Imagine this: Anya, a talented digital artist, poured her heart into creating stunning NFT landscapes within Horizon Worlds. Her virtual gallery was booming, drawing in patrons and bringing in sales income. She only required a few thousand dollars to hire someone to help her upgrade her software and needed loans for small businesses to expand her business. Sadly, MetaCredit rejected her application—not because of her credit score, but because their proprietary algorithm identified her avatar’s erratic social interaction metrics. In other words, she wasn't popular enough.

While Anya’s story is fictional, it depicts a future that feels chillingly plausible. In this metaverse, your digital avatar is in charge of your monetary fortune. We’re way past just discussing the merits of purchasing virtual land. We’re not being apocalyptic, we are serious about the massive new algorithmic overlord that would be birthed from the convergence of Meta and private credit.

Avatar Data Equals Creditworthiness?

Private credit firms, facing reluctance from traditional lenders due to the metaverse's perceived risk, are forging ahead with novel underwriting methods. FICO scores are out; your avatar’s digital footprints are the new collateral. Think about it: how long you spend online, which virtual events you attend, who you interact with, even your emojis. All of it is data food for MetaCredit’s black box algorithm.

That data is pumped into undisclosed algorithms which churn out a “MetaCredit score.” A single score that now governs your ability to acquire a loan, set an interest rate, or even gain access to different opportunities in the metaverse.

  • In-game performance: Are you a top player? Do you win consistently?
  • Avatar behavior: How often do you socialize? What kind of language do you use?
  • User retention rates: How often do you return to a specific platform?
  • Cross-platform interoperability: Are you active across multiple metaverse worlds?

On its face, that sounds really futuristic, perhaps even a bit rad. However, once you dig a little deeper, a more insidious story comes to light.

Remember the housing crisis of 2008? These subprime mortgages were then bundled together into complicated and misleading securities that concealed their risk and eventually crashed our economy. We’ve seen this play out in multiple iterations—private credit is often opaque, metaverse assets are still unclear. Together, these factors are the perfect storm for another disastrous roll out.

Algorithmic Bias: Redlining 2.0

The risk is more than economic collapse, it is causing a moral injustice. Algorithms learn from real-world data, so if that data is biased, the algorithm will just continue that bias and amplify it. As with any algorithm, MetaCredit’s algorithm is trained on data that inherently favors certain demographics or social circles. This community bias will result in entire communities being redlined in the metaverse, blocking them from accessing capital and economic opportunity.

Imagine this: your avatar’s skin tone and perceived gender may impact your future MetaCredit score. Even the virtual hood you’re “from” can have an impact! The promise of a democratized metaverse seems like a bad joke. This system as proposed would have a disproportionately detrimental impact on marginalized communities in the metaverse, replicating real-world racial biases that plague unsecured credit scoring.

The lack of transparency is terrifying. For one, we have no idea how MetaCredit’s algorithm works, what data it uses, or how conclusions and decisions are made. Given that there’s no appeals process, no way to challenge a negative score. Production-related changes aside, you are constantly at the mercy of a black box.

Now major private credit firms such as KKR, Apollo and Blackstone are tokenizing portions of their portfolios on blockchain platforms. They’re developing “on-chain credit vaults,” essentially fractionalizing metaverse-connected lending contracts. This introduces much needed liquidity to the market, but it raises serious questions about who is in control.

Who Controls Your Digital Future?

To support the metaverse, such an advanced financial infrastructure will be required. This comprises setting up digital equivalent of credit rating, ahead cross-platform borrowing guidelines, and insolvency procedures for defaulting worlds. Private credit is poised to pioneer this infrastructure, potentially transforming itself from a lending alternative into a meta-monetary authority that shapes the financial landscape of virtual worlds.

Is that really the future we want — where unelected, unaccountable private credit firms get to decide what the financial rules of the metaverse should be? A dystopia in which your digital persona is used as a weapon against you?

Here's the unexpected connection: we've seen this movie before. Financial instruments flourishing without regulation The lure of promises made through easy credit are widespread. The opacity of all of these transactions is similar to the ominous warnings that preceded the 2008 catastrophe.

The future of the metaverse is still to be written. It's up to us to shape it. We need to push for more transparency and individual control over personal data, so that we don’t leave our fortunes to the whim of MetaCredit’s unclear algorithm. Don’t allow your avatar’s data to shape your future.

What can we do?

  • Demand transparency: Push for regulations that require MetaCredit and similar platforms to disclose their algorithms and data practices.
  • Support decentralized alternatives: Champion open-source, decentralized finance (DeFi) solutions that prioritize user privacy and control.
  • Advocate for data ownership: Fight for the right to own and control your own data within the metaverse.

The future of the metaverse is not predetermined. It's up to us to shape it. We must demand greater transparency and control over our data, before MetaCredit's secret algorithm decides our fate. Don't let your avatar's data control your future.