Reality Check: NYT "Investors Snap Up Metaverse Real Estate in a Virtual Land Boom" article

It's expected that reporters get some details wrong when writing tech articles, or any article about specialized fields.  So, when you see mistakes or misquotes in an article about something in your field, usually you just shrug and move on.  

But, this NY Times article ("Investors Snap Up Metaverse Real Estate in a Virtual Land Boom") article is pretty egregiously bad, and (unfortunately) seems to be getting traction.  When I saw it yet again in this morning's Morning Brew newsletter, I decided to respond.

The hard part is where to start.  The title is absurd (there is no "Metaverse Real Estate" to "boom" for any reasonable definition "the metaverse"), and the assumptions and details in the article read like a press release from one of the crypto or NFT startups cited.

Before starting, a quick refresher: I'm not a "true believer" in Blockchain, Cryptocurrencies, and NFT's. Or even a mildly enthusiastic. On the contrary, I agree with the sentiment that NFTs and Crypto are very bad things (long but really worth a read) and that the best way to deal with crypto, blockchain, and NFT's is to burn it all down (a lecture at Berkeley that's a few years old but still worth watching).  Stephen Diehl has a lot to say along these lines, including a recent evisceration of the business of NFT's.

Now that you know where I'm coming from, you will understand why I have issues with the article.  It starts off reasonably, with a few "summary-for-the-layperson" paragraphs of some recent metaverse news (e.g., Meta is all in!), but then shifts to a specific crypto-fueled-virtual-world viewpoint, and lays out the ideas as fact instead of speculation.

But then over the next few paragraphs, it shifts first to what could generously be called hyperbole, and then into full-on crypto-fan boosterism.

The metaverse comprises multiple digital realms. Each is like a 3-D virtual city where avatars live, work and play

Fine, we can start with a bit of melodrama to set the stage.  But as you read, remember that the metaverse doesn't exist (yet? maybe never?) as more than a concept. Avatars (or people) don't "live" in the metaverse. And, contrary to the hype, very few people "work" in 3D worlds right now (a number that gets even smaller when you eliminate the people building the infrastructure).  

But real estate investing in the metaverse still is highly speculative, and no one knows for sure whether this boom is the next big thing or the next big bubble.

Since the metaverse doesn't exist (for any reasonable definition of metaverse) it is to see what might be referred to as "real estate investing in the metaverse."

Setting aside the fact that the article associates a small number of 3D virtual world systems with "the metaverse", it completely ignores the artificial construction of "real estate" they present. The systems cited in the article are designed and built to create unnecessary scarcity for the sole purpose of giving the illusion of value, even while the "land" in them only has value because of their design choices. On some level, this is fine:  it's the model that they want to present to their visitors and is not dissimilar to previous systems like SecondLife.  Except "blockchain and cryptocurrency."

But by presenting this "real estate" as "real estate in the metaverse" (a buzzy idea "everyone has heard of as the next big thing") the article implies that these systems are the thing Zuck and Friends at Meta are excited about.  Which they aren't;  it's far more likely that when Meta goes all in, these "investments" will become worthless.

So while "no one knows for sure", the vast majority of people pushing these systems as "the next big thing" (and certainly everyone quoted in the article) are folks with a horse in the race, and that stand to make money if people mistakenly "invest" in "real estate" in their systems, hoping to capitalize on the hype.

Technologists believe the metaverse will grow into a fully functioning economy in a few short years and offer a synchronous digital experience that will be as integrated into our lives as email and social networking are today.

Perhaps "some technologists", but certainly not all (or even most) "technologists". But, again, the metaverse is little more than a buzzword right now, with little agreement on what "it" is beyond "deeper integration of AR and VR into the internet".  When looked at this way, it's inconceivable "technologists" agree on much about it.  Strip away the jargon, and this statement simply says "The internet will continue to become more integrated into our lives".

I admit that up to this point, my qualms with the article felt small, and I almost stopped reading it.  But curiosity got the better of me, and so I continued, and here we are.

At this point, the article makes clear what "metaverse" they are talking about: virtual spaces built on crypto, NFTs, and blockchain. And from here on out, the story is completely told by folks with startups and ventures in the space, with no alternative voices (or even neutral voice) being heard from.  The view of what "the metaverse" might be, how "real estate" and "proof of ownership" and the relationship to the real world is one extreme end of the spectrum of possibilities and unlikely to be where we end up.

It is also unlikely to be what most people eventually experience as "the metaverse". It is very unlikely that immersive 3D worlds (be they AR, VR, or 2D-screen-based) will be based on blockchain, the currency used will almost definitely not be crypto-based, and NTFs will not be used as any sort of foundation for items and ownership in these worlds.  Decentraland (one of the systems cited multiple times in this article) was (and is) an interesting experiment in how far you could push a blockchain-based virtual world and sell land in it, but isn't a serious contender for how "the metaverse" will work in the future.  It, and other systems cited (Somnium, Cryptovoxels, Upland, etc), may or may not be around for a long time, just as SecondLife is still around, even as they remain on the fringes.

To continue...

Money in these digital worlds is cryptocurrency, as finance in the metaverse is powered by the blockchain

No, it's not. Finance in these specific 3D worlds is based on crypto, but not in whatever becomes "the metaverse".  Presenting this as fact is absurd.

Anyone entering a virtual world can buy or trade art, music and even homes as nonfungible tokens, or NFTs, which are blockchain-based collectibles that are digital representations of real-world items. The NFT serves as proof of ownership and is not interchangeable.

Except, of course, NFT's don't work that way (they aren't digital representations of anything, they are typically just pointers to something), and won't actually work for this purpose in practice.

And in recent months, the volume of transactions for commercial real estate in the metaverse has ramped up.

Transaction volumes on speculative assets tells us nothing of their real value. It is equally (more?) likely to be an indication of value manipulation and speculation than anything serious.

Metaverse Group is based in Toronto but has virtual headquarters in a world called Decentraland in Crypto Valley, which is the metaverse’s answer to Silicon Valley.

There is so much wrong with this analogy. Suffice to say, it isn't "the metaverse’s answer to Silicon Valley" by any stretch of the imagination.

For those wondering why a company would want to invest in a virtual office in the metaverse, Michael Gord, a co-founder of the Metaverse Group, said skeptics should look at the trends catalyzed by the pandemic.

“As more people participate, it’s where you’re going with friends, where you’re having experiences like conferences and concerts,” he said. “It’s inevitable that the metaverse will be the No. 1 social network in the world.”

It is true that there are concerts happening in 3D spaces (e.g., Fornite has done some promo events, as have others), and folks (including me) have run online conferences during the pandemic. I'm certainly a proponent of online events, both stand-alone and as companions to in-person events (for "reducing travel due to climate change" reasons, as well as "access for those who couldn't otherwise attend"). I've (partly) joked to people that I'd be happy if I never have to travel to an academic conference again.

But it's is nonsense to go from there to "It’s inevitable that the metaverse will be the No. 1 social network in the world."   It's not inevitable that "the metaverse" will be No. 1 for anything (except, perhaps, the place you do things in the metaverse). That's ok.  Everything big doesn't need to have to replace everything else.

And it's a huge leap to go from that to presenting the current crypto-NFT spaces as inevitable or something that the tech world believes is the way things will work.

It is more likely that if I want to "set up shop" somewhere in "the metaverse" I'll host my own (using current or future analogs to Mozilla's Hubs Cloud or one of a host of development environments like Microsoft Mesh or XREngine).  There is no "speculative real estate" to buy, just as there is none on the web right now, or in places like Altspace or Roblox or VRChat. Space is infinite, and the costs are real ones associated with servers and bandwidth and revenue for companies supporting it.

What's frustrating about this article is that every source in it is deeply invested in the space; a reader should find it unsurprising that someone whose business is based on the success of speculative asset ownership in these various online worlds will present the concept in the most positive, even if ludicrous, ways.

The remaining paragraphs are more of the same, so I won't pick them apart; quotes and statements from people whose business ventures need you to believe in the value of these virtual assets, be it artificially scarce "land" in 3D worlds, or NFTs attached to real-world locations and real-world objects. Paying money for an NFT of a pixel on some startup's overlay of someone's else's map of the world is simply throwing money away. And as numerous articles have pointed out, NFT's are impractical for many (most? all?) of the uses people imagine.  They aren't baseball cards, they are pointers to baseball cards that are being held by someone else (and who is free to make as many copies of them as they want, or simply throw them away so your NFT points at nothing).

Reporting the story like this, without any context or contrary viewpoints, is not what I'd expect to see from a newspaper like the Times.

An article like this should reflect the reality of the technology and how it might work in the future, which would be easy if they pulled in a wider variety of voices. As it is, this is little more than an advertisement for these systems that will, unfortunately, pull more folks into these speculative schemes.  

We don't know how these online worlds are going to be architected, and what technology innovations are going to change how we think about things. Certainly, we need ways of getting creators paid for their work, proving ownership of assets, and supporting interoperability and commerce in online worlds.  But cryptocurrencies and NFT's are unlikely to be the answer. It's true that many people are gambling a lot of money on assets in the various crypto spaces (land in these worlds, NFTs of all sorts, cryptocurrencies like Bitcoin and Doge), but the fact people are gambling doesn't mean that any of these things have real value, or that these approaches are inevitable.