Economic logic behind the meta universe

After the silence of the Internet community in the capital market for a period of time, COVID-19 finally succeeded in creating an investment concept in the second half of this year: Metaverse.

Restricted by the isolation policies of various countries, people’s demand for online social networking, business and entertainment increases, which puts forward higher requirements for the interactivity and authenticity of virtual reality. Therefore, the meta universe followed the trend and was born in the sky.

The concept of meta universe was born in the 1992 science fiction avalanche, which describes a virtual world parallel to the real world. Nowadays, there is no relatively accurate concept of metauniverse. My understanding is that metauniverse refers to “an expandable space in the digital world”, including the integration of technologies and concepts such as virtual reality, augmented reality, blockchain, cloud computing, digital twins, digital currency, artificial intelligence and big data.

In this way, this vague concept has more room to play in the capital market. At present, the main profit model of metauniverse is to invest in stocks, sell courses, hold lectures and hold forums.

However, for new things, new concepts and new technologies, “do not overestimate in the short term and do not underestimate in the long term” is a relatively pragmatic attitude. The key is to analyze the general logic behind it.

This paper explores the economic logic behind the meta universe from the perspective of economics.

Article logic

1、 Yuan universe, what are they doing

2、 Yuan universe, what do they want to do

3、 Yuan universe, what can they do

[6500 words in the text, 25 ‘reading time, thanks for sharing]

Let’s first look at what these enterprises that embrace the meta universe have done.

Roblox is known as the “first strand of the meta universe”. This is a game company founded in 2008 and is now the world’s largest online game creation platform. In March this year, the company received US $520 million in financing, and its market value exceeded US $40 billion on the first day of listing, 10 times higher than a year ago. China Tencent also participated in the investment of the company.

Roblox was the first company to write “meta universe” into the prospectus. Its listing set off a whirlwind of meta universe in the capital market. Dave baszuk, CEO of roblox, proposed eight elements of the metauniverse: identity, friends, immersion, low latency, diversity, anytime, anywhere, economic system and civilization. But we mainly look at what they are doing.

Roblox provides a multiplayer online game creation platform with more than 5 million developers and more than 100 million monthly active players. Users can create games or play games on it. Roblox also released two virtual currencies, robux and tix. Users can get robux by creating games and recharging, but they need to deduct some taxes. Tix is obtained through daily login. Tix can be converted to robux. At present, tix has been removed. On this platform, robux can be traded normally as a virtual currency.

Roblox is a platform that is easily reminiscent of the public chain of blockchain, especially Ethereum. Ethereum is an open-source public blockchain platform on which users can create contracts, that is, programs; At the same time, use the cryptocurrency “Ether” to trade. Different from the public blockchain, roblox and metauniverse provide more visual, freer and wider application virtual scenes.

In fact, as early as 2003, the game “second life” launched by Linden laboratory has a prototype of the meta universe. In the game, users have their own virtual identity, can also create organizations and commodities, and use a currency called Linden for various transactions. In 2006, linden coins could be exchanged with us dollars, the scale of users expanded rapidly, and the platform began to issue Linden coins. In the end, linden coin caused severe inflation and destroyed the virtual world of second life.

The application scenario of second life is more real and free, while roblox provides a better solution in terms of virtual currency and exploitable application scenarios.

Let’s see NVIDIA again. In August this year, NVIDIA said that what we saw at the GPU technology conference held in April was “fake Huang Renxun”. Through the video, we can see that the conference site is Lao Huang’s kitchen. Lao Huang is wearing an iconic leather coat to introduce grace, the first server CPU of NVIDIA’s new product. Meanwhile, Lao Huang spent 14 seconds publicizing his meta universe virtual reality world. However, no one thought that what we saw was false.

NVIDIA disclosed that all details from Huang Renxun to the kitchen were rendered. Of course, Huang Renxun also has real people on camera, which is not completely fake. However, the video that deceived everyone was enough to surprise the outside world, and NVIDIA also made a super marketing. NVIDIA took the opportunity to catch the shuttle bus of the yuan universe. Lao Huang said: we are on the cusp of the yuan universe.

NVIDIA is the world’s largest graphics card manufacturer. Its positioning in metauniverse is to provide underlying technology and realize the industrial application scenario of metauniverse through software and hardware technologies such as graphics card, chip, operating system, virtual reality and artificial intelligence. For example, they have developed a product called Omniverse, which is an end-to-end 3D simulation production and cooperation platform, which is considered to be the primary platform for the industrial scene of the meta universe. At present, it has been applied to BMW’s global plants. BMW can more truly simulate the production line and the operation of the whole plant through Omniverse, and optimize its production network. It is expected to help BMW improve its production efficiency by 30%.

NVIDIA actually presents its own technology and newly developed products with the concept of “meta universe”. Of course, NVIDIA provides the underlying technical support and expands the imagination of metauniverse in industrial application scenarios.

Look at Mark Zuckerberg. This is the leader who actively embraces the meta universe in the Internet industry. He believes that the meta universe will become the successor of the mobile Internet. In October this year, Facebook officially changed its name to “meta”. The accurate understanding is that a parent company called “meta” has been established to control Facebook. Zuckerberg claims that Facebook will become a metauniverse company in five years.

Zuckerberg’s enthusiasm for betting on metauniverse surprised the outside world. What did he see? Zuckerberg has always been very enthusiastic about virtual reality technology. As early as 2016, Facebook bought oculus for $2 billion. Their R & D investment in VR business has increased from $5.9 billion a year to nearly $18.5 billion now.

Although Facebook has not yet made a product or application scenario that can be touched by the meta universe, their imagination in the consumption level application scenario of the meta universe is far beyond roblox. Facebook is the world’s largest social platform, with a monthly life of 2.9 billion. Facebook can provide a comprehensive meta universe consumption experience scenario, not just games and social networking. Just like Zuckerberg As the founder’s letter Advertises: in the metauniverse, you can do almost anything you imagine – get together with friends and family, work, study, play, shopping, creation – and a new experience that is completely inconsistent with our current view of computers or mobile phones.

In addition to NVIDIA and Facebook, some enterprises also announced to join the metauniverse. Microsoft announced to add virtual reality technology to their conference and video call software to improve the immersion of enterprise video conference and create an “enterprise version of the metauniverse” It is said that apple is launching new VR devices. Tencent, Alibaba, Xiaomi and Netease in China have all taken action. In addition, Zhangjiajie scenic spot is also included.

From second life, robux to NVIDIA and Facebook, metauniverse tries to use all possible technologies to create a free virtual world that restores and connects the real world, but is not bound by the rules of reality – and finally establish the ecological rules belonging to the metauniverse.

In order to restore reality, metauniverse creates an immersive experience space and tries to copy a parallel world in the digital world; in order to get through the reality, metauniverse tries to match, link and bind identity, social networking, shopping, entertainment, currency and asset investment with the real world.

Of course, at present, the most matching application scenarios with metauniverse are games and entertainment. For example, the game platform fortress night and American rapper Travis Scott held a virtual concert in the game. Players can change venues with songs. The cool immersion attracted 12 million players.

What are the possibilities of the meta universe in the future?

If you associate roblox with Ethereum, if you associate meta with virtual currency Libra, if you associate Omniverse with big data and artificial intelligence, you can roughly observe what the meta cosmologists want to do.

Metauniverse is actually the technology accumulated by the Internet community in the past few years, including virtual reality, blockchain, digital currency, encryption technology, big data, cloud computing, artificial intelligence, etc. it is a visual and immersive application scenario. It can be simply understood that artificial intelligence is productivity, big data is the means of production, blockchain is the relationship of production, and metauniverse is the application field View.

Are they frying old rice? In fact, it is not. The introduction of such a collective concept as the meta universe is actually expressing some appeal.

This demand, if summed up in one word, is freedom.

The meta universe provides this demand for freedom – distributed networks, decentralized organizations, autonomous communities, encrypted banking networks, trusted artificial intelligence, immersive experience, unrestricted communication, flow and imagination, providing a space for phenomena and a scene for realization – look, the world should have been like this. On the contrary, the meta universe tries to be virtual The quasi realistic way challenges the centralized Internet in the real world and the centralized human power structure.

The world has long resisted the centralized control of the Internet. Big data killing, algorithm traps, information cocoon room, abuse of user data, secretly recording and monitoring user behavior, the former “Dragon Slayer” has now become the “dragon” that everyone calls. In recent years, these “Dragons” tend to be besieged and beaten, a typical case is Facebook.

Zuckerberg, the founder of Facebook, was surrounded by 44 members of Congress for five hours because of the disclosure of user information. The congressman asked Zuckerberg, “do I want to give you money so that you can not disclose my personal information?” “is Facebook an authoritarian company?”, and more importantly, “since you went to Congress in 2006 to apologize, why are you still apologizing today?” Faced with a centralized platform such as Facebook, lawmakers obviously don’t know much, let alone understand it. Zuckerberg is even more difficult to justify himself. He has to go to Congress to apologize since 2006.

Tesla and intelligent driving vehicles also face similar difficulties. The basis of intelligent system is big data analysis. Mastering various data of users and monitoring users’ driving behavior are the key to the improvement of intelligent driving technology. However, once the intelligent system is involved in driving, the responsibility identification of traffic accidents has to rely on data analysis. Nowadays, the centralized system of automobile manufacturers controls the data, which brings difficulties to the identification of responsibility. Users express distrust of this centralized power structure.

In 2008, Nakamoto released bitcoin white paper and established the first distributed network. It has found a centralized network solution, that is, blockchain distributed network. In bitcoin network, distributed settlement, verification and bookkeeping can be realized through the generation of blockchain.

Banking system is the most mature application of blockchain distributed network, which is the contribution of bitcoin network. However, later Ethereum believed that human behavior was extremely complex and could not be handled completely in the way of transaction and bookkeeping, but should be completed by protocol. The protocol was executed through code on the blockchain, and the smart contract was born. The thinking of Ethereum network is that all human behaviors are contracts, which are realized through code. In other words, code is the law, which restricts the implementation of the agreement through code, so as to achieve decentralization.

Ethereum has greatly expanded the application scenario of blockchain, but there is also a problem, that is, the trend of coding. In other words, distributed network does not present the application scenario of visual virtual reality, which restricts its development. Why is roblox exciting? Games can also be released on Ethereum by creating smart contracts, but roblox shows a more realistic application scenario.

Zuckerberg is also very interested in blockchain. Two years ago, he announced the creation of a cross-border distributed banking network and launched the cryptocurrency Libra. However, the application scenarios of Facebook are rich and real, and how to show them is a difficult problem. Nowadays, the concept of meta universe, especially virtual reality technology, provides visual application scenarios for distributed networks. When Libra distributed network and cryptocurrency are combined with the application scenario of metauniverse, Facebook has the opportunity to shape a completely different “parallel universe”. For example, Libra coin has rich application scenarios and can buy goods, game services and even tangible assets in a visual space. Moreover, users’ social and trading networks are distributed and end-to-end encrypted.

In this way, Facebook can get rid of the reputation of “authoritarian company” and the endless antitrust investigation in the EU. At the same time, it can also provide 2.9 billion users with a platform beyond the centralized Internet. This is the main reason why Zuckerberg bet on the meta universe.

Perhaps the biggest impact of distributed networks is to inspire the concept of digital asset privatization. Human beings have struggled for centuries for the privatization of assets. Globally, most physical assets have been privatized. Digital assets, including data and virtual assets, have not been truly privatized. Distributed data storage will realize the privatization of digital assets from the technical level, and metauniverse will open up the asset link between virtual and reality in the way of visualization, so as to further strengthen the personal property rights of parallel universe and real world. As more and more physical assets are mapped to the distributed network in parallel, more and more assets are privatized and confirmed after being chained. Metauniverse provides authorization, transaction and settlement that simulate the real scene.

According to Locke’s theory, property privatization is the basis for the expansion of individual freedom. The protection of virtual and physical property rights by the meta universe can greatly enhance individual freedom – this is the appeal of the meta universe.

We understand artificial intelligence from the concept of meta universe. Most people welcome AI, but reject hildo kasinsky’s prediction that it will be controlled by the technical elite in the name of AI. In distributed networks, data personal property rights can also support artificial intelligence, and this is a more benign and fair rule. Intelligent driving automobile manufacturers, Biopharmaceutical Enterprises and financial institutions can obtain user data by authorization and transaction in the distributed network. Metauniverse provides a more secure and immersive experience scenario for distributed networks and artificial intelligence. For example, the distributed intelligent driving system can show the owner’s fatigue driving state, and send out reminders and auxiliary intervention at the same time. This process is encrypted and secure. When a traffic accident occurs, metauniverse can restore the accident scene, and both users and traffic police can access data to judge the accident responsibility.

This is the freedom that distributed network and artificial intelligence bring to mankind in the space of meta universe.

Of course, the meta universe challenges not only the centralized network, but the more difficult social rules behind the centralized network.

Bitcoin, blockchain and digital currency unreservedly show dissatisfaction with the rules of the real world and try to launch a Don quixotic challenge. Therefore, they are restricted by the world power organization.

Yuanuniverse’s strategy is more low-key and intelligent. It shows the paralysis of “entertainment to death”. It puts more emphasis on another world presented by virtual reality, and the application scenarios are more entertaining, social and consumer. However, the meta universe gathers all technical forces to change the current human power rules in a parallel universe or imperceptibly. In the meta universe, distributed networks, cryptocurrencies, trusted artificial intelligence and autonomous communities will reshape the trust relationship between people and the power distribution system, which poses a challenge to a series of systems and legal arrangements in the real world.

In fact, the demand for reshaping the rules of the meta universe is not created out of thin air. It comes from the needs of the bottom of mankind and has erupted intensively in recent years.

In the era of globalization, there has been a serious conflict between human freedom and restrictive state system. The national system is based on territory and citizens’ nationality, and establishes legal currency sovereignty, tax sovereignty and various jurisdictions. Economic globalization, especially trade and financial globalization in the past half century, has broken through the sovereign restrictions under the national system to a certain extent. However, the nationalization of the legal currency system still poses a serious conflict with economic globalization.

There are at least three conflicts: first, the national regulatory authorities and the banking system restrict the transnational circulation of capital; Second, the seigniorage was controlled by a small number of people, who made profits by abusing money, widened the gap between the rich and the poor, and triggered a debt crisis; Third, the indiscriminate issuance of money has strengthened the motivation to restrict capital circulation and further weakened economic globalization.

After the 2008 financial crisis, the emergence of bitcoin challenged the current legal currency system and banking system. Bitcoin network is a cross-border distributed banking system, trying to get rid of the restrictions of national financial supervision. At the same time, bitcoin tries to create a more fair, open and competitive private currency system. So far, bitcoin is not a successful currency, but it challenges the unreasonable power organization of mankind.

A few years ago, blockchain and digital currency attracted much attention from the capital market, but they are difficult to find sufficient application scenarios under realistic rules. The metauniverse provides them with a virtualized scene. It is easy to misunderstand that the scene of meta universe virtualization is easy to bias the application of technology. In fact, the application scenario of the meta universe will change the rules of the real world.

Currency needs application scenarios to accumulate credit through a large number of transactions. Legal currency is used by citizens through national laws to establish the basic disk of application scenarios in taxation and public payment. In the era of American Free bank, a large number of banks issued a large number of bank notes. These bank notes were looking for application scenarios. At that time, the most mainstream application scenario was not commodity trading, but financing market. In recent years, so has digital currency. In addition to financing, digital currency also needs a wider range of application scenarios, such as game services, commodity trading, stock investment and so on. And these are what the meta universe can provide. If the application scenario in the meta universe is large enough, this digital currency has considerable credit. It can easily penetrate into the real world and become a currency circulating in reality. The credit established by a large number of users for money, banking system, virtual assets and community rules in the meta universe will be extended offline through votes in European and American countries, so as to change the current power organization and game rules.

In fact, the relationship between the meta universe and the real world has long been opened up by asset securitization. Some digital currencies and virtual assets have established asset reserve systems, and digital currencies, virtual assets and virtual goods correspond to a certain proportion of real assets, goods and services. The digital currency held by the user can be converted into US dollars and real estate mortgage bonds. The real estate pass invested by the user online may correspond to some real estate in a city in California. A virtual commodity purchased by the user can directly watch a singer’s concert online.

Of course, what the meta universe tries to present is not only the free issuance and borderless circulation of virtual currency. The so-called parallel universe displayed by yuancosmos is actually a free world with stronger mobility of capital, information and personnel, a distributed world with fairer distribution of public power and public resources, and an autonomous world with fully protected personal property rights and interests.

Is the universe a better world?

It is at least a more efficient world. Stock is like an initial element of the meta universe. Stock is an asset securitization and the virtualization of real-world assets. The value of stocks is reflected in strong liquidity and specialization of equity allocation. The liquidity shown in the meta universe and the specialization of equity allocation can bring efficiency. In the real world, more virtual commodities and securitized assets circulate and trade rapidly in the meta universe. The efficiency of the meta universe fundamentally comes from legitimacy, that is, fairer rules.

In the future, the metauniverse will face at least two challenges:

First, the matching of various technologies. Yuancosmos puts forward high requirements for computing power, which depends on the progress of software and hardware technology such as power, graphics card, chip, communication network and artificial intelligence. Some people will ask, do we need to invest in virtual reality or “star sea”? Let the market decide. Musk’s rockets and satellites may be the technical support of metauniverse.

Second, more legitimate rules.

North’s theory of institutional change attempts to explain how a series of institutional arrangements promote productivity. After the evolution of religion and state institutional arrangements, human society has continuously strengthened the centralized power system. However, the industrial revolution disintegrated the centralized power system, and the institutional arrangements such as private property rights and clients became the core of the industrial society, and encouraged the creation of individual diversity talents. Since the industrial age, the evolution of human system has always been accompanied by incentive, liquidity and risk.

The rule of metauniverse should be a rule with stronger incentive and liquidity, and it is also a rule with higher risk. This poses a new challenge to institutional change.

The metacosmic world needs to establish two key systems:

First, the individual property right system. From a general point of view, the individual property right system is the first and the premise of all efficient systems. Property right arrangement directly affects the efficiency of resource allocation. The economic performance of a society ultimately depends on the incentive provided by property right arrangement to individual behavior. In the meta universe, the confirmation, protection, authorization and transaction of digital property rights have a great incentive to the digital economy and can promote the progress of artificial intelligence more healthily. Distributed network, encryption technology and digital currency can also better protect personal assets mapped on the Internet in the real world. At the same time, metauniverse will provide borderless and visual personal asset transaction scenarios to promote the global allocation of personal assets.

Second, the public system. It is meaningful to discuss the public system on the basis of individual property right system, but the establishment and implementation of any public system are full of challenges. In the digital currency world, digital currency originally wanted to challenge the monopoly of legal currency in a competitive way. As a result, a large number of digital currencies returned to zero in inflation and fraud. The market is in a prisoner’s dilemma, which is caused by the lack of public system.

The public organization of yuancosmos is not a state or company, but more likely a distributed autonomous organization. Hayek advocated the establishment of human organizations with market rules, and Buchanan defined the participation behavior of public decision-making as market behavior. In autonomous organizations, everyone participates in public decision-making in the way of maximizing expected benefits. For example, everyone chooses the community and neighbors according to the maximization of expected income, and participates in the public management of the community at the same time. The “free rider” problem of public system will reduce its efficiency. It is hoped that metauniverse can reduce the transaction cost of public organizations.

The meta universe does not lead human beings to a virtual world divorced from reality. On the contrary, its direction and ultimate goal is to change the real world.

In short, like the endless new concepts, the meta universe hides the sickle of the capital market and the sickle of idealism.