fee is received. Thus it needs to be more scalable. But in the future, this problem will also get solved. I can imagine new smart contracts, and people are also thinking about solutions for this, and it’ll come in.
Of course, the other typical limitation today is that there are still too many scams. Still, as the technology matures, this will get solved and mitigated just like today on the regular Internet. It’ll get soft as well. And then the one thing that’s open and still needs a lot of work is the legal questions on the ownership and intellectual property rights of the NFTs. These remain to be addressed that are still open to governments and law firms. They’re having significant discussions on this, and at some point, it’ll become more transparent and suitable for the space because it’ll bring more clarity and help the mass adoption of NFTs.
Now what I find interesting in thinking about the future of NFTs: every capital asset will become an NFT. Capital assets are significant property, like a home, car, investment property, stocks or bonds, some collectible art, your Internet identity, or valuable online data. And I think in the future, they are all going to become NFTs, which means that in the end, you’ll end up having in our society is the market capitalization of NFTs is going to be bigger than all capital markets today, which will bring a significant impact on society.
Question 4
Evan:
Sustainable development of the blockchain ecosystem is important for the future of Web 3 and NFT. Incidents such as NFT art theft and crypto exchange hacks damage the “trust” for our decentralized trust systems. What do you think are the most significant weaknesses of the current system, and how could future development resolve these concerns and lead to wider adoption of Web 3 in businesses?
Michael:
The technology is not new, but only now it’s just being developed in a massive and scaled way. Naturally, new technology will encounter these challenges on the way. If you look back at the beginning of the Internet, you also have all these hacks, and there was little IT security, and people were getting hacked, with a lot of damage and almost no trust in the system. That’s why, in the beginning, it’s just hype and scam if you look at the articles and newspapers about the Internet. It will only be widely adopted if you can trust it. You will get rugged, and there’s all this crime on the Internet. Over time the technology matures, and the bad platforms that are not secure die out, and the ones who embrace the new security features win. Over time the technology matures, and security bits get built into more and more natively, which ends up with the Internet today, which is mostly secure. I even remember when I had my first laptop in 2005 or so, you always had to have all this anti-virus software, but now, when you have a PC, do you ever spend one second thinking about anti-viruses? Microsoft takes care of it for you because it’s natively built in, so if we make a parallel, now in the blockchain and Web 3 space.
It’s just still early. The technology is maturing quickly, and you have the new blockchains. The first-generation blockchain was like Bitcoin, which in the end, now turns out to be the safest and most secure network. But it only has limited use cases, which is more like primitive generation blockchain, and I hope it stays this way because that’s what I want: to be simple and secure. I want Bitcoin never to be hacked, but you can’t do everything.
Further, smart contracts are enabled in the second generation of blockchains, Ethereum. Then all the other platforms are just copycats from Ethereum. They’re all second-generation blockchains based on smart contracts and have different ways of scaling and solving the trilemma between security, decentralization, and scaling. But they can only solve some of the three because of these big trade-offs. They have their place in the ecosystem. Uh, but there are still many hacks and downs because they try to build these bridges between each other, which need to be more secure over time. This will mature, but what gets the space to mature should be the third-generation blockchains. The third-generation blockchains are like the Internet Computer with novel consensus mechanisms that eliminate all the problems you get in the second ones that are truly scalable. They have low cost and are highly secure, like built-in by the system where you don’t need any bridges anymore. And so Internet Computer, for example, solves these hack problems. And over time, there will be other new-generation blockchains.
The trend of hacks and thefts will go down, and when we do not talk about NFTs, there will not be any more hacks and thefts. In the end, what shows you when you massively adopt new technology? It’s when you don’t talk about the technology anymore but only about the product and use case. And so now, everybody’s talking about NFTs. But NFT is just the technology underneath it. My grandma will have a digital wallet in the future, and people will only talk about having a digital wallet with digital collectibles and digital assets. Nobody will talk about NFT, and no one will care about which blockchain it is on anymore from a user’s perspective. And so the day we stop talking about NFTs and which blockchains it’s on, we’ll have reached true mass adoption. And at that point, there will be no these thefts and hacks anymore. That’s where the technology is mature, and people have widely adopted it and are using it in all aspects of life. And that’s exactly what will happen in a few years.
The same will happen with the metaverse. People will not talk about the metaverse anymore, just today with the smartphone. Does anybody talk about APIs and digital apps? No, you just use it. It’s just part of your reality. Maybe in the future, as the line between the real world and the virtual world always gets more blurred, also thanks to new devices that come with augmented reality, mixed reality, and virtual reality, the metaverse is just going to be like a digital layer on top of the real world. But the line is very blurred. Then augmented reality and virtual reality can become omnipresent in our lives, not as an escape, but as an augmentation. And you’re just not going to notice anymore. What’s reality, and what isn’t? It’s just going to be a mix of all. It doesn’t mean everybody will be on VR headsets, spending eight hours per day escaping the real world. No, that’s not what we imagine. We imagine the line blurring between the virtual and the physical world. This line blurs, and it’s just like today.
Everybody is spending several hours per day on their smartphones. You can imagine that in a few years, everybody will spend some hours in some form of metaverse with augmented reality through glasses or virtual reality, headsets just on the smartphone, the PC Screen, or maybe new types of devices that we don’t even imagine yet. We stop talking about the metaverse when we don’t realize it. This era will come. But for that, we still need some big technological breakthroughs for headsets and glasses, these kinds of devices and user interfaces that you need for mass adoption of the metaverse. It’s still a few years away, and we’ll see which devices could be adopted over time. Just as Apple did, they’re just talking about the good products and applications people want. That’s what’s going to get adopted. And we are still determining what it will look like here. So that’s what makes it exciting. It’s a journey for humanity: everyone is experimenting and exploring, making it fun.
Relevant Materials
[1] Oxford Quantum Circuits (OQC)
OQC builds quantum computers to help our customers solve some of humanity’s most significant challenges, from climate change to new drug discoveries. OQC has built the UK’s most advanced quantum computers, the only commercially available in the country. We have also launched the UK’s first Quantum Computing as-a-Service (QCaaS), bringing quantum to the enterprise at the fingertips of our customers and partners.
[2] Quantum resistance cryptography
In cryptography, Quantum resistance cryptography (sometimes referred to as post-quantum cryptography, quantum-proof, or quantum-safe) refers to cryptographic algorithms (usually public-key algorithms) that are thought to be secure against a cryptanalytic attack by a quantum computer.
[3] Internet Computer
The Internet Computer is the first World Computer, and is unlike anything else in existence today. The network hosts tamperproof and unstoppable code at unlimited scale that runs with efficiency comparable to traditional software hosted on centralized IT platforms, such as cloud services. This “blockchain code” has gained essential new capabilities, and can securely serve web experiences directly into web browsers, process and store vast amounts of data, interact with Web 2.0 infrastructure, and run transactions on other blockchains, enabling trustless multi-chain. Almost all online systems and services can now be built fully on-chain.
[4] Collective Shift
Collective Shift is a trusted global resource for demystifying and simplifying the world of crypto investing. The expert team and personalized investor dashboard help you navigate the complex and dynamic world of cryptocurrency with confidence, delivering tailored insights, analysis, and tools to save you time and make informed decisions.
[5] CryptoPunks
CryptoPunks are 10,000 unique collectible characters with proof of ownership stored on the Ethereum blockchain. The project that inspired the modern CryptoArt movement. Selected press and appearances include Mashable, CNBC, The Financial Times, Bloomberg, MarketWatch, The Paris Review, Salon, The Outline, BreakerMag, Christie’s of London, Art|Basel, The PBS NewsHour, The New York Times in 2018 and again in 2021. The Cryptopunks is one of the earliest examples of a “Non-Fungible Token” on Ethereum and were an inspiration for the ERC-721 standard that powers most digital art and collectibles.
[6] ORIGYN Foundation
The ORIGYN certification platform enables art owners to mint and generate a digital certificate of their physical artworks for authenticity, provenance, and preservation in a secure, transparent, and decentralized environment.
[7] OpenSea
OpenSea is the world’s first and largest web3 marketplace for NFTs and crypto collectibles. Browse, create, buy, sell, and auction NFTs using OpenSea today.
[8] Royalty fees
NFT royalties are payments that compensate original NFT creators for the use of their non-fungible tokens (NFTs). In business, royalties generally pay the creator a percentage of sales or profits. With NFTs, royalties are usually set by the owner during the minting process. Royalties from NFTs give the original owner a percentage of the sale price each time the NFT creation is sold on a marketplace. The average NFT royalty typically ranges from 5–10%. In most NFT marketplaces, the creator can choose their royalty percentage and the payments are automatic upon each subsequent sale in the secondary market.
Acknowledgments:
Interviewee: Michael Peterer
Interviewers: Evan Ma, Tianyu Wu, Zichao Chen
Executive Editor: Tianyu Wu, Xinyu Tian
Chief Editor: Prof Luyao Zhang
