#002

Gm / good afternoon/ good evening. Welcome to Cybermonk #002.

While I initially intended to send this to you last Sunday (10/10), I failed to account for the federal holiday. It was a long weekend for most folks in the US. Cybermonk may not be in the business of chasing buzzword clout, but we do mind propensity to open emails. Sending and receiving emails over a long weekend is no bueno.

Rather than send out two more editions about the m-word, I've compressed the rest of the essay into this newsletter. Hope you enjoy + see you next Sunday.

The metaverse* is coming, part 2

*henceforth known as the m-word. If you want to read the full essay all at once, you can find Part 1 and Part 2 put together here.

Where we left off: Part 1 of this essay contextualized the m-word conversation and outlined the dueling, dominant schools of thought in virtual worldbuilding: web 3.0 punks and the 1 trillion club. They have both staked a claim in the m-word. They do not see eye to eye.

But they're also not the only relevant players in this conversation. The last paragraph from Part 1:

The big 'ole messy middle

Back in the day, following another type of holy war, the Treaty of Westphalia established nation-states, the atomic unit of international relations. This is a wild digression from what you were likely expecting, but bear with me.

Punks and tech megacorps challenge the Westphalian system in different ways.

Most digital world-building takes place outside the realm of governments, but not necessarily beyond their reach. This year, China has brought its entire consumer internet sector to heel. Among other things, this crackdown has imposed new compliance costs, reshaped tech companies' relationships with their users, and constrained their ability to ship whatever they want. The free-wheeling days are over. In the West, specifically the US, the specter of more stringent regulation looms large over the tech sector.

And that's the point: Virtual worlds aren’t impervious to the geographical boundaries of our meatspace world. Governments may not be the driving force of the m-word, but they can still throw a monkey wrench into its development.

Beyond domestic policy, consider the balkanization of the web, tech stock exchange listings, telco infrastructure, smartphone OSes, and app stores. Why wouldn’t the splinternet extend into the m-word? Definitionally, does that make it dead on arrival? If not, does a set of fragmented, nationally controlled m-words that don’t “talk to” each other really count? What would authoritarian vs. democratic versions look like? Would the US and EU use the same version, given their divergent digital regulation and data governance postures?

Next up in the messy middle...

A new breed of challengers: the m-word natives.

Having made their names in gaming, these companies are led by technologists who have strong feelings about the m-word and distinct philosophies on what it should look like. Long before it was fashionable, the m-word natives have been building in public toward their vision. Two m-word natives have, in fact, gone public. Across the board, their valuations have soared for two reasons:

1. The Covid-19 panini pulled forward future trends, including the displacement of analog by digital.

2. Markets are slowly pricing in the fact that these companies’ self-serve creation tools, graphic engines, and 3D/AR/VR platforms have TAMs far beyond just gaming.

The canonical example is Epic Games, which could be described as the developer of a blockbuster, battle-royale shoot-em-up game. But, if anything, Fortnite was a proof of concept that helped Epic cash-flow its investment in other m-word tooling, such as the Unreal Engine. In words and deeds, CEO Tim Sweeney has positioned Epic as an ‘arm the rebels’ company. Epic has fought what it would call the mobile OS megacorp duopoly in Web 0.0 format (US courts), which has conveniently doubled as a crusade for hearts and minds.

Also in this club: Unity, which offers a cross-platform game engine and real-time 3D rendering/development tools. The company, which primarily serves mobile game devs and Fortune 500s, has meaningfully helped pushed the envelope with AR/VR adoption by making it easier to create in these mediums. One fascinating benchmark that Unity CEO John Riccitiello has highlighted is the ratio of artists to developers in an organization. “In gaming, it used to be 1:1. Today, artists outnumber technologists at least 2:1, and it's quickly heading to 5:1 or more,” Riccitiello said. This sort of leverage and increased productivity will be essential building out a vast network of worlds and simulations.

Roblox, meanwhile, weds world-building with user-generated content. Massively popular and sticky with younger users, Roblox has been able to evolve beyond game-like mechanics (shoot, collect, pass level) to third-place, proto-m-word dynamics (create, explore, socialize). The results are impressive, with 43 million daily active user and millions of items/skins/cosmetic upgrades created.

Another must-mention is Niantic, the AR developer behind Pokémon GO. Niantic CEO John Hanke has observed that the m-word term is derived from dystopian sci-fi novels. He advocates not for fully immersive VR, but what his company is building: “data, information, services, and interactive creations” overlayed on our real world via AR.

Clearly, the m-word-native companies don’t see eye to eye on everything. And they bring different strengths to the table. But they are picks-and-shovel companies (also, Nvidia!) to watch in this brave new world.

Beyond governments or m-word natives, the messy middle has a long tail. These are the companies, brands, developers, online communities, and everyday users who will create/build toward an m-word or otherwise participate in its incipient sub-economies. These groups can vote with their feet. Dominant tech topics du jour—platform take-rates, creator monetization opportunities, distribution chokepoints—will shape how they vote. Take it to the bank (of Nook).

The synthesis

Set aside the heady question of whether a m-word is technologically doable or socially desirable. While that isn't to be taken for granted, for our purposes, we'll assume the m-word is doable and desirable. Where, then, will it land on the spectrum of to

The punks have a lot of whitespace in front of them. Crypto, distributed databases, shared ledgers, digital wallets, and NFTs can and should remake marketplaces, virtual economies, and digital ownership models. Yes, there are a lot of shady, rugpully elements to certain parts of this world, but to reduce Web 3.0 to 'number go up' or 'tulip mania' or 'scam' is missing the forest for the trees. In particular, the non-fungible speculative mania we see today seems destined to eventually give way to genuine utility and value. Two examples form music: Steve Aoki giving free Lollapalooza tickets to his NFT holders. And 3LAU's new company, Royal, which could let artists' true believers share in their upside.

In the vibrant punk ecosystem, the pace of innovation and iteration is unmatched. Technological complexity is steadily being abstracted away, usability is improving, and tens of millions are being onboarded.

If we extrapolate the trend to critical-mass adoption, it’s difficult to imagine a future archetype m-word user settling for ownership models that resemble the status quo. The accessible example is digital avatars: Today, you can’t take them across apps or bring them from game to another.

Imagine if you could. From that vantage point, why would anyone opt for assets that can be programmatically confiscated, usable only in one enclosed game/experience, or not eligible to be traded/exchanged/sold? You earned or bought those avatars, cosmetic skins, emotes, spaceships, and pet doges. They should be truly yours!

For virtual economies, arguably the m-word’s important component, today’s biggest virtual game/world economies don’t have many selling points over the punk paradigm. V Bucks, Cod Points, Robux, and Bezos Bucks would take a back seat to currencies that can be freely traded. That’s not to say corporate digital currencies won’t exist—They just wouldn't be the only medium of exchange. The punks should be saying: your illiquidity and trapped assets are my opportunity.

So, there’s a strong case to be made that a new ownership layer of the internet/m-word will be distributed and decentralized, as the Punks are pushing for.

On a more meta level, an m-word would by definition require the 1T Club to accede to higher levels of interoperability. That’d impact take rates across the toll booths they set up in whatever successor to our current internet.

But the 1T Club will still be capable of standing up and scaling lucrative m-word divisions, barring an outlier event (eg, sweeping trust-busting). In the general public’s eyes, the 1T Club members are still relatively popular institutions. From an execution perspective, the 1T Club has clear hardware, software, user base, and data beachheads in whatever comes next. Not only can they stake a claim, they can heavily allocate toward improving their odds of success.

If the m-word bulls are to be believed, it will be a multi-multi-trillion dollar market. Even with less market share, that big of a pie could still mean the 1T Club gets bigger.

But they’ll face competition at every level and layer. There’s the m-word natives and Punks. But plenty of other examples immediately come to mind: Snap and social identity. The House of Mouse and IP. Copyright lawyers and litigation. Etc etc....

The m-word may very well be cobbled together by a vast multitude of players, eclipsed in complexity perhaps only by our digital advertising ecosystem. Speaking of ads: Some of the driving forces of today’s web are likely to survive into whatever comes next. Closed ecosystems, sandboxed systems, proprietary technology, megacorps...and ads...aren’t going away.

While the feature-complete m-word is still a distant goal, it’s very plausible we’re already living in the early, formative stage of the precursor. We’re on V1. Let’s say that V-N equals the full thing. It’s a fool’s errand to try predicting what V3, V4, so on and so forth will look like.

In any event, here's this fool’s 10¢ on what V-N looks like: The punks make direct contributions with some ideological compromises along the way. The 1T club loses power and control, relatively speaking, but most of the members remain forces to be reckoned with. New megacorps emerge. Not a total revolution of today’s tech ecosystem, but a sizable shake-up.

But who’s to say? Let’s check back in 2031 and 2041 to see how this fared.

Presents of Mine

(ie, link dump and assorted thoughts)

Ministry of identification: A proposed congressional bill would mandate identity verification for social media accounts. Kneejerk reaction: Orwellian undertones. Contemplative response: This won't see the light of day. Nonetheless, as a thought practice, making social media cos. KYC users wouldn't directly mean the death of pseudonymity. But if you log all of that data in the back-end, it could theoretically be subpoenad or stolen in a security breach. Quite the slippery slope.

Taiwan Semi: TSMC, world's largest contract chipmaker, is a monster manufacturer. Dat capex go crazy. Whereas pre-pandemic it may have been easier for TSMC customers — automakers, device manufacturers, etc — to set their own terms when placing orders, now the chipmaker has all the power in the relationship.

Dept. of probably nothing, Part I : BofA initiates crypto research coverage, finds $2T asset class too large to ignore.

...Part II: Epic is open to listing blockchain-based / NFT-involved games on its store, after competitors Valve and Steam opted to do the opposite. By the same (non-fungible) token, Epic CEO Tim Sweeney has said:

...Part III: NFT market passes $10B in secondary sales; Coinbase launches its own non-fungible platform; As someone whose writing is referenced on the NFT Wikpedia page (no really, see Ref #94), IDK what to make of all this. I also don't know why my writing is referenced on the NFT Wikipedia page.

Before we close, I just want to thank you for signing up...and engaging! #001 stats:

As a seasoned newsletter hand, I'm under no illusion about why these numbers are so high. #001 was first send, Cybermonk is still in the honeymoon phase, Apple's privacy changes are likely distorting open rates, this 12-day snapshot shows the long tail of opens, etc etc...

Still, it's encouraging, so thanks again for reading! Don't forget that you can always reply to let me know what you think, offer suggestions, or send me your best PowerPoint decks on why high-speed trains are inevitable.

Until next time, Ryan

🤠.FM / @ryandoofy