As we look back at the pandemic and how it wiped out large chunks of our real-life economic and cultural experience, the past six months have been a pivotal period for digital convergence, neatly wrapped up in the idea of the “metaverse”
I know this to be the case because when I turned to the internet for instant enlightenment on the subject, a Thomson Reuters analysis of the legal metaverse linked the idea to all sorts of trendy tech buzz-phrases: virtual reality, blockchain, DeFi (distributed finance) and DAOs (decentralised autonomous organisations). Bingo! I had all I needed to dish up a few hundred of my own words of wisdom on the subject.
Joking aside, convergence is a useful phrase to bear in mind when approaching a subject like this. As new technologies emerge, they usually absorb the functions and norms of preceding technologies. Theatrical presentation techniques were replicated in early film and radio formats, which subsequently migrated to television. Then the web came along to suck them all into its limitless chasm. Now the metaverse is threatening to appropriate all that content into a multimedia world of 3D simulations.
Amid all of the speculative frenzy and beard-stroking techno-babble – yes, this remains the domain of those of a male-hipster persuasion – it’s worth going back to the origins of the metaverse to see what they can tell us about the implications for accountancy and commerce.
Seems like we’ve been here before
As Bill Mew wrote in his tech predictions for 2022, the metaverse is not new. Speculative fiction author Neal Stephenson coined the phrase in his 1992 debut novel, Snowcrash, which is well worth a read if you have a taste for this sort of thing.
For cynical old cyberpunks like Bill, Neal and me, the metaverse is a 21st-century “reimagining” of what we used to call virtual reality (VR) back in the late 1980s. By that point, computers became powerful enough to model the mathematics of shapes, spaces and light and to calculate the flow of water, hair or dinosaur muscles. If you produced two slightly different visualisations and showed them in a stereo headset, you could immerse the viewer within the simulated environment.
It looked pretty good on a 2D screen too, as anyone who has seen ‘Jurassic Park’ or ‘Toy Story’ will attest.
The gaming industry was a hotbed of computer graphics and VR innovations, coming up with shortcuts to cram 3D experiences into games cartridges and consoles. These techniques migrated onto the World Wide Web when it appeared and were realised in the ultimate 3D landmark of that era in the shape of Second Life.
If you’re more into finance than 3D graphics, Second Life created a new generation of digital entrepreneurs who made money designing, developing and selling real estate, experiences and subscriptions to online 3D simulations.
This commercial legacy lives on in the gaming world, where many people run viable businesses designing environments where players can buy assets or tools to aid their performance via in-game purchases.
There is already an online marketplace called OpenSea, where metaverse assets can be traded and paid for with non-fungible tokens and cryptocurrencies.
Why the sudden interest?
We can thank Facebook founder Mark Zuckerberg for revving up interest in the metaverse. Faced with a growing backlash from whistleblower revelations of privacy violations on his social media platorm, Zuckerberg announced in late October 2021 Facebook was changing its name to Meta. The rebrand reflected how Facebook was shifting its corporate focus to the metaverse, or as he gushed, “an embodied internet, where instead of just viewing content – you are in it”.
As we have seen, Zuckerberg hardly has first-mover advantage in this area, but everyone in Silicon Valley and beyond is throwing their weight behind this “Web 3.0” concept, including the increasingly ubiquitous Disney+.
Yet all is not well in Meta-land. During the past month, Meta’s share price dropped 40% after it announced on 2 February that Facebook user numbers fell for the first time ever in the fourth quarter of 2021. The problem wasn’t helped by changes to Apple’s privacy policies that were estimated to reduce Meta’s advertising earnings from iPhone and iPad users by $10bn or so.
Is it real, or is it metaverse?
Zuck’s Boris Johnson-like approach to PR looks like it may be falling flat on its face, but it’s clear that the virtual economy is very real and that there’s a lot of money at stake.
It’s taken a while, but accountants have got used to accounting for brands and other intangible assets. These assets may not exist in the physical realm, but there are ways to measure and transfer their value that allows them to be recorded on a company balance sheet.
Most financial transactions are now digital and often record the transfer of assets that are held in databases – yet another digital simulation. Online marketplaces, NFTs and Bitcoin give us the means to transfer value within and beyond the metaverse, so making the accounting leap is a relatively small step.
Call me old fashioned, but I’m wary. Believing in financial systems is an act of faith. Where the emerging virtual economy is pockmarked with scams and shady dealing, the financial system most of us have grown up in is braced by regulations and backed by government support and international co-operation. Those structures were put to the test in 2008 and they survived, though we’ve been paying for it ever since.
Ultimately, though, my faith is rooted in the walls around me, the books and CDs on my shelves and the various toys I play with when I switch off my computer and phone - physical things you can see, touch and hold. You can’t eat an NFT, particularly if someone unplugs its blockchain server.
And at a time of climate emergency, placing even more reliance on systems that consume vast and expanding amounts of energy isn’t a very good look.
But come to think of it, when you look at what we’ve been experiencing recently in physical reality, it’s easier to understand the lure of the metaverse. War is at the door, we’re right in the middle of pestilence and then there’s MTD. Who can blame people for taking refuge in a more welcoming and comfortable world, even if it isn’t real?
