Is Digital Scarcity the Key to the Metaverse?

Published: Wed, 12/07/22

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WEDNESDAY DECEMBER 7th 2022

The Daily REYD tm

For years the dream of a persistent virtual world has been touted as a unique future form of human experience.

Since Facebook rebranded to Meta and doubled down on early billion-dollar investments into virtual reality, such as headset manufacturer Oculus, has the vision been hyped as a unique future form of human experience.

The economic and business promise of a persistent virtual world – so far only basic and disconnected virtual spaces exist – is in part based on the concept of digital scarcity,

In the physical world, items derive their value from scarcity and they are scarce because there is a cost to producing them.

In the digital world, items are made up of information that can be copied and distributed easily. As we've seen, copyright protections don't matter a lot in the Internet where hundreds of different Country's laws make it almost impossible to enforce.

Before blockchain technology was invented, creating scarcity in goods—making them unique or hard to duplicate and allowing for transfer of ownership without an intermediary such as a bank—was necessary if they were going to have value.

Computer games, like Second Life, created their own unique intra-game economy almost two decades ago. Software company Linden Labs insisted that Second Life is not a game, but a place of role-play escapism for users that control their own unique destiny.

However, this really wasn't a "metaverse" since Linden controlled all the assets and there was no way to remove them.

In 2009, Bitcoin was the first application of this concept, where for the first time in history, you had a digital commodity with natural scarcity.

After Bitcoin, the next huge innovation was in 2018: the creation of a standard for non-fungible tokens. This took the concept of scarcity to the next level.

As an extension to that concept, there are important ideas that will underpin the metaverse economy and non-fungible tokens (NFTs) play a key role.

The first is that in future metaverses, digital worlds will be interoperable and digital assets or representations—like avatars—can be taken from one world to another.

NFTs are unique digital identifiers that are encoded on blockchain and cannot be altered. As such, they can be used to demonstrate property ownership and provenance—or ownership history—of digital assets. That makes them easily tradeable and allows them to be transported from one digital world environment to another.

The digital tokens known as non-fungible tokens (NFTs) would allow people to efficiently and reliably display their value in the metaverse. This is similar to how an object's specialness underlies its value on Earth, but signaling will be more important than ever before in a virtual world where everyone can create anything they want

This is even more important in the artwork world, which was almost destroyed by images of everything being copied onto the internet. Anyone could have their work copied from a website and then "stolen" overnight.

Digital artwork is a digital object. It's not the same thing as a physical painting, because it doesn't exist in the real world. But it is still something that can be owned, and can be sold or traded for money or other goods.

When someone makes a digital artwork, they don't have to worry about whether or not their work will be stolen or lost—because it isn't really something that can be stolen or lost. Digital art doesn't have to be stored in a vault somewhere; it exists on the internet and can be accessed from anywhere with an internet connection.

NFTs are a solution to digital scarcity. By tying ownership of natively digital artwork to an entry in a public, immutable ledger, the artwork becomes collectable. There is now a clear, verifiable way to distinguish the actual owner from those right-clickers who happen to have a copy on their hard drive.

The philosophical debates over whether this is a significant distinction – equivalent to that between Kenneth Grffin and those with a saved jpeg of Interchange, for instance – are ongoing. But for digital artists, the practical consequences have been immediate and transformative. Since NFTs allow the artist to track who owns their work, as well as enable them to assign ownership of it at any time.

Yet, there are some issues with this. Artificial scarcity is when a resource is limited in an effort to drive up demand and value. It's the idea that if you make something hard to find, it will be more valuable. But what happens when that becomes reality

Real estate, like all assets, is a reflection of the opportunities and constraints it faces.

When real estate is located near infrastructure, services, and other people, it becomes more valuable because these urban things create efficiencies that make your property more valuable.

Investors balance out the higher cost of land by increasing density and building tall buildings. Tall buildings are costly and expensive to maintain, so there are limits on how many can be built in an area.

However, arrtificially scarce assets are likely to behave in a way that is different from genuinely scarce assets. For truly scarce assets, prices are likely to be set by a market mechanism driven by the value of access. For artificially scarce assets, however, prices may be limited because there is an infinite supply of “scarce” assets available.

As the price of an artificially scarce resource increases, demand for that resource will also increase. Prices for artificially scarce resources are generally set by supply and demand, but this can lead to unexpected consequences.

For example, a company may discover that it can create more artificial scarcity by lowering its price on a limited-edition product. This forces other companies to do the same thing in order to stay competitive, which drives down prices even further. As this happens, consumers are less likely to feel like they need to purchase the limited edition product because there is no way they will be able to afford it at its original price point.

Let's take a simple case example: imagine a world with about one million passionate gardeners. A virtual land system or NFT membership tokens that only support 100,000 members is likely to leave a lot of people on the outside.

Currently, the end state of many different online communities built around virtual land or non-fungible tokens (NFTs) doesn't appear to be very different from how the internet functions now.

We have millions of websites and online communities. Many of them use membership fees or other tools like participation metrics to sort and filter genuine contributors from lurkers and freeloaders. Do NFTs solve this problem better than any of these other methods? Not everyone thinks they do.

Either way, blockchains and the metaverse will be here for a while, but it seems some more brainstorming is needed for the digital scarcity ideas to work beyond a few niche collectors. While people are naturally collectors, there is still nothing preventing people from making copies of these products using screen shots, recording software or even making similar items for other worlds. When it comes to "land" in the metaverse, there needs to be also more of a value proposition than just owning something cool or new, because that will wear off after the 100th or so metaverse colony is created with land for sale.

The Metaverse should be an immersive experience where users can do anything they want. If you want to own land, you should be able to buy it and build whatever you want on it—but that shouldn't create a new problem where only the rich can afford it. The goal should be making things as accessible as possible so everyone can have fun without worrying about money or time constraints.

Pesach CV Lattin
Pesach@lattin.us

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Davis-Standard has appointed Anthony Toklo as the company’s chief marketing officer. His new position will see him oversee the company’s global marketing and communications strategies. READ FULL STORY

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TheRundown
At least 10 News Stories you Must Know
(but don't have time to read!)

1.The World Cup isn’t over, but Qatar already has its sights set on the only comparable global sports tournament. The Middle Eastern nation is making a bid for the 2036 Summer Olympics on the premise that it believes this year’s World Cup shows the country’s ability to host an event of that scale. in preparation for the World Cup, awarded by FIFA in 2010, Qatar built seven new stadiums and refurbished one more. The country spent at least $229 billion on these stadiums and other infrastructure in preparation for the World Cup.

Qatar's hosting has raised numerous issues, chief among them the treatment of migrant workers, who provided the main construction force for most of these venues. The Guardian reported that at least 6,500 migrant workers died since Qatar was awarded the World Cup in 2022—and per ESPN's "Qatar's World Cup," its government has avoided compensating their families by attributing those deaths to natural causes. Qatar recently raised its estimate of migrant worker deaths

2. Pinterest is cutting its recruiting team in the wake of a slowdown in hiring, according to a new report. The digital scrapbooking site will downsize its recruiting team and lay off some employees, but did not disclose how many people were affected or how widespread the cuts were, according to The Information. "We made great hires at Pinterest this year and have strong talent in place to support the needs of our business," a spokesperson told The Information. "With less need for hiring support, we've made the difficult decision to reduce the size of our recruiting team." Pinterest has experienced a surge in popularity over the past several years as more people use mobile devices to access social media. It currently has 3,975 employees—27% more than it had last year—and has an estimated $16 billion valuation.

3. in the latest sign of senior leadership turmoil at Salesforce, Slack co-founder and CEO Stewart Butterfield is stepping down next month along with two other senior executives, a Salesforce spokesperson confirmed via email. Chief Product Officer Tamar Yehoshua and Jonathan Prince, senior vice president of marketing, brand and communications, who both joined in 2019, are also leaving, said the spokesperson. The disclosures follow last week’s surprising revelation that co-CEO Bret Taylor plans to leave Salesforce in January.

4 Microsoft is considering building a super app that combines shopping, messaging, web search, news feeds and other services in one place.

The software giant wants its app to boost the company's multibillion-dollar advertising business and Bing search as well as draw more users to Teams messaging and other mobile services. Unlike Apple and Google, Microsoft doesn't operate a mobile app store for smartphone users. By creating an all-in-one app that people don't need to leave to access its other offerings, Microsoft hopes to emulate a mobile strategy that has worked for Tencent. The Chinese firm's WeChat app, which combines messaging with shopping, online games, news and a variety of services including grocery ordering, is a source of inspiration for top Microsoft executives.

5. Jeff Shell, CEO of NBCUniversal, said that TV advertising has been "even worse really in the last month or so," although he did not provide specific details. Shell said it is a challenge to determine why the market has worsened. He believes that macroeconomic conditions may be partly responsible, but also thinks people are uncertain about whether or not their businesses are worsening. He did say, however, that NBCU should expect fourth quarter revenue to rise by mid-single digit percentages mostly due to World Cup business at its Peacock streaming service and higher political advertising for its TV stations. UBS has estimated 11% growth for this quarter based on these factors. (MP)

6. Meta Platforms, the parent company of social networking service Meta, has threatened to remove news from its platform if Congress passes the controversial Journalism Competition and Preservation Act.

Meta's move came the same day that Senate lawmakers proposed attaching the Journalism Competition and Preservation Act to this year's must-pass defense spending bill. The Journalism Competition and Preservation Act, which cleared the Senate Judiciary Committee earlier this year, would allow news outlets to band together to negotiate with large tech companies over payment for “access” to news articles. “If Congress passes an ill-considered journalism bill as part of national security legislation, we will be forced to consider removing news from our platform altogether rather than submit to government-mandated negotiations that unfairly disregard any value we provide to news outlets through increased traffic and subscriptions,” spokesperson Andy Stone said Monday on Twitter.

7. Keurig Dr Pepper is defending its search process for a new public relations agency following industry pushback, according to PR Week.

The marketer’s request for proposal (RFP) has become a flashpoint of controversy due to 360-day payment terms, meaning the winning firm would not get its full payment for nearly a year. Alternatively, agencies can receive financing at their own cost. VoxComm, a group representing leading agency trade bodies, called the ask “an egregious display of corporate bullying.” But Keurig Dr Pepper is standing its ground, resurfacing old questions around how much power agencies wield when dealing with demanding clients. Agency trade groups are balking at Keurig Dr Pepper’s latest RFP, with VoxComm issuing a “red alert” in response to the matter. VoxComm represents top industry organizations from around the globe, including the 4A’s, PR Council and Institute of Canadian Agencies (ICA). Like a lot of agency-client spats, the issue boils down to finances.

8. The State of Customer Experience, a study by the Northridge Group, shows that consumers are increasingly frustrated by online shopping. Only 11% will now tolerate inefficient customer service, down from 14% in 2020. And 26% have higher expectation for online self-serve options, up from 17% in 2020.

Overall, 79% of consumers say they will continue to shop online at the same level or higher, compared with 68% who said so two years ago. Only 14% to reduce their online shopping, down from 24% two years ago. It’s not clear why some individuals will cut their spend: Is due to a poor customer experience, or fears of a recession? Either way, consumers prefer live chat with agent when dealing with issues: 61% prefer this option versus 58% who prefer phone calls and 51% who prefer emailing an agent directly through their website. Mobile apps and web self-service are also popular ways to contact an agent when needed (51%).

9. Did you know that Audigent has integrated Equifax audience segments into its platform? Now, advertisers have access to anonymized data around insights such as how consumers earn a living and the types of cars they drive.

This is great news for companies who want to build out their data management platform (DMP) segments, but don't want to connect them with demand-side platforms like The Trade Desk.

"Buying data through the supply path has significant benefits," says Drew Stein, Audigent CEO. "It's dynamic and can be optimized in real-time, and it allows for newer and novel identity solutions to be applied in the future."

Audigent is powering more than one hundred thousand campaigns per month—and we're not stopping there!

10. Instagram is trying to make your life easier by adding a native content scheduling tool.Last week it was LinkedIn, this week it’s Instagram. The popular platform has officially announced its native content scheduling tool, allowing you to prepare all your posts in advance. The feature helps you schedule all content, including Reels, Photos, and Carousel posts, up to 75 days in advance. You can find the new addition under “Advanced Settings” when you want to create a post or a Reel. Use the “Schedule” option to set the exact time and date and you’re good to go!

Why we care: Native scheduling cuts out the friction you often get with third-party apps and gives you certainty that your posts will show up as planned. It can also help you test different parts of the day when your audience may be the most engaged, allowing you to grow and scale your creator account quicker. And if you’re entertaining and growing your audience? You may just be recession-proof!

11. It's a big day for the New York Times, both online and in print.

On Tuesday, all of the paper’s real estate was taken over by General Electric in a seven-figure campaign designed to promote its coming split into three separate companies, each publicly traded. It's the first time that all of their pages have been taken over by a single advertiser. When readers click on the home page, they receive a banner ad that states “A new beginning is on the horizon at GE.” Readers can link through to four additional ads, each explaining one of the breakout companies. And they are invited to “Pick up a paper copy to see how focus can change your world, too.” (MP)

12. EU privacy regulators have ruled that the advertising business of Meta Platforms should not automatically require users to consent to personalized ads based on their browsing activity within the company’s apps. The ruling is yet to be formally announced and could face appeal. The decision comes after Apple introduced privacy measures that allow iPhone users to opt out of ad targeting based on their activity on other websites. But that rule does not extend to browsing activity within Meta’s apps, which the EU decision calls for. The panel’s finding asks for Ireland’s Data Protection Commission (DPC) to issue orders reflective of the panel’s position. A Meta spokesperson told the Wall Street Journal that “it is too early to speculate,” but said they would continue to engage with the DPC as they finalize their decision.

13. The TikTok-Biden Administration agreement will be delayed, according to The Wall Street Journal. The two sides had reached a tentative deal this summer, but senior U.S. officials felt it didn't go far enough to protect American interests. ByteDance, the Chinese owner of TikTok, has already taken steps to address some of the U.S.'s concerns, including moving data to be stored on Oracle servers in the U.S. It's unclear how the talks can move forward and TikTok said that the government didn't tell them of any more concerns. A company spokesman said that the company is ready for a "timely conclusion" to their agreement with the U.S., so that they can put these concerns to rest."

The Watercooler
Impress your Co-Workers with these useless facts about marketing

"We have abilities to do more than one thing. We’re complex human beings. I can wear a leather dress and still have an 8-year old and wipe up the eggs that are on her face. Because we can do it all, absolutely.”

-- Bozoma Saint John

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