Governing models for digital nations

For most of us, the story of creation comes in two forms that we’ve neatly compartmentalised: the first is the “philosophical” form, which broadly involves an act of creation by a divine power where the natural order of things as we see is deemed to be by divine design; the second is Darwinism, which simplifies into the case of a chaotic primordial biological soup organising itself over billions of years to get to the status quo, purely by iteration and probability.

When asked, most people who aren’t irrationally religious would say that they obviously subscribe to version 2, although version 1 is a philosophically succinct encapsulation of an otherwise chaotic and hard-to-explain process. Furthermore, the complexity of intelligently designing a complex system such as our world is likely beyond the intellectual possibilities of the human mind – few would be worthy of that task.

However, when given the chance to create a new world, which approach would a world creator choose? The opportunity that stands before us today is the opportunity to shape and craft a viable metaverse. The question is which version of the story of creation will ultimately turn out to be true for the metaverse, because while none of us were around to observe either the Big Bang or the first chapter of the book of Genesis, the primordial soup of the metaverse is bubbling in front of our eyes at this very moment – if only we could bother to look.

For the moment, everywhere we look, the approach is somewhat planned: whether in the fully contained world of Roblox, or the open worlds of Axie Infinity, Decentraland or the Sandbox, the mechanics of gaming, economy and development are defined by the developers of the ecosystem – very much like a divine figure to the inhabitants of each budding corner of the metaverse.

Success and failure of these ecosystems depend almost entirely on the ability of the developers, arguably the benevolent dictators that rule over these dematerialised nation states, to manage all the aspects of player interaction. The key difference here is that should the dictator fail, the inhabitants will quite simply leave.

For external observers and investors, the question to answer is straightforward (even if the answers may not be): Are the development team doing the right things to continue to grow the community? If they are, how long can they be successful for?

Of course, the open worlds that exist in the crypto world have committed to an eventual transition to community governance – but even so, democracy has had its failings too, as history can well attest.

Then again, what’s the alternative? It’s not like a world is going to build itself.

Turns out, it can.

A new world (for adventurers)

A couple of weeks ago, we wrote briefly about a new NFT project called Loot (For Adventurers), which comprised 8,000 NFTs minted at zero cost (other than Ethereum gas fees), each comprising a list of items not dissimilar to something one would find in an adventuring RPG: helm, gloves, boots, armour, weapons, shields etc. Perhaps it was taking a shot at all the animal NFTs that were being minted (apes, penguins, dogs, cats etc) by taking the imagery out and replacing it with lines of white text on black background. Or perhaps it was truly an exciting philosophical experiment. Either way, it caught on hard.

This little foray very quickly created an explosion of creativity: some tried to draw the items on their lists, with the lack of any native imagery leaving interpretation entirely up to the imagination of the NFT owner; others were much more profoundly inspired. Hot on the heels of the launch of Loot came a spoof parody version of it called BLoot (where the items were named as a mockery of Loot items, with some NSFW language involved), while within the realm of Loot came mLoot (more Loot, a series of more item lists beyond #8,000), monsters (also with randomised characteristics, some of which could be killed by specific Loot items only) and most recently, Realms – tokens that describe parcels of land in the world of Loot. One project took things even further down the road of abstraction: “The N Project” minted a randomised series of numbers from 1 to 14, with the output being 8 numbers in white text on a black background.

A currency was also launched, called Gold (For Adventurers), or AGLD for the traders amongst us, and was airdropped to all owners of the original 8,000 Loot tokens. Not unexpectedly, the “B” version, aptly named BGLD, followed suit, dropping BGLD to all BLoot tokenholders. These AGLD tokens had no apparent value or purpose assigned to it, other than following the general trend of borrowing the concept of “in-game currency” from most adventure games, which tends to be called “gold”.

Interestingly, the Loot community immediately latched onto it and applied a recent focal point of the crypto zeitgeist to it: “AGLD would be the governance token for a Loot DAO”, proclaimed some corners of crypto Twitter. A great debate ensued about who should hold AGLD, with proposals for “later” joiners of the community (i.e. those that didn’t mint the first 8,000 Loot bags) to own a second grade currency instead (“silver” perhaps?) while retaining exclusive voting and governance rights for AGLD holders, who were the “OGs” of the Loot world.

That battle still rages on as we write but whatever the conclusion turns out to be, the beauty of the entire situation is that an entire world, complete with characters, items, monsters and even maps, has been spawned on the back of what was probably a cross between an experiment and a joke.

At the heart of it is a demonstration of the power of open-sourced code: almost anyone could adapt the code of the original Loot bags and build anything they wanted around it. Contrary to traditional game developers, or even the microcosmic metaverses that we see today, there are no rules in Loot, and all the different bits can be built by different teams. No trademarks, no copyrights, just an absolutely chaotic and open world. No one even knows how gameplay will work, nor how the economy will be structured, nor what the rules of engagement are – this is literally a bubbling cauldron of primordial soup, waiting for a Cambrian explosion to happen.

How, what, when, where, why, by whom, or even “if” – no one knows what the plan will be. In fact, there is no plan in this World (for adventurers).

Let’s just call it that, if it isn’t already.

As close to reality as it gets

By any measure, the chaos that is now characteristic of the early days of the World (for adventurers) bears greater semblance to the fundamental chaos of reality than the divine intelligent design model of the other pockets of the emerging metaverse. Within this intrinsic chaos, one would expect order to develop and disintegrate over time, as systems grow, rise and collapse, no differently from the history of our world as we know it.

In a way, this is “natural”. There isn’t a governance token to invest in which somehow harvests a cut out of every transaction that happens in the world, although one may argue that Ethereum – on which all of the World (For Adventurers) is built – is the “god particle” of this entire realm. Investing in such a world, constructed from the bottom-up, isn’t as straightforward as making a call on a development team’s pedigree (for there are many). It is as much of a game of chance, wit and acumen as it is settling a new continent and literally planting flags on the ground, organising others around governance decisions and just trying to make things work.

Of course, the World (For Adventurers) doesn’t need to be the only instance of a primordial soup bubbling in wait for life to spring out of it. Rather, it is just the beginning of a new native approach to world building.

This week we learnt a new word thanks to Chris Dixon in this thread – “skeuomorphic”, which refers to how things are developed in the computing world to resemble “real” world equivalents. In short, he argues that tokens are a new digital primitive, and that waves of evolution in computing generally comprise two eras: the first is the skeuomorphic, and the second is the native. The skeuomorphic era therefore involved replicating offline “things” into an online “version” – websites were like newspapers, but on screen, for example. Only when things evolve into the native that entirely new functions, impossible prior to the technological advancement, come into existence (e.g. social networking, crowdfunding etc).

He goes on to argue that tokens (both fungible and NFTs) are a new digital primitive on which new, wonderful applications can be built. In particular, he mentions Loot for another crypto-specific reason: composability, which allows players to get fully creative on what they build and grow around the items that were created in Loot. This is true as well in ecosystems like Axie Infinity, which is starting to also see an emergence of user-generated content (e.g. in-game games designed by players) which is expected to continue to flourish as the rest of its corner of the metaverse develops.

We’d push the envelope slightly further by asserting that the knee jerk reaction to looking at AGLD as the “governance token” for a “Loot DAO” is in itself second-degree skeuomorphic – it imposes the now-established structure of a governing DAO on the World (For Adventurers) when maybe there doesn’t need to (and shouldn’t) be one.

Perhaps the way to place bets on the World (For Adventurers) – it really is a name that’s growing on us quite quickly! – is to do so the same way one would approach settling on new lands: pick up as much land and resources as possible, trade and execute on a strategy to develop what one gets one’s hands on.

Which is the way?

Ultimately only time will tell which approach to metaverse world-building works best: the walled-garden approach taken by the likes of Roblox, the open-world but top-down planned (with a promise of future decentralisation of governance) approach of Axie Infinity et al, and the wild west free-for-all that Loot started.

Arguably all three approaches to building the metaverse have similarities: they all provide some groups the opportunity to earn an income from the expenditure of others (e.g. Roblox developers building experiences, certain gamers in Axie Infinity playing to earn SLP to sell to breeders etc), there is some degree of user-generated content and customisation and all of them hold themselves out as open, unconstrained environments for maximal expression of creativity.

In our view, however, there is one critical differentiator between the successful and the wildly successful: alignment of interests. More precisely, the ability for players to own a piece of the virtual world they inhabit, not just in the form of items registered to an account or inventory (e.g. Diablo 3), and not even in the form of items that are tradeable within a specific universe (e.g. Roblox items and gear), but absolute ownership and the ability to take those assets and do whatever one wants to do with them.

The NFTs that form the basis of blooming ecosystems like Axie Infinity and Loot represent that absolute ownership. The items can be taken out of the games and title to those assets are absolute, even outside the game – they are tokens built on Ethereum’s ERC standards which make them portable into any other Ethereum-compatible smart contract, which is essentially all of the decentralised web as we know it. An owner of a specific Axie, for example, is automatically granted a non-commercial use license for the NFT – what owners decide to do on the basis of that license is entirely up to them.

It is arguably this sense of absolute ownership that draws the line between “just a game” that one plays for fun and a “community” to which one belongs and shares responsibility for governance, which one is consistently incentivised to nurture, develop and support. Collectively, this support turns into a solid base of committed denizens of emerging pockets of the multiverse.

So perhaps the story of the multiverse doesn’t really start with whether it was formed by intelligent design or by chaotic serendipity – these feature in chapter two.

Chapter one goes all the way back to the basics: a world of users rather than customers, a world without adversarial relationships between firms and customers, a world of alignment, openness and sometimes ruthless innovation.

Perhaps the metaverse is already upon us, and crypto marked its very beginning.

Edward PlayfairSeptember 24, 2021