Editorial: Why I Think High Fidelity is Doomed

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Look, I realize that I have been exceptionally cranky lately when it comes to High Fidelity. The company is just trying so hard to make its remote teamwork social VR platform a thing, but, sweet minty Jesus, I think they are failing (and flailing) big time.

I follow the High Fidelity corporate Twitter account, and this morning, somebody posted the following tweet:

Clicking through takes you to the High Fidelity Marketplace, where you can pick up Piper Peppercorn’s virtual coffee mug for 25 HFC (High Fidelity Coin):

So, the thinking here is something along the lines of: “Hey, we want to get people visiting and using High Fidelity, so I have an idea! Let’s promote various items from the Marketplace on Twitter! Somebody will want that coffee mug so much, that they will:

  • download and install the High Fidelity client software;
  • create an avatar;
  • go shopping on the High Fidelity Marketplace and buy that coffee mug.”

I’m sorry, but that is a completely insane expectation. Between tweets for various objects for sale like this coffee mug and a scarf (yes, a scarf!), and numerous generic tweets about the joys and benefits of remote working, I am seriously starting to wonder what the hell is going on:

High Fidelity should stop trying to promote remote teamwork in general, and start focusing squarely on selling their platform. They are not going to convince any company to try using remote workers through these ineffective tweets. If they think this will actually make any sort of difference with executive decision makers, they are sadly mistaken.

The virtual coworking island cam fiasco is a perfect example of a company seemingly completely adrift, without any clear indication that they know what to do, or how to market themselves. It took two days—two days—for the company to even notice that its livestreams had no audio. And the livestreams hardly showed off the platform in its best light, even though they have some innovative product features such as spatialized audio. Nobody is going to watch these videos and think, “Hey, this is cool! I want this for my business!”

High Fidelity is one of the clients of a professional PR company, called Firebrand Communications; do they not listen to their advice at all? Or is this the best advice they are being given at this point? (One blog reader astutely pointed out that any good PR company would be monitoring mentions of their clients on social media and blogs, and stepping in when somebody posts highly critical, deeply negative blogposts like I have written about High Fidelity recently. That’s what PR companies do.)

High Fidelity is a sinking ship, and it just breaks my heart. I’m just going to come right out and say this: I now believe that the company is doomed. Their user forums are a virtual ghost town (nobody has posted anything for a week now, a troubling sign). Many people, like Jason Moore of the MetMovie Project, have abandoned HiFi for other social VR platforms. You load up the HiFi client and visit, and except for a few events like the weekly salon hosted by DrFran, the platform is empty.

High Fidelity is a case that should be studied at university business schools of how not to treat your existing userbase, and how not to promote yourself to try and get new customers. High Fidelity desperately needs help, particularly when it comes to marketing and public relations, and I’m not sure that they are going to get that help before they run out of the millions of dollars of venture capital they received, and simply close up shop.

So, what do you think? Please feel free to leave a comment below or, as always, you are welcome to join the freewheeling conversations, arguments, and debates about social VR and virtual worlds taking place on the RyanSchultz.com Discord server, the first cross-worlds discussion forum! We’d love to see you there.


Guest Editorial: What’s Wrong with High Fidelity

The following guest editorial is by Dale Glass, who had an interesting perspective on the economics of the social VR platform High Fidelity. I asked him to write up his thoughts to publish on my blog, and here they are:

What’s Wrong with High Fidelity

by Dale Glass

I showed up at High Fidelity a some months ago, looking for greener pastures. Second Life isn’t living up to its potential in my opinion, so I started looking for alternatives. I checked out several, and HiFi is the one I fell in love with. The source code is available, the system is far more flexible than SL, it actually supports VR, JavaScript is far more sane than LSL, the community is amazing… but unfortunately, there had to be problems.

I quickly found the Federated HiFi Users Discord, and one of the first questions I had to ask was: “This is very neat, but how is it going to make any money?”. Not only is HiFi free to use, but it’s pretty much impossible to give the company any money if you wanted to.

High Fidelity is a bizarre thing for a business to make. If it had been named something like “Open Metaverse” and was run by a volunteer group, it would have made perfect sense. The very structure of HiFi seems to be made to resist corporate interests and to be usable by a group of random people spread around the globe. The entirety of the source code is open, the architecture is distributed both for hosting domains and assets, and the local currency is a cryptocurrency. Now, none of those things are in the most anti-business state possible (for instance, HiFi has exclusive control over the cryptocurrency), but it’s not a terribly business-friendly design either. Normally such designs come either from projects that are Open Source or Free Software from the start, or from projects that normal people aren’t expected to be interested in paying for anyway and that expect primarily corporate clients, like databases. But HiFi decided to try to target the average person at first, and that’s where things get weird.

The main issue for High Fidelity in its original incarnation is that there is no business plan in sight whatsoever. Accounts are free. Charging for hosting content won’t work because domains are self-hosted, and so are assets. And skimming off user-to-user transactions isn’t a viable plan because it requires a huge, thriving economy which has yet to materialize, and that the company doesn’t seem to be trying very hard to support.

Compare this with Second Life. I used to think that SL’s model of selling people virtual land was a weird idea that should be done away with, but now I think that it was actually a stroke of genius. Virtual land provides a huge incentive for people to reliably pay a fixed amount into Linden Lab’s coffers, and businesses just love that sort of periodic, predictable payment. And the way SL land works provides an incentive to buy more of it: right after you buy your first parcel you find out you have limited space and prim counts, and start thinking: “if only I had a bigger one…” Even SL’s deficiencies work in its favor here. Should one want better frame-rates or a bit more privacy, it’s possible to build in the sky. But most people want to keep something on the ground, so that of course that quickly eats into one’s prim limit, which adds yet another reason to give LL even more of your money. And there’s just that people can see how big your parcel is, so having a large one can certainly be a point of personal pride. SL’s model very nicely reproduces the impetus to keep up with the Joneses.

The benefits of this model don’t end there – Second Life land allocation corresponds directly to server usage, so as the user base grows or shrinks payments and the needed resources stay in sync with each other. And since the payments are periodic and automatic, Linden Lab also derives some benefit from people who pay for resources and then forget to use them.

Of course, Linden Lab also took care of ironing out any issues that got in the way of making money – such as stopping the fluctuations of their currency, and making it as convenient as possible to get money into and out of Second Life.

This is why despite being old, not making the news anymore, and slowly shrinking, SL is still chugging along and doesn’t seem to be in any kind of imminent danger.

So let’s review how High Fidelity could possibly make money from the way things are right now:

Accounts? No, accounts are free. And in the current state, nobody would pay for one.

Hosting? No, HiFi delegates that entirely to users. It’s the likes of Amazon and Digital Ocean that make the profit here.

Registrations? True, HiFi does charge $20 per year for place names. But I can’t imagine this paying for much more than HiFi’s coffee budget. There are way too few domains around for this to amount to anything.

Charging an amount for converting USD to and from HFC? They already do so, and this is often the suggested solution to HiFi’s woes, but it’s not viable. Let’s suppose HiFi taxed transactions at 20% (which would be very excessive and cause people to transact outside of HiFi). Let’s also suppose that an employee can be had for $50K/year (which would be unrealistically cheap in California in my understanding). Then it would take 416 people, using $50 worth of HFC each and every month to pay for that single person. Supposing HiFi could exist with just 20 employees (the current team page has 60 people), that would require it having 8,320 such users. People with such an intense desire for virtual goods are going to be very rare, meaning the number of active users in such a scenario would be far higher, probably at the very least in the hundreds of thousands. With HiFi currently being deserted and not growing any, this is a completely unrealistic expectation.

Then there’s HiFi’s attitude towards all of this. Even if HiFi suddenly became popular, for some strange reason the company seems intent on making it as hard as possible to give it any money. Buying HFC involves making an appointment (!), and even then you can’t pay for it the normal way: the company wants to be paid in Ethereum (!!). It boggles the mind that in 2019 a company working with the very latest VR technology is using a banking model out of the previous century, except for the cryptocurrency part, which while very modern isn’t particularly convenient. This of course puts a brake on what little economical activity there is in it, because even to get started one needs to find a cryptocurrency exchange, register, and prove your identity to it. I have paid another HiFi user and it was easier and faster to do it through their forgotten Second Life account. The fact that the state of HFC is so bad, that the best thing to do is to ignore it entirely, isn’t good.

So, that’s how things are. HiFi in its current incarnation doesn’t have a working business model, doesn’t seem to be making any real progress towards one, and is oddly apathetic about the one way it has of earning some cash. They are pivoting now and changing track to something else entirely, but it makes one wonder how they expected the old model to work out.

Thanks, Dale! Not too long ago, I had written about somebody saying that High Fidelity was making it difficult to give them money, but I couldn’t remember who first voiced that idea. It was you! It was such a succinct and memorable phrase that it stuck with me.

BINGO EXTREMO: Drag Queen Bingo in High Fidelity!

Well, this evening’s BINGO EXTREMO event at High Fidelity was well attended, with 150 avatars playing several successive games of Bingo for prizes of Oculus Rifts, HTC Vives, sums of HFC (High Fidelity’s in-world currency), or (twice) everybody present winning 100 HFC! In a surprise twist, our emcee was none other than London drag queen Lady Camden:

There were a few technical glitches (some people’s numbers wouldn’t rez on their Bingo cards, and the sometimes the board showing which numbers were called was too blurry to read), but overall, the event was a success.

High Fidelity seems to have truly mastered the ability to host events with a large number of avatars present. Congratulations to Philip Rosedale and his team for another successful Bingo night!

High Fidelity Begins a Pilot Test of Trade Between Its High Fidelity Coin (HFC) and Ethereum (ETH): Will This Step Jumpstart Its Economy?


High Fidelity is the first of what I call the “Big Five” social VR platforms (i.e., HiFi, plus Sansar, Sinespace, VRChat, and AltspaceVR)  to set up a blockchain-based in-world currency, called High Fidelity Coins (HFC). On January 8th, 2019, High Fidelity announced that it would begin testing the trade of High Fidelity Coin and Ethereum (ETH; a popular cryptocurrency):

Initially, we will allow users to purchase HFC using ETH. We will conduct trades of HFC in fixed amounts equivalent to $25 or $50 (HFC 2,500 or 5,000). Since HFC is a stablecoin pegged to the US Dollar, while Ethereum varies against the Dollar, the exchange rate between HFC and ETH will fluctuate.

We are currently allowing creators and performers that have earned in-world currency to sell their HFC for payment directly for USD. These trades are handled in-person with High Fidelity staff. As we enter the New Year (2019), we will begin offering automated tools to support selling HFC for ETH.

As we’re still learning about trades for ETH, we’ll begin by scheduling in-person (in-world) trades for users buying HFC with ETH. A High Fidelity banker will specify an Ethereum wallet to deposit your ETH to pay for the trade. You’ll receive HFC from the bank on the successful completion of your trade. You can schedule an appointment here.

If you’re new to the world of blockchain trading, you can learn more about one of the more common trading platforms (Coinbase) here. You can learn more about the steps required to set up a wallet for payment here.

Over time, we see this being our primary method for purchasing and selling HFC. It’s convenient, global, well-governed and broadly adopted. In future, we may enable trades to other cryptocurrencies or tokens, either directly or through third-party exchanges. We also hope that HFC will be used by other VR platforms or applications, making the transfer to Ethereum even more useful.

High Fidelity also published a list of Frequently-Asked Questions (FAQ) about this move:

Who can trade HFC and ETH?

All High Fidelity users will be able to buy and sell their HFC for ETH. An ETH wallet will be required.

What is the HFC to ETH exchange rate?

HFC is pegged to the US Dollar. US $1 = HFC 100. Since the value of ETH floats against the Dollar, the value of High Fidelity Coin floats against Ethereum in turn.

Why is HFC a stablecoin?

Speculation in High Fidelity Coin as a cryptocurrency would be counter to our goal of creating a thriving economy in High Fidelity. If the real world value of HFC changed unexpectedly for non-economic reasons, the potential rewards for creators and those working in High Fidelity would become unpredictable, discouraging users to hold and trade with the currency. We want people to know they can cash out their HFC at any time for a fixed real-world value.

Can we still trade directly for US Dollars?

Yes, but this may be discontinued in 2019.

Will you start trading HFC for Bitcoin?

In future, we may enable HFC trading for other cryptocurrencies, including Bitcoin.

Why aren’t you just using ETH in the first place?

High Fidelity has developed its own cryptocurrency, HFC, since traditional blockchain currencies are not suitable for a virtual world environment. Specifically, ETH is more of an asset class than a stable trading currency. Its value varies over time, making it difficult for traders to use the currency in fair exchange for goods. Additionally, HFC trades more quickly and without built-in transaction fees. Currencies that rely on a proof of work method to generate and confirm blocks (e.g. Bitcoin) currently require too much time to be used as a real-time transactional currency.

This is uncharted territory for High Fidelity, and a step not without some risk, despite their assertion that they want HFC to be a “stablecoin”. Many other social VR and virtual world platforms will no doubt be watching closely to see how well HiFi’s economy adapts to this change. High Fidelity is still having a bit of difficulty getting its economy off the ground, and encouraging content creators to make and sell products on its Marketplace, at least compared to the relative success of the Sinespace Shop and Linden Lab’s Sansar (where the Sansar Store now boasts well over 18,000 items on sale). Linden Lab and Sinespace currently have no plans to introduce cryptocurrency on their platforms, as far as I am aware.

Could this move backfire? Given the constraints that High Fidelity has put in place, it seems doubtful that this could fail. However, many Ethereum owners will likely hesitate before exchanging their hard-earned cryptocurrency to HFC. While HFC might prove a safe haven in the current bear market, it may also prove a trap in times when ETH is soaring in value. Frankly, blockchain-based virtual worlds are just too much of a risk for me to even contemplate investing a penny, and I would urge anybody who does to do every single scrap of their homework before investing in any cryptocurrency.