Hu Jie: The Year of the Tiger has arrived. How should we embrace the Metaverse?

Source: SAIF ThinkTank

Dialogue Guests: Hu Jie, Xiao Lei

This article is sourced from the SAIF ThinkTank WeChat public account and is compiled by 8btc.

Xiao Lei: Happy New Year, Professor Hu! First, I would like to hear your definition of the Metaverse. The heated discussions about it have been ongoing for months; do you think there is a unified understanding among people now?

Hu Jie: Hello, everyone! First, let me wish you a Happy New Year, may the Year of the Tiger bring you good fortune!

I believe the definition of the Metaverse is far from unified. When a new thing emerges, people's understanding of it certainly goes through a process. There are a thousand Hamlets in a thousand people's eyes; currently, there are almost no two people who have a completely consistent understanding of the Metaverse. My understanding is just one voice among many.

First, I want to remove the veil of mystery surrounding the Metaverse. Logically speaking, perhaps we don't even need to create this new term—"Metaverse." In my view, the Metaverse is virtual space. And what is virtual space? After the advent of computers, content is generated through interaction with humans and internal computations. Once this content is presented to humans, we begin to imagine that there is a space within it. Since all content is presented in space, and computers can provide us with content, we use our imagination to associate it with a space, which we call "virtual space."

So, in this sense, virtual space emerged in 1946 with the birth of the computer. With the development of computer and network technology, virtual space has become increasingly rich. By the time of the internet era, everyone has seen that virtual space is indeed very rich—not only visually appealing but also containing many useful things.

Today, with further advancements in technology such as computers and networks, virtual space has entered a new era—just as we divide the history of Earth into many epochs, when significant changes occur in a stage, we give it a new name. Today, virtual space has undergone some new changes, and we feel that the changes are so significant that it is insufficient to express our discontent without giving it a new name, so we call it the "Metaverse."

Xiao Lei: You have vividly described the essence of the Metaverse as "virtual space."

I have a few examples in mind regarding the Metaverse: one is the 77-minute introductory video made by Zuckerberg when he transformed Facebook into Meta, which describes a virtual reality social space closely related to his products, accessed through VR glasses; another example is the one depicted in the movie "Ready Player One," where people's spiritual sustenance lies in the gaming world; yet another is described in "The Matrix," where people's physical bodies remain in reality while they are plugged into pods, serving as biological batteries for AI, living in a simulated reality, holding onto the best memories before AI ruled the world. In fact, the Matrix could be considered the Metaverse; another example is in the realm of virtual currencies, the ecosystem built on Ethereum—where the wallet's private key represents our identity in the online world, along with smart contracts, gas, and NFTs representing ownership of virtual assets. Ethereum seems to be something similar to the Metaverse built on a computational network.

So, which of these examples is closer to your vision of the Metaverse?

Hu Jie: That's an interesting perspective. Following the previous line of thought, let me discuss these examples from a different angle.

As mentioned earlier, the Metaverse is a stage in the development of virtual space. The reason we give it a new name is that this new stage has two significant technological changes.

The first technological change is perceptual technology. The role of perceptual technology is to regulate the interaction between humans and computers. The content generated by computers must be transformed into signals that can be perceived by our six sensory organs: eyes, ears, nose, tongue, body, and mind. The various results computed by computers must be converted into these signals before they can be perceived by humans.

The second role of perceptual technology is to convey our intentions to computers. For example, if you want it to write, calculate, or record, you need to express your intentions. Traditional methods include typing on a keyboard or swiping on a touchscreen; now we can wear glasses and blink, use facial expressions, movements, sounds, or even in the future, transmit thoughts through signals to the computer.

Thus, perceptual technology bridges the gap between humans and computers. Today's perceptual technology has made significant advancements compared to the past, and each advancement can lead to entire industries or many applications within virtual space. From PCs to mobile devices, the entire industry has undergone tremendous changes. Therefore, changes in perceptual technology, such as VR, AR, MR, and various wearable devices, will greatly alter our understanding of virtual space.

The second technological change is the emergence and application of blockchain technology. It has effectively thrown a stone into the water, creating ripples.

From an application perspective, the most crucial aspect of blockchain technology is the "ledger." The ledger is very important; when a large group of people gathers to engage in economic activities, orderly division of labor and cooperation is needed, and the ledger plays a key role. It allows for the confirmation of ownership of what each person produces and possesses. Once confirmed, it must also allow for the transfer of ownership from one person to another—these all require the support of the ledger as a tool. Sometimes, this ledger is intangible, like being remembered in the mind of a tribal chief. But regardless, it must exist.

Therefore, we can say that the ledger is the core infrastructure of modern economic activities. All our complex economic and financial activities rely on the ledger. When you go to work at a company, it is essentially a ledger—how long you worked and how much salary you receive at the end of the month all depend on the ledger.

Everyone should now understand that the ledger is very important. A key characteristic of traditional ledgers is that each ledger is managed by one person, whether it's a natural person or a legal entity, but it is always managed by one individual. The core feature is that when someone wants to modify the ledger, they can do so, meaning the reliability of the ledger depends on our trust in that person, which is what we call "centralized management."

What problems does this type of ledger have? Most of the time, there are no issues, but sometimes it can become a bottleneck in our economic activities. When a group of strangers comes together and wants to engage in orderly economic activities, hoping that all assets can be confirmed and that there can be orderly division of labor and exchange based on that confirmation, challenges arise.

This is a typical situation that can occur in virtual space. In virtual space, people from South Africa, Arabia, Asia, and the Americas can meet; they may not even know each other's true identities but have encountered each other in virtual space. The premise for them to engage in orderly economic activities is whether there is a trustworthy ledger. Constructing such a ledger is very difficult and challenging, and people have been exploring this for about 40 years. Finally, on the evening of October 31, 2008, a person named Satoshi Nakamoto came up with the idea, saying, "I have built upon the achievements of predecessors and made some improvements to create the Bitcoin system."

We won't discuss the role of Bitcoin itself; the ledger technology it demonstrates is very powerful. Its characteristic is that a group of "rabble"—people without mutual trust—can come together and actually create and manage a trustworthy ledger.

This distributed ledger allows the "rabble" in virtual space to gather and engage in orderly economic activities. This technology builds the infrastructure for economic activities among groups with weak or no trust in virtual space, providing a solid foundation for everyone to conduct orderly economic activities in a trustworthy manner.

Thus, the advancements in perceptual technology, combined with breakthroughs in the application of blockchain technology, have transformed our virtual space. In the past, virtual space was more about "information" transmission, whether for entertainment or commercial needs, its functions were quite limited, serving only as a means of information transmission. However, in the new era of virtual space, you can not only transmit information but also transmit value. The tool that supports value is the ledger.

Returning to your question: which of the four analogies is closest to my vision of the Metaverse?

In my mind, it is a "new era," not a "project." In such a new era, you can imagine doing various things. Zuckerberg's video, "Ready Player One," Ethereum, and the Metaverse in "The Matrix," in my view, are all "projects" constructed within virtual space. I categorize these projects into two main types: one is called "tech-oriented," and the other is called "economy-oriented."

The "tech-oriented" applications in virtual space focus more on leveraging advancements in perceptual technology to create new things. For example, Zuckerberg's headset—improving VR to make long-distance communication more vivid. In the past, it might have just been typing text or sending sounds; now, wearing glasses allows you to see friends far away—this is essentially an application of new technology, or an enhancement of experience brought by technological progress, but in other aspects, it doesn't represent much of a breakthrough; it's still old wine in a new bottle.

"Ready Player One" and "The Matrix" are also reflections of our real world in virtual space, but perceptual technology has made our past imaginations of the world more vivid; overall, they are still tech-oriented. The same story, once told by grandma through a song about "once there was an old monk and a young monk," is now more vivid; not only can grandma's voice be transmitted to you, but the old monk and the young monk seem to be sitting right in front of you.

The second faction is called "economy-oriented," represented by Ethereum, which relates to the "second technology" I just mentioned. The "economy-oriented" does not pursue or emphasize changes in perceptual technology, but for example, Ethereum, while still using traditional perceptual technology, has many profound changes, which are the changes in economic models we just discussed.

People from all over the world, who may not know each other, come to a virtual space supported by a project like Ethereum and find that they have a foundational ledger to support them, and this ledger is very trustworthy. Why is it trustworthy? Because mathematics says it is trustworthy, algorithms say it is trustworthy. People feel that with such a ledger, they can engage in economic activities, create things, and confirm ownership, which can then be transferred from one owner to another. Various trading activities will emerge on this basis, including financial and other economic activities. Therefore, after being empowered by blockchain, this virtual space can engage in new economic activities. This economic model may differ from the traditional offline economic model, which is more presided over by centralized platform institutions.

Xiao Lei: You have provided a very interesting perspective: if economic cooperation in the virtual world needs to break down barriers of nationality, culture, and ideology to achieve larger-scale division of labor, it requires the breakthrough technology of blockchain. I would like to ask a related question: what do you think is the role of "NFTs" in the Metaverse?

Hu Jie: The term "NFT" has now become a household name. However, I think people's understanding of it may not be very clear.

NFTs are a tool; compared to the ledger we mentioned earlier, they can only be considered a supporting role. With blockchain support, we can construct a ledger that is jointly managed by multiple parties, where there is little trust among the managers, which brings us a lot of imaginative space.

This ledger typically has two wings, which are supporting tools: the first wing is called "smart contracts." It is a set of languages that can turn some relevant agreements around the ledger into a program. For example, if I agree with you on when you will pay me and when I will pay you, this agreement can be written into a smart contract through this program.

The second tool is called tokens. Tokens are like "a blank piece of paper." In the real world, what can a blank piece of paper do? It can do many things; for example, if this piece of paper states that a building in Huangpu District belongs to you, then this paper is a property certificate; if this paper states that shares of a certain company belong to me, then it is a stock certificate; if this paper states who owes whom money, it is a promissory note or bond; it can also document things unrelated to money, such as stating that Zhang San is a PhD from Jiaotong University, which is a PhD certificate.

Many rights in our real world are carried on paper. In the future, if a lawsuit arises, you can take the property certificate to the judge to prove that the house belongs to you. In reality, we need many proofs to establish ownership of an asset to facilitate our economic activities. Similarly, in virtual space, you also need a piece of paper to record who owns what asset. Its form relies on a virtual carrier composed of computational structures, which we call "tokens."

What does this virtual blank paper represent? It depends on our agreements. For example, you can agree that it represents shares in a company, then it is stock; you can also agree that it represents a song, then it is copyright, and so on. So "tokens" come as a supporting tool for the ledger.

Tokens are divided into two categories: one type carries homogeneous rights such as equity. For example, if 10,000 tokens represent 100% equity, then every 100 tokens represent 1% equity. The characteristic of this type of token is that the connotation or meaning of ownership it contains is the same. No matter if I hold these 100 or those 100, they both represent 1% equity; they are the same, and we call this type of token "homogeneous tokens," which is one category of our supporting tools; the other type of token is unique. For example, if the copyright of a song belongs to someone, they only need to issue one token because it is unique, one of a kind in the world. We call this type "non-homogeneous tokens," or "NFTs - Non-Fungible Tokens."

Having explained what tokens are, let's look at what people use them for. For example, if you paint a picture and are afraid of others copying it, you register it with the copyright office; the copyright office keeps a copy and gives you a paper proving who painted the picture, and you can use this copyright certificate to protect your rights—this is the traditional copyright certificate.

However, this process requires running errands and is also inconvenient. Now, we find there is another "copyright office" on the blockchain. It is not managed by one person but by a group of people who do not know each other. They rely on managing a ledger and issue a token through the smart contract associated with this ledger. They call the process of "issuing a token" as "minting." Minting a token is equivalent to writing a bunch of content on a blank piece of paper, proving that the future holder of the token owns the rights to "a certain object."

This "certain object" is a "string" stored at a certain address in virtual space, which is specified when the token is issued. If displayed with appropriate software, it will show a painting.

Under this agreement, once a token is issued and held, the community believes that since he/she holds the token, and the content on the token has made such an agreement pointing to the string at a certain address in virtual space, which displays a painting, the community will recognize the NFT holder's ownership of that painting. It is just like going to the offline copyright office to obtain a paper certificate.

Logically speaking, this is merely the traditional copyright confirmation process. The greatest significance of NFTs in virtual space is "digitalization." NFTs circulate in this space, making transactions very convenient, from confirming rights to authorizing and future rights protection, using NFTs will be relatively easy. They can also be combined with smart contracts to perform some "fancy" actions; for example, if Zhang San owns this painting and issues an NFT, then sells the painting to Li Si, he not only needs to inform Li Si where the painting is located but also transfer the NFT ownership proof to Li Si. After receiving it, Li Si can not only appreciate it but also prove to the community that he owns the painting. Moreover, when Li Si later transfers it to Wang Wu, he can make an agreement: for the next transfer, I will share half of the appreciation. Thus, when Li Si sells it to Wang Wu, Zhang San may also receive half of the profit. This flexibility, supported by smart contracts, can create more business ideas that cannot be easily supported by traditional proof systems.

So will NFTs become more important in the future? Logically speaking, NFTs are not a new thing—they are merely a proof of ownership; they themselves do not increase the value of the work. For example, a painting will not fundamentally differ whether it is confirmed through a paper method or an NFT method. However, due to their programmability, tradability, and other technological conveniences, they may indeed bring some marginal increases in value.

Xiao Lei: The Metaverse is an irreversible trend, and we indeed see many tech companies striving in this direction. The pace at which tech giants are advancing in the Metaverse seems to be accelerating. I am a bit worried; do we really want to build our future on Zuckerberg's or Microsoft's servers?

Zuckerberg's video, while impressive, gives me a sense of dread, as it feels a bit like the Arasaka Corporation in "Cyberpunk 2077." Every product from Meta may require me to contribute data at the level of brain activity to enter its Metaverse. If our social interactions in the Metaverse really become like WeChat, where work, life, family, and friends are all on it, and without WeChat, it feels like disappearing from the world, isn't that terrifying?

Do you think we might have another option, such as a slightly decentralized, bottom-up, web 3.0 approach to build a healthier Metaverse?

Hu Jie: I will respond from two levels. First, on a small scale, when a new technology emerges or a new era of virtual space arrives, whose opportunity is it? Is there space for small companies to grow or explode? We have repeatedly seen these big brands stifling the survival opportunities of small companies. A deeper question is whether our personal data privacy and even our interests and destinies will be controlled by these big platforms in the future.

This is a deeper inquiry, and your answer is already hidden in the question—you mentioned the concept of "web 3.0." What is web 3.0? "Web 3.0" is a relatively vague concept, but its basic direction is quite clear: it aims to return data interests and rights to ordinary consumers as much as possible.

The specific technologies to achieve this direction are diverse. For example, a platform like Taobao connects buyers and sellers. Because there are many sellers, buyers find it valuable; and because there are many buyers, sellers find it valuable—actually, the value of this platform comes from the mutual provision of buyers and sellers; when they come together, business is done. The value comes from their gathering, from each individual buyer and seller. However, most of the value generated from this gathering is taken by the platform because the platform controls the data, the ledger, and the entry points, etc. The technological characteristics of the "web 2.0" era have placed the platform in a very advantageous position within this ecosystem, and this advantage is reflected not only in profits but also in data control, discourse power, and rule-making power. In a sense, we are all feeling the oppression brought by this platform.

Today, new technologies have emerged, and perceptual technology has improved. Imagine this: these big platforms can use VR glasses to transform the past keyboard and touchscreen operations, placing you in a virtual space, then displaying shelves for you to freely and quickly navigate through a sea of products to choose from—could this be considered an upgrade into the Metaverse?

In a sense, it might be, but I believe this is a very simple upgrade. This upgrade may not have much essential significance for many users. Because in such a world where user experience becomes more vivid, the entire economic structure, profit structure, and power structure remain old. In other words, Taobao will still occupy an unshakable monopoly position in the Metaverse era.

This is not what we want to see. We hope to build a ledger to support orderly economic activities without relying on the big companies behind the big platforms to dominate the game. We hope that a group of ordinary people can construct a ledger themselves. Based on this ledger, we can build a set of game rules supported by smart contracts and tokens that allow for a more "distributed" distribution of interests, enabling those who genuinely contribute to the entire group to express their intentions reasonably through some technological support, thus forming a new system upgrade.

Furthermore, let everyone’s data return to themselves, rather than being stored in a big company—every individual should own their data, be able to protect it, use it, and grant appropriate authorization to third parties without worrying about their privacy being fully exposed to others. Each person's fate—including their economic and sociological fate—should not be controlled by super giants. This is gradually becoming a reality, which is what we refer to as the "web 3.0" ideology and technology. They can gradually make the storage, computation, transmission of data, and the distribution of economic benefits and game rules "distributed" become a reality.

Although it will take another 10 or even 20 years to fully reach that point, we have already deeply realized the necessity of doing so: this is not just a matter of profit distribution; it also relates to the broader direction of humanity's future fate.

Xiao Lei: You mentioned two very important points: whether we can move towards a better future depends on the simultaneous readiness of "thought" and "technology." To reach a relatively ideal state, it may take some time.

But I feel that the speed of capital seems to be faster than the healthy and normal development of cognition. We have seen that in just a few months, investments related to the concept of the Metaverse have been exceptionally hot—between October 2021 and January 2022, in just three months, global financing related to the Metaverse has approached $1 billion. We also see many companies announcing the establishment of "Metaverse divisions" and thousands of newly registered "Metaverse" related trademarks.

Do you think that capital, in a direction that was originally very promising, might hold everyone back and inflate this bubble too much?

Hu Jie: If we look at it from a broader perspective, any technological advancement or a breakthrough at a certain stage will attract a lot of attention. Capital is certainly the most sensitive group; it is very natural for them to notice technological progress and potential business opportunities. After they rush in, or under their influence, more people, even ordinary individuals, will enter this field.

I think we need to view this with a calm mindset; we shouldn't worry too much, as it is unavoidable. Human nature is such that it is always profit-seeking; when an opportunity is discovered, even if it is just 1%, people will chase it. This is why there is "venture capital." Because the risks are high, but the potential returns are also high, people will pursue it. Therefore, technological progress itself moves forward along a certain curve, whether fast or slow, capital will always discover this possibility, rush in, and inevitably create some bubbles.

Looking back at the development of the internet, how many bubbles have accompanied it? From the 1990s to now, over 30 years, I can't even count how many rounds of bubbles have been related to the progress and application of internet technology. This is a natural law, from the overzealous hype pushing it to an unrealistic value, to the burst and disappointment, and then continuing to develop.

So today, the concept of the Metaverse has emerged. From being unknown outside the circle in the first half of last year to the heat in the second half, and now even a bit crazy, it must be such a process. This is fine; in fact, it has facilitated the technology to break out, awakening the attention of capital, entrepreneurs, and even ordinary people, which is positive for its development. Because with more attention, there will be more resources and investments, even if there is excessive investment, it will certainly promote its development. Of course, this process will involve waste, but compared to the waste caused by insufficient investment, this waste may be acceptable.

So, at what speed will Metaverse technology and its related applications move forward? I believe it will develop at least ten times faster than the past internet technology.

People often ask me: when do you think the Metaverse will "take shape"? I can accurately answer: in 3.5 years.

People may find it incredible: how can this time prediction be so precise? This is my secret. Since it's the Spring Festival, let me share the secret with everyone—how I came up with this calculation.

Thirty-five years ago, in 1987, the internet symbolically arrived in China. The landmark event was that on a certain day that year, the Chinese Academy of Sciences sent China's first email to the world—the content was "Crossing the Great Wall, flying towards the world."

If at that time, someone had told you that this technology was incredible and would completely change every aspect of human life, you might have dismissed it: isn't it just typing on a keyboard and sending out some text? But 35 years later, today the internet has indeed permeated every aspect of our lives, fundamentally changing our way of life and the social landscape.

Today, no one doubts the revolutionary nature of this technology; it took 35 years. And I believe technology is accelerating; the technologies and applications related to the Metaverse will develop at an accelerated pace. So I give it a speed ten times that of the past, 35 years divided by 10—this is the source of my "3.5 years" prediction. This is derived from many profound precise models, and today I share it with the audience who are destined to hear it, which is not for outsiders to know.

Xiao Lei: This big red envelope today is truly valuable; please do not share it. I will remember the 3.5-year timeframe and hope to have a recap with Professor Hu after 3.5 years.

Finally, on behalf of everyone, I would like to ask Professor Hu an important question: since we have arrived at the doorstep of the Metaverse, what preparations should we start making from now on?

Hu Jie: If I had to suggest just one word to everyone, I would say learning.

This era is changing too quickly; technology is always evolving rapidly, and the progress brought by technology is also changing rapidly. Various social and economic changes are appearing before our eyes at an extraordinary pace. In such an era, maintaining a learning mindset and an open attitude is very important.

If you are an entrepreneur, you must have an open mindset to understand; it may be a business opportunity; if you are a young person, you should explore what the Metaverse is and what changes it will bring to this world, and how to prepare to embrace this world; if you are a regulator, you need to understand this industry even more, what challenges it will bring to our existing economic models and regulatory models? How should we view it, and how should we adapt to it? Not with a defensive mindset, but with an embracing attitude to study all aspects of it: how to better cooperate with its development while trying to avoid the problems it brings; if you are an investor, that goes without saying. Investors represent capital, which is the most sensitive and perceptive, so you must study well, understand the essence of this matter, seize investment opportunities, and minimize the risks involved.

In this era, maintaining an open mindset to embrace new technologies and a new world is crucial. For example, during the Age of Exploration, humanity set sail and discovered that the world was much larger than imagined, bringing endless opportunities; this was a brilliant phase in human history. Today, in the era of the Metaverse, we are also facing a similar situation, seeing a new continent and a new world before us. At this moment, the most important thing is to learn, embrace, and welcome a more brilliant and exciting life!