The Evolution of the Metaverse

Announcer:

Today on Building the Open Metaverse.

Philip Rosedale:

The most appealing virtual worlds may be places where we're sort of forced to get along, rather than allowed to imagine our own reality and everybody else's be damned.

Announcer:

Welcome to Building the Open Metaverse, where technology experts discuss how the community is building the open metaverse together, hosted by Patrick Cozzi from Cesium and Marc Petit from Epic Games. 

Marc Petit:

Hello, my name is Marc Petit from Epic Games, and my co-host is Patrick Cozzi from Cesium. Patrick, how are you today?

Patrick Cozzi:

Hey, Marc, I'm doing great and I have a fun story for you. So a lot of people ask me, "What type of listeners listen to this podcast?" We say, "The community has a lot of developers, creators, product managers, technical leaders." Well, I knew that my brother actually listens to the podcast and he works on installing floors on ships. It turns out I just learned that my sister is also an avid podcast listener and she works analyzing blood, like when you get your blood drawn. So we have quite a broad base of listeners.

Marc Petit:

I can see my family is not nearly as gracious as yours, by the way. I’ll have to talk to them. We got some great numbers. We're not going to brag here but one day we'll share those numbers. We’re super happy with how the podcast is going.

Today is a very, very special episode because we're welcoming a true pioneer of the metaverse. He was the CTO at RealNetworks and he founded Linden Labs, where he created Second Life many, many years ago and ran it for nearly 15 years. Recently, he founded High Fidelity, a specialty company, but returned to Second Life as an advisor. We're super happy to have Philip Rosedale with us. Philip, welcome to the show.

Philip Rosedale:

Thank you, I'm glad to be here. This is fun.

Marc Petit:

Absolutely.

Patrick Cozzi:

Welcome, Philip. We usually like to start the podcast by asking our guests about their journey to the metaverse. For you, tell us what fascinated you as a young programmer and entrepreneur. Take us through the creation of Second Life and tell us what you're up to these days.

Philip Rosedale:

Sure, sure. Well, I guess when one talks about tech-related things you always want to put yourself in perspective in terms of history. I was born at such a time that, for me, the personal computer was pretty available. I got my first personal computer at a swap meet for 20 bucks. That was a Timex Sinclair ZX81-based computer. I had pretty good access from an early age to programming and to using computers, but what I didn't have access to was an internet, was a network, and so I think that plays into the experience.

As a kid, I was fascinated with building things and I was really interested in physics. Things like how lasers worked, or astronomy, or just how the world worked, and I think that influenced some of my early explorations into computers. I was really interested in simulation because I was struck by this idea that there's got to be a way to create some building blocks that have some laws of physics to them, and then let them run inside the computer and watch what happens.

I think, like a lot of other people, that was a formative experience that was important. I remember my buddy had one of those Mandelbrot set zooming viewer things on Windows. This would've been like 1981 or something, and we were zooming in on the Mandelbrot set. We were going as far as we could until we ran out of resolution at some point, because I guess we'd run out of Floating Point Precision or something on the computer. Then we did this calculation where I said, "Hey, wait a minute, how many times do we zoom in before the whole thing turned blue?" It was like 12 times or something, and so we did this math where we said, "Well, if we zoomed in 12 times as much as we could each time, how big was the original beautiful curlicue Mandelbrot picture? We calculated, and it was the size of the surface of Earth. I remember being like, "Everything is in here. Everything is inside the computers."

I also had this experience as a kid where I wanted to be an astronaut and build spaceships, like so many kids do. As I learned about physics, I started to get into this idea that actually traveling into space is going to be really hard, and going to find a planet with life on it is going to be really hard. It's going to take a lot of power and a lot of time to do that. I think that was another thing, I was intrigued by the idea that we might be able to simulate things inside computers that we wouldn't have the time to find in the real universe. I think that idea of making computers come to life, that's what really got me into it. I think from an early age then, I was fascinated by this idea of what it would be like to walk around in a virtual world that was somehow alive and running its own rules; that was the thing that never left me.

Patrick Cozzi:

Very cool. The massive scale and all the simulation, that very much resonates with me. 

Philip Rosedale:

Yeah, some things have stayed the same and some things have changed. I think one thing that you hear a lot of people say again today about the metaverse—I also had this belief when I started Second Life—that infinite possibility, and infinite freedom, and freedom from constraints, and freedom from scarcity, and freedom from limitations of any kind was at the core of the thing that would make the metaverse compelling.

I would say after 20 years now of Second Life, and looking back on all this stuff, and working on High Fidelity, and just working so much on this, I'm struck by the thought that we don't want so much a world of infinite possibility. Rather, we want a world that we share with others in constructive and sometimes conflict with them.

This idea that, like the real world, the most appealing virtual worlds may be places where we're sort of forced to get along, if you will, rather than allowed to imagine our own reality and everybody else's be damned sort of perspective. That's something that I've really been changed by. I got there by, of course, watching Second Life and what happened to people inside Second Life. Did they seek to leave the world behind and imagine their own reality, or did they focus more on their interactions with other people? It was the latter that was true, that what was interesting about virtual worlds was the degree to which they were the right kind of space between people, rather than being these imagination laboratories.

Marc Petit:

By the way, I listen to you... I need to call out our friends from Into the Metaverse, Yonatan and Matthew; they do a fantastic job. I know you were on their podcast recently. They take a very different point of view, but it's a very great podcast to listen to and a good bunch of people. I think it's on that podcast that I heard you say that the metaverse is a version of the internet that is 3D, but it makes the internet a live experience when you can interact with other people. But that's going to require new rules and ways to enforce those rules. So how did you handle that on Second Life, and what's your point of view now?

Philip Rosedale:

First of all, I think we were lucky. We were fortunate to do some things right on Second Life that we didn't understand until later, let me just say. I think many, many great technology projects, many projects in general have some people claim prior knowledge about them where, come on, let's be serious, you can't really have that. I think something like Second Life was so complicated in the moving parts that we were bringing together that who could possibly have estimated, for example, whether it would bring people together or bring them apart? As we've seen, say, in the last 10 years with social media, the bringing them apart thing.

I think there were things we were fortunate that we did right and those things are really interesting to look at right now. To your point, and I think what you were alluding to that I mentioned in an earlier podcast, was that the metaverse is a combination of two things in different proportions.

One is going from 2D to 3D, which is, admittedly, an important work that we need to do. A lot of stuff as humans we need to do in 3D because we understand it so much better, remember it so much better, et cetera. But this idea of making the internet a live experience, even if it was 2D, that's the more important social, societal, and human issue. We are social animals who seek to collaborate and communicate at every opportunity. We need environments in which we can do that well and we can do the things we want to do there.

I think the big thing with the metaverse is if you were on a website and you could see and hear the other people that were at the website at the same moment as you, what would happen? How would you keep people so they got along, and what would the rules be? I think that's the most important conversation that we all need to be having.

Marc Petit:

What about rules and systems to enforce those rules? Because there is no jurisdiction in the metaverse, and can we rely on just people's goodwill? I think we've learned over the 15 years that it may not be the right thing to do.

Philip Rosedale:

We're in an interesting spot where we've got a whole bunch of negative examples in front of us; we’ve got all kinds of things that look like bad things to do. One of them is just writing a rule book. You think about it's like going into a pool and you get that list of no bare feet, no walking with drinks, no horseplay. That idea of managing a world by having a list of rules, and then having some unfortunate person sit there as a moderator, and apply the list of rules to all the people's behaviors, that's just absolutely nuts.

We've already gone beyond the capacities, even in much less communicative environments like Facebook groups or something like that. We’ve already gone beyond the ability to apply that centralized control to those worlds.

On the other hand, removing all responsibility, control, authority altogether, and enabling people to just be as mean as they want to everyone all the time, because hey, it's the metaverse? This, I think, is maybe what's captured by the extreme libertarian sort of fully decentralized mindset around it. That's not going to work either. Nobody wants to live in a savage kingdom where death awaits you at every corner, and everybody's nominally mean. If you get into a firefight with somebody over politics, you're both going to suffer immensely; that’s not right either.

I think that we've got a bunch of stuff that hasn't worked, and we've got to land somewhere in the middle. I think Second Life accidentally... Again, I don't want to claim that I was so smart about this. Second Life, we were trying to facilitate people building things together and engaging in trade. That was one of the things we were really trying to do, and so, in our attempt to support that as a company, we happened into doing some things right.

Those were things like pseudonymity. Anonymity is a recipe for disaster because people can harm each other without any consequences. Pseudonymity is the word that I think most people use for the case where your avatar is a sticky, precious identity but it's not Philip Rosedale. It's not your true name, it's not your Facebook account. I think that the way that pseudonymity gets built, the way that you have sticky relationships with communities, with places, and with individuals, can be done in a way that enables us to be our best selves, and enables us to take care of each other.

Explicitly, just to give you one very specific answer, everything's got to be done with groups. This is my philosophical, cryptic answer to this. We're talking about scanning people's eyeballs and stuff so we can know who they are in the metaverse. That is not going to work; that’s not the right approach. That's got all kinds of negative consequences of that, too, like surveillance and governments harming you and stuff. 

The thing that's going to work is belonging to a bunch of overlapping communities. Some people call this polycentrism right now. I think that's a good word for it. We all belong to a ton of different communities and, when we walk into a public event, we are often known to be members of those communities. I'm a local. I'm a member of this neighborhood in San Francisco, and when I go to a town hall meeting I'm an alumnus of RealNetworks, as you mentioned earlier. 

These are things that tie me to the people around me and the world I'm in and constrain my behavior. I can't just be anybody. I can't just do anything I want to do, because it's going to get back to me through the membership that I have in these communities or groups. I think that the right kind of belonging to groups, and then knowing that of the other people you encounter in a virtual world; I think there's a pretty obvious path to having really great moderation.

Everybody's talking about this week, if you told me, “How would you fix Twitter?” I would say, "Hey, where are the groups in Twitter? Can we celebrate and explicitly identify who belongs to what group so that, when there's a conflict, the groups can sanction their members rather than some people that Elon just fired having to sanction the members?"

Marc Petit:

Interesting, because that's an implicit way for the groups to manage their reputation.

Philip Rosedale:

Exactly.

Marc Petit:

Because, in real life, we care a lot about this.

Philip Rosedale:

There's a lot of stuff I don't like in the last few years where... It's a very engineering thing to do, and I'm totally guilty of it myself, historically. This idea that there should be one currency for everyone worldwide. There should be one set of moderation rules. There's one best form of human governance. These things just aren't true. There's never been any evidence that all seven or eight billion people on the planet can effectively use the same currency. That just doesn't make any sense. Look at Europe as a bunch of countries that struggle to use a single currency right now, and you can see the flaw in that.

Patrick Cozzi:

Philip, I wanted to switch gears a little bit. First, congrats, I believe you rejoined Second Life as a strategic advisor earlier this year.

Philip Rosedale:

Definitely. I'm helping a little bit more than I historically—of course, I've never been out of touch with Second Life, as you might imagine. I've always been close to folks there. But about two years ago, a friend of mine and another person who was also becoming a friend actually bought Second Life from myself and from its original investors. I've become more involved recently in terms of trying to provide what help I can. It's just a fascinating time to be advising Second Life. What a wild moment to have everything come back around and have everybody reexamine the metaverse and avatars and virtual worlds and then find their way in many cases back to Second Life and say, "Well, how did it work there?"

Marc Petit:

Can we frame some numbers? You studied in 1999.

Philip Rosedale:

Yes.

Marc Petit:

I don't know if people remember what graphics were in 1999.

Philip Rosedale:

I started Second Life because graphics, as you know, Marc, started to happen in 1999. I just heard somebody, maybe it was Neal Stephenson, say it in a talk, "1999 was the year of the GeForce 2," and that was that. That was the first chip that could do 3D on its own and I jumped out of RealNetworks and started Second Life, started Linden Lab in 1999, because that happened. Then the other thing that happened in 1999 was broadband. It became obvious that broadband was going to work, that we were going to have high-bandwidth internet access. From an investor's perspective, you could be sure that you could bet on that in a few years.

Marc Petit:

The peak of Second Life has a million MAUs, by today's acronyms, monthly active users.

Philip Rosedale:

Yeah, so Second Life's size today is about a million monthly active users, and that's about the biggest that it ever got. What was interesting was that Second Life took a long time to get started; like all overnight successes, it was not an overnight success. It was about $20 million of investment before we reached profitability that was spent, and then it was from 1999 to 2003 to launch it. Then there was a lot more work to do after launch. Then we became famous in 2006. It was really like six or seven years before we knew it was going to work. But yeah, the interesting thing about Second Life was it skyrocketed into everybody's visual field in about 2006.

It got up to about a million people actively using it, and then that number has stayed about the same. It's grown a little bit through and beyond COVID, but remarkably—and of course this is super fascinating for all the other companies that are trying to work on this—it reached a peak population size. In a way, nobody really knows and there have been a lot of attempts to change that population size, make it bigger, that haven't worked. That's one of the things that I talk about a lot because we've got companies like Facebook saying they need to backfill $50 billion a year in lost revenues by delivering the metaverse to people. I got to tell you, I've been there and it's a really hard problem.

Marc Petit:

But as a comparison point, Roblox is more than 200 million MAUs.

Philip Rosedale:

That's right.

Marc Petit:

Social gaming is a very powerful online endeavor.

Philip Rosedale:

There's so many interesting things to say about Roblox. First of all, great company. Amazing amount of technology there. It started a little bit after Second Life. David and his friends started Roblox, I think it was like 2006. 

Roblox, in many ways, is Second Life but for kids, which is really interesting. Second Life is definitely not for kids. There's a variety of reasons for that, not all of them explicit. Some of them are just the culture of it. But basically Second Life dislikes kids, and kids dislike Second Life from the very beginning, and so it was a self-selection.

The thing about Roblox is if you offer young kids, say between eight and 14 years old, the opportunity to instantly be 20 years old and drive around in a convertible Volkswagen, and chit-chat with other kids that are doing the same thing, imagining that they're older, 100 percent of kids want to do that—as we all know, or those of us who are parents know. The trick is that 100 percent of kids want to do it, which is why Roblox has 200 million MAU.

Patrick Cozzi:

Philip, earlier you mentioned it's great to see virtual worlds and avatars coming back around and, given that 20 years experience, do you have any lessons learned you want to share with the community listening to the podcast? Whether it's business lessons or other social experiment lessons?

Philip Rosedale:

Let's start with hope. We’re all losing hope in some ways lately. There's a lot of concern that technology, for example, is only leading us in negative directions with respect at least to human behavior. I don't think that's true at all and Second Life is great evidence of it. I think it would be very difficult to argue that the things that make Second Life a friendly place, which it is—I can come back and defend that more. But online communication in general, as it becomes lower latency, as we're closer to feeling like we're actually talking to each other, like we three do right now; as we get closer to that, if we do things right, we can cause people to behave better and better and better to each other. In exactly the same way that people behave well to each other when they end up in the same room together at, let's say, a party or something. I think there's a lot of hope to be held out that we can do that.

I think sometimes we look back at asynchronous messaging—we look at something like Reddit or Twitter or Facebook groups or Instagram—and we say, "These things are all bad; they’re causing harm to people." That absolutely doesn't have to be the case. 

I'm a broken record about this, but I think that the choice to make targeted advertising the business engine behind a bunch of these products, unfortunately, is inseparable from the harm that's being caused to human behavior. I think that if you take that business requirement away, if you don't have to run ads—or if you don't have to run targeted ads; normal ads are fine—you suddenly have an opportunity to do something good with technology for people. There's every opportunity to do that, so I'm very enthusiastic about looking soberly at what we need to do to actually get there, but anticipating that we can get 10 million people in a virtual room and have them behave well together.

Marc Petit:

Maybe that would be a good moment for you to remind us what was the economic model of Second Life? I think it's very interesting and everybody's scratching the back of their head. As you said, we’re on the back of 15 years of targeted advertising and data collection. What was the economy like in Second Life?

Philip Rosedale:

First, let me start with the easy answer, which is something like GitHub, or WordPress. Second Life's business fundamentally, or a big piece of it—and then I'll get to the other piece—the biggest part of Second Life's income, its revenues, is from charging hosting fees which are associated with land in the virtual world, which is associated with computer resources.

We basically rent cloud computers to people that are using them because they have a home there in Second Life and it's literally on a plot of land. The company charges about $20 an acre a month for land, and the world of Second Life is about the size of Los Angeles. The company makes a good deal of money. It's a great business, profitable, basically charging people a hosting fee, which is a lot like an AWS fee, for the land that they occupy in the virtual world.

That's the first thing: you can definitely build a virtual world and have it be a great business. We make more money per person than Facebook does, for example, across its businesses. We make more money per person, per year than Google does in advertising. You don't need to do advertising. That's the first thing, hosting cloud resources.

The second part of Second Life's business, which is the one that's really fun to talk about and a source of interesting stories and anecdotes and whatnot, is that, from the very beginning, we anticipated that people would want to make stuff using the building blocks of the world. They'd want to craft things. They’d want to make glasses or hair for their avatar, or a motorcycle or furniture for houses. We anticipated that a lot of people would want to sell the stuff they made to each other, so we built a bunch of things to make that work. It's worked, and it's still, today, a $650 million a year economy in people buying and selling things from each other.

What did we do to do that, and what is there to be learned from that? Well, we basically had to build a cryptocurrency. Now, this is 2003 and it was all the more important that we had to build a cryptocurrency because, in 2003, there weren't things like Venmo. Even if all of our participants had been in the United States—which they're absolutely not; they're all over the world, uniformly distributed—what we needed was some way that somebody that made a piece of virtual furniture in Second Life could sell a copy of their chair or whatever to somebody else in the world. Then hopefully, eventually, there'd be a way for them to turn that back into dollars if they wanted to use that job of making stuff to pay their rent.

We had to solve that problem from scratch. There was nothing. There were no tools we could use. There was no cryptocurrency. There were no payment systems we could use. Somebody like Visa was not in a million years going to let us have people buying and selling things, say, with credit cards in the virtual world. 

What we did was we built a currency, a digital currency. I usually say digital currency to separate the broader category of that from cryptocurrency which is, more specifically, things like Ethereum, Bitcoin, proof of work, proof of stake, et cetera. We built a currency that people could use to exchange with each other in the very beginning. 

In the beginning, we gave everybody a thing—which is now being debated a lot in real-world politics—we gave everybody a basic income. Everybody, when you woke up in the morning—actually, I think it was weekly at the outset—you got a weekly income of Linden dollars, which is the name of the currency. Therefore, you could kickstart the economy that way. Everybody suddenly had a ready supply of these Linden dollars in their wallet because new ones showed up every week. They could start spending those Linden dollars on buying stuff from each other and, boom, that took off so we had to do a lot of other stuff. 

One of the things we had to do, which again is very much in the news today, is we recognized early on—because we talked to economists and smart people that were giving us good advice about stuff, people like Bill Tai and Larry Lessig that were very thoughtful people working on these things—we recognized that if the price of our currency either wildly fluctuated or, even worse yet, went up and up and up over time, nobody would use it for exchanging goods and services with each other because it would be better to hold that currency and watch it go up and get rich.

We had this big problem, which was, as we know today with Bitcoin and Ethereum, if you just start off with a limited number of tokens in your currency and more people are coming to be interested in it tomorrow than yesterday, then you inevitably have this situation where the value of the currency goes up continuously and it doesn't work as a currency. That's exactly what we see with Ethereum and Bitcoin. There's absolutely nobody out there buying absolutely anything. Nobody's buying anything with Bitcoin and Ethereum because they're sitting on it. It's a commodity or it's an investment, not a currency. 

We had to do a bunch of stuff to make that work. One was we gave people this basic income so, as new people came in, we could actually give people more currency so that the price would stay stable. Then the second thing we did was we actually did a more complicated fed desk sort of thing—and we still do this today—where we would sometimes sell new currency. We would print new money, basically, and then we would sell it on the open market. We would sell it to everybody, if you will, at the prevailing market price.

Those two knobs, the basic income and the selling of money on the open market, by adjusting those knobs we were able to keep the market price of the Linden dollar stable to within a couple percentage points against the U.S. dollar and the Euro over the last 20 years. This monetary policy has been very successful.

Marc Petit:

You always allow people to trade their Linden dollars into U.S. dollars?

Philip Rosedale:

Yeah. We provide an exchange called the LindeX where they can trade their Linden dollars back to dollars. It's basically just like a currency exchange; again, today is such a great news day. FTX and Binance, same thing. We built the code to enable the same currency exchange that you see in those exchanges. You place an order, and the order can be partially filled and it all just works. We built that type of currency exchange...I think we deployed it in 2005 if I remember correctly.

Marc Petit:

You had property tax, a VAT?

Philip Rosedale:

Yep.

Marc Petit:

And that was it? And the exchange mechanism, that’s amazingly powerful.

Philip Rosedale:

Yeah, and so the company makes a little bit of money on that GDP, that $650 million GDP. The company makes a little bit of money because some of those transactions go through a marketplace where you pay to put up a listing, and then you pay a small fee. By small, I mean single-digit percentage, not the 47% or whatever that Facebook talks about. We charge very small fees on some of the transactions. When you take money out to dollars we charge a couple of percentage points as well, but there can be multiple exchanges. From the very beginning, we believed that we wanted our currency to be treated as a real currency.

Marc Petit:

I think I heard you say in the Washington Post that you would consider taking Second Life to the mobile platform. Would those economics work on the mobile platform?

Philip Rosedale:

I think the economics would work—

Marc Petit:

Because the 30%, you're going to have to cope with the 30% tax on that platform.

Philip Rosedale:

Right, a virtual economy where there's a lot of internal trade cannot suffer a 30% tax on each transaction. You're right; the mobile providers, Apple and Google, have a stranglehold on the market. One of the things that stranglehold does is it completely forbids the possibility of something like Second Life happening on a mobile device. I would also add, though, that mobile devices don't allow the rich interactions between people yet that are also required to make a metaverse takeoff on them. 

It's challenging on both sides but you bring up a very good point there. You can't have a circular economy, which is a word that people use for a couple of different things. In Second Life, a circular economy is where Philip makes shoes for avatars, Marc does hair for avatars, and Patrick makes motorcycles that he sells. The three of us have met each other in the world as strangers but we've come to like each other, and every couple of days we buy something from each other just for fun, to respect the other person's craft. We do that circularly. We buy back and forth. Well, if you charge 30% every time we make a purchase from each other, all three of us run out of our original dollar within a couple of transactions. That idea of circular economies, not being able to suffer really high fees, is very important as something that we learned about Second Life. That completely puts the breaks on a Facebook metaverse or a mobile metaverse.

Marc Petit:

Last question on the topic, I love the simplicity of the Second Life model. I think it's brilliant, but we're not seeing that in Roblox, Fortnite, or Horizon Worlds. Aside from the mobile 30% fee problem, do you have a hypothesis as to why nobody's going for an open economic model like this?

Philip Rosedale:

We could look at something like Fortnite where, for most people that play Fortnite, the experience is a relaxing experience where you are playing a role. You're improving your skill at a very specific craft and you're not trying to earn a living or run around sharing content. Now, of course, for example, Fortnite Creative is this wonderland that's growing, and growing of people making amazing things and sharing them with each other. But that's still early because it doesn't yet, for example, have a currency where people could buy and sell from each other. 

I think that one of the things that's happened is, because this modern interest in the metaverse has been most tied, both on the Web3 side and on the experiential side, to games, some games are more relax-and-consume experiences. You're leaning back, you're consuming. It's the end of the day, you're trying to wind down. 

I think part of what's happening is we're still early on all this stuff. The number of platforms and the opportunity for social interaction isn't robust enough yet to drive all the other pieces that are needed to follow it, if that makes any sense.

Patrick Cozzi:

Philip, interesting that you mentioned walking to the bar as an example; I’m going back to the early 2000s. My first interaction with Second Life was when I was hanging out with my friend who did all my tattoos and he's jamming out his computer. I'm like, "Hey, Nate, what are you doing?" He’s like, "I'm hosting a party, and I'm DJing at a bar in Second Life."

Philip Rosedale:

How fantastic! If you look down at the map from the sky of Second Life right now, there is a satellite map you can use to decide where you want to go next. You see these little clusters of green dots, which is where the people are on the map. A lot of those little clusters of green dots are people DJing for each other and playing live music or playing guitar. There's a lot of communal fireside gatherings that make up the majority of where people are in Second Life. Yeah, that's a great anecdote.

Marc Petit:

Before I let Patrick geek out again, one thing you said earlier is that people are equally distributed across the planet, and it looks like the population in Second Life is very diverse. Do you have an explanation as to why?

Philip Rosedale:

First of all, because the whole gist of it was getting people to meet each other for the purpose of starting a business: dating, finding friends around a topic, or whatever. Again, as compared to games which are different in that way, importantly, the requirement with Second Life was parties. For example, are you going to go into a party that has an 80/20 gender balance? No. You're not going to go into that party in the real world and you're not going to go into that party in the virtual world.

One of the reasons that VR is failing right now—and by VR I mean VR headsets—is that VR headsets are not equally appealing to all genders. They're not equally appealing across a range of prospective segmentations of people and, unfortunately, that means that you end up with a very homogenous crowd of people that are using it. That means that if you're trying to have a good party or an experience where you meet new people that are interesting to you, it's not going to work. 

I think once we have Metaverse experiences that are really centrally based on connecting you with new people, we're going to all realize much more so that they have to be inclusive and diverse. There's just no way to do it without that. 

And I should say Second Life was, at the outset, something that you accessed not via browser. It had a download and there was, especially earlier on, more of a dependency on graphics cards. But Second Life from the very beginning has been very diverse in terms of people using it because it used the standard access tool that, especially at that time in the early 2000s, we used a computer or a laptop computer.

Patrick Cozzi:

Philip, in mentioning the web there, do you think you could build Second Life today, focused on a web browser?

Philip Rosedale:

It's interesting. I wonder. I think you could. At a high level, the capabilities of web browsers and browser graphics today are really good. There are some people in Second Life who would say, "Oh my God, no, the high-quality rendering is critical and Second Life needs to look more like the Unreal Engine." That's fair, there's a lot of really beautiful art—

Marc Petit:

You can talk about that, by the way.

Philip Rosedale:

There's a lot of beautiful, beautiful, beautiful scenery and art and artistry and avatars in Second Life. But I think if I was starting it all over again, because of that target of diversity and inclusion, I'd just look at the browser. I think we're pretty close if you started a new project today, don't you agree? If you said we're going to launch in two years, you could probably depend on the browsers for that.

Marc Petit:

I agree. If you need to deliver a high-quality experience, you can always switch to a hybrid mode and pixel stream off the game engine. I think it's not a black-and-white decision.

Philip Rosedale:

In terms of geeking out, I've been doing some work lately, spending some time with the folks at Improbable. Some of their events that they've done have been pretty moving to attend. They do pixel streaming and they did this event recently as a test, but it was a real event. It was for Other Side, which is the Bored Ape Yacht Club thing. They got 5,000 people literally shoulder to shoulder at times. We were all crunching right up into each other, chasing around the announcer. 5,000 people with voice on. That's a pretty amazing experience. 

By the way, I just love that you mentioned pixel streaming. I think the challenge of getting beyond 100 people in the same space, that's another total blocker for metaverse stuff to kick off. We can't have a metaverse with 100 people. It’s not going to happen.

Marc Petit:

Definitely. The network layer is the bottleneck in game engines right now. We had, on this podcast, Lincoln Wallen, the CTO of Improbable, talk to that. Hadean is another company that tries to solve a problem. There's a number of things, and the browser seems to be a better platform for high CCUs interaction at this point. That's why maybe hybrid solutions would be best. You could switch modes pretty easily if you want to start something, Philip.

Philip Rosedale:

Why, thank you. It is funny, because I have spent this year thinking deeply about what I want to do next. You're right; it's just a fascinating moment. I think that somebody's going to crack. I think there's going to be a couple of breakthroughs in virtual worlds that are going to be really interesting. I think the near-term ones are not going to involve VR devices, I'll just say that. I think they're getting way better. It's been super fun to work on them.

I started my company with my two co-founders, High Fidelity, to basically try to build an open-source software layer that presumed the VR devices were going to work. I've been banging my head on that problem for a decade and I think that they are getting better, but we're nowhere near what we need yet in terms of a VR device.

But that said, I think that if somebody can crack nonverbal queuing among avatars, topic one. Then, topic two, getting more than 100 people in a room; doing it, say, by web rendering or by pixel streaming and then figuring out the interactivity—which I can speak to more about how I think that's going to happen—the expressiveness of the avatars. I think once we get there, you're suddenly going to see some real interesting things going on that we haven't seen yet. Why can't we have a political rally in a virtual environment, for example, that's rowdy? That's a big public debate about an important topic. Why can't we do that? We should be able to do that.

Marc Petit:

Is there anything in the world of Web3 that you feel can be a game changer?

Philip Rosedale:

Not yet. Not in two words. First of all, decentralizing everything is just as bad as centralizing everything. If you go to extreme decentralization versus extreme walled garden or whatever people like to say, those are both total fails in terms of social appeal. That's one thing. 

Then, as I can delve into more technically, the infrastructure for blockchains today is simply not ready yet. I've worked on it. We built a blockchain-based NFT and currency store for High Fidelity around about 2016 to 2018. I've been working on it super hard but the speed and capacity and operational stability of the blockchains is, as we all know, simply not there yet. Second Life itself has more transactions per second than Ethereum and Bitcoin combined, so the technology is not there yet. Then there's just all these really interesting and philosophically interesting issues around the design of decentralized systems and getting it right. We absolutely have not gotten it right yet in such a way that we can create good environments for people.

Marc Petit:

What about identity and ownership? There were a lot of promises right there.

Philip Rosedale:

Yeah, I wrote something on Twitter the other day that I thought was—of course, I wrote it so I'm biased—but I thought it was a good point. I said that ownership is no more something that you can store on the blockchain than friendship.

Ownership is a human social contract. The universe has no concept of ownership built into it. If I give you my iPhone, you can look at the atoms all the way down to the individual molecules and particles. You will not see Philip Rosedale on there anywhere. It’s not on there. If you look at the right data in my iPhone it'll say it belongs to Philip Rosedale, but, hey, wait a second. What does that mean? Does it really belong to me? If you take it from me and don't give it back, does it need to come back to me?

All of the rules around that are community rules. They are rules that human beings have agreed mean something. I'm always chuckling about this idea that the blockchain is a revolution in ownership, because it doesn't encode ownership. It's a suggested strategy where we might be able to store things. But of course, as we know today, the current form of the blockchain, the rule, the social contract for ownership, is this: the first person who posts something owns it. 

I wouldn't live in that country, would you? I don't want to live in a country where I can take all the photographs Marc took on his vacations, upload them to the blockchain, claim they're mine, sell them and then laugh at Marc online on Reddit. I don't want to live in that world. The blockchain, as it stands with regard to ownership, is a suggestion that the way ownership should work is that the first person who posts something owns it.

That's a bad suggestion. It's technically feasible but it's uninteresting to humans. I think that sometimes technology suggests a better way of doing things. But what we've seen with blockchain so far is that it doesn't unless you're blurring your eyes a lot and looking at things.

Again, I don't want to diss it in that sense. Saying, "There's got to be a better way to do money," that's something I've been thinking about a lot over the years because of Second Life. There is a better way to do money, but it's not the Ethereum token. I think there are better ways to use technology to build currencies, for example. I think we're part way there and it's amazing, isn't it? That it's been 10 years, we've been 10 years since Bitcoin.

Patrick Cozzi:

Already? Wow.

Philip Rosedale:

I just can't believe that, myself. I know it because I wrote a paper. I've put this up—I think you can find it on WordPress, or Medium—I wrote a paper called "Single Global Currency" in 2009, at the same time that Bitcoin came out. When Bitcoin came out, I was like, "This is totally fascinating." I basically just wrote a very hand-wavy project plan that I presented to my board at Second Life. I said, "Hey, we could not store the database for the money. We could instead come up with a way to let hundreds of thousands of different people store the database and wash our hands of this whole thing," because we were realizing what a complicated thing it was to manage a currency.

Patrick Cozzi:

Philip, we appreciate you sharing all of your insights from the incredible depth of experience you have. I really loved all the human aspects of the metaverse that you shared and, certainly, the lessons on the currency and economic models. Quite a lesson for myself. To wrap things up, we'd love to ask if you'd like to give a shout-out to any person or organization.

Philip Rosedale:

One that's a public service message for those of us that are looking at identity and groups and behavior and governance: I always talk about people that I wish I'd read, things I wish I'd read when I started Second Life. One of them is the work of Elinor Ostrom. I think there's a group called the Ostrom Foundation, where you can find out more about the work there. The general idea is that there doesn't have to be a tragedy of the commons if you support the right human connections and rules around how things are governed.

It's a very salient topic right now because we're talking about wanting Twitter to be our town hall, and Elinor Ostrom won the Nobel Prize for exploring the idea that we've all heard as the tragedy of the commons. What she found was that they don't happen. Tragedy of the commons is an idea that, under normal human circumstances, doesn't ever happen. She got the Nobel Prize for explaining why that was. That's something that I'd call out that all of us should be experts in right now that are working on internet systems.

Another one would be my co-founder and my friends that are still working on High Fidelity spatial audio. This ability to hear three or four people talking at the same time without becoming incredibly frustrated is another thing that we've been doing great work on at High Fidelity. That is going to, as Bluetooth gets better, et cetera, et cetera, it's going to be one of the necessary but not sufficient components that I think can help facilitate good behavior.

Marc Petit:

Fantastic. Well, Philip Rosedale, you are a true pioneer and a deep thinker. It made me think we should have a version of this podcast with multiple hours. It feels like we've skimmed on so many topics. It was fantastic. Thank you very much for being with us today. Patrick, thank you very much as well for being with us. Thanks to our audience. We hear a lot of good feedback so please hit us on social. Let us know what you think. Let us know who you want to hear from and we'll be there. Thank you very much, everybody. Thank you, Patrick. Thank you, Philip. It was amazing.

Patrick Cozzi:

Thanks, everybody.

Philip Rosedale:

Thank you. Thanks for having me.