If the Metaverse is primarily driven by virtual worlds

If the Metaverse is primarily driven by virtual worlds and virtual creations rather than better smartphones, then we want to see the highest profits go to the developers of virtual platforms and those who use them. You can only access the Metaverse through hardware. Every hardware player wants to be the payment gateway or at the very least the main channel. Oculus is the reason Facebook is so invested in Oculus, despite not having a major operating system. Snap is also developing its AR hardware , while Apple defends its 30% take.

To return to my prior essay,

Roblox is a feature and not a bug. Apple’s default position is to make all products that are created on iOS platforms available as individual apps that can be downloaded from its App Store. Apple is the app store that consumers use to access apps and developers use to create, distribute, and monetize apps. Think about EA as a professional game developer, instead of independent Roblox hobbyists. EA wouldn’t make a Roblox game, where they can only collect 25% of consumer spending. Instead, they could make an iOS game that can collect 70%.

… In other words, a Roblox developer would not be able to collect a greater share of game revenue if (1) Apple created a Roblox-like platform;(2) all eligible users only wanted to play Appleblox on their iOS devices; (3) Apple operated Appleblox at breakeven (which the App Store was meant to do but didn’t); or (4) Apple didn’t charge fees to the Apple App Store (which all Apple Services do).

This is the heart of Epic Games’ lawsuit against Apple. Epic does not need to sell 18% more digital backpacks than it already sells. Supercell doesn’t require higher margins. Both these companies are profitable, successful, and defendable today. The fight for payment supremacy has made the Metaverse payment rails more expensive and less dynamic than they were cheap and dynamic. This is because these rail operators use them to manage the Metaverse and prevent disruption.

While the rise of non-payments intertechnologies like Unity and Discord are a good thing, they are also subject to their own policies. The Verge says that arguing over whether Apple’s guidelines included or excluded a thing is pointless because Apple holds the ultimate authority. Apple holds the ultimate power to interpret and enforce guidelines in any way it wishes, as well as change them whenever it pleases. This is because Apple controls distribution and revenue for all developers.

This control is good news for Apple but not for the Metaverse economy. Apple doesn’t deserve 30% of a transaction to buy virtual real estate, virtual avatars, or other virtual assets created by developers who don’t follow Apple’s standards. These virtual platforms run on almost every device in the world and are not integrated into Apple’s products. All because an end-user owns an iPhone (which might have been bought for Apple Photos, iMessage or better hardware). Apple should not be paid 30% of the sale price for assets that are traded. Or 30% of the virtual labor or kickstarter loans. This is especially true when Metaverse’s owners must pay another virtual platform — one that allows them to run their business — and the government.

All major NFT platforms and blockchain-based universes are browser-based, and do not have console releases or mobile apps. These mobile and console platforms control their browsers, which, as we have already mentioned, does not support open standards for rich user input and complex rendering. Developers are faced with difficult choices: high fees or poor experiences. Users can still support creators through other platforms, but this is not feasible for many people.

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We have a view of what happens when digital payments rails are flexible and cheap.

China was still a cash society when Tencent’s WeChat was launched in 2011. The country moved quickly into digital payments and services. This was due to its simplicity and ability to connect directly with a user’s account (rather that require an intermediary credit-card), small transaction fees (0.1% for peer to peer transfers and 0.1%) for merchant payments, ease of use (no retailer specific currencies), instantaneous payment (no fees to speed), confirmations and the use of common standards (QR code based payments). Tencent was able to quickly build up its domestic video-gaming industry thanks to this. This is a result of the absence of Asian credit cards.

Alibaba began as a marketplace. However, the need to digitally pay for goods led to the same outcome. Alipay, the company’s mobile payment system, is now the main competitor to WeChat. It passed PayPal in 2013 as the world’s largest mobile payment network (and it charges only 0.55%).

Tencent, Alipay and, most recently, Sea Limited (through their game products), have become the largest digital payment and virtual currency management systems in this world. They appear poised to continue doing so as long as their governments allow.

These systems would be subject to the control of hardware gatekeepers in the West. Tencent has grown so fast in China that it holds the advantage over Apple. Tencent can process payments for its Mini Programs and does not take a cut. Facebook applied for the same permissions in West, but was refused — even though it restricts payments to small tips for creators of on-platform platforms and waives its own share. Analysts estimated that Apple would lose 30% of its global sales if Tencent was banned by Apple after the threat of Apple banning Tencent grew in 2020.

The Proto-Metaverse Economy

The policy decisions made by various publishers and virtual platforms can adversely affect the Metaverse economy. These policies make it more difficult for users to spend money. They penalize users for spending diversity or on multiple platforms. They also limit the utility of all purchases, as well as limiting total investment.

All major virtual platforms use their own currencies, for example. Fortniteuses a V-Bucks currency, Robloxuses Robux and Call of Dutyhas CoD Points. Minecraftuses Minecoin. You can only purchase them in pre-set amounts that rarely match specific purchase prices. For example, $5 outfit means $7 in V-Bucks. Sometimes, the exchange rate (i.e. These amounts can vary in exchange rates (e.g. USD to virtual currency). A user can purchase 1,000 V-Bucks on Fortnite for US$8 or 125 per $1, 2,800 for US$20/or 140 per $, 5,000 for US$32/or 156 per Dollar, and 13,500 for US$80/169 per USD. These currencies are not refundable, though this may be partly due to the difficulty of refunding cross-platform titles.

These goods have limited utility due to ownership restrictions. Many games prohibit players from giving outfits or selling items that they don’t own or trading for in-game currency. This currency cannot be used to convert into cash. Publishers that allow trading and reselling often place strict restrictions on this behavior. Roblox allows only “limited items” to resell (otherwise peer trading would make Roblox’s sale less profitable) — Roblox Premium subscribers are the only ones who can sell these items.

These are not “bought” items, but they are licensed on an indefinite (and therefore revocable) basis. This is not a problem for $10 skins or dances but it’s prohibitive for exclusive virtual land or high-priced items. No one will purchase $10,000 worth of virtual property that can be taken away without or with repayment. They won’t trade it for it (if it disappears who pays? They will not trade for it.

Josh Ye reported on a China case earlier this year. Tencent sued a Chinese game item trading platform to determine who owned the in-game currency. Tencent claimed that these assets had no “material value in real life” while in-game currency purchased with real-money was “effective services fees.”

While ownership rights are an important aspect of investment, as is the price of any good or service, the possibility of profit is a powerful human motivator. The growth of new industries has been funded by speculation, even if it causes a bubble. (A lot of America’s cheap-to-use fiber optic cable was laid during the dotcom crash). We want to make the most of our time, money, and energy in the Metaverse. This means that you must take full ownership.

This also allows users to transfer virtual goods between different platforms and games. Skeptics say this is not worth the effort. “Who wants to play Fortnite with peely skin?” To be fair, an enormous, comically drawn anthropomorphic banana makes no sense in Call of Duty.

Users want certain items in different places, such as a Darth Vader outfit, LA Lakers jersey or Prada purse. They don’t want it to be bought over and again. Although they might be able to today, it’s not likely that they will in 2026. This is because the transition to virtual apparel is still very early. In 2026, there will be hundreds of millions of people who will have many (effectively duplicated) outfits from their various games. They will not hesitate to buy them again. The ability to buy multiple titles at once will result in more sales and higher prices.

Or, to put it another way: Would Disneyland sell more merchandise if it was only allowed to be worn in its parks or used there? What would someone pay to buy a Real Madrid jersey that could only fit in Santiago Bernabeu Stadium. How much less would Roblox users spend if the player’s outfit could be used in a single Roblox video?

Consumer spending today has been constrained by the fact that games don’t last forever. As an example, think about what you might buy while on holiday, but cannot bring home with you: a Boogie Board or a water bottle. Or a costume for Dia de los Muertos. Spending is always limited by expected obsolescence.

This risk is also present for businesses. Any developer should not build a business that is limited in its wares and services to the popularity of any platform, or its economy or policies. This risk leads to less investment, and therefore fewer and poorer products overall. It is not a win-win situation for any developer, user or game/platform. (For more information, see Section VIII, Contents, Services & Assets in the Metaverse.

These problems, like the Metaverse payment rails have their roots in history and convention. The first games to allow players to ‘buy’ and’sell’ in-game items, such as a health pack or sword, were naturally able to use fictional currencies. It makes no sense that Hyrule would use USD. These games couldn’t access real world currency.

Online and multiplayer games led to in-game economies that allowed players to trade goods and make purchases with USD. Many games, like Call of Duty have the option to place themselves in the real world, eliminating the conflicting narratives associated with USD. Nevertheless, most games still used their own currencies and prevented reverse exchange (i.e. The COD Points were converted back to USD and couldn’t be integrated into other games.

In-game economies are closely tied to both player enjoyment and publisher revenues. They can also be difficult to optimize and break. This is why major games employ in-house economists. Trading, open economies and an increase in commercial item value will all lead to play-to-earn behaviors and mechanics that can quickly become “work”, which can ruin a game’s fun and fairness. It is more difficult for developers to correct this if there is a larger Metaverse economy or firm that owns the rights. There is a reason why, today, almost all of the major NFT/blockchain-based “games” are actually centered on collecting or speculation, rather than more traditionally-defined gameplay.

Aside from that, major developers have not yet built in-game economies that can interoperate with an internet that doesn’t exist. They don’t want open economies to lead to players not buying virtual items from other developers. They want to maximize their spending and lock in to their titles.

Developers will find ways to support the “Metaverse’ business models over time. They’ll also use the Metaverse’s larger economy to quickly outperform other “legacy” game makers. Free-to-play gaming was once considered to be a radical business model. It would have led to lower revenues and, at worst, could lead the industry into bankruptcy. It turned out to be the best way of monetizing and the core driver of video gaming’s cultural ascendance.

Many games charge despite this. Many games are still offline or single-player, while others are mostlysingleplayer and/or mostlyoffline. This is the key point. The Metaverse is not for everyone. Participating in the Metaverse economy does not mean all resources are shared, and only one “Metaverse currency is accepted.” Openness, trade and the movement of people and data between ecosystems makes the global economy more powerful and successful. However, this doesn’t necessarily mean that everything is compatible and/or appropriate elsewhere or uncontrolled.

Although you can carry a shotgun anywhere in the country, it is not allowed in all cities and in very few stores. Although your car may work on all US roads you might have to rent a cart if you want to drive at a country or golf club. Some countries require import cars with imperial dashboards to convert to the metric system before being driven. Or, to update their exhaust to comply with local regulations.

Tiffany’s and the MET allow you to wear your own clothes, but it doesn’t mean that the dress code must be followed. While you can bring almost anything to the movies (except food and drinks), your AMC credit won’t work at Cinemark. Although currencies can be exchanged, not all businesses accept them. And there is no exchange fee. Many stores do not accept credit cards. They might offer a limited selection and then charge additional fees.

There will be some economic solutions that can help facilitate the transition to an open Metaverse. Developers might embed degradation in an asset’s code. This skin can be used for 100 hours, 500 games, or 3 years, and then it wears slowly. Users might be required to pay an additional fee in order to transfer an item from one publisher to another (just like many goods are subject to import duties in the “real world”. Or, you can pay more for an “interoperable version”. This is a pity, but the market will decide the right model.

It is possible that third-party technologies and services will be developed to manage assets and federate payment. This brings us to blockchain.

Source: https://www.matthewball.vc/all/metaversepayments