The Metaverse: Virtual Worlds But Real Opportunities – Forbes

A March 2022 Wunderman Thompson Intelligence survey of more than 3,000 people between the ages of 16 and 65 in China, the United States and the United Kingdom found that while three-quarters to them had heard of the metaverse, only 15% said they could explain the concept of the metaverse to another person (and half of them were probably wrong). Those same people, when asked about their main concerns about this metaverse that they didnt understand were, put children's privacy first and highlighted a number of other data protection, privacy and safety issues.

It seems that their answers illustrate a challenge to us (ie, the digital financial services industry): how can we explain what the metaverse is and how can we give confidence in our approach to privacy and security. So let me try to rise to that challenge and tackle both of these complex issues head on.

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First, what exactly is the metaverse? I've seen so many different descriptions of the new cyberspace for work, rest and play over the last few months that it's really unclear what most people mean by it. In fact, despite Gartner's IT prediction that by 2026 a quarter of the population will spend at least one hour a day in the metaverse "for work, shopping, education, social and/or entertainment", I doubt that many in the financial services industry can give any more of a cogent and concise description of what that metaverse itself will be than the people interviewed for the survey mentioned above, other than it will be a bit like "Call of Duty" with Mark Zuckerberg dressed as a skeleton in it and there will be a tiger wandering around in a JP Morgan branch in Minecraft.

Virtual dating.

Rather than complain about the imprecision of the vision, I thought it might be a good approach to think from first principles what the metaverse is and what corporate strategies around it will be important. But where to begin?

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The obvious starting point is virtual worlds. These have been around for many years, so therefore it is reasonable to wonder what it is that will now transform these virtual worlds into a metaverse. It is not, I suspect, Mr. Zuckerberg's virtual reality headsets. I could use one of them right now to play 3D World of Warcraft or whatever and it would be a lot of fun, but it would still be a virtual world. A metaverse is surely more than Second Life UHD.

The Financial Times defined the metaverse as a collection of shared virtual worlds which are interoperable in the sense that people can navigate them while taking with them their digital identity and their digital assets. Now this strikes me as a very straightforward and practical description and I like it very much. This is a world where transactions take place between what Jaron Lanier called "economic avatars" (that is, virtual identities that can own property).

We have good starting point then. The metaverse is virtual worlds with digital assets and digital identity. But what exactly are these digital assets?

Well, that is quite easy to answer: digital assets are tokens and the protocols for moving these tokens around is what is known as decentralised finance (or defi). Digital assets and decentralised finance are together loosely known as web3. Frances Zelazny of Anonybit set out the relationship between the two plainly when she wrote "the metaverse is dependent on [web3]", going on to say that users can expect "increased democratisation, inclusion and user control, instead of having big tech and centralized gatekeepers".

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So you might say that the metaverse is made up of virtual worlds with web3 transactions in them. Now we are getting somewhere.

A check back to that Financial Times definition. The metaverse is virtual worlds plus digital assets (ie, web3) plus digital identity. Now that latter clause is where we need some new thinking. Tokens and defi are not a good way to implement identity and without identity we cannot complete the metaverse. We need identity to make our metaverse work.

Professor Bill Buchanan OBE from the School of Computing at Edinburgh Napier University is leading expert on cryptography and cyber security (and also an excellent speaker, by the way). I always take what he has to say about things very seriously and I couldn't agree more with him on his comments about the nature of the infrastructure that we need for the online economy.

Bill writes that we joined together a set of interweb tubes with very little trust built in to them and then we patched them up with what he calls simple methods (but what I might call string and sealing wax). He says that "our digital future must be towards an infrastructure that properly integrates trust" and that when it comes down to it, web3 means the digital signing of transactions to support the true integration of the digital identity of the citizen into the digital world.

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We already have the tools and techniques needed to implement these citizen digital identities. We have private keys and digital signatures and computers and all of the other components. We already have smartphones that contain Trusted Execution Environments (TEEs) capable of handling advanced cryptography (yet we send them completely insecure text messages and call that "security). What we need is a way of using them in a truly secure manner and this where credentials come into play.

Why do I focus on credentials? Well, in a recent paper on the topic Vitalik Buterin (the genius creator of Ether ETH eum) and his co-authors write the economic value finance trades on is generated by humans and their relationships and go on to say that because web3 lacks primitives to represent such social identity, it has become fundamentally dependent on the very centralised web2 structures it aims to transcend, replicating their limitations.

That is the missing piece of our jigsaw. Relationships that enable transactions, or what I might paraphrase as "the reputation economy". This is an economy where the fundamental enabler of economic activity is not the identity of counterparties but their credentials, not who they are but what they are: a regulated financial institution, a rideshare driver with five stars or a person.

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Credentials, and more specifically verifiable credentials (that is, if you present your driving licence to me, I can cryptographically verify that it is not a fake and that it really does belong to you) are the way forward.

Such verifiable credentials (VCs) have a crucial role in resolving the "clash of the titans" between the emerging metaverse and the growing demands for data privacy. The metaverse wants to harvest new, uncharted personal information, even to the point of noting and analysing where your eyes go on a screen and how long you gaze at certain products. Data privacy, on the other hand, wants to protect consumers from this incessant cherry-picking.

As David Blonder (legal counsel, and data protection officer at BlackBerry) notes, since people will always trade security for convenience and since the metaverse mean far more user interaction than, for example, a mobile phone we (ie, the industry) must assemble an infrastructure that is robust without negatively impacting user convenience.

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(My view is that this will be achieved through the use of smart wallets, but thats a topic for another day.)

There you have it then. A good working definition is that the metaverse is virtual worlds plus web3 plus verifiable credentials.

What I think is one thing, but what people who actually know about virtual worlds think should have priority. The CEO of Epic Games, Tom Sweeney, is one such person and his views not the topic are fascinating. He, for example, points toward the field of zero-knowledge proofs (the idea that you can verify that something happened without receiving any private details about it), which are a powerful technique for delivering both privacy and security in a decentralised system and he is absolutely right. There is groundbreaking work going on right now to bring zero-knowledge proofs and verifiable credentials together, so when Tim says I think that's going to be the backbone of a large part of the next century in technology he's almost certainly correct.

Another visionary in the field is Philip Rosedale, the chap who founded Linden Lab (the home of Second Life) a generation back and has therefore spent more time in the metaverse, or at least the proto-metaverse, than pretty much anyone else on the planet. Hence his views on the topic are of signal importance. After Linden Lab he went on to launch a VR startup that later pivoted to spatial audio (so perhaps Scott Galloway's insistence that the metaverse will come in via AirPods rather than headsets is more considered than I thought).

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In an interesting twist, that startup is now investing in Linden Lab and Mr. Rosedale is returning as a strategic advisor. There was a very interesting piece on his perspectives on the metaverse in "The Information". What particularly caught my eye, given my obsession with digital identity as a fundamental platform for the new economy, was his view on "true" names. He says that persistent pseudonyms are at the heart of the metaverse and that true names, for so many reasons, are not what we want to go toward, because not everybody wants to use their true name or true face.

When you put all this together virtual worlds where people want to do business, decentralised finance moving tokens around and persistent pseudonymous identifiers with verifiable credentials as the token owners I think you can see a clear and consistent definition of the metaverse as well as the strategic outline for the financial services sectors response: managing the customers digital assets and digital identities to keep them safe in this new world.

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The Metaverse: Virtual Worlds But Real Opportunities - Forbes