Why virtual reality must be decentralized: (Decentraland.org)
These days everyone is talking about blockchain and decentralization. Very often there is an attempt to put everything on the blockchain and to decentralize everything. Unfortunately sometimes this attempt involves trying to decentralize something just for the sake of raising money through an ICO.
Intuitively I would’ve thought that a project about virtual reality on the blockchain would again be one one such example. However, after further research I believe this is not the case. I’m going to explain my thesis.
First we have to understand what virtual reality actually is, in the real world people accumulate resources as those serve a purpose. For example you can use your land to grow food and your house to protect yourself from the rain.
On the other hand, your virtual land and your virtual house have no purpose, they are not resources. Virtual reality is simply a new way to browse data. But we are basically talking about user interface. You could have virtual land and a virtual house on your computer and just watch it on your browser. The fact that you are experiencing the virtual house in 3D with some special glasses is simply a user interface difference.
Let’s continue our analysis by ignoring the fact that virtual reality as a user interface is more immersive than a simple two-dimensional virtual reality that you could see on your computer with your browser.
Someone could argue that the Internet is already virtual reality, after all you can go on Google and search pictures of houses. So what’s the difference?
The main difference is that the normal reality has restrictions, for example, you cannot easily duplicate your house. The Internet as we know it doesn’t have restrictions, I could copy and paste the picture of my house many times. It can be a good thing but sometimes restrictions are good. For example certain things would have no value if they were not scarce. Imagine that someone really wants to buy a Ferrari. The reason he wants to buy a Ferrari is not just because he needs a car but it’s also because with the Ferrari you can impress other people. However in order to impress other people the Ferrari must be scarce. If everyone has a Ferrari then it’s basically useless as its value is not for moving to point A to point B but it is to impress other people.
Virtual reality as we imagine it (an alternative world that looks just like our current world but is “virtual”) must have similar restrictions as our real world. In our current reality we assume that all resources are valuable, but in reality a good number of resources is only useful in the sense that it attracts other people’s attention. Think a new outfit, and expensive watch, an expensive purse, etc.
In the digital world you’re not going to attract anyone’s attention with a picture of an expensive Gucci bag. However in the real world you will.
The goal here is: is there any way to transpose this to the digital world? Is there a way that a picture of a Gucci bag can attract attention in a virtual world just as much as a real Gucci bag will attract attention in the real world?
In order to do that we must to some extent replicate certain properties of the real world. For example the concept of scarcity must be re-created. The best way to guarantee scarcity for digital assets at the moment is blockchain. Blockchain can guarantee scarcity because it is decentralized.
Decentralization ensures that no one can change the rules. If you enter some virtual reality world that is hosted on some central server the person who controls that server can basically change the rules whenever he wants.
In the real world people invest in countries which have political stability. No one wants to invest in places which are highly unstable and where the rules can change from one day to another.
We now come to the key points why I believe blockchain makes sense for virtual reality. The reason is permanency.
Permanency is extremely important when you want to build something. Let’s say that you have some very weak material, most likely you will only build for yourself some very basic shelter. If however you have some very strong material you may decide to invest the time and effort to build yourself a castle. The material that is used to build something is going to determine to a large extent what is going to be built. For example, it’s a lot harder to build a statue than it is to draw on a piece of paper. So why people put so much more effort to shape a stone? Because they know it’s going to be a lot more permanent.
Why did the Egyptians build the pyramids as big as they were? Because they could be seen from afar and would last a very long time.
Blockchain offers those same properties in the digital world. We have to understand that in the digital world the only real resource that exists is attention. In the real world we have the resources that are needed for practical purposes (like food) and resources that are needed for attention (expensive watches). In the digital world we only have the attention type of resources. Resources require effort to be built, regardless of whether they are digital or not. People are going to invest a significant amount of resources to build something in the digital world only if they know it will have permanency. This permanency is guaranteed by the blockchain because of its decentralization.
We have so far analyzed why blockchain can ensure that digital assets in a virtual reality world can be permanent so to incentivize people to build things in the digital world. However now we must try to understand how this can work from an economical point of view.
The virtual world must recognize private property so that people are incentivized to build things. Property should also be transferable to incentivize people even more to build things as they know that they could potentially resell them in the future and also to ensure that they can sell something to someone else in case they lose interest in it (imagine for example if you could build the house but never sell it, every time someone needed to move they will leave that house empty with the result that there would be plenty of houses that are empty and in state of abandonment). In this case land will be transferable on decentralized marketplaces like district0x.io ensuring that things in the virtual world will have actual and real economic value.
This requires a currency for the digital world which must be scarce or it is worthless.
Not only the currency should be scarce but also the land. Why is that? If you have infinite land anyone will build anywhere. The Internet is an example where you have infinite land. Few people remember how the Internet was before search engines, back then you needed to know a specific site in order to visit it. Search engines are born from the fact that the infinite amount of potential virtual land (domain names) didn’t allow for easy discoverability of things. So you quickly needed search engines.
Let’s look however at the real world. You go to a new city for holidays. Do you need a search engine to find a restaurant? Most likely you will find some just by walking the streets. The value of physical real estate is much higher than the theoretical value of domains because they allow discoverability by proximity. When you browse your virtual reality world you will find clusters of virtual assets which are discoverable by proximity. Because the best areas would be the most expensive most likely you will find the best information/services there.
Remember that in the virtual world it’s all about attracting attention.
Attention is a form of currency in the sense that to get it you must spend resources. Anything that doesn’t have a cost is not really worthy of attention as anyone could replicate it. No one would pay attention to your $10 watch because everyone can get one but everyone would pay attention to your $1 million watch because very few people can get one.
Let’s think about Facebook, Facebook is in some way an evolution of the old forums and chats. Back then people were already trying to get attention by saying things about them. The thing is everyone could pretend to be whoever they wanted to, so no one would give it much weight. On Facebook, however you need photos in order to get attention. You have to show that you went to some expensive restaurant or went for holidays in an exclusive destination. People rarely put photos of their bathroom. The point of posting a photo on Facebook is simply to get attention.
The virtual reality we imagine however should be virtual and possibly not connected to our real life, so we are not going to get attention by posting photos of our last meal in the best restaurant in town. We will get attention by creating something in that virtual reality world that requires a lot of effort and so is worthy of attention. That thing however must be discoverable, people are not going to find it from a search engine. That means that land must be scarce and people must pay for it. They must then create things which will attract attention.
Attention is not just about narcissism, but it’s also about the possibility of communicating. Let’s say you want to communicate with some like-minded people in the virtual world. You must first attract their attention. You will meet a lot more people if you have bought some of the best land available and built a huge pyramid than if you are just a pedestrian walking by.
So the idea is that as the world evolves and most of our needs are met easily (like food and shelter) what we crave more and more is entertainment. This is obvious if we look at how much the entertainment industry has grown in the last 50 years. However even more entertaining than passive entertainment (like movies) is getting attention from other people and interacting with them. That’s why multiplayer games are so popular. But imagine now a game which is more than a game because it’s permanent. It’s not real in the sense that you cannot drink the virtual milk of your virtual cow but you know at least that there is no server administrator anywhere in the world that can decide to turn off the server where your virtual cow is located. In the virtual world objects are always associated to an identity (which of course can be anonymous) and that identity can always control them. The digital asset becomes not the content itself but the power to alter the content.