Foundation Metaverse Europe Position Paper on Metaverse and Web3 by Lennart Blödorn (Original in German, automatically translated version)

What is Web3?

If one considers the metaverse as a virtual communication space that maps a new or existing reality, then the web3 can be understood as a part of its infrastructure. However, the web3 is not simply the same as the metaverse. Both the web3 and different metaverse can function independently. By connecting to the blockchain and the token economy that comes with it, completely new possibilities arise.

This potential must be leveraged with the help of appropriate support for companies and start-ups. At the same time, there is a need for a social discourse on which European values must be respected by virtual worlds and decentralized products. It should be left neither to companies nor to politics alone to decide according to which rules artificial realities evolve. The design of web3 and Metaverse is rather a task for society as a whole. Here, as in the real world, rules must be developed for joint interaction.

One example: Shortly after the release of the Facebook metaverse “Horizon,” there were reports that users felt physically harassed by other users.

• Here, there is already design leeway for platform providers today, such as proximity limits in digital interaction so that avatars maintain a minimum distance from one another, or proof of identity that would remove anonymity in the metaverse. Just like the Internet, the metaverse must not be a punitive space. The limits for infringements must be clearly defined.

• Furthermore, it must be ensured that there are institutions that represent a European ethic in the metaverse at an early stage.

Working worlds and digital ownership in the metaverse

At the latest with the renaming of “Facebook” to “Meta”, the term metaverse has become suitable for everyday use. But behind the name change are not just empty words. With the project “Horizon – Workrooms” Meta created one of the first Metaverse applications for the broad mass of companies. With Workrooms, meetings can be held in a virtual environment. Employees have the opportunity to join the virtual meeting with VR goggles. Since, unlike a video conference, the immersive 3D world has no screen limitations, there is any amount of space to display digital content. For example, not only a single computer screen can be shared, but several digital monitors can be displayed in the virtual space at once. Employees thus interact in a natural way. When you consider that 93% of communication is non-verbal, the advantage of a virtual meeting over a simple video conference is significant.

Participate in these meetings with the help of your own avatar. This has, as in real life, a very individual appearance. Starting with physical features, hairstyle and fashion accessories.

Thus, the development indicates that brand companies will also sell their products as virtual goods in the metaverse. People also want to carry the physical Louis Vuitton branded handbag in the digital world. But since there is basically no limit to the means of production in the digital world, the handbag could now be copied as often as desired. The principle of the “token economy” counteracts this. Virtual goods thus become unique products through the use of blockchain technology. With the help of so-called NFTs (non-fungible tokens), every digital asset is de facto given a certificate of authenticity. This digital value creation also allows goods such as digital jewelry, art or fashion to be sold. This allows manufacturers to be adequately compensated for their digital products. Moreover, the participant of a virtual meeting can thus wear the fashion that most closely represents him or herself.

The metaverse in the middle of society

Even within this development, there are, of course, a variety of legal and social issues that remain unresolved. For example, it is still questionable at present what the situation is with copyright in relation to digital goods.

There is also an overall societal question about the ultimate goal of the Metaverse. Quite a few experts speak of the metaverse as a point in time, not as a technical development. According to their conception, the metaverse is the time in the future when a person spends more time in the virtual world than in the real one.

• What might be the social consequences of this? What are the guidelines for interoperability between virtual worlds? Should platform operators be required to export digital goods to other virtual worlds?
• For all these issues, we see the Metaverse Europe Foundation as a European advocacy group that recognizes and addresses these issues and brings them up for discussion in society.
  
  

Ditch the Middleman – web3 and the End of the Platform Economy

Away from the metaverse, there are also use cases within the web3 world that already do without a virtual world. Recently, a part of the crypto world has attracted attention, which is mainly associated with gambling, fraud and soldiers of fortune – we are talking about cryptocurrency trading. The events surrounding the international trading exchange “FTX” have vehemently damaged the entire reputation of the web3 world. However, both the social and the political side unfortunately disregard the fact that cryptocurrency trading is only a small part of the technological development. Accordingly, there are a large number of innovative projects that have emerged with the evolution of the new Internet.

One example of this is tokenization. This refers to the securitization of bearer or usage rights on a blockchain. For example, real estate can already be securitized digitally using tokens. The advantage is a significant gain in efficiency, for example, in the trading of tokenized real estate. Since different intermediaries are usually eliminated, the trading and organization of tokenized assets can be facilitated. Another advantage due to the simplified organization is accessibility. Since the share in a property can be divided into any size using tokens, this facilitates access to alternative investment opportunities. On the supply side, this results in easier raising of capital and more efficient resale of real estate shares.

These digital tokens are stored in a so-called wallet, which is either kept by the company itself or externally. With the help of so-called decentralized financial protocols, these tokens can be used for further financial services, for example. The area around decentralized finance (DeFi) also enables the bypassing of intermediaries, in this case banks. This is why people in web3 generally speak of the end of the platform economy. So in web3, you can take a real estate share represented by a token and use them to deposit it as collateral with a financial protocol. This gives you the ability to borrow money without a middleman or another platform. The deposit of the tokenized values serves as security. In the future, it is increasingly likely that users will feed these logs with personal data so that a creditworthiness decision can be made.

Here, too, the question of social discourse arises continuously:

• What regulations should decentralized financial protocols be subject to in order to ensure socially relevant issues such as compliance with money laundering laws?
• What data may a protocol use to decide whether to grant credit in the area of DeFi?
  

No one wants a decentralized financial system that uses data to determine people’s ethnicity as a metric for their creditworthiness. Currently, we are at the beginning of the development of virtual value creation and a new token era. This gives us the freedom as a society to have a say in what this development can look like.

• This is precisely why the Metaverse Europe Foundation will specifically promote initiatives that recognize the opportunities of the Metaverse and web3 and assess the associated risks.
  

This is the only way to ensure that European values will continue to be represented in both the digital and virtual space within the next few decades.