Abstract
Technical standards in digital technology can now be utilised to gather numerous digital sub-universes into the metaverse. However, how to create and implement guidance for the metaverse based on technical standards remains unexplored. This study investigated the theoretical framework and policy implications for future technical standards-based metaverse governance (TS-MG). The methodology entailed reviewing the available metaverse governance literature to establish both theoretical and case analyses of practices based on the economics of standards and the theory of networks. This study found that TS-MG encompasses the formulation, security, and compatibility of technical standards. TS-MG should enable the first-mover advantage of standards formulation for standard-setting organisations. It also includes phased governance policies that balance the compatibility and security of standards in the initial, growth, and mature stages of the metaverse. This study highlights the necessity of cooperation among governments, standard-setting organisations, and enterprises to (1) accelerate the development of systemised standards and (2) promote the effective supply of metaverse standards.
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Introduction
The word metaverse, which comprises meta, meaning transcendence, and universe, was coined by Neal Stephenson in his cyberpunk novel Snow Crash (Stephenson, 1993). Hyperconnectivity activates the metaverse, and the public and private sectors participate in forming the ecosystem (Lee et al., 2022). Its foundation is the information industry and digital trade, and technical standards comprise the governance core for such network industries (Shy, 2001, 2011). Now, governance has become imperative for the metaverse (Wang et al., 2022) but the process necessary to create and implement guidance based on technical standards has neither been determined nor explored. This study, therefore, establishes a theoretical framework for technical standards-based governance (TS-MG).
Similar to Stephenson’s novel, people in the real world are engaging in the metaverse as digital avatars by entering a virtual space with a functioning social and economic system (Elias, 2014). The metaverse is a parallel virtual world and promises to be the next evolutionary phase of the internet. Through blockchain, extended reality, 5G, cloud computing, artificial intelligence (AI), and digital twins, the metaverse can create an integrated virtual reality, which is distinct from its simple counterpart in its interactive story culture (Yi 2021). Consisting of independent sub-universes and shared technological infrastructure sophisticated to a higher degree, it has a higher dependency on technical standards. Consequently, it requires a more complex set of technical standards compared with the Time Division–Long-Term Evolution (TD-LTE) standard and the Transmission Control Protocol/Internet Protocol (TCP/IP) in PC and mobile internet, including user identity, social relations, digital assets, and application programming interface standards. Technical standards affect not only the benefits of the metaverse but also its security. Thus, metaverse governance based on technical standards needs to be clarified.
This study develops a TS-MG analysis by applying the economics of standards (Blind, 2004; Blind et al. 2018, 2021; Yang, 2023) and the theory of networks (Shy, 2001, 2011; Toshimitsu, 2018; Abrate and Menozzi, 2021; Cantner and Vannuccini, 2021; Prytkova and Vannuccini, 2022). Specifically, the following three dimensions for developing metaverse governance are provided: (1) Construction of a theoretical framework based on the economics of standards and the theory of networks to promote theoretical research on governance at the technical and institutional levels; (2) Analysis of governance policies by combining theoretical and multi-case methods to deepen the understanding of the technical characteristics of governance; (3) Examination of the phased governance implications based on technical standards to serve as a reference for policymakers and practitioners.
Literature review
Digitalisation has changed both the content and the mode of international trade and global value chains (GVCs). Inclusiveness regarding the benefits of the digital economy must be ensured. Digital transformation presents increasing regulatory challenges for governments seeking to grasp the opportunities the digital economy presents while facilitating benefit-sharing (Lopez-Gonzalez and Jouanjean, 2017). Digital trade liberalisation provides better commodities for consumers and improves operational efficiency for enterprises (DTE, 2018). Meanwhile, the trade interests of GVCs are affected by harmonised technical standards (Blind et al., 2017; Yang, 2022). The US, EU, and China have used domestic and foreign policies to embrace the opportunities and achieve economies of scale for their firms based on digitalisation (Aaronson and Leblond, 2018; Aaronson, 2019). At the end of 2018, 27% of regional trade agreements in force were digital trade provisions (Froese, 2019). The United States–Mexico–Canada Agreement explicitly added a digital trade clause (Alvarez Leon, 2021). These statistics indicate that digital trade is becoming increasingly crucial in trade agreements (Elsig and Klotz, 2022).
Digital trade rules are necessary for moving toward digital economy governance (Froese, 2019). Without international coordination, data localisation measures will fragment the digital space (Trommer, 2017) and affect internet openness (Van der Marel, 2019). Standardisation can help confront this challenge (Sen, 2018); digital trade barriers have the same effect as commodity trade barriers: protecting special interest groups at the expense of consumer welfare (Van der Marel, 2019). Policymakers need to distinguish between agreed-upon, negotiated, and conflicting digital trade rules, ensure the security of digital trade networks, and guide digital trade development (Huang et al., 2021). Currently, the privacy aspects surrounding free-flowing data are hard to regulate by rules based on jurisdiction (Rana and Meena, 2021).
Improving existing trade rules and standards is essential in preparing for digital economy governance (Ma et al., 2019). For example, meeting the requirements of a digital economy requires supplements to trade agreements and their existing rules on digital trade. Digital economy development must be supported by new, or at least modified, transaction rules (Franc, 2019) by making gradual changes while maintaining backward compatibility with the original standards. However, reforming standards sometimes requires a distinct break from old standards (Cohen, 2019). While changes in standards can be achieved through relevant parties’ cooperation, they can also result from conflicts among multiple participants. For example, Bluetooth and HD DVD standards for digital video storage and playback remain backward compatible with conventional DVD formats but are mutually incompatible. If parties cannot agree on a ‘best’ choice, standard wars may follow.
For international regulatory cooperation in the digital economy and governance of the metaverse, the World Trade Organisation (WTO) has promoted institutionalised interaction among its members in trade policy (Trommer, 2017). Governments increasingly restrict global data flows and require data localisation and with increased global data flow and digital technology development, governments and regulators must determine how to benefit from these while maintaining the integrity of domestic regulations. International regulatory cooperation is expected to ensure that global data flows do not undermine domestic regulatory objectives by formulating standards and agreements in the domains of privacy and consumer protection (Meltzer, 2019). As digital security is one of the basic dimensions of digital trade (Ismail, 2021), preventing network security risks in digital trade is an urgent global governance task.
As digital technology continuously develops, digital trade needs to be defined and guided in trade agreements (Grier, 2017). Under the WTO, products are divided into goods and services, which are incompatible with the digital economy in terms of structure.Footnote 1 Furthermore, the inherent characteristics of digital industries and the business strategies of established players in the digital market pose anticompetitive risks. Thus, balancing trade liberalisation with the pursuit of legitimate public objectives in digital trade agreements has become a challenge. Multilateral agreements regulating digital trade should be recognised to address these challenges (Neeraj, 2019). Moreover, the adverse effects of restrictive data policies are closely related to the import of data-intensive services. Countries with restrictive data policies will be affected by a low level of global service transactions (Van der Marel and Ferracane, 2021).
The metaverse is a site of untapped opportunities that pose new security risks for enterprises. Companies such as IBM and Sun Microsystems have invested money and talent to enter this arena. In the virtual world, economic and technical strategiesFootnote 2 still have positive effects on investment return and return on net assets (Boa-Ventura and Zagalo, 2010). Virtual commerce will apply immersive technologies such as augmented reality (AR) and virtual reality (VR) to e-commerce, thus transforming consumers’ perceptions from 2D product catalogues to immersive 3D virtual spaces in the future (Shen et al., 2021). In virtual commerce, consistency between application design standards and the factors affecting consumer behaviour is vital for promoting purchase decisions. The relationship between programming standards and consumer behaviour thus needs to be improved. As an evolutionary paradigm of the next-generation internet, the metaverse will establish a fully immersive, super space-time, self-sustaining, virtual shared space for work, social interaction, and leisure. However, privacy and security vulnerabilities in the metaverse (inherited from the underlying technologies or emerging in new digital ecosystems) may hinder its widespread deployment. Meanwhile, owing to the inherent characteristics of the metaverse, that is immersive realism, hyperspace, sustainability, and heterogeneity, its security configuration faces scalability and interoperability challenges (Wang et al., 2022).
In summary, obtaining benefits and preventing risks are core issues in digital trade and metaverse governance. The benefits of digital trade and metaverse derived from the free flow of data are affected by national security risks and international regulatory cooperation attempts to eliminate such security concerns. Standards are the technical foundation for governance of the digital economy and provide a technical framework for governance of the metaverse. As a new form of digital trade governance, governance of the metaverse faces greater challenges in these areas, and its dependence on technical standards is more obvious. Digital trade flows increase uncertainty in the existing patterns of industrial and labour competition. These social and economic problems challenge the digital trade development, thus establishing requirements for the security of the standards themselves.Footnote 3 If the compatibility and security of standards are not clear, data flows may become localised out of concern for security. Therefore, this study established a theoretical metaverse governance framework which include standards formulation, compatibility, and security.
Theoretical framework
Formulation of standards
Without technical standards, the metaverse cannot be built. This digitalisation transforms content production, the economic system of the nation, user experience, and scenes of the physical world with the support of technical standards. The metaverse evolves based on technical standards, shared technical facilities, and the successful integration of tools and platforms. It uses extended reality technology to provide an immersive experience, uses digital twin technology to generate images of the real world, and applies blockchain technology to build an economic system. The virtual and the real worlds are closely integrated into the economic, social, and identity systems, and each user can produce content and edit the virtual world. Whether a product, scene, or mode, the commercial application of the metaverse is based on technical standards.
Technology is a driving force of the metaverse that can be guided, in part, by governments. Metaverse standards can come from government bodies, such as government departments and standardisation agencies, or market players, such as industry alliances and enterprises. Given the current development stage of the metaverse, its standards are developed in advance (before the market matures), unlike the ex-post formulation of standards in traditional industries. Such pre-market standards occur in the advanced technology field and are closely related to intellectual property (Blind, 2004). Before the market matures, a standard can potentially restrict the entire international market. Most standards are formulated by nongovernmental organisations emphasising speed and leadership, which activates their official formulation. The ‘Collingridge dilemma’ also needs to be considered.Footnote 4 That is, the social consequences of technology cannot be expected at the early stage of its life. However, when undesirable consequences are discovered, technology becomes a part of the entire economic and social structure, which renders it very difficult to control. This is the dilemma of control. When the change is easy, the need for it cannot be predicted; when the need for change becomes obvious, it becomes expensive and time-consuming, making it difficult or impossible to change (Collingridge, 1980; Genus and Stirling, 2018). If the development of standards is lacking in the initial stage, it will be difficult to manage the metaverse after its rapid growth.
Based on the above characteristics, the formulation of metaverse standards should take the first-mover advantage and first-mover strategy,Footnote 5 which has three elements:
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1.
Accumulating technical experience in advance to reduce the construction cost of the sub-universe. Technical standards and protocols streamline the data code. Users with heterogeneous needs are involved in the metaverse, forming a natural-seeming virtual world and constantly expanding its edge. The metaverse’s technical standards are open source and characterised by creative effects. As a condensation of current optimal experience, standards establish a normative path for the evolution of the sub-universe.
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2.
Creating further artificial scarcity (on both the demand and supply sides of the metaverse) and diversity of meta-space resources for enterprises to optimise the sense of experience in the virtual world. At present, mobile internet dividends are gradually receding, and the new content of the metaverse layout and the change in consumption scenarios have initiated new digital dividends. Countries, organisations, and consumers that take the initiative to obtain scarce resources by first formulating standards can be benefit from this.
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3.
Controlling the formulation of metaverse rules to prioritise obtaining investment benefits. When Facebook and Tencent entered the market, they tried to obtain the first-mover advantage by setting technical rules for gaining an advantageous market position. The metaverse is currently poorly regulated, and improving the decision-making capacity and influence of standard formulators in metaverse governance are inseparable to help first movers obtain technological dividends generated by metaverse development earlier.
Compatibility of standards
The compatibility of technical standards can ensure the benefits of metaverse governance. The metaverse depends on networking and exclusion from the network means exclusion from the market (Farrell and Saloner, 1985). The metaverse presents a networked collection of inexpensive, self-configuring, immersive environments (Jaynes et al., 2005) but if only isolated, fragmented sub-universes A–C exist but are not interconnected, it is not truly a metaverse (see Fig. 1).Footnote 6
The essence of the internet itself is connectivity. Each sub-universe developed by a different platform must be able to connect to maximise its value. The metadata industry provides an example; at the initial stage, software and hardware compatibility standards, user conversion standards for different platforms, NFT standards, and payment standards had not been formed for interconnections between different metadata. While negotiation can solve this problem, it involves calculating investment costs and the interests of all parties. The key variables are observable but difficult to verify; thus, they increase the connection cost of metaverse governance. The network structure surrounding standards further strengthens the hierarchical order of endogenous technical standards (Cohen, 2019).
Supported by the technical standards’ compatibility, the metaverse’s large-scale expansion and real-time interoperability can be realised. The creation, development, and improvement of the metaverse depend on interoperability standards such as tools, services, formats, protocols, and engines. These standards support fields such as image rendering, physical AI, the import/export of asset formats, forward compatibility updates, tool usage and authoring activities, and information management. The compatibility of technical standards will establish a connection between sub-universes and between the real world and virtual society to achieve interaction and human-machine dialogue. Furthermore, technical standards affect innovation behaviour in uncertain markets (Blind et al., 2017). The compatibility of standards builds a technical network for knowledge and innovation transmission, promotes the integration of the physical and digital worlds, and enters a new world of the Internet of Things (IoT) and digital twins.
The compatibility of technical standards enables governments to expand the metaverse’s boundaries to support connection and interoperability involving a wide range of fields such as technical solutions, protocols, formats, and service content. Interoperable metaverse benefits from standardisation activities for compatibility (Hyun, 2023). If enterprises only imitate the more virtual and immersive versions of mobile internet and app stores, the metaverse’s potential revenues and vitality will be reduced. A single internet protocol (IP) or multiple IPs cannot form a metaverse. It is necessary to build a series of IPs and enrich the outlook through various forms of content to provide users with richer content and immersive experiences. For example, under Tencent’s proposed pan-entertainment, the comprehensive content supply and continuous content derivation of the entertainment industry chain can potentially develop into a metaverse in the content field. The metaverse also needs a wealth of user-generated content (UGC) to continuously broaden its boundaries. With the development of VR technologies, the form of content presentation will be further upgraded, and users can have extreme immersive content experiences such as VR drama viewing and immersive online entertainment.
Security of standards
Security risks faced by the metaverse involve data, networks, and AI. The risk of data leaks and the nefarious use of sensitive personal data is problematic in the metaverse. In 2021, for example, hackers attacked the cross-chain protocol Poly Network, resulting in the theft of $610 million in digital assets. The hacker promised to return the assets once the code vulnerability was repaired.Footnote 7
Governments can guard against the security risks of metaverse governance based on the security settings of technical standards. For example, the security jurisdiction of metaverse data involves a large amount of data that is continuously generated in the metaverse, and its data security is closely related to the national interests of participating countries and the personal interests of citizens. The local standards of metaverse developers may conflict with the domestic standards of other countries in terms of cross-border data collection and use and the protection of users. It is necessary, therefore, to establish internationally unified standards for data protection in the virtual world or a set of conflict-coordinating standards applicable to metaverse governance in various countries. In a multilevel world with different regulatory methods, data protection legislation is still absent or in the early stages of development (Mantelero, 2021).Footnote 8
With the construction and improvement of the internal economic system of the metaverse, the investment, operation, and consumption behaviours of users in different countries are increasingly complex. Countries, therefore, need to establish coordinated, unified standards for the jurisdiction to support metaverse development as an obstacle-free platform for global virtual collaboration. The metaverse is a transformative technology that can modify cognitive mechanisms like emotion, experience, attitudes, and behaviours, producing positive and negative outcomes (Riva and Wiederhold, 2022). An example of this is the access standard of the metaverse: its design purpose is not to improve market entry but to protect the security of transactions. Given security disputes that are beyond the capabilities of metaverse members and are difficult to resolve, countries can utilise negotiation and adjudication by international standardisation institutions in the real economy for resolution. Such intervention, however, has certain limitations. Specifically, it should only be involved when the transactions on the metaverse platform involve public interests or national political or economic security and administrative decisions, and the results should not inhibit the autonomous space of the metaverse.
Phased governance countermeasures
The standards differ at various stages of the metaverse’s development (see Fig. 1). The metaverse can be divided into three levels—technology, application, and interaction—of which technology is the core. Technical standards comprise the requisite component that makes it possible for a sub-universe to integrate with the metaverse, and sub-universes are continuously produced and merged with the support of technical standards. The compatibility and security of technical standards become crucial to decision-making and determine the depth and breadth of metaverse governance.
In the initial stage, the scale of each metadata platform is small, the scale effect is not apparent, and compatibility and security of technical standards are low. At this stage, the first-mover advantage in the formulation of standards is evident. In industrial or emerging countries with technical capability, metaverse enterprises and industrial alliances will actively formulate standards. The key to governance based on standards lies in the top-level design and determination of the evolution direction of technical standards. As many countries lack clarity about the metaverse and its development, they face much uncertainty. Hence, the security of technical standards at this stage ensures the necessary security foundation for the evolution of the metaverse. The compatibility of technical standards provides possible future expansion space for the metaverse, but if the technical standards in this stage are missing or influenced by certain interest groups, the metaverse may stagnate or face a greater monopoly risk.Footnote 9
The second stage is the growth stage. Herein, the compatibility and security of technical standards have been improved vis-à-vis the initial stage. Stakeholders make trade-offs between compatibility and security.Footnote 10 Revenue from the metaverse intensifies the competition and dominance of each sub-universe regarding the compatibility and security of technical standards. In this growth period, each sub-universe faces a survival-of-the-fittest scenario, and the scale effect of the metaverse begins to emerge and become increasingly obvious. As in the real world, trade and economic activities have become concentrated (Gaspar, 2020), and the global network has become increasingly dense, reciprocal, and clustered (Cepeda-López et al., 2019). Compatibility and security decisions regarding technical standards differ among countries, thus the evolution of governance differs and includes cellular and hierarchical modes,Footnote 11 each with its own characteristics, as described below.
The first mode is cellular governance. Technical standards have low compatibility and high security. The standards of each sub-universe are inconsistent, and incompatible between countries. There is a barrier (boundary) for different sub-universes to connect each other, and data between sub-universes cannot flow freely. Meanwhile, the security of the metaverse network is high. This mode arises in the early stage of metaverse development. The scale of each metadata platform is small, and the scale effect is not obvious. For example, internet companies of different countries do not exchange data freely, just private domain traffic.Footnote 12 However, if the private domain is filtered, private domain traffic can guarantee benefits, and the relevant models are also stable. As countries emphasise the security of metaverse development, the benefits from positive network externalities will be affected. Countries develop governance independently for the sake of technological security, and in the case of low compatibility and high-security concerns, metaverse governance represents limited network expansion under the security constraints of standards.
The second mode is hierarchical governance. Here, technical standards have high compatibility and low security. Some sub-universe standards are compatible with some technologies, and the fragmented sub-universe mode in the initial stage is broken. In this stage, the metaverse achieves the free flow of data between compatible sub-universes. Meanwhile, the compatibility of the metaverse network is an improvement over that of the cellular model. This pattern appears in the metaverse’s growth stage. However, to avoid security risks, countries do not achieve full compatibility. On the other hand, countries have achieved compatibility between sub-universes with compatible technical standards while maintaining independence among sub-universes incompatible with the sub-universe’s technical standards. The metaverse is thus amenable to a hierarchical governance structure, where the compatibility of standards ensures the periodic benefits of the metaverse, and metaverse governance faces security risks from the data flow.
The hierarchical metaverse governance also faces stability challenges. Stakeholders gradually improve the security of the metaverse. Because sub-universes A and B are at different hierarchical levels (see Fig. 1), if metaverse standards represent the path of technology spillover, the benefits of each sub-universe will decrease with the gradual reduction of levels. The benefits of sub-universe A are the highest, followed by those of sub-universes B and C. However, the benefits of sub-universes D–F are the lowest. When different sub-universes try to obtain more benefits and maintain compatibility with different countries, the hierarchical mode will change and will be reorganised.
Whether cellular or hierarchical, governance in the growth period of the metaverse highlights the trade-off between compatibility and security. To ensure the security of standards, each sub-universe is compatible with the extended boundary of the metaverse. In the cellular mode, if stakeholders attach more importance to security than compatibility, the government needs to promote international and interregional cooperation in technical standards to provide possible space for improving the compatibility of standards. Gradual expansion of security assurance is conducive to expanding the metaverse itself. Within hierarchical modes, if stakeholders value compatibility more than security, the government must issue stronger antimonopoly policies and avoid unfair competition and potentially high risks. For example, VR allows individuals to spend hours in immersive virtual environments and interact with the metaverse. Risks are not limited to usability challenges; they also have social, psychological, and physical implications owing to immersive technology (Han et al., 2022). If countries scrutinise the security of the metaverse resulting from changes in internal and external factors, governance may return from the hierarchical model to the cellular model.
The third stage is the mature stage. Here, the technical standards have high compatibility and security. All sub-universes have the same or fully compatible technical standards, and data flows freely between sub-universes, forming a metaverse containing all sub-universes. Standardised unified docking based on large-scale connections and interactions among users has matured the metaverse’s operation. Governments cooperate closely in establishing an effective system of technical standards for metaverse governance, and the technical infrastructure of the metaverse is running well. Metaverse governance focuses on the unified standards of each sub-universe, mutual benefit, and symbiosis. In this stage, the sub-universes are highly integrated and connected, and countries reach a consensus on the interconnection of technical standards and harmonise the metaverse technical standards.
Metaverse governance in the growth stage overcomes the initial isolation and fragmentation that may arise and lays a foundation and guarantee for openness and compatibility in the mature stage. The positive network externalitiesFootnote 13 enabled by the interconnection of technical standards in the mature stage are more important in this stage than in the growth stage. The security requirements of technical standards in countries also increase; compared with the growth stage, the breakthroughs and leaps in the security and compatibility of metaverse technical standards here support true metaverse formation and promote the continuous iteration and upgrading of the metaverse.
The current situation of standards-based governance
Currently, the metaverse is in the initial stage. The maturity of standardisation is low, and the appropriate standardisation strategy for countries hoping to build the metaverse must be a priority. Standards for the metaverse mainly come from pre-setting standards before it matures (pre-metaverse) but can also be post-setting standards after it matures. Stakeholders have laid out standards and are beginning to explore compatibility and security. The technical conditions are the obstacles for the following stage of its evolution. Breakthroughs will be made in standards in communication, computing power, interactive modes, content production, and economic systems.
First-mover path of standards
In the metaverse, standards are defined as tools, protocols, formats, services, and engines that support the creation, operation, continuous improvement, and common use. Standards support physical computing and AI. Countries are focusing on developing stable and friendly technical standards and adopting first-mover strategies to benefit. As in the real world, the metaverse has standards and rules of compliance. At present, countries are encouraging domestic metadata platforms to expand their scale. US companies have technological advantages in the metadata industry, and the governments of South Korea and Japan are aiming to strengthen the competitiveness of domestic industries.
Industrial countries have taken the lead in exploring the formulation of standards for the metaverse. The first metaverse game company, Roblox, was established in the US. Meta has deployed VR through Oculus devices and launched Horizon, planning to develop a VR social platform. Google has established cloud games through Stadia as well as software and services through YouTube VR. Epic Games developed the Fortress Night and Final Fantasy series. South Korea’s Ministry of Science, Technology, Information, and Communication organised Samsung, Korea Telecom, SK Telecom, and Hyundai Motor to establish the Metaverse Alliance. Japan’s Ministry of Economy, Trade, and Industry issued reports on the future possibilities of virtual space to guide the metaverse industry development. Developing technologically advanced standards in the metaverse helps countries obtain digital benefits, especially in AI, the IoT, network security, and quantum technology, while ensuring security and reliability.
Emerging countries are also becoming involved. Brazil has experiences linked to the research in the context of the Digital Education Research Group UNISINOS/CNPq, which was developed in Brazil using different technologies in metaverses (Schlemmer and Backes, 2015). China’s internet companies, represented by Tencent and Alibaba, have also invested in the metaverse. Tencent has proposed the authentic internet, invested in Epic Games and Roblox, and increased its investment in cloud games and short video content. Byte Dance continues development in AI and algorithms and has purchased a stake in a UGC social platform. Additionally, Mihayou has cooperated with the Shanghai Ruijin Hospital to jointly establish the Mihayou Joint Laboratory in the brain disease centre of Ruijin Hospital to explore brain-computer interface technology. Additionally, the Chinese government has started promoting the application of VR/AR industrial standards to accelerate implementation.
Trade-off between security and compatibility in standards
The metaverse contains a large amount of data, including biological characteristics, geographical location, financial status, consumption preferences, and game habits. Whether directly provided or indirectly generated by users, these data belong to the scope of data security and privacy protection. Zuboff (2015, 2019, 2020) researched on these standards.Footnote 14 In the US, regulators focus on data security and privacy protection standards. To curb data abuse and privacy breaches, the US Federal Trade Commission implemented stricter privacy restrictions on Facebook in 2018. The US Commodity Futures Trading Commission proffered assumptions about metaverse data security. Specifically, if a smart contract code is used to violate a security agreement, its code developers should be prosecuted. This also reflects concerns about data security in the development of metaverse blockchain projects.
Based on existing divisions of the industry chains (Arumugam, 2022), the metaverse industry chains are composed of seven layers: experience, discovery, creator economy, spatial computing, decentralisation, human-machine interface, and infrastructure. In the different layers, the metaverse needs to establish a series of shared and widely recognised standards as the technical basis to promote the unity of the whole metaverse system and the liquidity of the virtual economy system. Cryptocurrencies and NFTs can provide digital ownership and verifiability for the metaverse. Breakthroughs in blockchain technology, edge computing, and AI can further realise decentralisation. Widely recognised shared standards must be formed for the issuance and circulation of virtual goods to flourish the metaverse economy.
NFTs have the potential to become such a standard protocol. Digital works, virtual plots, game skins, and equipment generated by content creators become digital assets and circulate through transactions. Meanwhile, the universality of NFTs allows digital assets to take effect on other platforms in the metaverse. The metaverse needs to build a decentralised platform based on community standards and protocols, which can be realised through blockchain. It also needs to protect and exercise digital property rights, which requires Web 3.0 (currently a new stage of Internet development) to be built on the blockchain network. Excessive security in technical standards will lead to data localisation and excessive compatibility may form monopolies.
Taking the open standard of the metaverse as an example, Unity launched a distribution portal in 2020, enabling developers to create a single component of their applications and then distribute and manage them in mobile app stores (including Apple and Google). Certain open standards and exchange formats have also been developed; Open XR and Web XR are used for rendering,Footnote 15 WASM is used for the portable binary code formatting of executable programs, Tivoli Cloud is used for virtual space, XRE is an end-to-end solution for hosting humans and AI in virtual space, and VRM is a popular file format standard for 3D avatars. The unpublished WebGPU has been designed to accelerate graphics and computing, Dat is a point-to-point data protocol, and the IPFS (InterPlanetary File System) is a point-to-point hypermedia protocol. Dissatisfaction with the existing internet will lead to more successful open standards in the future. To achieve standards cooperation, these open standards need to offer developers higher profitsFootnote 16 than those provided by closed platforms. Otherwise, open standards have difficulty competing with other standards with technical advantages. The metaverse also needs to create a virtual world with continuously expanding boundaries based on game architecture to carry the expanding volume of content.
Problems with the technical standards for governance
There are a number of issues with governance standards. First, the standards themselves are not unified. Technical standards could facilitate companies working together virtually in a reflection of physical reality. These include security, assets, social protocols, and NFT and trading regulations. Interaction in a virtual space requires advanced Internet and hardware capabilities, and countries like Brazil and China lead the way in metadata industries. However, the interconnection between metadata platforms exists only in the initial stage.
Second, the security and compatibility of standards face uncertainty in the initial stage. The current technical conditions are still the threshold for entering the metaverse. Future breakthroughs in communication and computing power, interactive modes, content production, economic systems, and standards protocols will bring people closer to the metaverse.Footnote 17 Since its evolution is unclear, countries do not fully consider the security and compatibility of technical standards. However, a governance mode that only focuses on compatibility faces the risk of negative network externalities, and one that only focuses on security will inhibit its development. Government concerns about the compatibility and security of standards have not been included in trade or technical agreements. Enterprises introducing new products or services are prone to join the formal standardisation process (Blind et al., 2017) and take the lead in laying out technical standards initially to gain profits in the growth stage.
Third, international cooperation in formulating standards does not yet exist. As an idealised virtual world, the metaverse requires unified interactive tools and standards. The existence of standards and protocols can enable users’ identities in the metaverse to achieve interoperability on the platforms (sub-universes) of major companies. The digital assets and content held by users also need to be interconnected. Metaverse formation requires standardised agreements between platforms, such as Tencent, Facebook, and Roblox, and needs to ensure that the metaverse meets the compliance requirements of governments.
Besides the above issues, there is also criticism of the metaverse itself and the hype that surrounds it. For example, one can point to the huge losses of enterprises involved in the metaverse, such as Meta. Investors are ‘cutting leeks’ by nonfungible tokens (NFTs) and Web 3.0, resulting in a negative impression that the metaverse is another Ponzi hoax theme and capital speculation bubble. Users also believe that the metaverse will lead to the reality of dystopian films such as The Matrix and Ready Player One, and an excessive addiction to the virtual world result in the disconnection of human relations from reality. However, this study holds that standards are possible solutions. Meta needs standards to clearly define the metaverse, thus effectively explaining why people currently using its social media applications want to become part of the ‘personalised internet’. Standards can also be used to elaborate the concept of the metaverse to defend investment risk. On 10 November 2022, the first IEEE metaverse standard was officially established. This standard is IEEE P2048 Standard for Metaverse: Terminology, Definitions, and Taxonomy. The standard committee in charge is the IEEE Metaverse Standards Committee (CTS/MSC). Through the definition of the metaverse, people can know that NFTs (with only collection and investment value and no use value) can only meet the needs of a small number of people—NFTs cannot represent the metaverse. Moreover, formulating ethical standards (i.e., IEEE P7016) can avoid the negative effects of the disconnection between the metaverse and reality and help to expand and strengthen real interpersonal relationships.
Key points of phased TS-MG
Each sub-universe to be integrated into a metaverse must establish complete standards to support the economic system. Otherwise, they will be mutually separate even if Tencent, Mihayou, Meta, Roblox, and Epic Games can build several sub-universes based on continually improving their technical level. A series of highly immersive gaming, social, or industrial sub-universes cannot form a metaverse on their own. The emergence of standards, protocols, and economic systems will aggregate various sub-universes into a true metaverse and thereby realise the digitalisation of learning, production, and life. The focus of governance at different stages of development are outlined below, which are predictions based on current data.
First, over the next three years (2022–2025) governments will improve the standardised workflow of international standard-setting bodies, cooperate with parties to ensure that the voting processes respect all views, and prompt national stakeholders to join metaverse standardisation worldwide. With technological development, Internet and metaverse enterprises develop independent virtual platforms. These platforms form different sub-universes, including platforms for games, social networking, and content. Algorithms, VR/AR devices, and AI, which are more immersive forms of interaction and experience emerge with technological upgrading in communication. The 5G or even 6G penetration rate will be improved, and cloud games and XR technology will mature. Metaverse game enterprises will make breakthroughs in the next generation of games. AI-assisted content production will be facilitated. The US, China, and other major economies will have introduced several immersive experience platforms that combine games, social networking, and content.
Second, over the next decade (2025–2035), governments will make appropriate interventions to prevent improper rent-seeking behaviours by metaverse developers as well as behaviours that harm the economic order and security of the metaverse.Footnote 18 Governments can, for example, stipulate minimum standards for autonomy in the metaverse community, such as the standardisation and transparency of service terms, which will promote its development. The metaverse will expand to include more experiences with the development of immersive pan-entertainment platforms. Activities and behaviours directly or indirectly related to consumption, education, meetings, and work will be transferred to the virtual world. With increasing consumption in the virtual world, digital currencies such as digital USD, and NFT-based digital information capitalisation, the economic system will begin to be established, driving virtual platforms to realise positive network externalities to promote transactions and social interactions.
Third, sub-universes, virtual platforms will gradually form a complete set of standards and protocols over the next 15 years (2035–2050) to realise the aggregation of sub-universes and form a metaverse. These sub-universes will remain independent but will achieve interconnection through unified interface and interaction standards. The form of the metaverse will expand with scientific and technological improvements. All aspects of the real world will flow into the metaverse system to open the boundaries between RR (real reality) and VR. The metaverse thus enters the mature stage. The demand for new tools and technologies will be further enhanced by metaverse evolution. The core technologies will cover rendering, computing, XR, payment, tools, projection, volume compression, AI, and machine learning. The quality and functionality of these toolsFootnote 19 and the number of builders will be key to successfully integrating and building content. The same is true of the speed these tools and technologies required and the extent to which they target developers, limit consumer choice, and encourage innovation. With the deepening and expansion of the metaverse, interactions between the virtual world and the real world will become the norm. Government intervention will clarify the direction of metaverse development and governance—namely, continuous openness and compatibility—and will deal with future difficulties.
Conclusions and policy suggestions
Main conclusions
Based on the economics of standards theory and the theory of networks, this study investigated TS-MG. This study found that effective metaverse governance should comprise three elements: technical standards must be formulated, the standards must be compatible, and they must be secure. Standards with these characteristics promote competition, market access, professional innovation, and knowledge sharing of metaverse. Platforms constitute the sub-universes of the metaverse, and standards are key to integrating multiple sub-universes in a metaverse.Footnote 20 Additionally, different stages of metaverse development involve different governance modes. Technical standards in governance need to distinguish various stakeholders, such as government departments, industrial alliances, enterprises, and consumers.
Policy suggestions
This paper proposes the following three main policies for TS-MG.
(1) Formulating development strategies for metaverse technical standards and setting clear development schedules and phased goals. Both mandatory and voluntary standards should be set with regular evaluation and revision to ensure metaverse development. The mandatory standards should be developed for criteria that must be guaranteed, such as the basic requirements and safety objectives of the metaverse. Countries should promote the development of blockchain technology and improve coordination efficiency among metadata platform enterprises regarding compatibility. Governments also need to outline a metaverse security standards system and develop security standards based on the characteristics of metaverse technology and typical application scenarios. Countries should focus on technical infrastructure, core technology fields, and intellectual property issues; and encourage national standardisation organisations to solicit metaverse industries and enterprises and collect standardisation needs. Countries unable to afford the necessary financial or technical investment can set up specific departments to track the latest trends in metaverse development, participate in the metaverse forum worldwide, and engage in standard-setting activities as participants rather than leaders.Footnote 21
(2) CooperatingFootnote 22 on the top-level designFootnote 23 of metaverse development to ensure the inclusiveness of the metaverse standards system. Countries can incorporate issues concerning the compatibility and security of metaverse technical standards into trade and technology agreements. For example, informal organisations like G20, the G7, and the BRICS, which differ from formal institutions such as the UN, contribute to global governance (Prodi, 2016); they can incorporate issues concerning technical standards into their agendas. Governments should ensure joint planning and formulation of technical standards, avoiding conflicts and overlaps in standards. Industrial and emerging countries need also strengthen their involvement in dialogue and cooperation in metaverse standards, coordinate standardisation policies, and make the processes transparent. Countries should support domestic standardisation organisationsFootnote 24 in negotiating and signing cooperation agreements with international and regional standardisation organisations. Currently, the cooperation field focuses on IoT, information security, AI, 5G, industrial digitalisation, and intelligent transportation. To ensure global users’ confidence in the quality and safety of metaverse-related products and services, countries can cooperate in developing international standards.
(3) Focusing on differences in industry- and enterprise-level policies. At the industry level, domestic governments can manage the standardisation strategies of each platform and the compatibility and security of core standards to prevent monopoly. Governments can encourage rapid responses at the industry level to meet the standardisation needs in specific technical fields in the metaverse, ensure fairness and consensus in standards for rules and procedures, and encourage the establishmentFootnote 25 of alliances. Moreover, governments can issue metaverse standards to support regulations and policies—including a mechanism for meeting the special needs of stakeholders—and facilitate spill over effects (i.e. the positive externalities) for driving technological progress. Metaverse enterprises must also be flexible, anticipate market demand, and participate in the international standard-setting process. These enterprises should increase research on new platforms for hosting future interactions between the virtual and real worlds and focus on the leading and participating rights of terminal products in terms of technology iteration, industry-standard definition, and value distribution models.
Limitations and prospects
This research was limited in terms of analysis and discussion of the specific effects of technical standards on the following particular aspects: breakthrough technologies in AI, digital twins, and the two-way connection between the physical world and VR, including national interests and ethics. Technological expansion and civilisation involvement are the realistic future background of metaverse development. The technical standards and connection problems in these areas are valuable investigating directions in the future. Two additional areas of research are recommended: (1) how will potential cultural conflicts in the real world affect the goals and methods of metaverse governance? and (2) do decisions about the compatibility and security of technical standards in the metaverse reflect the cultural characteristics of different countries? As the metaverse has not yet been realised, theoretical model analyses may be a more suitable research method for such future work.
Data availability
Data are available from the authors upon reasonable request.
Notes
The WTO and its predecessor (the GATT) along with the rest of the Bretton Woods system were developed to benefit the economy.
The strategies vary based on what they do and what they aim to achieve.
The metaverse’s technical standards are open source.
Sincere thanks to the referee who highlighted this.
Nations, industry groups, and firms develop technical standards at different levels: national standards, industrial standards, group standards, and firm standards. Thus nations, industry groups, and firms can be the first movers and take the first-mover strategies.
Many thanks to the referee who highlighted this. Certain frameworks attempt to focus on ethics, social acceptability, privacy, and resilience (recovering after incidents). The framework of this study has narrowed the score, such as security and compatibility. The reasons include: (1) compatibility and security are the fundamental principles for building a metaverse, (2) both the economics of standards and the economics of network focus on the implications of compatible and secure technical standards playing in the digital economy, and (3) from a more general perspective, ethics, social acceptability, privacy, and resilience cause uncertainty and conflicts, thus can be classified into the security dimension, which needs security standards to attenuate and normalise.
On 11 June, hackers returned nearly half of the stolen assets (US $260 million). Poly Network tweeted that it had received digital tokens related to three cryptocurrencies: Ethereum, worth $3.3 million; BSC, worth $256 million; and Polygon, worth $1 million. However, $269 million in Ethereum and $84 million in other tokens have still not been recovered.
It is also necessary to include an adjudicating body like the WTO and its predecessor, the GATT. Certainly, disputes will arise with some frequency.
This study differentiates the first mover from the interest groups, as they are not the same. Large enterprises dominate the standardisation in the business field. Standardisation experts at the practical level need the necessary technical knowledge and resources to participate in standards’ formulation. SMEs, consumers, regulators, governments, and nongovernmental organisations are all stakeholders. They may not have professional knowledge, but they will be affected by the standardisation process and results. Too few stakeholders involved in standards’ activities may lead to market failure. Economies of scale, information asymmetry, externalities, and coordination are the sources of market failure (Swann, 2010). The positive impact of compatibility standards is that they obtain network externalities, but the negative impact is that they may give rise to a monopoly (Blind, 2004). If the metaverse is a monopoly, there will be winners and losers, and the interests of the latter will be harmed. This is not helpful for the development of the metaverse. Therefore, the role of the metaverse standardisation policy is to allow more stakeholders to participate in the standardisation process to ensure the process transparency and that the standards developed will be widely accepted.
Stakeholders are not just platforms, and vice versa. The stakeholders of the metaverse are developers, creators, contributors, consumers, and investors.
The cellular and hierarchical modes are typical in the growth stage. These two modes are applicable for this stage. Because this study focuses on the compatibility and security of technical standards, if both the compatibility and security are low, we classify this as the initial stage; if both the compatibility and security are high, we classify this as the mature stage. Thus, in the growth stage, there are two modes, the cellular mode (low compatibility and high security) and hierarchical mode (high compatibility and low security). These two modes are applicable for this stage and are not more advanced.
Internet companies have long since passed the early stage.
This grants vast power to Internet companies. This study assumes that, on encouraging different stakeholders to establish a metaverse standardisation process and a supervision and evaluation mechanism for the effect of metaverse standards, metaverse companies will use this power beneficially. The possible market failure further strengthens the necessity of TS-MG.
Zuboff describes surveillance capitalism and the prospects of an information civilisation as the emergent logic of accumulation in the networked sphere and considers its implications for information civilisation. Surveillance capitalism challenges democratic norms and departs in key ways from the centuries-long evolution of market capitalism.
Rendering is the last step of computer graphics, which refers to the process of generating images from models through software, including the processing of the geometry, viewpoint, texture, lighting, and shadow. Rendering technology is needed in many fields, such as film and television, animation, games, interior design, product design, and scientific simulation. Realistic rendering requires not only powerful technology but also a huge amount of computation.
Governments can reward standards developers according to the diffusion degree and the number of users of open standards. Standard-setting institutions, standardisation associations, and enterprises may jointly set up funds to provide financial support for the formulation of open standards.
However, it will not inevitably put us on an equal footing. Countries need to strengthen cooperation in the field of standards to avoid the possible inequalities caused by the metaverse.
This study assumes this will happen in the metaverse, although it has not happened in the internet age. The trend of the progress of human civilisation will continue, so these problems will eventually be solved.
The projected industry structure of the producing firms will be competition, monopolistic competition, monopoly, or oligopoly, depending on the operation of the market and government governance. If the structure is a monopoly or oligopoly, then enterprises may choose to collude, and small enterprises may follow large enterprises. The government needs to consider whether anti-unfair competition laws and anti-monopoly laws can correct problems in metaverse.
Standards are the fundamental elements necessary for the compatibility and integration of various elements; the standards are the interdependent, integrated components that together comprise the limitless, expandable, interconnected backbone of the system on which the metaverse runs or exists. They determine governance in the most fundamental sense, as the metaverse would not be able to exist without them.
On 22 June, 36 companies including Meta, Microsoft Epic, Nvidia, Qualcomm, and Sony, established an organisation called the Metaverse Standards Forum to establish industry standards for the metaverse, AR/VR. The organisation plans to hold its first meeting in 2022. Apple has not joined the organisation for the time being. The chairperson of the Metaverse Standards Forum is Neil Trevett, an executive of NVIDIA. He welcomed any company to join the organisation, including participants from the crypto world. The forum aims to promote exchanges between various standards organisations and companies to achieve real-world interoperability in the metaverse.
This study calls for active cooperation on many issues; however, even the United Nations needs to overcome certain challenges for the metaverse to work as well as intended. This paper holds that the cooperation mechanism should be combined with the competition mechanism. Take the cooperative development of ISO international standards as an example. The partners come from specific competitive standard-setting institutions or enterprises rather than official speakers. These enterprises may not be large-scale enterprises, but they recognise the importance of setting standards early and participating actively. As proposed by the forum, all parties are welcome to participate in the standard formulation of the metaverse. However, these participants should be competitive and adapt to the survival-of-the-fittest principle in the market. The progressiveness of technology and the maturity of standardisation field are the key factors that determine the formulation and cooperation of metaverse standards. It is difficult to imagine that the metaverse standards promoted by government officials alone will be recognised.
Not every country will have the technical capabilities to do so. This study encourages countries that currently do not have the technical capabilities to participate in standardisation activities of the metaverse to participate in forums and strengthen the education of standardisation and standards at all levels of schools or universities. The setting of international standards focuses more on cooperation and participation than leadership.
Not every country possesses national standardisation organisations, but they have domestic standardisation departments to deal with standardisation activities.
Governments can jointly hold group standard seminars with standardisation associations, industrial alliances, and enterprise leaders on a regular basis to invite successful and unsuccessful group standard leaders to speak. The commerce department can continuously track the latest developments of standards in specific fields and publish them in real time, as well as invite experts in various fields to form an expert think tank. Periodicals in the field of standardisation can regularly publish special issues, inviting entrepreneurs and scholars to write articles and discuss the formulation of group standards.
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Acknowledgements
This work was supported by a post-funded project of the National Social Science Foundation of China, ‘Research on academic frontier theory and policy of the economics of standards’ (No. 21FJLB039).
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Yang, L. Recommendations for metaverse governance based on technical standards. Humanit Soc Sci Commun 10, 253 (2023). https://doi.org/10.1057/s41599-023-01750-7
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DOI: https://doi.org/10.1057/s41599-023-01750-7
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