2. Recognize that decentralized systems

2. Recognize that decentralized systems can play a role in unlocking new economic opportunities by fostering innovation, competition, interoperability and portability of ownership and identity

The promise and excitement of web3 is driven, to no small extent, by the potential benefits of decentralized computing systems. By driving interoperability and portability across service providers, decentralization has the potential to bring people greater choice, freedom and economic opportunity.

The internet itself was born as a decentralized communications network. As it grew, points of entry like landing pages, indexes and marketplaces made it easier for a wider audience to navigate an increasingly wider set of options. These new centers of gravity did not change the fundamental nature of the internet, but they did make it more accessible to more people, which in turn led to unimaginable innovation and new economic use cases. Web3 builds on this precedent, using blockchain technology to decentralize use cases beyond simple communications — such as ownership verification, identity validation, exchange of value and more — to new, as yet unconceived ideas. To enable continued innovation in this space, regulators and policymakers should:

Recognize that decentralization exists on a spectrum.

Web3 applications can consist of individuals acting on a network, but companies still have an important role to play in preserving the integrity of platforms, protecting users, safeguarding against illicit activity and ensuring accountability.

While decentralization has its benefits, a fully decentralized environment could be so vulnerable as to work against the interests of its participants. Today, much of web3 consists of complicated layers of technology that are not intuitive for most people. Companies can build familiar and simple user experiences, while providing necessary centralized functions like fraud detection, content moderation and customer service.

Where, in their centralized experiences, companies have proactively developed robust and tailored technological solutions for technically complex functions (e.g., detecting intellectual property infringement or other violating content), these advanced tools can be adapted and applied to companies’ web3 experiences. Equally, hybrid models leveraging both centralized and decentralized infrastructure could foster better resilience and cybersecurity, thus enabling a thriving ecosystem.

Adopt a balanced approach towards risks that recognizes the potential economic and social benefits of web3 technologies.

Industry players and other participants in the web3 space are working to manage some of the novel issues created by decentralization, and governments should support such efforts as they come to market.

An ever-evolving ecosystem — where there is no single point of accountability for the processing of blockchain data — requires a pragmatic, proportional, case-by-case approach in line with user expectations. As regulators consider whether new regulations are needed, we would encourage them to evaluate how to make use of existing concepts and exemptions in light of the specific nature of a given blockchain use case. Moreover, they should focus on principles rather than imposing rules too soon.

Realizing the potential of decentralized technologies requires reimagining concepts like: personal identity, economic ownership, organizational governance, data ownership, categorization of blockchain data vs. pseudonymization, the right to deletion vs. immutability and how technology platforms interact.

Blockchain-based assets are one of the core tools that will make interoperability and portability possible in the metaverse. Digital art or collectibles are simply the most popular current manifestation of the concept. NFTs and tokenized assets can be also used, e.g., as a record of property ownership or other official records. For example, the State of California has embraced blockchain applications for vital records, and the United Kingdom permits it as an appropriate means to service notice of the commencement of legal proceedings.

In addition to enabling the portability of assets, blockchain technology has the potential to create a verifiable and highly portable digital identity based on or supplementary to government documents. The ability to establish, safeguard and control one’s own personal identity in a digital format will be critical in the metaverse and could also help bring more people into the financial system.

How Meta is applying this principle to promote economic opportunity.

As we build for economic opportunities in the metaverse, we know that creators, communities and consumers will want to move beyond the siloed way in which apps operate today. Right now, we are working to expand experiences on our existing platforms and apps beyond two-dimensional screens so more people can become familiar with experiences in the metaverse, particularly as augmented reality (AR) and virtual reality (VR) hardware becomes more available. We’re also helping people participate in the metaverse economy through non-VR devices that they may already own.

In the future, we anticipate greater demand for people to be able to carry assets — such as digital tools, digital identity and digital belongings — from one metaverse experience to another. In such a context, interoperability would enhance the functionality and inherent value of these assets and the services where they can be used. In turn, creators could establish a more direct relationship with their community and keep that relationship across platforms.

People could experience all of the things that creators produce across different platforms and apps, rather than being tethered to a single one. Creators and consumers would have direct control over their digital assets and would not risk losing access if a platform changed their policies or ceased to exist. This is why we’re exploring web3 technologies in our current family of apps, even if we do not yet know the full extent of the role blockchain-based assets will play in the metaverse.