Payments, Payment Rails, and Blockchains, and the Metaverse — MatthewBall.vc - Deepstash

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The Payment Rails Of Metaverse: In Depth

MATTHEWBALL

Payments, Payment Rails, and Blockchains, and the Metaverse — MatthewBall.vc

Payments, Payment Rails, and Blockchains, and the Metaverse — MatthewBall.vc

matthewball.vc

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The Tenets Of Metaverse

the Metaverse has been positioned as both a successor state to the mobile internet, as well as a platform for human leisure, labour, and existence at large.

The success of this vision depends on whether the Metaverse has a thriving economy. That includes competition and a constant ...

The Existing Payment Rails

The most common of the existing payment rails in the US are ACH (“Automated Clearing House”), Fedwire, CHIPs (“Clearing House Interbank Payment System”), Credit Cards, PayPal, and peer-to-peer payment services like Venmo. These rails have different requirements, merits, and demerits.

Limitations Of Wire Transfer

Wires can only be used between (and thus through) banks, are only available during non-holiday weekdays and during business hours, transactions are not reversible, cannot be used to request funds (so it doesn’t work for credit card payments, invoices, etc.), and have high sending fees (e.g. Chase...

Existing Payment Rails: Credit Cards

Credit cards are another key payment rail. They involve swiping a physical card (or entering credit card information), after which a credit card machine or remote server captures account information and digitally sends it to the merchant’s bank, which then submits it to the customer’s credit card...

Digital payment networks include PayPal, Square, and the Cash App. Individual accounts are primarily funded via ACH or credit card, at which point the platforms then serve as a centralized/single bank used by all accounts. As a result, all transfers between users of the same payment platform are ...

The Fight to Control Payments in the Metaverse

In the virtual world, the economy primarily involves goods that only exist virtually, which are bought via purely digital transactions.

This economy is also large. Roughly $54B was spent on virtual goods, skins, and lives last year, compared to $42B at the movie box office and $30B on reco...

The State Of The Virtual Payment Rail State

In truth, the “rails” of the “virtual economy” today are much worse than those of the “real world.” They’re more expensive, cumbersome, and slow to change.

As an analogy, the current technology is based on precedents that are closer to the founding of CHIPs in the 1970s than either PayPal o...

Gaming Consoles Turning Into Subscription Platforms

PlayStation and Xbox users need PlayStation Network and Xbox Live IDs to access online games and must usually pay additional monthly fees to access these games, too. Player entitlements (trophies and game purchases) are also forever locked to these platforms. If you buy Call of Duty: Modern W...

The Network Effect

A household can just as easily buy an Android as an iPhone, or a PlayStation not an Xbox. But in the digital/virtual era, market power comes primarily from network effects and scale. And each of these platforms works hard to lock developers and users to their platforms by forcibly bundling separa...

No Rich 3D Effects In iOS Browsers

Apple uses its control over the App Store to prevent iOS browsers (whether made by Apple, such as Safari, or others, like Google Chrome) from using most of WebGL, a JavaScript API that allows for complex browser-based 2D and 3D rendering.

Apple claims this restriction is ...

NFC Double Standard

Apple prohibits applications from using its NFC chips for payments, thereby ensuring Apple Pay is the only digital payment solution that can use tap and go. Apple claims this is for security, but third-party developers, such as Marriott and Ford, are able to access the Apple NFC API so users can ...

Changing Rules Using The Metaverse

The very premise of the Metaverse presumes that the “next” platform shifts from hardware-based operating systems and hardware-centric experiences to persistent and ubiquitous virtual simulations. We already see this today. The most popular games in the world, such as Fortnite, Roblox, an...

If the value in the Metaverse will be primarily driven through virtual worlds and virtual creations, rather than better phones, then we want the most profits going to developers of the virtual platforms and the developers on them. However, you can’t access the Metaverse except through har...

The Undeserved Cut

Apple does not deserve 30% of a transaction for virtual real estate or virtual avatars that are created by developers that don’t use any of Apple’s standards, built on a virtual platform that runs on nearly every device in the world, and not integrated into any of Apple’s products — all because t...

All of the major NFT platforms and blockchain-based worlds are browser-based and lack console releases and mobile applications. These console and mobile platforms control their browsers and, as mentioned earlier, do not support common (and open) standards for complex rendering, rich user input, a...

Yes To WeChat, No To Facebook

In the West, these systems would normally be at the mercy of the hardware gatekeepers. However, Tencent grew so powerful so rapidly in China that it even holds leverage over Apple, who allows it to process payment for its Mini Programs without taking a cut. Notably, Facebook asked for the same pe...

Beyond various platform fees, the Metaverse economy is adversely affected by the policy decisions of various virtual platforms and publishers. These policies make it harder for users to spend money, maroons user spending, penalizes users for spending diversity and or using multiple platforms, and...

Consumer spending today is constrained by the knowledge that no games last forever. Think, as an example, of anything you might buy on holiday but can’t bring home in your suitcase — a Boogie Board, a water bottle, a costume for Día de los Muertos. Expected obsolescence always c...

Open economies, trading, and increases to commercial item value inevitably trend towards play-to-earn mechanics or behaviors, which can quickly devolve into “work” that ruins a game’s sense of fun and fairness. And the larger the Metaverse economy and more firm the ownership rights, the harder it...

Over time, developers will figure out how to support “Metaverse” business models. And they’ll use the Metaverse’s comparatively larger economy to quickly surpass more “legacy” game makers. Free-to-play gaming, after all, was once considered a radical business model that at best would lead to lowe...

New Solutions For Upcoming Problems

Some economic solutions will likely emerge to facilitate the transition to an open Metaverse economy, too. For example, developers might bake degradation into an asset’s code — this skin works for 100 hours of use, or 500 games, or three years total, during which it slowly wears. Alternatively, u...

A decentralized database isn’t needed to prove or manage asset ownership (if the NBA or Disney or Valve said who owned an image file or virtual currency, everyone would believe them). Nor is it needed to safely and quickly transfer money (Alipay and PayPal move billions per day via purely digital...

The decentralized, permissionless, trustless, automatically compensating blockchain model has several benefits. Most important is the fact that developers and users can invest their time and capital with confidence that a blockchain’s policies, incentives, or economics won’t change arbitrarily ov...

CHRIS DIXON

If the ethos of Web 2.0 was “don’t be evil,” a blockchain-based web 3.0 is “can’t be evil."

The Future Is Decentralized

Blockchain’s permissionless, trustless and financial systems also enable their networks to be widely decentralized in operations and adoption. The former minimizes control, increases performance time and liquidity, while decreases gas fees, while the latter increases network effects and ...

Crypto Economy Shows The  Way

Cryptocurrencies like Bitcoin and Ether, can be bought, sold, and traded globally and across almost all wallets (whereas PayPal cannot send money to a Venmo user directly) and in seconds to minutes, with no intermediary taking temporary custody. Users do not need a bank account, nor is it necessa...

Regardless of whether cryptocurrencies become a common form of payment in the “real world”, they’re increasingly being used in gaming via NFTs and blockchain-based studios - and for initial user payments, in-game currencies, and UGC payments. As a result, the “crypto Metaverse” suffers from subst...

NFTs: The Promise Being Delivered

The NFT(Non-Fungible Tokens) market has shown obvious signs of excess speculation over the past year. But it’s also clear that the hard-coded promises of NFTs — irrevocable ownership, open economies, and the ability to endlessly repurpose virtual assets — has led to substantial consumer spending....

Today, only a tiny fraction of online users and gamers even have a crypto wallet, and almost no brands and games issue NFTs. But irrespective of multi-month dips in the blockchain/crypto/NFT economy, we see more of these groups embrace blockchain-based experiences each month. This produces a virt...

The Winner Takes It All

Blockchain standards also look like the best way to engage today’s major games, gaming platforms, and brands into the emerging Metaverse, too. While companies like Activision Blizzard and Take-Two may recognize the potential of open economies and platforms, they’re unlikely to sign onto any syste...

An Open Item Economy

Developers are held back by the worry that, in an open item economy, they might create far more value than they themselves capture.

For example, Developer A might produce Skin A for Game A, only for Game A to decline, and Skin A become a popular (and valuable) item in Developer B’s lon...

The most disruptive aspect of digitally-native “programmable” payment rails, however, is how it enables greater independent collaboration and funding.

Using smart contracts, a new, multi-member entity can be created within minutes. No signing documents are required, nor credit checks, lawye...

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