In 2003, Professor Peter Ludlow logged in to his account on Sims Online and was shocked that everything he built and owned in the game was gone. He was evicted from his virtual home, his properties were confiscated and he even lost his pixelated cats.

Initially developed in 1989, Sims Online was an open-ended game where players can build real estate, create communities, interact freely, and trade using an in-game currency the Simoleons.

“We even called it a metaverse back then,” Ludlow told me in a recent interview as we pondered why people consider the “metaverse” a new fad, despite its decades of history.

The community of Sims Online was rich and brewing with creativity. At least 80,000 users flocked to the virtual world, competing to build the most decorated homes and create the coolest communities.

As a philosophy professor interested in technology, Ludlow was on a mission to document the budding phenomenon that would shape Internet culture for years. He created The Alphaville Herald, a website offering news and interviews about the game’s daily happenings.

Ludlow chronicles the development of what could be considered the first three-dimensional metaverse. He also witnessed how some users managed to turn the game into a massive business.

“A lot of gamers don't like introducing non-fungible tokens (NFTs) into games because they think it’s turning a game into a business,” Ludlow said. “But it has always been this way.” He recalled that many have made millions of dollars trading virtual assets.

SimCity

As expected, such a budding virtual community with lots of money flowing within it was a playground for scammers. Some built robots that could perform fake tasks, cheat the game rules to earn virtual currencies and deceive detection systems. Some organized mafias and gangs tricked users out of their cash or virtual currencies. Others built bondage dungeons and offered virtual sex.

The Herald was there to report on it all. It gained notoriety and exposed embarrassing incidents and problems within the game’s governance. It became too much for the Sims Online owner, Electronic Arts.

Citing a technicality, EA accused Ludlow of breaching its terms and conditions, confiscated all his assets, and blocked him from the game.

Ludlow moved to another virtual world, Second Life, and documented his experience in a book. Today, he is a contract philosopher at Status, which develops web3 communication and Internet browsing products.

Bearing witness to the metaverse from its earliest beginning in text-based games to its latest iteration, Ludlow has a vision of where it should be heading.

One central theme that guides this vision is that “people are going to keep learning the painful lesson that there's no way for a platform moderator to police a virtual world,” he said.

On the Lack of Imagination

Second Life had its golden years between 2005 and 2010. For example, in 2007, Coca-Cola launched an in-game contest to design a functional vending machine. In 2008, CNN and Reuters established virtual offices there. There were dozens of digital twins for real-life university campuses, and every major brand wanted to show off in the virtual world.

“All that they were trying to do was to create simulacra of the ‘real world,’ products in the virtual world,” said Ludlow, “I was critical to all of it.”

Ludlow thought that brands “misused the technology, as they lacked imagination, played it too safe. Why would Nissan build a simul to their car when they could have built flying saucers or magic carpets?” he said.

While Sims Online and Second Life still attract thousands of active users, the word “metaverse” today may conjure blockchain-based platforms like Decentraland, Sandbox, or remind everyone of Mark Zuckerberg’s multi-billion dollar endeavor to transform Facebook into Meta.

The metaverse veteran is not impressed.

“If you went from something like Second Life in 2003 and stepped into Decentraland, you'd say, ‘Wow, this is a step backward to the technology,’” said Ludlow, arguing that in terms of graphics, communities, and gameplay, the original virtual realities were more advanced than the current ones.

Brands’ approach to the metaverse hasn't changed either.

“Everyone says, ‘Well, I don’t want to miss out on this NFT thing, but they are not leveraging the creative possibilities.. They are just cutting and pasting from the real world to the virtual space’” he said, asserting that he doesn’t see anything “interesting” so far in the brands' NFTs space.

Ludlow does not believe brands' presence in virtual worlds is a signal for adoption. Big corporations exited Second Life as fast as they entered it.

Read more: The Sandbox’s U.S. Chief Mathieu Nouzareth Wants To Build The Metaverse With You

“When there is a new technology, major brands feel they have to be there in case it takes off,” he said. “If it doesn’t they just pull the plug.”

Another fatal mistake of many contemporary metaverse projects is their fixation on avatars and three-dimensional worlds. Some of the most critical decisions and community management discussions in Sims Online and Second Life did not happen inside the game but in public forums and private chats.

“This is why I considered Facebook's transformation into Meta is extra stupid,” he said, arguing that Zuckerberg’s new vision is a regression rather than a step forward. Ludlow says that people do not usually present themselves online as dragons or wizards. There are few instances when they need an alternate persona. Most of the time, they spend their lives in online meetings, in front of cameras or writing online.

“We are already living in the metaverse,” Ludlow declared. Second Life, Decentraland, Sandbox and the other future virtual worlds will be only parts and corners of it.

The Big Question of Governance

Aside from his fierce criticism, Ludlow does recognize the advances in the new metaverses: the use of blockchain and the promise of decentralization.

Researchers, journalists and entrepreneurs have written volumes on the decline of Sims Online and Second Life. There were many problems with its scalability, as they could not deal with the influx of new players at their all-time highs. There were also many problems with governance, as companies were facing a myriad of legal and ethical issues that they needed to be equipped to deal with.

Can blockchain technology solve all these issues?

Ludlow argues that the current state of blockchain technology may not solve the problem of scalability. Centralized systems remain superior in accommodating large numbers of users, and he hopes advancement in technologies will make decentralized ones more robust in the future.

However, he acknowledges that blockchain governance seems more promising than the old centralized systems. When Electronic Arts cracked down on The Herald, Ludlow found a way to minimize the damage. He used an online exchange that took his Simoleons and swapped them for Linden Dollars, the virtual currency used in Second Life. He had to trust a third party to swap his digital currencies, and it worked.

What if Second Life was built on blockchain? These currencies would have been crypto, and he could swap them without the intermediary. Perhaps he would have also kept his property and cats.

Ludlow identifies the main problem of governance in a straightforward question: what do you do about troublemakers in the space? The history of centralized metaverses shows that companies usually favor the “Finger of God” approach, where they try to take control and resolve issues. Ludlow says this approach is futile. Users can always create new avatars and alter personas. Scammers usually operate multiple accounts and shift between different identities. “It is almost impossible to ban a person from a virtual world,” he concluded.

In the hay days of Sims Online and Second Life, the community developed many tactics to punish troublemakers. Vigilants teamed up under the command of organic community leaders and found ways to punish scammers. Good samaritans orchestrated attacks on scammers and mafias to reduce their in-game reputation and, in some cases, even confiscate their properties and return stolen items.

They could have been better tactics, but they were usually more efficient than what many company-hired moderators could ever achieve.

A Vision for the Future

Ludlow’s book, and the Herald’s archive, serve as cautionary tales on the woes of virtual worlds and gold mines for anthropologists and researchers of virtual worlds. But some of his other writings were more prophetic and futuristic. In 2001, Ludlow edited a book titled “Crypto Anarchy, Cyberstats, and Pirate Utopias.”

Back then, the word “crypto” was used more in the context of cryptography. There were discussions on “anonymous digital cash” as a means of transactions and theories about an Internet resistant to censorship.

“I think that vision (in the book) ended up being truer than anyone imagined, right?” he said.

So how does he envision the perfect metaverse of the future?

It will be one that leverages blockchain technology for governance. This would include creating immutable archives for the “sacred documents” and personal identifications so no authority can tamper with them. Moreover, the infrastructure would have no single point of failure. There will be distributed ledgers among our computers and laptops, and no system will rely on one server farm in a remote desert owned by a corporation.

In his metaverse vision, there will be a need to vote on certain decisions, in which all people have equal votes, regardless of how many governing tokens they own. The process would require a technical development that allows user biometric data verification tied to a non-transferable token unique for every person while keeping their anonymity.

Ludlow’s vision for today is not fundamentally different from what he wrote 20 years ago. But much has changed since then. His book on crypto anarchy was published eight years before the invention of Bitcoin and a couple of decades before venture capitalist Balaji Srinivasan popularized the concept of network states and Open AI’s CEO, Sam Altman, introduced his biometric cryptocurrency Worldcoin. But Much has changed since then.

“It is entirely feasible now, something I didn't think 20 years ago, that eventually, blockchain-based communities will replace things like nation-states,” he said.

Correction: This story was corrected June 6, 2023 to refer to Sims Online throughout rather than SimCity