Patryk Baranowski

The Web 3 Toolbox

February 23, 2021


The Web 3 Toolbox

Web 3 consists of several principles, protocols and standards which could be said to form a stack that will inform and can and is being leveraged by the entrepreneurs and architects in The Metaverse.

In combination these technologies can be seen as a highly composable Web3 Toolbox for The Open Metaverse, where they are one and the same thing.

The Web 3 Toolbox brings a number of core innovations and building blocks, located in the middle of the diagram:

Internet Money: Bitcoin introduced a form of internet money and since then has served as a hedge to deflation, and increasingly for institutions as a treasury instrument, in fiat based systems due to loose monetary policies after a series of negative economic events and a gateway for many into a new virtual economy (at the time of writing estimated at 1 trillion USD in market capitalisation)

Decentralised Finance (DeFi): Ethereum extended Internet Money through the introduction of smart contracts to allow for stablecoins, that is virtual currencies which unlike Bitcoin are designed to be stable rather than a speculative asset. The generic programmability has allowed for an explosion in open, decentralised financial instruments often referred to as DeFi. These include borrowing and lending without the need for banks, as well as more sophisticated instruments such as options and decentralized exchanges, and some entirely novel structures, such as automated market makers. This has formed a proto-capital-market, at the time of writing estimated at $25 billion in total value locked.

Sovereign Virtual Goods: Bitcoin introduced digital scarcity for a fungible asset (“internet money”), where each token is interchangeable for another. Similarly, digital scarcity for unique assets has been realised through NFTs (Non Fungible Tokens). Here, unlike with a currency, the underlying assets are not interchangeable but unique in some way. The innovation in this area has concentrated on Ethereum, and as the result of a handful of simple standards for NFTs and their metadata there has been an explosion of innovation initially in a creator economy context of; art, music, tickets, virtual land, collectibles and gaming items. Whilst not new, their mainstreaming began late 2020 and have proven to be a powerful mechanism for the world builders and content creators of the Open Metaverse. They act as a gateway through digital consumption & play that will suck in the masses of users primarily because any activity in the open metaverse can be gamified and rewarded with NFTs, which can in turn have value on the open market. Virtual goods are ultimately easier to sell than physical goods, and will have significant and increasing value. Core technologies and entities around NFTs include minting houses, which facilitate the initial creation of the goods, marketplaces, which similar to real-world auction houses enable price discovery and trading.

Digital to Physical redemption: beyond purely digital sovereign virtual assets, new specialised protocols like Boson Protocol solve the digital to physical redemption problem, by representing physical items as NFTs which can be redeemed in the real world without the need for intermediaries. Enabling decentralized autonomous commerce across the metaverse blurring the distinction between virtual and physical.

Decentralized governance: as a result of both the necessity for governing the growing landscape of decentralized technologies and networks and the ideals of its community, a class of tools and concepts for decentralized governance has emerged. The concept of a Distributed Autonomous Organization (DAO) enables individuals and entities to form groups, jointly own assets, make decisions and participate in the economics of the DAO. Several mature building blocks for DAOs have emerged, including Aragon and DAOStack. They include and extend to tools like voting structures, and multisignature wallets for joint custody of assets. On the level of protocols, mechanisms for staking and slashing have emerged to incentivise participants in these open networks to behave benevolently. The Open Metaverse can benefit from insights and tools from decentralized governance both for governing metaverse platforms and their components, and enabling economic participation in each, as well as for people to organize themselves within it, such as with gamer guilds or clans.

Distributed Compute & Storage aka Cloud 2.0: The idea that The Cloud of distributed storage and compute could also be decentralised by specialised protocols like Filecoin or CUDOs, so not reliant on or giving any advantage to anyone company for example Amazon, Google or Microsoft which control 66% of the market. It almost means people that invest in expensive hardware to access the metaverse and increase performance can offset some of the cost by renting out capacity and in turn earning crypto-currencies and joining the virtual economy. It is also believed at a certain scale, and density in a given physical locale, it could increase the proximity of physical hardware to The Cloud at any given time as we unlock the bandwidth and compute of neighbouring connections, and therefore allow greater ‘edge computing’ for Metaverse ubiquity.

Self Sovereign Identity & Verifiable Claims: For a truly Open Metaverse, it is crucially important for people to have security of an online identity which they can protect and accumulate value with. Sovereignty and by consequence self custody of what the user owns are core principles to Web 3. However for what is called a true SSI (Self Sovereign Identity), we need dedicated protocols solely for the preservation of privacy of identity itself vs being public and on-chain when identity and its data is treated as just another digital asset. Innovations in Self Sovereign Identity and Verifiable Claims specifically mean we can identify ourselves, transact and prove things about ourselves (attest) without revealing the underlying or associated data. This is critical to avoid the role of a government or platform as the sole arbiters of our online identities, deplatforming or even state violence. And being applied to gaming and the metaverse by teams such as Crucible.

People, organizations and machines access these capabilities directly through wallets and applications, and by delegation through automated agents, always following the principles of sovereignty and self custody:

Self Custody – Wallets and Applications: The self custody of digital assets and wealth through user-controlled private keys and open source wallet software (free of any platform form of censorship and control) is foundational to crypto and as a consequence the Open Metaverse. This is sometimes referred to as sovereign wealth. The infrastructure was initially purely for the administration of crypto-currencies but is now being used for the management of other digital assets like data and NFTs (Non-Fungible Tokens).

Agent based Web: Computer programs with economic agency or autonomous agents that live and transact on blockchains to carry out increasingly complex automatic programs, such as AEAs (Autonomous Economic Agents) via

Outlier Ventures has been investing and accelerating the Web 3 ecosystem since 2013. In 2019 we launched Base Camp – an accelerator program for pre-seed startups operating in DeFi, NFTs and open data. We provide capital, help with your token design, access to our network of the best investors and founders of Web 3, back office support and mentorship.

What is more, in 2020 we started a decicated token launch program called Ascent where we help you launch, accelerate and scale your network.

Find out more about Base Camp and Ascent!

Next week we will show you the anatomy of a virtual world and talk about building in the Metaverse.

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