Are Vision Pro, Quest 3, and the Metaverse unrelated? a16z explains why the Metaverse must involve Web3

The following content is compiled from the a16z column by authors Elizabeth Harkavy, Eddy Lazzarin, and Arianna Simpson. The original title is "7 Essential Ingredients of a Metaverse", which mentions that hardware devices like Vision Pro, Quest 3 are not essential for the metaverse, decentralization is what matters.

a16z Explains Why the Metaverse Must Have Web3

Since the 1990s, the term "Metaverse" has attracted much attention, especially during the pandemic when online activities surged, particularly after Facebook changed its name to Meta. Remember: Reflection on Facebook's name change to Meta.

Is this just ambiguous marketing jargon? What exactly is the Metaverse? How is this term defined? Where is the boundary between the Metaverse and another virtual world? These are common questions people have about the Metaverse, so we hope to outline our views and how the Metaverse interacts with Web3.

From many perspectives, the Metaverse is just another term for the evolution of the internet: making it more social, immersive, and far more complex than today's existing economic systems.

In a broad sense, there are two competing visions that can achieve this goal: one is decentralized, rich in property rights, at the cutting edge of innovation, interoperable, open, owned by the community that establishes and maintains it.

The other vision, too familiar to many, is centralized, closed, subject to corporate whims; and often extracts exorbitant economic rents from its creators, contributors, and residents.

The key to comparing these two visions lies in openness and closure, and their differences can be conceptualized as follows:

An open Metaverse is decentralized, allowing users to control identity, grant property rights, have appropriate incentive mechanisms, and ensure value returns to users rather than the platform. An open Metaverse is also transparent, permissionless, interoperable, and composable—others can freely build within and across Metaverses.

To achieve a "true" Metaverse, it will not be closed. It requires seven essential elements, which are the minimum requirements for what is called the Metaverse. Our goal is to eliminate misconceptions about what a true Metaverse is and what it is not for builders and potential participants and provide a framework for evaluating early Metaverse attempts.

Metaverse Element 1: Decentralization

Decentralization is the overarching principle of the correct Metaverse, and many of the following features rely on or are derived from this central concept.

Decentralization means not owned or operated by a single entity, nor subject to the whims of a few powerful intermediaries. Centralized platforms often start out friendly to attract users and developers, but once growth slows, they become competitive, exploitative, and engage in a zero-sum game with their relationships. These powerful intermediaries often abuse user rights, engaging in centralized control and economic exploitation.

On the other hand, decentralized systems demonstrate fairer ownership distribution among stakeholders with relatively equal interests, reducing censorship and promoting greater diversity.

Decentralization is crucial. Without it, anyone can be subject to a "Rug pull," an unstable condition that discourages building on top of it, hindering innovation.

Since centralized platforms cannot make the same type of solid commitments programmatically as blockchain, their commitments may be rescinded or altered when arrangements are no longer reasonable, depending on the mood of leaders or organizations.

Protecting against such abuses and ensuring decentralized control is the most potent way to prevent such situations and ensure Metaverse security.

Metaverse Element 2: Property Rights

Today, most successful games make money by selling in-game items (such as skins, emotes, and other digital goods).

However, those purchasing in-game items do not actually own them—they are merely renting. Once someone moves to another game, or if the game decides to shut down or change the rules, players lose visitation rights.

People are accustomed to the centralized service rental model of Web2, so actual ownership—digitally tradable, transferable, or withdrawable digital items—often feels unsettling.

But the digital world should follow the same logic as the real world: when you buy something, you own it. It's yours.

Just as courts uphold these rights in the real world, code should enforce these rights online. True digital property rights were previously impossible before the emergence of cryptography, blockchain technology, and related innovations such as NFTs.

In short, the Metaverse transforms digital serfs into landholders.

Metaverse Element 3: Identity Sovereignty

Identity is closely related to property rights. If you cannot own yourself, you cannot own anything. Just as in the real world, in the Metaverse, people's identities must be able to persist independently, not entirely reliant on a small set of centralized identity providers.

Identity verification is about proving who a person is, what access rights they have, and what information they share. Currently, this requires a middleman to verify identity, using popular single sign-on methods like social logins or SSO.

Today's tech giants like Meta and Google use this approach to collect data to build their businesses: monitoring people's behavior to develop models for more relevant ad services. Additionally, since these platforms have complete control, attempting innovation in the identity verification process relies on the honesty and willingness of the underlying companies.

The cryptography at the core of Web3 enables people to verify their identities without relying on these intermediaries. Thus, people can control their identities directly or with the help of chosen services. Wallets like Metamask and Phantom provide ways for people to authenticate themselves.

Standards like EIP-4361 for Ethereum login and ENS (Ethereum Name Service) allow projects to collaborate with open protocols and independently contribute to a richer, more secure, and ever-evolving digital identity concept.

Metaverse Element 4: Composability

Composability is a system design principle, specifically referring to the ability to mix and match software components like Lego bricks.

Each software component only needs to be written once and can then be reused. This is akin to compound interest in finance or Moore's Law in computing, as it can unleash exponential power.

To achieve composability, a concept closely related to interoperability, the Metaverse must provide high-quality and open technical standards as a foundation.

In games like Minecraft and Roblox, you can use the system's provided basic components to build digital goods and new experiences, but moving them outside that context or modifying their internal workings becomes more challenging.

Embedded service companies like Stripe for payments or Twilio for communications can operate on websites and apps, but they do not allow external developers to alter or remix their black-box code.

In its most robust form, composability and interoperability can be achieved across a wide range of the software stack without permission.

Decentralized finance (DeFi) is an example of this powerful form. Anyone can adapt, reuse, modify, or import existing code. Moreover, developers can develop in parallel within a shared virtual computer like Ethereum's memory, creating entirely new experiences on existing protocols like Compound's lending protocol or Uniswap's automated market-making.

Through the powerful new elements of composability, property rights, identity, and ownership, builders can create entirely new experiences.

Metaverse Element 5: Openness/Open Source

True composability is impossible without openness.

Open source is a practice that makes code freely available and can be freely redistributed and modified.

Regardless of the degree or type, open source as a principle is essential for the development of the Metaverse, so we list it as a separate element, although it overlaps with the above composability.

What does open source mean in the context of Metaverse development?

The best engineers and creators—rather than platforms—need full control for comprehensive innovation. Open source and openness help ensure this. When code repositories, algorithms, markets, and protocols are transparent public goods, builders can pursue their visions and ambitions to build more complex, trustworthy experiences.

Openness can lead to more secure software, make all participants more aware of economic terms, and eliminate information asymmetry.

These features can create fairer systems, effectively giving network participants the same fundamental rights. They can even do so without outdated U.S. securities laws, laws designed decades ago to address long-standing agency problems and information asymmetry.

In Web3, the power of composability largely stems from its open-source ethos.

Metaverse Element 6: Community Ownership

In the Metaverse, all stakeholders should have a say in system governance based on their level of participation. People should not be constrained by decrees issued by a group of product managers at a tech company.

If any entity owns or controls this virtual world, then, like Disneyland, it may offer a form of restricted escapism, but it can never fully realize its true potential.

Community ownership is a puzzle that places network participants—builders, creators, investors, and users—on an equal footing to collaborate and pursue common interests. This coordination miracle—previously rudimentary or outright impossible before the advent of cryptocurrency and blockchain—organizes through ownership of tokens, the network's native assets.

Aside from the technological advancements created by decentralization, the philosophical significance of community ownership is essential for the success of the Metaverse.

In decentralized autonomous organizations (DAOs), participants embody this principle. They eschew the rigid forms of company structure in favor of more flexible, diverse democratic and informal governance experiments. Users govern, build, and drive communities in DAOs rather than being dominated by a single entity.

Metaverse Element 7: Social Immersion

Large tech companies want you to believe that high-performance virtual reality or augmented reality (VR/AR) hardware is a crucial, perhaps even the most critical element of the Metaverse.

This is because these devices are a ruse. Companies view them as a pathway to becoming the primary computing interface providers for 3D virtual worlds, thus serving as a stepping stone to bridge people's Metaverse experiences.

The Metaverse does not necessarily need to exist in VR/AR.

What the Metaverse requires for its existence is based on social immersion in a broad sense. More important than hardware are the types of activities the Metaverse enables. They allow people to gather remotely, collaborate, interact with friends, and entertain, just as they currently use Discord, Twitter Spaces, or Clubhouse.

The pandemic has heightened the demand for immersive experiences—beyond traditional text-based communication platforms like email—due to the surge in the use of other remote meeting and telepresence tools like Zoom and others.

Additionally, due to the economic factors mentioned earlier—property rights, autonomy, community ownership—the Metaverse can enable people to make a living, conduct business, and gain status. In typical knowledge worker workplaces, people use tools like Slack for collaboration, while in the grassroots organizational movement of DAOs, Discord and Telegram dominate.

The Metaverse is not about the "visual" mode—it's about the tool you use to view the Metaverse, a convenient term for those controlling hardware manufacturing.

While many companies have started building various parts of the Metaverse, if a virtual world lacks any of the above aspects, it cannot be considered a complete Metaverse, in our view. We believe that, as shown in this framework, the Metaverse cannot exist without the foundation of Web3 technology.

Openness and decentralization are the pillars of the entire framework. Decentralization allows property rights to persist independent of strongmen. Community ownership prevents the system's single-point control. This approach also supports open standards, aiding decentralization and composability, a direct subsequent feature of interoperability.

The development of an ideal multidimensional virtual world will gradually come to fruition. Many issues remain to be resolved to prevent us from falling into the dystopian model of IOI-dominated Oasis in Ready Player One. However, if builders adhere to these principles, such an outcome is less likely to occur.

When the Metaverse arrives, it should embody the full expression of these principles—with decentralization at its core.