Metaverse
January 27, 2022

The Metaverse Part 3: Centralised and Decentralised Metaverse

In part 3 of our Metaverse deep dive we take an in-depth view into Facebook/Meta (centralised) vs. other crypto metaverse topics (decentralised)
6 min

Centralised Metaverse

The year 2020 marked the beginning of a new age in human interaction, with regard to how we chose to connect ourselves with the digital experience of both centralised and decentralised systems. Lockdowns paired with work-from-home mandates accelerated this transition, with digital solutions becoming popularised within the working environment through the use of applications such as Zoom and Microsoft Teams. The gaming industry has also massively benefited from this digital transition and has begun exploring new avenues and potential methods of immersion into these metaverses.

We now approach an interesting junction whereby the infrastructure behind these systems allows for the optionality of two distinctly different choices for consumers, 'Centralised' and 'Decentralised' solutions. Both provide strengths and weaknesses with their approaches to creating these digital worlds that are set to take on a larger role within our societies going forward.

New to the metaverse? Catch up on part 1 of our metaverse deep dive here: The Cyber Big Bang: What is the Metaverse?

The very nature of centralised systems, from big tech to the central banking system and even as far as the state itself, has come under the microscope. Analysis of these types of systems inherently seems to indicate that they concentrate power in the hands of a very few over time. This brings us back to the topic of how comfortable individuals are entrusting their data, financial wealth and personal liberties with these institutions. Is it possible that the level of exposure to and reliance upon such systems have reached an all-time high?

A notable example of a centralised system is Mark Zuckerberg's Facebook, which on the 28th of October announced a rebranding of the company’s name to Meta and signalled an increased push to venture into virtual environments. The reaction to this pivot in the company’s strategy garnered significant reactions and has captivated the imagination of many as to how these worlds will evolve and the broader implications this will have for both the firms that create them and the users. With cryptocurrencies increasingly contending for a place at the table as a legitimate asset class in the mainstream financial world, the expansion into virtual economies is opening up new possibilities. According to the graph below from Google Trends, interest in Zuckerberg’s idea has skyrocketed in the last year since he introduced it to the world.

Centralised services have certain advantages over some decentralised solutions due to operating with established user bases and offering interoperability between applications within this centralised framework. For example, with Facebook having approximately 2.9 billion active users, this already poses a large potential on-ramp to their metaverse products and easy cross-platform usage with their other services (e.g. Instagram, Whatsapp, etc.). Well-established players within the metaverse sphere also include gaming platforms with large player bases that they can draw upon; platforms who are already accustomed to the concept of these digital worlds. Examples of how these digital worlds have expanded what they offer is illustrated by how Fortnite hosted concerts within the game with well-known artists such as Travis Scott and Ariana Grande in 2020. The Travis Scott concert drew up to 12.3 million players to this live in-game concert, demonstrating just how well these centralised gaming platforms can already scale and accommodate users. Therefore, it stands to be seen that these centralised systems have a user base advantage compared to current decentralised systems.

Centralised systems have already delved further into this form of cyberspace more heavily and with early success compared to their decentralised counterparts. The established user bases and the ease with which centralised infrastructure can be created allows for aggressive strategies to be embarked upon in this space with relative ease, whereas the decentralised space is very much in its infancy and is prone to trial and error.

A major drawback of these centralised systems, however, is the security weakness they pose with respect to being networks with a single point of failure. Facebook itself has been plagued with data mismanagement accusations, most notably with the legal case involving Cambridge Analytica over privacy violations and how this harvested data was used to sway political discourse. Facebook generates significant amounts of data on their users, using up to 100 different data points to generate an in-depth analysis of an individual’s preferences and even gaining insight into phone contacts and other intimate forms of data. The concerns over trust with a company such as this is then perfectly justified with respect to users’ data. As a result, there is a significant driving force in users wanting to seek out decentralised solutions as an alternative to alleviate these worries of how their information is handled or is vulnerable to theft. Users will have to decide how much value they place upon their data, along with understanding the power structure of the differing systems and how those potentially in power could be incentivised to use their data.

The bridging service between these centralised and decentralised platforms however is beginning to be formed, allowing for users to gain exposure to decentralised currencies through centralised services. Twitter within the past year has allowed for users to ‘tip’ each other with Bitcoin and Ethereum, allowing for a proliferation of users gaining access to these decentralised networks. Further down the line, this could lead to these decentralised currencies being used within these centralised metaverses, allowing for users to maintain a valued degree of sovereignty when using these services.

Decentralised Metaverse

The metaverse that is currently at the focal-point of discussion nowadays seems to be greatly focused on forming connections with others, especially via gaming. However, the metaverse is not just limited to gaming. It can in fact be applied within sectors such as online shopping, workplace and investment tools, social media and even festivals. Due to the many applications and use cases revolving around the metaverse, many people question whether or not it should be centralised or decentralised. In this section of the article, we will be looking into the latter, considering its advantages and disadvantages and how these may differ under certain circumstances.

Catch up on part 2 of our metaverse deep dive here: The Major Players of the Metaverse

A potential major advantage of a decentralised metaverse over a centralised one is that decentralisation allows for participation without permission. This resonates with the metaverse cryptocurrency project known as Axie Infinity (AXS) which has a market cap of approximately $6.5 billion. AXS has a blockchain design that allows for player ownership of economies and provides rewards for skill progression. Anyone who wants to get involved in this particular project can ‘play and earn’ and work towards earning resources that have an equivalent real monetary value. Furthermore, as Axie Infinity is partially owned and operated by its players, who can dictate the trajectory of the project and direct it towards a favourable outcome for the players.

An alternative stance on the permissionless property of decentralisation is that it allows for unmoderated content. Many who oppose a decentralised metaverse will look at evident examples of where social media experiments like Parler and Gab neglected the need to moderate inappropriate content. However, the counterargument to this is that even though a decentralised metaverse ecosystem has a permissionless nature, that does not prevent developers from applying appropriate moderation for their communities. Bitclout, for example, is a decentralised application that could possibly implement a layer of moderation on their otherwise uncensored blockchain that stores its messages.

Governance is a key topic when discussing the metaverse. An example of its significance is shown via Decentraland, a crypto metaverse. Decentraland uses DAOs (decentralised autonomous organisations) to give their users the ability to dictate the future of the game. This is advantageous to users as they can implement changes and updates via voting. Moreover, this shows that metaverses are not limited to cryptocurrency games, evolving into advanced ecosystems that act upon democratic values.

Source: consensys.net/blog/blockchain-explained/what-is-a-dao-and-how-do-they-work/

Within many crypto metaverses there are in-game/in-world items that can take the form of NFTs. A large-scale example of this is found within the gaming industry. For many gamers, achieving certain goals via unlocking various achievements in a gaming ecosystem is highly desirable and holds value. NFTs provide greater transparency and access to gaming markets. Moreover, as every NFT is unique, items/tokens in the metaverse can be coded to aid the provenance of in-game user-generated content as well as NFT gaming assets.

With a metaverse blockchain, one can create and own a digital portrayal of themselves and what they have made. Additionally, people in the metaverse have autonomy over their own experience and can even utilise augmented reality technology in order to maximise enjoyable interactions. Moreover, this can be achieved without having the worries of lack of physical space. Furthermore, adding cryptocurrencies and other digital assets to the equation can help propel and expand the global economy even further as there is still so much room for growth as highlighted by the image below that illustrates the current market cap of the metaverse coins.

Source: Coingecko 26th Jan 2022

Catch up on parts 1 and 2 of our metaverse deep dives here:

Part 1: The Cyber Big Bang: What is the Metaverse?

Part 2: The Major Players of the Metaverse


Disclaimer: This assessment does not consider your personal circumstances, and should not be construed as financial, legal or investment advice. These thoughts are ours only and should only be taken as educational by the reader. Under no circumstances do we make recommendation or assurance towards the views expressed in the blog-post. The Company disclaims all duties and liabilities, including liability for negligence, for any loss or damage which is suffered or incurred by any person acting on any information provided.