The metaverse puts the digital asset interoperability challenge on steroids

In his monthly crypto tech column, Israeli serial entrepreneur Ariel Shapira covers emerging technologies within the crypto, decentralized finance and blockchain space, as well as their roles in shaping the economy of the 21st century.

In the year 2022, we no longer need to ponder how many stars there are in the sky — Yale astronomer Dorrit Hoffleit has already established that humans can see about 9,096 from Earth with the naked eye. Now that we are past that, we might as well start pondering how many metaverses there are on the internet, and oh boy, are those plentiful.

When rebranding into Meta, the company formerly known as Facebook opened the floodgates, pushing the concept of the metaverse, a shared virtual reality (VR) and augmented reality (AR) digital experience, right into the spotlight. Where Meta went, others followed. The word “metaverse” only came up seven times in investor pitches in 2020, according to Sentieo. In 2021, the watershed year, entrepreneurs mentioned it about 128 times when pitching.

One would think that from a consumer perspective, metaverse proliferation can only be a good thing. As more and more metaverses lay their claims to users’ time and attention, they naturally have to compete among themselves. Ideally, they would try to outshine one another by offering a better user experience, more functionality, and other consumer-friendly practices.

Grabbing the biggest piece of a pie

In reality, though, the through-the-roof metaverse propagation may very well fly in the face of its very own core principles. A shared experience means everyone can join in, should they want to, but this is where we hit the first hurdle. To meet up with your friends in Meta’s Horizon Worlds, its prime metaverse builder, you’d better make sure that you all have Oculus Quest VR sets. To experience something like OVER’s AR-driven metaverse with NFT-based land ownership, though, you only need a more or less modern smartphone. This is in itself an accessibility issue, which, in Meta’s case, also comes with the temptation of user lock-in through dedicated exclusive hardware. Falling to this temptation means siloing your entire metaverse.

Transferring the user’s assets from one metaverse into the other is not an easy feat either. We’ve already heard nonfungible token (NFT) advocates lavish praise on how NFTs will usher in a whole new era of revolutionary interoperability in video games. That hasn’t happened so far, though, and there is more to this than technological constraints. Business considerations are in play as well, as NFT game developers are more interested in selling their own NFTs than adding value to those created by others.

A constellation of VR- or AR-based metaverses can hypothetically operate on similar logic. If a user wants their avatar in Metaverse 1 to don the Gucci shirt they bought in Metaverse 2, it means the economy of Metaverse 1 lost on a sale. Furthermore, if Metaverse 1 ends up supporting wearables from Metaverse 2, it means it is adding utility to the assets sold by another vendor without any benefit for yourself, if not at the detriment to your own offering.

On the business level, projects can find workarounds for this issue. It could be fees on interoperable item sales that would give every supporting metaverse a cut in the transaction. Alternatively, metaverses can strike cross-promotion deals and explore other ways to create shared value.

Even a bilateral interoperability accord among metaverse projects pushes the situation away from the zero-sum game it may look like. Metaverse 1 may add value to assets offered within another ecosystem, but its own assets get extra utility, too. If their respective ecosystems bring in user bases of comparable sizes and have roughly the same transaction volumes, the arrangement looks pretty…