Exploring the metaverse: Why a universal digital identity is essential

In a recent TechRepublic podcast, Clarence Reynolds spoke to Allan Cook, chief xReality officer at Deloitte, and Wendy Henry, global lead for blockchain and digital assets consulting at Deloitte, to discuss various aspects related to the metaverse, including blockchain, Web3, NFTs and privacy. The following is an edited transcript of their conversation.

Listen to the podcast version of this interview on SoundCloud

Clarence Reynolds: Will the need for a more universal digital identity to enable overall freedom of movement across a variety of metaverse worlds be necessary?

Wendy Henry: The short answer to that is a digital identity, especially what we consider to be a self-sovereign identity, has been and continues to be the holy grail. The short answer is yes, there will need to be an identity, but figuring out how to establish that credible, verifiable identity the people are willing to create and is universal in their usage has been an extremely hard nut to crack.

Web3 is built on blockchain, and when you talk about blockchain, any kind of transaction has to have an identity behind it. We’ve had identities emerge. Then, you get to the whole interoperability component, which is going to be even more important in the metaverse.

SEE: Metaverse cheat sheet: Everything you need to know (free PDF) (TechRepublic)

Understand that as we tee up the whole idea of identity and its use in a Web3 or metaverse world, blockchain’s only going to be part of that solution. Technology is the easy part. There’s a lot of issues around establishing, creating and maintaining an identity or credential. Those kinds of issues are a little bit harder.

We have to think about some of the complex issues like keys and custody and recovery and regulations like KYC and AML. You have to think about things like privacy and security, and that all has to get wrapped up into this trusted, verifiable identity that’s going to then be attached to a presence in the metaverse.

Allan Cook: Everything Wendy said is 100% true. In addition to some of the technology and technical challenges, in terms of more social challenges, we tend to resist new forms of identity, especially on the internet. I think everybody’s been burnt one way or another at some point with someone getting hold of their identity. That’s also going to be a big hurdle for us to overcome — getting people used to the idea of having this universal identity.

If we can do it, it’s going to really help overcome some of these walled gardens. At this point, I think there’s some really big challenges. When I’m using one device, technology or application, I have to log in separately. I may have bought a logoed hat in one environment, and then when I go to the next environment, I can’t bring that same hat with me because my identity doesn’t translate. It needs to happen, but it’s going to be a slow process.

Clarence Reynolds: How will blockchains and tokens enable a more robust digital economy with a seamless movement of identities, avatars and digital goods across metaverse experiences? What are some of the challenges with this approach?

Wendy Henry: Again, teeing up some of the concepts is important here. Web3 is really the concept that there’s a decentralized internet that’s underpinned by a cryptographically-secure protocol or technology, which we know is blockchain. That’s important to ascertain.

The other thing is when we talk about tokens, we’re really talking about an asset that’s been created and managed by code, and that’s a little bit hard for people to get their heads around. These snippets of codes are things we call smart contracts, and they’re stored on that distributed ledger that we call blockchain.

All of that’s coming together with why blockchain and tokens are going to help enable this digital economy or metaverse. Without those mechanics, you don’t really have the trust to engage in those environments in and of themselves.

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That’s really the way that blockchain and tokens are going to merge to help provide what I consider to be a trust layer in these worlds where you and I may not know each other, but we’re going to engage. We’re going to go in; we’re going to have different personalities. You might not be Clarence, I may not be Wendy, but we’re going to come in, and we’re going to conduct commerce. We’re going to potentially have conversations.

We might engage in social activities, and there has to be the ability by which there’s a trust factor there, but then, there’s also the ability to have those kinds of transactions. That’s all going to be facilitated through the blockchain and the tokenizations that will happen.

Clarence Reynolds: When you mention trust, something that is for some people trust-adjacent is privacy. Are there unique implications for privacy within this vision of a consumer metaverse?

Allan Cook: Absolutely. With each iteration of new technologies — how we interact with technology, how we use technology, how ubiquitous technology is in our life — there’s a greater degree or invasion of our privacy and a diminishment of that trust factor. This next iteration is going to be even greater.

Today, my phone can track where I am pretty much all the time. Folks can see what types of apps and services I’m interacting with. This next iteration, we are literally going to be wearing the technology — maybe it’s AR glasses or other biometric devices.

I have a smartwatch right now which is literally recording the way my body is functioning, the biometric information. When you have an emotion, a galvanic sweat response happens where your pores in your skin get a little bit of moisture in them to actually allow you to start to react. You may not be aware that you’re having that emotional reaction, but the devices will actually start being able to record it.

If we start looking at things like face tracking, retinal scans, emotional recognition and these things, these devices will know ourselves better than we do, because a lot of this is actually going to be happening at a subconscious level. Our body is just reacting.

This really does make the concept of privacy critical, and the ownership of that data and the protection of that data. Wendy and I, whenever we’re working with any of our clients in this space, these concerns on how we’re going to protect this very personal, very confidential health data for the clients who are going to be using this is always top of mind.

That being said, the blockchain and the idea of this decentralized identity really will help users to control, manage and own their data in a much more private, simpler manner. It will allow me the opportunity to sell that value, so then, I will be able to share it when I choose to and depending upon the benefits that you — the application owner, the service provider — the benefits you’re going to give back to me.

It’s going to create a whole new kind of value exchange and a new means for compensation, so it’s “good news, bad news” on how it’s going to move forward.

Clarence Reynolds: Talking about the value chain, does a Web3 metaverse, using blockchain and tokens, enable new business models?

Wendy Henry: Yes. This is the most exciting part of what’s happening in this space right now. I don’t even think we’ve really begun to scratch the surface here. We’re seeing a lot of areas where we’re recreating the physical and the digital, and that’s good news.

There’s a lot of learning; I’d like to say we’re on a learning journey. We definitely had our fair share of hypes and scams, which are all learning opportunities, but the technology and the standards are still emerging. Now, we’re beginning to get a greater understanding of the art of what’s possible with these technologies. That is essential to these new business models.

Let me give you a real example. Look at decentralized autonomous organizations. If you look at some of the statistics, there’s approximately 2 million token holders across almost 5,000 organizations now, and they span so many different ideas and interests that these DAOs are now in service.

Well, in support of the fact that people want to explore and use and belong to DAOs, we now have DAO service providers that have sprung up. Nobody would’ve thought of a DAO service provider a year and a half or two years ago, but now we have them, and it’s making it very easy for people to create DAOs and their governance structures. It’s not perfect, and it’s still emerging, but that’s an entirely new service that’s started to come together.

SEE: Meta report: Future of work includes VR headsets, the metaverse and vendor collaboration (TechRepublic)

We’re not only seeing these things as insular units, but now we’re also starting to see businesses get their heads around what the power of a DAO is and starting to weave those into business constructs. We’re starting to see, as businesses are rethinking themselves in a digital world, these are part of the fabric of what they’re starting to define.

NFTs are another good example of this, and they’re going to be crucial in these new worlds that we’re going to exist in somewhere either tomorrow or in the future. That type of token was grounded in a smart contract.

t was, at first, most widely known as a collectible, but now, once again, we’re seeing not only individuals but businesses understand that NFTs can be a unique and programmable way of interacting with a customer base in a very different way. You can get an NFT from a sports team, and it can give you special access to some of the team members.

These are all emerging, and we’re starting to see more and more creative uses of those. We’ve only scratched the surface here, and I’m super stoked for what’s to come.

Clarence Reynolds: What does the future of work look like in the metaverse?

Allan Cook: That’s going to be really difficult to predict, to be quite honest.

I like to use the analogy of looking back at how ubiquitous our use of smartphones has become. I remember when I first got my first mobile device — I didn’t even call it a smartphone then — but I remember being offered an extra 20 text messages per month. At the time I was like: “Who on earth would need 40 text messages per month?” The idea was just ludicrous to me.

And yet now, these phones — I don’t even want to call it a phone, because I rarely actually talk on it like I would with a telephone. It’s my mapping device, it’s my organizer, it’s a compass, it’s a game-playing machine. It’s 1,000 different things that I never would’ve thought of. It’s literally the very first thing I pick up in the morning, and the last thing I kiss before I go to sleep each night.

I read a statistic that we now touch our phones over 4,000 times per day. The ubiquity of just how essential that device is was just mind blowing. Yet 20 years ago, 25 years ago, none of us even had these devices, so it’s going to be extremely difficult for us to figure out what are going to be the truly killer apps, the truly killer use cases. We’re starting to scratch the surface on some of these, as Wendy said.

SEE: Best uses of the metaverse for business (TechRepublic)

Immersive training is a great use case. I know that the retention for immersive training when you’re doing a VR headset is 95% or better, unlike computer-based training, which is in the low teens. If you’re doing something like safety training, which is absolutely essential to get right, doing an immersive training makes sense. If it’s too expensive, too difficult or too dangerous to do the training in the real world, why wouldn’t you do it in an immersive world?

Using AR at sports events is just fantastic; I can see all of the stats as I’m watching the game go on. Virtual reality brings the best of the game experience into my house, and augmented reality brings the best of the in-home experience to the stadium.

I saw a recent world championship that’s going on right now — you hold your phone up and see all the players moving around the pitch with their names above them, and then you can click on them and actually see details about each one of these players.

We can’t even begin to predict how incredible some of these use cases are. The only thing I will predict is they will be totally ubiquitous. They will be everywhere. The devices we’ll be using will be constantly on us. As Wendy said just now, we’re just scratching the surface. It’s terrifically exciting.