Virtual Reality Society: Unplugging into Decentralized Living - Artur Sychov

Transcript

[Music] All right. All right. Thank you. Thank you for both of you and for those who are watching and especially those who will be watching later. Uh so yeah, today we'll be talking quite a bit of uh VR decentralization and uh also problems of centralization of games and generally um virtual living. So um yeah, my name is Arthur Sichov. I been doing Somnium um and virtual reality with blockchain for a lot of years already since 2017. And um I guess from all this text which I don't know why I put there, you can

basically remember that I'm a VR geek. I love VR. I spend a lot of times in VR. Um and I also love blockchain and decentralization. I've been building products um both in blockchain and VR for a long time. both hardware and software and um I am active um adviser and board member in several VR startups. So really breathe and leave uh VR but today I want to talk a little bit about centralized gaming and centralized virtual economies.

There is a lot of problems with that and unfortunately the problem is getting bigger and bigger and maybe let's before I go into what is exactly the problem I'll tell you a story uh which happened to me and taught me quite a uh quite a difficult lesson let's say in the early 2000s I've been playing a game called Ultima Online uh which was one of the first if not the first MMO RPG games um on internet where we were able to communicate with other players, exchange value, uh, buy things, sell things from other players, and it was all happening in the real time online. And I've been playing this game a lot. Probably my

parents will tell you that I've played it too much. Um, but, you know, it took me years. I've gathered some wealth, online wealth, buying things, selling things, earning things. And um and then one day I came to my computer. I wanted to log in to my account in Altima online and I was greeted with a message that was blocked. I didn't know why. I didn't do nothing wrong. I had no idea. And then I started, of course, writing to the administrators, so the owners of those servers. um asking what's going on and it took probably two months to for me to finally uh find out

that someone from the similar IP address that I had committed some kind of bad behavior in that game and they just banned the whole IP address and all the accounts who were using that IP address. And then I told them, "Oh great, at least now we know the problem. Please unban me." And they said, "No." And that for me was a pretty cold shower because I've spent years collecting those items, friendships and items and everything. And then just in a second it was gone.

So okay. So I started all over of course with help of the friends and stuff but that was and still is in my mind as as an example. So what is the problem with centralized gaming uh systems? You really don't own anything. the the the you basically own nothing in those games. You you know whether you play uh mobile games uh on your mobile phone and buy some coins or you play uh I don't know Fortnite or whatever you really owe nothing and you rely on those centralized entities to grant you access and permissions. I don't even go to terms and conditions because it will is

another horror story. But uh even without those terms and conditions you own nothing and at any point of time it can be taken away from you. Of course you're also forced to buy um centralized currencies which are uh you know virtual non-existent centralized currencies which in 100% of the times work only in that specific game. it doesn't work anywhere else and you buy them and in 99% of the time you can't even sell them. You just buy them and buy some goods for those but if you have some leftovers you cannot use them.

So you really just spend money. It's a one-way direction money spending uh thing. Of course on top of all of that you have payment providers which take significant cuts from every transaction. So you end up, you know, paying the company something and then the company pays uh other providers and there are a bunch of them behind the uh, you know, the closed doors. They pay them a lot of money as well. And in case you're a creator trying to earn the living on that platform, you get at very best maybe 60% but most of the time you get 50 and less percent for what you have sold your items for or your experiences for. And that of course is a problem as well.

Um and those companies they control closed ecosystems. So even if you sell something and you are able to earn those virtual coins on those platforms, you are still bound to their terms and conditions and you have to wait for them to allow you to withdraw those coins. So you you know you go and say okay I want to withdraw. They their spending transaction and you don't know it takes them sometimes days sometimes weeks and sometimes they even decline um for you to withdraw. that happens and that's a problem. So you are in a full mercy of those platforms and those centralized silos. Now the problem if you think about it if we talk about virtual worlds

right what is a virtual society we want to you know with virtual worlds we want to replicate the real world but also enhance it. We want to be connected. We want to talk to each other. We want to transact with each other. We we want to uh make friends. We also want to make business. Uh because more and more people are going online, more and more people are playing online games, but also living online lives in, you know, on the internet and especially in virtual reality because it's very real and it actually is very immersive. But here you have an example.

You have 70 plus countries with payment method restrictions. So you can't buy or sell things effectively in those platforms. You can't transact with those people effectively if you use one game in one country. So the user in US will have a very different experience than the user in Brazil or in user in Europe and they will have different capabilities. That all is fractionalizing the experience and again because you're in a mercy of those platforms in a centralized hands. Um, as I said before, average 30 to 50% platform fees on all transactions. And if you try to make a living in virtual world, it's a problem for a creator to pay so much tax, let's call it, uh, to

those platforms. Now, of course, you own nothing means that if game shuts down, you get nothing out of it. So, my account was banned. I get at best good memories but sometimes even those memories are vanished because now I cannot get into the you know in my account and check what what was my achievement and things like that. And it's estimated that more than 450 million in player assets um have been lost to just game shutdowns without any consequences. The game goes bust and your all your assets are are gone.

Um and of course after all of that tens of thousands of hours are of gameplay and work uh are lost forever which is not ideal. Now the good thing is we're on a Ethereum conference there is a solution for that and uh we at Somnium and uh you will see later we do use blockchain to solve those problems. Now does blockchain solve 100% of the problems? No. But it actually gives a good foundation to start building on top of that for gaming companies or for virtual societies to actually make it in a much better and effective way. So with blockchain of course you have all that

assets are verified and transparent. Now what does it mean in reality? It means that any creator or any purchaser can actually look at the asset and verify who created this asset when it was created and who is the original owner. Because in games, not only have a problem of centralized entities, but you also have a problem of um theft. Some users will copy other users, create the same model, and try to sell it under their name. It's easier in real life to control that. Much harder online because there is so many other copycats. With blockchain, you can solve it because if you are a bar, it's just one click away. You verify who is the creator. That's it.

Um the smart contracts does they do verify and uh enforce the ownership rights. Um and that means that you can hardcode some rules into the smart contract and no one even the platform creator cannot go around those rules. Meaning if we have hardcoded insomnium that we take 5% from every transaction that is it we cannot change it. Um, and if we would want to change that, we would have to rewrite the whole smart contract, redeploy those things, and of course, users will see it. They will have an option to, you know, opt out or not not opt in into that new contract. They can still use the old

one. Um, no central authority can revoke access when items are moving from one user to another and the platform is intermediary. the the platform never owns your item, never owns your tokens, your money. Um, that basically evaporates the ability to for a platform to control you because it's between the user and another user and the platform is just the platform. The true word of the platform is enabler, right? It enables you to transact u but uh the the you know all other people can transact among each other and of course most important part if we talk about blockchain all the assets and the earnings whether it's

ERC20 token or something else or you bought something in a game they stay intact in your wallet even if the server shutdowns. Now we'll come to some problems about that later. how it, you know, it's not all pink as I said as it sounds, but it's a very good step towards the the right future. So, blockchain solves a lot of those problems and it allows to for a platform to build a really solid foundation. Now, this is the live example video uh we've recorded. Um, again, everything you'll see is live recorded in VR. It's not CGI. It's basically people doing it. Um, and it's it's an example of how people can

transact in VR in real time using blockchain without taking off the headset. Uh, you know, confirming some transactions. We have developed this smart contract and we have developed a system which allows people to control every step of the way by themselves without relying on Somnium but still stay in VR and do it natively and do it fast. Um, as you see, we use uh we use Ethereum as the main layer for some assets. We also use polygon for many transactions and our utility token cube, but it could be any other utility token if you build another game. So, let's have a look at the [Music] video. So, every tip

you see is the real transaction on polygon happening in real time. And another one [Music] [Applause] [Music] [Applause] [Music] [Applause] So yeah uh some magic is not real magic but um you get the point. So um it's quite a gamecher for

creators because again you as a musician we have a lot of concert in VR concerts in VR we have a lot of shows and meetups and things like that and there are a lot of creators who for example sing and play guitar right now they in many games they don't even have ability to get tipped but even if they do they are again born to centralized uh system where they have to wait weeks for their money they have to pay 50% % for the card and they are not in control at any given point of time which is a problem in this example which I just showed you transaction transaction on average happens within 3 to 7 seconds and it's instant and it's between me who tips the person uh and

the person who I'm tipping so the performer and there's another transaction which goes to platform which is inbuilt in our smart contract which goes to Somnian space as a 5% fee and It's all transparent. The moment transaction finished, it opens up in your browser automatically. You're still in VR. You don't see it, but all the receipts are right there in front of you. And of course, you can go back and check everything before. So, you're you are in a full control of that experience. So, this is just an example of of the transaction. Very important thing to understand. Cubes never touch our wallet. We don't own your cubes. You directly transact with another person.

platform takes only 5% not 50. Um users have full control of their funds and of course transaction is presented instantly after its completion. Very important for transparency. Now there's good things but there are also bad things. Um the good things are players have a choice and we'll get to that. That will be one of the last slides. players have a real choice and that's the most important part I want you to remember from this uh from this uh talk of course the centralized ledger and transparency you know who is transacting you can of course check how often that user is transacting who he is transacting with all of that is publicly

available information we as the platform cannot hide it user or a bad actor if he wants to be a bad actor he cannot hide it very transparent and it's needed online especially Um it's fully user controlled value flow. So one user to another programmable economy. So with our SDK with any SDK people can program the behaviors. You can build a game inside the world and benefit users from reaching certain levels programmatically. Um you can use you know SDK the C and the blockchain and the tools we provide or also tools available freely uh to do that and potential for interperability.

interoperability. It's interesting part because one asset you purchase in Somnium with blockchain with the help of blockchain could actually potentially be recognized by another platform and be used in another platform which is a very big concept. We try work with other platform to reach that level. It's very hard because different technologies on a on a front end layer are different. Uh but it's possible in the future. But now there are some negatives uh and current limitations. centralized infrastructure dependencies. We're still dependent in Somnium on some level on some centralized servers. Now, we're making active steps to get rid of that. So, all blockchain tokens are, you know, and and items are stored on IPFS. Um, so we try

to decentralize as much as we can, but still the network layer where you talk to other users is still dependent on some centralized servers and it will take some time to get there. As I said, difficulty in interoperability as as lovely as it sounds to be able to buy, I don't know, guitar here and then use it in another game. It will be possible for sure, but it's not possible right now in a seamless way. Uh, so platforms have to work together to make that happen. clunky and unfamiliar user experience that I think one of the biggest ones because right now if you want to onboard a non-blockchain user to a blockchain ecosystem and say hey you just connect your wallet here for us it's probably

5-second adventure you just connect go to someone's space account connect your wallet you're done but for the person who doesn't know how to deal with it it's a challenge and the way how we try to mitigate it is to make UI as great as possible and as easy to use as possible for on boarding to be simple because people are still not familiar with this and as much as we work hard it's still a barrier and of course speed and scalability issues polygon is great ice and deep but you know it still presents some sort of uh challenge you you have certain you know if you'll get a thousand users that's fine but if you'll get 10,000 users transacting at the same

time for example on the main square insomnium they try to tip someone and there will be 500 100 people doing it at the same second there will be a backlog and the transaction suddenly will go from 3 seconds to probably 25 seconds right maybe a minute um at those highest level transaction and that can cause a problem because you know you don't want to wait a minute to chip someone you want to do it right now in VR immediately um but that is you know it's something is being worked on and I think polygon has improved tremendously um and even ethereum has improved on the main layer um tremendously so as I wrote here it's totally doable You know you can you can do it. It's just you need to have a will. Not every platform will have a will. Why? Because decentral

decentralization in general puts a big positive pressure on platforms. And when I say positive pressure is something to remember because now suddenly if the platform is decentralized and users control their money and users control their flow and items suddenly you you have a choice as the user. You don't need to stay on Somnium Space if you don't like Somnium Space. What if Arthur said something wrong to you or tip you only one cube and you wanted 10. You said bye-bye Arur. I'm leaving the platform and suddenly you can go and sell your items somewhere on the open platforms like OpenC or uh wearable or whatever up to your choice. You don't need to even do it on our marketplace

and you're gone and you recoup all your value. So when players get choice, suddenly the platforms are now competing um you know by offering great services and not by locking people up in their ecosystem because right now if I would guess I would say platforms if in their board meetings they think about you know those platforms which they have users they think about okay 70% of the time how can we lock people in so that they never leave our ecosystem and then 30% of the time they think about uh okay how can we make our experience better. It's my guess, but I would say maybe it's even more than 30 7030. Now, um users never rely on payouts and they never wait for payouts.

The payout is instant. It's between the user to user, which is which is great. Um platforms cannot be wall garden anymore. Reputation becomes something more important than control. Bad actors, they can really get easily abandoned. So if the platform screws up for some reason, I mean I hear the stories for other platforms every day from users. They come to us and they complain and they say, "Oh my god, I do like this and blah blah blah. It's horrible what they did. I they had this SDK. They promised us the support for this feature and then they cut this support and they just didn't explain anything and I was building for years my world." And I say, "Why do you go there then? Why don't you leave?" Yeah, because all my items and

all my friends and all my buildings are there. I cannot leave. That's the story every time I hear on a daily basis. Um, and with a decentralized economy, with the users being in control, platforms cannot do it anymore. And that is a challenge. That's why you won't won't see platforms rushing into this um, you know, things what we are doing or trying to do that fast because the uphill battle to get those users and to keep those users um, is very very difficult. Trust me, I know what I'm talking about. Um and of course developers and creators they retain ownership of their work and income streams. This is very important because there are artists who are spending thousands of hours to build worlds, avatars, wearables, whatever and

then suddenly they own nothing in the end and the platform just kicks them out. That's not fair. That that's not how the way should be. It's not how it is in real life. If you build something, if you create something great and you you're recognized, most of the time you retain your rights. I know music industry is a little bit tricky, but uh they can do better. And of course, transparent metrics on chain again every time you can click and you can see what's happening uh what's happening there. And I will finish with uh the last video is uh you know you can with the central decentralized economy you can buy almost anything sometimes even love I don't encourage it I'm just saying it's

possible this is try something this some love love I can't grab the love you [Laughter] Okay, this is golden. Why can't I drink? You can buy that without a content sounds very dirty but I already It's an emerging economy. Yeah, I just want to say you know people do

what they what they got to do. So now he put the transaction in and the transaction is happening on the blockchain. He's waiting in some in some countries money. So, so if if we get to a point where cubes, so you see around about 7 seconds the item is coming to the [Laughter] [Music] user. you guys. I got love. So

that's basically the the message. But yeah, he purchased it and he was very um excited about it. So, thank you. And in case you have any questions, I'll be happily answering your questions. Thank you. [Music]