The Battle For Control Of The Metaverse: Can Open Innovation Outrun Corporate Domination?

Talk of the metaverse—what it is and what it means—was everywhere at SXSW last week. But dig deep into where the Web3 crowd gathered, and discussion centered on a more existential question: Who should control the metaverse and how it operates? Crypto-natives, including The Sandbox, FLUF World and a growing force of passionate communities, worked to bring attention and urgency to the belief that this moment defines control of our digital future. Will it be owned by corporations, or will the metaverse be a space in which people hold the keys to their own identity, followings, data and digital assets, with full agency to leverage them across applications and platforms? Behind the debate is this core question: Can a metaverse operated by its citizens become richer, more equitable and more valuable to its users than one that is corporate designed and operated?

Mark Zuckerberg, the de facto leader of the corporate metaverse tribe since renaming his company, took the stage virtually to assure the crowd that Meta would be behind “the fundamental tech to bring the metaverse to life.” He emphasized their work on the entire tech stack—from the hardware to access it and the applications that use it to the digital identity systems that define the people in it. This is something “a lot of people at Meta have wanted to build for a long time,” said Zuckerberg.

Across town, Brooke Howard-Smith and Alex Smeele, founders of Non Fungible Labs and the team behind FLUF World, were issuing a call for a very different future with a “Metaverse Manifesto,” a collective vision for an open, inclusive metaverse that empowers its inhabitants. Throughout SXSW, Web3 speakers described using blockchains and blockchain-based tools to shift control of data and identity from people to corporations, enable people to directly own digital assets, orchestrate direct flow of economic value without middlemen, align incentives to support collaboration, and enforce operations and governance that the community has agreed on. With public blockchain technology serving as a base layer ledger, these attributes could support a metaverse that is natively interoperable and controlled by its users, not corporations.

This open foundation could unlock a powerful new era of community-fueled innovation and creativity. Public blockchain technology is not only open source, but offers the railways to track and directly reward creators and innovators for the value they generate in the system. Crypto-natives are betting that this combination of “open” and incentives could ultimately fuel a version of the metaverse that is far richer, healthier and more valuable to users than a version that is limited by corporate imagination and business models.

From its start in software—where open source developers distribute software with its source code—the concept of open is a force that has propelled hyperspeed evolution across industries. Radically open frameworks tap into collective creativity—and the power and agility of the crowd—to drive rapid innovation. In an article published by Wired, Chris Andersen, the curator of TED, described how the debut of YouTube unlocked open innovation that transformed the world of dance. What had started with challenge videos posted by rival street dancers exploded into a global laboratory, where remixing led to whole new dance styles overnight. In a world in which culture shifts quickly, the best innovation often comes from the community itself. Open frameworks give a ready path for diverse and distributed creators to rapidly test and launch ideas—and if, over time, more innovation flows through open frameworks than proprietary platforms, “walled gardens” could eventually fall behind.

FLUF World was born out of this kind of open framework. In August 2021, Non Fungible Labs launched a collection of 10,000 NFT rabbit avatars, or “FLUFs,” which live on the Ethereum blockchain, and thus are application independent. The project creators worked to build a community around the collection, and granted NFT holders commercial rights to their FLUF. This gives NFT holders, which number in the thousands, a direct interest in the overall success of the community. Out of this approach, the “first metastar” was born when The Hume Collective, a self-described Web3 record label, gave their FLUF, angelbaby, a personality, an origin story and 3D animation, performing in an immersive digital performance at the “FLUF Village” at SXSW.

In a paper for the Knight First Amendment Institute, Mike Masnick speaks to how a transition from a platform-centric world to open protocols could create a “laboratory of the real world” that results in more innovation, competition and user value. When developers and other stakeholders can build on a common standard, they can innovate without fear of being shut out by a single powerful platform. This also makes it easier for users to switch providers, motivating providers to act in users’ best interests.

But the community’s ability to get robust standards in place will be one of the deciding factors in this race. Smeele talked about how the industry has not achieved true interoperability and there is much more work ahead. He asked, “Interoperability is the big buzzword in the industry right now . . . but as a community and as an industry, how can we come together and look at standards that we can apply now to ensure that down the line, we know that things will truly be interoperable?”

User experience also needs to mature rapidly. Initially, “The metaverse is going to be empty,” said The Sandbox cofounder Sebastien Borget, who expects 99% of metaverse content to be created by users. This is the “cold start” problem, where people don’t want to go to a digital space until there is a rich experience and network already in place.

Meanwhile, Meta invested $10 billion toward building a metaverse in 2021 alone. With user agreements in place that give the company proprietary use of the data of nearly 3 billion users to understand and influence behavior across what Zuckerberg described as the entire tech stack, they have a stunning lead in the work to gradually transition the average user to Meta’s version of a metaverse. And web users today are accustomed to the “free” products enabled by the large platforms’ business models, which use the sale of the same users’ data to fund the service. Web3 communities are still looking for business models that reduce the cost of decentralization, which inherently shifts the expense of the network to the people who use it.

But ultimately, the users—and the economy—will go where people have the best and highest-value experience. When whistleblower Frances Haugen unearthed thousands of pages of internal documents that show how Meta’s algorithms stoke division and harm children, millions of people were forced to confront the dangers of closed, proprietary digital spaces. Philip Rosedale, the founder of Linden Lab (the parent company of Second Life), described the importance of examining the business model for the metaverse. “If you take what we’re doing today and extend it to the metaverse, the problem with that is that it amplifies the problems we already have in social media networks, and makes them horrifically worse, and I think that’s an existential risk,” he explained. “We have to have a business model for the metaverse that’s not trying to modify people’s behavior to make more money.”

An open model introduces many new challenges, including the highly complex question of how to moderate in a decentralized digital space. But it also gives people and their communities a more transparent, participatory system for problem-solving. Instead of relying on a small number of corporations constrained by the interests of their relatively few shareholders, a truly open metaverse focused on serving the interests of all users could give people the chance to come together and build solutions directly into the system itself. Ultimately, this work could also lay the groundwork for the discovery of new, more symbiotic business models that are designed from the bottom up, by user-stakeholders themselves.