nderstanding the Metaverse and Web 3.0
11 JAN 2022
TOPICS: DIGITALIZATION | TECHNOLOGY DRIVING INNOVATION

The “metaverse” has captured the imagination of technology investors, but what is it, and what does it signal for the next era of computing? In the latest episode of Exchanges at Goldman Sachs, Goldman Sachs Research’s Eric Sheridan examines how the blending of elements of the physical and digital worlds via virtual reality, augmented reality, gaming and immersive online communities is contributing to the rise of a more decentralized Web 3.0.

Even stodgy big-bank commentators are finally acknowledging the critical connection between the blockchain and metaverse. For instance, Goldman Sachs analysts led by Rod Hall asserted that blockchain technology is central to the development of the metaverse and is the only technology that can “uniquely identify any virtual object independent of a central authority.”

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Decentraland is a traversable 3D world that’s truly decentralized. In other words, it’s not controlled by a central organization — that’s part of what makes the metaverse so appealing, really.

This doesn’t mean that there aren’t rules, though. There’s a currency economy based on the MANA token. The crypto is primarily used to buy “in-world” goods and services, but it serves other purposes as well.

Blockchain technology is central to the development of the metaverse and Web 3, Goldman Sachs said in a research report.

It is the only technology that can “uniquely identify any virtual object independent of a central authority,” and this ability to identify and track ownership will be crucial to the functioning of the metaverse, analysts led by Rod Hall wrote in a note published on Dec. 14.

For Web 3, blockchain allows for the “partial elimination of centralized control,” the note says. In the future, users will be able to log in without the need for a third party, such as Meta, Google or Apple, the note adds.

Web 3 is the third generation of internet services which have been made possible by decentralized networks.

Goldman analysts feel that cryptocurrency is just the beginning for blockchain. Since 2017, blockchain has spread from the banking sector to more distributed applications across multiple verticals, such as communication and media and manufacturing, they note.

The Wall Street bank sees blockchain as the one of the most disruptive technology trends to appear since TCP/IP and HTML “ushered in the internet in the 1990s.”

“Investment implications are hard to predict at this juncture, but companies who are dependent on centralized control of user identity will likely find their business models challenged by the adoption of blockchain,” the report added.

The metaverse is an immersive digital world created by the combination of virtual reality, augmented reality and the internet.

One of the biggest endorsements for the metaverse came earlier this year when social media giant Facebook decided to rebrand itself to Meta, as a sign of its future focus.

Meta (formerly Facebook) also announced that it was planning to hire 10,000 staff in the European Union to develop its metaverse.

JPMorgan, the largest bank in the U.S., said it has become the first lender to arrive in the metaverse, having opened a lounge in Decentraland, a virtual world based on blockchain technology.

As well as the unveiling of the Onyx lounge (the name refers to the bank’s suite of permissioned Ethereum-based services), JPMorgan also released a paper exploring how businesses can find opportunities in the metaverse.

"There is a lot of client interest to learn more about the metaverse,” Christine Moy, JPMorgan’s head of crypto and the metaverse, said in an email. “We put together our white paper to help clients cut through the noise and highlight what the current reality is, and what needs to be built next in technology, commercial infrastructure, privacy/identity and workforce, in order to maximize the full potential of our lives in the metaverse.”

Blockchain applications in health care for COVID-19 and beyond: a systematic review

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The most common platforms used were Ethereum and Hyperledger. Blockchain technology has numerous potential COVID-19-related and non-COVID-19-related applications in health care. However, much of the current research remains at the technical stage, with few providing actual clinical applications, highlighting the need to translate foundational blockchain technology into clinical use.

The nakedly QAnon conspiracy theorists got in on the act, too. “New Zealand’s pro-tyranny PM Jacinda Ardern is filmed coming out of the globalist Death Star financial headquarters at BlackRock,” gurgled one prominent QAnon account on Gab, the social network beloved by the far-right. Endless comment threads filled with the usual screeds of invective, dystopian fantasy, casual comparisons to Nazism and a big serving of misogyny. Naturally, New Zealand’s own disinformation groups eagerly shared it.

But just how insidious and secretive was Ardern’s BlackRock visit? So insidious and secretive that you can find evidence of it on, well, her own Facebook page on the day it happened.

When it comes to meetings that determine the trajectory of global development, the first half of June was a busy time. The G7 Summit was held in Bavaria, and the Bilderberg Club conducted its annual meeting next door in Austria on June 14. Many of the participants in that club’s meetings carry more weight than the presidents and prime ministers from the Group of Seven. We know that each year, the presidents and chairmen of the boards of directors of banks and corporations with impressive brand names like JPMorgan, Goldman Sachs, Morgan Stanley, Deutsche Bank, Lizard, Banco Santander, HSBC, Royal Dutch Shell, British Petroleum, Alcoa, Google, etc. all meet as part of that club. Those brands are household names, and there is no denying the economic and political influence these banks and corporations wield all over the world.

But some attendees of Bilderberg Club meetings represent organizations whose names mean little to the public. But that’s not because those organizations are less influential than Goldman Sachs, HSBC, or Royal Dutch Shell. On the contrary, their impact is often even greater, although they avoid the limelight. And that’s true, not only during meetings of the club, but also in everyday life. Organizations like this are rightly known for working «behind the scenes».

In particular, Philipp Hildebrand, a vice chairman at BlackRock, made his appearance as one of the 140 participants at the meeting in Austria. Philipp Hildebrand is a man «widely known in narrow circles». A glance at his track record shows that in the past he has held positions such as IMF director for Switzerland, chairman of the Governing Board of the Swiss National Bank (SNB), director of the Bank for International Settlements (BIS), and so on. And now he is a vice chairman at this little-known organization called BlackRock. But I would suggest that Blackrock’s influence is every bit as significant as JPMorgan, Goldman Sachs, and Morgan Stanley put together. In the past I have written that BlackRock is one of the Big Four – a group of huge financial holding companies that control many sectors of the economy in the US and abroad. Other members of the Big Four also include: the Vanguard Group; State Street Corporation; and FMR Corporation (Fidelity). Here is a brief sketch of BlackRock.

The company’s very name, «black rock», is probably intended to convey an image of strength and solidity. In a recent article titled «The Wars of Wall Street» (May 13, 2015), Russian strategic analyst Elena Larina wrote: «…behind every well-known bank on Wall Street stand even more powerful and unregulated institutions. Those are asset management companies. The biggest and most mysterious of them is the BlackRock corporation headed by Larry Fink. Currently it manages assets – the vast majority of which are stocks – worth more than $4.5 trillion. Just one figure – $36.5 trillion – gives an idea of the extent of the firm’s predominance, and that number is slightly less than the capitalization of this company that is included in the S&P 500, meaning that BlackRock controls a significant part of corporate America».

BlackRock (BR) is an international investment company headquartered in New York (USA). At the end of 2013 it had $4.57 trillion in assets under management. By mid-2014, those assets had grown to $4.77 trillion. Some experts believe that BlackRock controls more assets than any of the other Big Four firms.

BlackRock is the youngest of the Big Four, founded in 1988. It has literally only been in the market for a quarter century, but has soared to heights beyond the reach of other companies. The company has a global presence, with 21 investment centers and 70 offices in 30 countries and with clients in 100 countries.

And unlike the family-owned FMR, BlackRock is a public corporation with shares traded on the stock exchange. The principal owners of BR, if one can trust Wikipedia, are Bank of America (34.1 %), PNC Financial Services (24.6 %), and Barclays PLC (19.9 %). But that information is likely out of date. NASDAQ claims that as of Dec. 31, 2014, BR’s biggest shareholders (share capital, %) were: PNC Financial Services – 20.98; Norges Bank Investment Management – 7.15; Wellington Management Co. – 6.38; FMR – 4.16; Vanguard – 3.89; State Street – 3.43; and BlackRock Institutional Trust Company (BRITC) – 1.98. In additional to institutional investors, mutual funds also hold shares of BlackRock, as is typical. Almost every member of the pantheon of the Big Four is included in the top ten of these funds (six from the coterie of Vanguard, two from FMR, and another two have to be looked at separately).

The biggest institutional shareholder is PNC Financial Services – an American financial company with $345 billion in assets at the end of 2014 and headquartered in Pittsburgh. But when we look at who owns PNC Financial Services, it appears that its five largest institutional investors include three of the Big Four. That would be Vanguard, State Street, and BlackRock Institutional Trust Company (BRITC). The last of these companies is a division of BlackRock – part of its empire.

And the third largest institutional investor – Wellington Management Co. – is very closely linked to another member of the Big Four, the financial company Vanguard. Perhaps the only one of BR’s institutional investors that is relatively independent of the Big Four is the company Norges Bank Investment Management – a specialized division of the Norwegian central bank, which is responsible for investing the Pension Fund of Norway in the financial markets.

Individual shareholders, primarily those who serve as the company’s senior managers, also invest in BlackRock. The five biggest individual investors own shares equal to 1.16% of the company’s capital (as of April 2015).6 The key figures in BlackRock’s management are: Laurence D. Fink – founder, chairman, and CEO; Robert S. Kapito – founder and co-president; Charles Hallac – co-president; and Susan Wagner – founder and member of the board of directors.

It is worth noting that BlackRock has the smallest staff of any of the Big Four companies – numbering only 11,500 (in 2013). That works out to over $400 million in managed assets per BlackRock employee. That figure is beyond the reach of other companies and organizations in the American financial sector.

Like the other Big Four companies, BlackRock owns a capital stake in the leading banks on Wall Street. But the company also has an appetite for European banks. In December 2009, BlackRock purchased Barclays Global Investors for $13.5 billion. As we see, BlackRock has a very intimate relationship with Barclays bank. That bank, by the way, took first place in a ranking created by the Institute of Technology in Zurich. The Rothschild-led Barclays Bank also held some staggering positions during the global financial crisis.

Suffice it to say that in 2007, Barclays was the biggest institutional investor in some key Wall Street banks, such as Bank of America, JP Morgan Chase, Citigroup, and Bank of New York Mellon. Plus, Barclays was the second largest institutional investor in the US bank Wells Fargo. Incidentally, Barclays also held strong positions in many non-US banks. It is worth noting that BlackRock was as a major shareholder in those same banks as well (although not as significant a figure as Barclays). It could also be seen that BlackRock and Barclays seemed to work in tandem, but their codependence was not easy to establish.

It can be difficult to figure out which end is the dog and which end is her tail and who is controlling whom. Is Barclays directing BlackRock or is BlackRock running the bank? But most experts are inclined to believe that it is BlackRock that is dominating the famous Barclays bank, which has always been associated with the Rothschild family. Therefore, a correction can be made to the Swiss rankings, in order to take into account BlackRock’s purchase of Barclays. The Swiss list of top ten companies did not previously include BlackRock, but now it can be added with confidence. If BlackRock assumes Barclays’ place, that will put it right at the top. The company is very influential, publishing the credit ratings of countries all over the world. According to its January 2013 rating, the most creditworthy country is Norway, followed by Singapore, Switzerland, Sweden, and Finland. BlackRock awarded the United States only 15th place.

Of course BlackRock’s interests are not limited to banks. It buys shares in a wide spectrum of industries in different parts of the world. We have talked about how Fidelity owns a 7% stake in the world-famous company Google. And the second largest investor is BlackRock with 5.7%. NASDAQ provides information about the investment activity of several major divisions within the BlackRock financial holding company: BlackRock Group Ltd. (BRG), BlackRock Institutional Trust Company (BRITC); and BlackRock Fund Advisors (BRFA). See table 1.

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And so, many banks and companies that are represented at the annual meetings of the Bilderberg Club, are, to a greater or lesser extent, dependent on BlackRock. If Philipp Hildebrand spoke at the current conference, then I am sure the other attendees listened to him with particular attention and respect. For this reason, one of the best-informed people in the world, former Fed chairman Paul Volcker, once called BlackRock the most powerful financial corporation in the world.

However, spokespeople for both firms told Reuters that, while they do appear to own significant shares in the world’s biggest businesses, those shares are purchased using money belonging to their clients – and therefore the shareholders are ultimately their clients.

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VOTING RIGHTS
Both Professor Edmans and Franklin Allen, a professor of finance and economics at Imperial College London (here), told Reuters they did not believe people should be concerned about Vanguard and BlackRock having significant shares in large companies.

Meanwhile, Professor Pavlova said a concern could be that the two companies “may not accurately represent client preferences” when voting in invested companies on their behalf. She also acknowledged that both “try to be transparent in how they vote (by) publishing this information”.

As company shareholders, BlackRock and Vanguard can vote on behalf of their clients at company shareholder meetings. Both firms also have “investment stewardship” functions, which enables the proxy votes.

BlackRock’s spokesperson said the votes can also be carried out by a portfolio manager – and in some cases at BlackRock, can be carried out by the clients themselves (here).

Working to expand proxy voting choice for our clients

BlackRock’s role is to help our clients achieve their long-term financial goals. Core to this is the fact that the money we manage is not our own; it belongs to our clients. We work hard to stay ahead of our clients’ needs by delivering them the widest set of choices across everything we do so they can choose what works best for them.

Our view is the choices we make available to clients should also extend to proxy voting. We believe clients should, where possible, have more choices as to how they participate in voting their index holdings.

Beginning in 2022, BlackRock is taking the first in a series of steps to expand the opportunity for clients to participate in proxy voting decisions where legally and operationally viable. To do this, BlackRock has been developing new technology and working with industry partners over the past several years to enable a significant expansion in proxy voting choices for more clients.

Much like asset allocation and portfolio construction, where some clients take an active role while others outsource these decisions to us, more of our clients are interested in having a say in how their index holdings are voted. We want to provide choice to these clients while continuing to support those who have selected BlackRock’s industry-leading investment stewardship team to vote on their behalf.

These voting choice options will first be available to institutional clients invested in index strategies – within institutional separate accounts globally and certain pooled funds managed by BlackRock in the U.S. and UK. Approximately 40% of the $4.8 trillion index equity assets we manage1 for our clients will be eligible for these new voting options.

While we are offering clients more choice in how their index holdings are voted, BlackRock Investment Stewardship (BIS), our independent investment stewardship team, remains central to BlackRock’s fiduciary approach. In seeking client feedback to develop this capability, we heard that many clients want BIS to continue voting on their behalf, while we also heard from clients interested in greater participation in proxy voting.

Since its inception two decades ago, BIS has grown to be one of the largest investment stewardship teams in the asset management industry. This reflects the importance we place on engaging with the boards and management of the companies that we invest in on behalf of clients, advocating for sound corporate governance and sustainable business models to support long-term financial returns. BIS is also an industry leader in providing transparency regarding our stewardship efforts. Learn more about BlackRock’s commitment to Investment Stewardship and find information on BIS policies, corporate engagement, and proxy votes.

BlackRock is committed to exploring all options to expand proxy voting choice to even more investors, including those invested in ETFs, index mutual funds and other products. This initiative will require the cooperation of additional partners across the investment and proxy voting ecosystem. In certain instances, it will also require regulatory and operational system change.