The pseudonymous economy and the metaverse

If more work and life moves into so-called metaverse, there is an opportunity reimagine notions of identity in a way that could address a number of systemic challenges we face today, particularly with respect to privacy and reputation.

Today, much of our internet activity is carried out under our real – i.e. government-issued -- identities and names.  The implications of this become clear whenever there is a data breach and personal information is released; but there are also many examples of people being subjected to all sorts of reputational attacks for saying things online that others find disagreeable.  

As we think about the challenges that this represents, perhaps a more effective mitigation is to enable people to compartmentalise their identities; to apply a similar concept to "airgapping" to their various personas such that they can compartmentalise reputational risks.  

Some years ago, Balaji Srinivasan introduced the concept of a pseudonymous economy as a response to some of these challenges:

“The pseudonymous economy is the foundation for muscular classical liberalism that is capable of standing up in today’s information environment. Rather than make naive appeals to people to look past gender or race, or to not cancel or to not discriminate online, instead we make it impossible to do that by taking away that information entirely with realistic avatars and fully functional pseudonyms.”

The basic concept is that people will be able to create multiple identities or personas representing different aspects of their online life.   These pseudonyms would not be anonymous in that it would establish a reputation over time and persists across its different interactions with firms or individuals.  They would be able to transact and contract; they would be able to make payment and receive payment; and they would be able to participate in different forms of dispute resolution, such as online courts.  

Each pseudonym would have a degree of pseudonymity that could be measured/quantified based on the number of bits of entropy: with seven billion people in the world, this is approximately two to the power of 33.  This means that, given 33 independent bits of information about a person, you can fully de-anonymise them so a pseudonynous identity would be measured by the number of bits of uncertainty.  There would therefore be a sliding scale between 0 and 33 denoting how much protection a particular pseudonym offers.  People may opt for different levels based on their personal preferences or the uses of the pseudonym.

In the future, a person will have their real name which they use for their formal interactions with the government but may also have a "speaking name" that they use on social media platforms;  an "earning name" which they might use to earn money by providing services – perhaps through some emergent and decenteralised digital labour market, and maybe a "paying name" that represents their economic interactions with a cryptocurrency platform (such as an Ethereum Name).  In the event, for example, that they are subject to some sort of "mob attack" on social media, their formal name would not be linked to it and therefore the ability of these mobs to inflict real world damage on someone's family, employment, or social network would be largely mitigated.

For each persona, there could be an avatar that they use as the mechanism for their interaction with other humans within the metaverse.  This avatar could be photorealistic or it could be a cartoon-like character.  

The obvious benefit of using pseudonyms is that it could mitigate some of the privacy concerns associated with mass data leaks by enabling an "airgapping" of people's identity; such that it would not be easy to link the leaked data back to an individuals real-world/government-issued identity.  

As we move to remote work and digital labor markets where firms will access and contract with a global talent pool, the use of photorealistic avatars and pseudonyms would also abstract away many of the physical attributes that are often the basis for job discrimination.  A firm would contract with an avatar based on their digital reputation without necessarily knowing the country of origin of the human behind it nor know if they have a physical disability or even their gender.  That person's interacts with the rest of the firm could be within a metaverse, using an avatar as their primary representation, or it could be via video conferencing platforms where, rather than see the actual person, they are seeing a photo-realistic rendering similar to the recent work demonstrated by Meta.  

It would also support innovation.  If we use blockchain as an example, it has been observed that Satoshi's pseudonymity was as important as decentralisation in the evolution of the technology.  By operating under a pseudonym, it was impossible to "play the man instead of the ball" thus enabling Satoshi to focus on designing and building the bitcoin technology.  

Many of the building blocks for this future are already emerging: technologies, such as Unreal's Metahuman or Meta's recent work in avatars, are making available the ability to create photo-realistic synthetic humans and will continue to evolve; people are already operating under pseudonyms in some sense (such as the example of how people bifurcate their email accounts or use various identities on Twitter or Reddit); emerging identity technologies, such as self-sovereign identity, are allowing digital identities to be created, trusted, and reputation to be established and proven cryptographically; and there is growing concern and awareness of the threat of data leaks and social media mob attacks to people's real world, such as their families, social networks, or employment.