Ever since I started getting into the metaverse, I’ve been looking at the similarities and differences between how the concept of “housing” works in the real-world vs how it might be applied in Web3. My previous experiences working in the real-estate industry and housing activism helps to give me a perspective and insight that might be interesting to some, I think.
Given that my interest in Web3 is largely formulated from a musician’s point of view, I’ve always had an agenda when it came to crypto -- the advancement and protection of the creative classes as a whole. The types of “creatives” out there range widely depending on background and interests, of course, but there are patterns that play out in the real world that can be analyzed more objectively by looking at the fundamentals of society -- economics, geography, and standards of living relative to the former two.
Incidentally, these are the issues and data points that are rarely brought up in the media/social media since it tends to bring up uncomfortable truths in the real-estate market that no-one wants to talk about. In the United States (and many urban centers in the Western world), the solution to the housing and homelessness crisis is zoning reform -- not anything else. Aside from Andrew Yang and a few activists out there (I was part of the YIMBY movement for several years, may possibly get involved with Yang’s new Lobby3 effort) there are very few people talking about the real issues when it comes to housing since the well was poisoned by wealthy homeowners and special interest groups many years ago.
The result of this is already apparent to most people -- record high housing costs, followed by record high homelessness rates -- which seems obviously related (supply and demand) but people still fail to understand that the two things are connected in a very direct way. Housing affects everything in society and can be very difficult to talk about, but I’d like to focus this article specifically on how it has affected the creative classes -- and in particular, how these trends mirror what has happened in the crypto markets in the last few years as the NFT hype began to spiral out of control.
It may not come across as a surprise to many out there, but right now the whole concept of “urbanism” in American cities stands on very shaky grounds -- the high costs of living -- coupled with the proliferation of automation and remote work have driven many people out of urban centers, leading to the dispersion of talent that will most likely leave a permanent scar even in the most “beloved” cities across the US. People come to cities for the jobs, diversity, and the vibrant/innovative culture that urban centers provide, but in recent years that ethos has been dwindling as the high costs of living have gradually priced artists, the middle-class, immigrants and migrants, minority communities, sub-cultures -- basically anyone who fails to meet the financial cut-off point -- out of the neighborhood altogether.
How could this have happened? The reason is simple -- there simply isn’t enough housing to go around. US cities have attracted the attention of people all over the world, driving up demand, but failed to provide an adequate supply of housing in order to keep housing costs at a reasonable level. When demand outpaces supply, the cost of it goes up -- the fundamental laws of economics doesn’t change, even when it comes to real-estate. When the costs of living skyrockets, the only things you’re left seeing in the neighborhood are yacht clubs and corporate franchises -- turning the culture of it into a bland, homogenous goop that is neither interesting nor exciting.
Housing activists spend most of their time advocating for more housing construction -- building more housing during a housing shortage seems like a pretty straightforward, reasonable thing to do. But the NIMBY mindset has taken hold and ended up running everything: NIMBYs fight housing construction at every turn, because of the fear that adding more supply would be detrimental to their “home values”. Affordable housing? Sure, in theory…just not here. “Not In My Back Yard” - as the saying goes. What we see in real-estate we often see in crypto too -- as people clutch onto their coins as if they were pearls. (With the added irony that many of them have no plans to ever sell.)
After having priced out the very people that made the city an interesting place to be to begin with, thus begins the process of urban decay -- and the eventually collapse of the real-estate market in itself. (A big “market correction” about to come soon, especially as the Federal Reserve starts ramping up interest rates in reaction to inflation costs right now.) The tragedy here is that the idea of building more housing leading to lower home values is largely a myth -- the more people you have in a community, more valuable it becomes, both in the short and the long. But that myth continues to persist out of a general fear of change -- a mindset that, unfortunately, seems to have taken hold in the Web3 ecosystem as well.
The Ethereum ecosystem (which I’ve been a part of since 2014) underwent a similar pattern during the beginning of the NFT hype -- at first, there were many artists who saw the potential in the technology and jumped in as soon as they could. Back then, minting an NFT was maybe a few bucks at most, and could be seen as a reasonable investment for an artist even if they didn’t have a lot of money. These artists were, objectively speaking, the reason why the excitement existed to begin with -- those works had a type of inspiration and optimism that was immediately obvious and struck a chord with the general public, prompting many to get in on the hype.
As demand grew, gas fees grew to $50, $100, $200, $300…I’ve seen it as high as $600-700 per transaction, in some cases. Most people focused on the multimillion dollar sales of Cryptopunks and other crude imitations of country club membership cards -- but did not notice that the people that initiated the whole thing were starting to leave, one by one. Then came the grifters -- or the “gentrifiers”, if you will -- that seemed to embrace the soulless process of artistic works produced by machines, en masse.
There are a lot of bad faith arguments about the nature of blockchain technologies as a whole (I hope the whole “it’s bad for the environment” thing can be put to rest eventually) but I do think that most people in the ETH ecosystem right now are engaging with the wrong argument -- the problem with NFTs isn’t that the technology is bad, but that the quality of artworks that’s being marketed right now is very poor. The idea that a crudely drawn, low-resolution image with slight variations added by a simplistic algorithm is somehow culturally “innovative” was never a tenable position to begin with -- but as they say, money talks, BS walks.
People have a strong affinity for things like Pokemon because each creature was hand-created individually by an artist somewhere, and was collected later on. Which is more interesting? A collection of 100 artworks that were procedurally generated through an algorithm or a collection of 100 artworks that were each crafted through the blood, sweat, and tears of individual artists themselves? It is the latter, of course. But that is the sort of work that people are avoiding right now.
I’ve seen similar patterns happening in Decentraland right now, where the price of land-ownership has gotten out of the reach for most. ($MANA runs on the ETH ecosystem and has similar issues about gas-fees as well). The neighborhood is starting to resemble the “nice” parts of town, which are basically full of yacht clubs and corporate stores. I have no doubt that money will be coming into the metaverse over the next few years especially as big companies continue to enter, but in its current trajectory it’s pretty clear that Decentraland is going to peak as some point by catering too much to the upper crusts of society, then experience the same issues that the real-world has in regards to urban decay.
To be fair, the leadership classes of the Ethereum team seem to be aware that Web3 is not quite “there yet” (Vitalik has always maintained that NFTs in its current form is “overrated”) so they might be enlightened enough not to let the ETH ecosystem repeat the mistakes of the real-world in this way. (ETH culture seems to be allergic to irony, which I consider to be a good thing.) But there are people out there who would be more than happy for the metaverse to resemble the sort of exclusive, quiet neighborhoods of the suburbs where basically nothing interesting ever happens -- it just kind of depends on what type of a world they want to live in. (Most people would just take the money and run, for what it’s worth.)
The solution to the exclusivity problem in the metaverse is the same as what you would do in the real-world -- add more housing options that cater to a wide variety of living situations and income levels (single-family homes, condos/apartments, tiny homes/micro-equity contracts, co-ownership models, rent models, etc.) and the problem basically takes care of itself as developers build as much housing as is needed until filled. But yes, that would mean adding more housing supply -- ideally one that is more dynamic than the 1x1 grid model that we have now -- since that is the only way for the metaverse to be sustainable in the long-run. (Equity in vertical spaces and renting should also be introduced, imo.)
The “one-size-fits-all”, fixed-supply model is not only boring, but it’s also immoral, I would argue -- since there is no physical danger in digital spaces, we should be maximizing our neighborhoods for interestingness, not safety -- but I’m only one voice in the DAO, after all.
Whether Ethereum manages to stay ahead of the innovation game in the long run is yet to be seen, but as most artists know; creativity never stops, it only adapts. In the beginning most artists were clustered around the ETH ecosystem since that just seemed to be the most obvious choice -- but since the platform became gentrified, creatives have scattered all across the web in every direction. Since so few people talk about it, we really have no idea where they are, where they went, or what they might be doing.
(It’s worth noting that the Dogecoin community has a very strong community of artists as well, but there’s a big problem with DOGE -- the lack of NFT support. There are plans to introduce these features in the future but like ETH2’s upcoming upgrade, the project is still largely in limbo.)
Though it might be tough to admit, we have a refugee-like situation in Web3 right now that is much more serious than people think -- unlike in the real world where physical locations creates physical obligations, there is really nothing forcing people to stay in any given metaverse at any given time. In the real-world, if a city loses its reputation it may take decades to fall apart -- in Web3, if an ecosystem ceases to be interesting, it will likely disappear almost immediately. On the internet where everything moves so quickly, empires can rise and fall within a matter of months -- if not weeks.
If Web3 platforms fails to provide a reasonable alternative to Web2 platforms, it’s very likely that people will just flock back to a 3D version of the old models and nothing will change. Or worse -- people will flock to a new Web3 platform and the platform itself turns into a Web2 clone with crypto buzzwords thrown on top -- basically the same thing as before, except that you’re paying with tokens instead of fiat.
Many of the artists have found new homes in low-cost Layer 2 systems, or on ecosystems like Tezos that has been Proof-of-Stake from the very beginning (Hic et Nunc recently rebranded itself into TEIA after some drama with its founder, Rapheal Lima [gather more information about this ecosystem]), while others are patiently waiting for alternatives like Musicoin to get off the ground so that they can work with platforms that seem more serious about protecting the interests of the artists out there -- for the most part, however, where the creatives have gone is still largely unclear.
With Hollywood and Web2 companies unraveling and Web3 projects largely in disarray, the world now is having trouble making sense of itself: feelings of anxiety and uncertainty -- as well as the stock market that helps us distract ourselves from said things -- now runs at an all-time-high. While there’s no shortage of finger-pointing about who’s “fault” it is, I think that most people just want someone to do something about it: that “thing” can be Web3, if it so wishes to -- there’s a huge cultural vacuum in the wake of COVID that is just waiting to be filled.
At the end of the day, the solution to the problem of inequality is equal access and opportunity to equity, big or small. A truly benign system will cater to both the big spenders as well as the small because it knows how to effectively value both in a balanced way. But the details of how to make this work can’t happen if the two groups don’t interact with each other -- which is why mixed-income communities are an essential part of urbanization that has to be maintained at any cost.
It’s in human nature to form cliques and tribes, and crypto/Web3 cultures are no exception. The cultures of Bitcoin and Ethereum are very different from each other, as with Dogecoin and Tezos, Manacoin and Sandbox, etc. There is a natural tendency for people to silo themselves into groups that they feel most comfortable with and interact with only those of similar views and outlooks. This may feel more comfortable for the average user, but monocultures tend to stagnate if left alone for too long -- a healthy ecosystem requires a level of disagreement and dissent, to a certain degree.
Web2’s attempts at retaining its “diversity of thought” on its platforms largely involved diversity initiatives -- the folks at the top picking and choosing which “minority” groups should be explicitly promoted on their platform. But this approach is limited by the perspective of the leadership classes out there (who gets to decide who is more oppressed than the other?), and has a tendency to create a lot of fractionalization and bad blood among the communities themselves -- not ideal, to say the least. Besides, no matter how smart you are, accommodating every possible disadvantaged group out there is a literal impossibility.
In a previous article I advocated for the sortition model for running DAOs as a way to avoid these problems -- in a way, a way to avoid doing politics itself (campaigning, fundraising, administration), while still having all of the perks. Sortition governance works as a sort of out-of-the-box, automated way of enacting political governance in Web3 communities that may not necessarily want to spend the time nor resources to democratize their decision making processes.
Is picking delegates at random a risk? Sure. But I would probably argue that it’s the lesser of evils compared to how things are normally done, where politicians are chosen for their popularity and fundraising abilities rather than their ability to run things effectively. (Sortition allows you to basically eliminate the need for the aspects of politics that most people hate.) And random sampling being a time-honored method of generating objective data -- it seems like the ideal way to get the most accurate picture of the needs of the community as a whole. It also is a way to reduce internal dissent, since the selection process will never get hijacked by special interest groups or personal agendas.
Of course, giving up the power of judgment and choice is not really what humans are known for, to say the least. The sortition model is probably untenable in the real-world, since the temptation for those in power to say “I know best” is probably too strong -- the opportunities to corrupt the model on the backend, too numerous. But in Web3, we have the golden opportunity to do things differently that otherwise might not be possible. So -- why not give it a shot? What is there to lose?
Mixed-income neighborhoods have, historically speaking, been proven to be the most vibrant and often where the most interesting things happen -- and I don’t have any doubts that the same will be in Web3. But I think the patterns in recent years show that this sort of decentralized utopia won’t happen if we leave things to chance -- chance itself has to be integrated into the system itself. Who will be the one to get there first? Time will tell.