Web3, cryptocurrency, and the metaverse. What do these three things have in common, save the fact that they are all current technological buzzwords? The metaverse and cryptocurrency are linked by many software developers and investors and will be a part of Web3, a decentralized internet managed by individual users rather than by large corporations.
Although cryptocurrency (Bitcoin (CRYPTO: BTC) is the first of hundreds of cryptos) and the metaverse, which is essentially three-dimensional immersive virtual worlds, are two quite distinct things, they may become increasingly dependent on one another as they advance.
The Role of Blockchain in the Metaverse and Cryptocurrencies
Let’s begin with blockchain, a vital piece of technology that powers both cryptocurrencies and the metaverse. Blockchain is a public digital ledger that stores transaction data. It was first created by the person who created Bitcoin, Satoshi Nakamoto, and is currently utilized by other significant cryptocurrencies, such as Ethereum (CRYPTO: ETH). Peer-to-peer transactions using a blockchain network can eliminate middlemen (like a bank or IT company) from user interactions. In addition to other benefits, this can save costs and expedite transaction times.
Digital versions of conventional fiat currencies are still used for online commerce. To conduct business in a digital environment, the blockchain and the currencies based on it were created. Some people believe that metaverses, with their immersive services and 3D virtual worlds, employ blockchain technology to enable permission-free interactions between internet users.
Metaverse Shopping
Today, there are several 3D immersive worlds available, including video games with real-time player interaction. However, other definitions hold that unless these 3D worlds have a fully developed digital economy, they cannot properly be considered a part of the metaverse.
Users may buy digital goods from many of these games and services. This is a typical practice among serious video gamers. You may buy clothes and accessories to personalize your appearance in the game or boost your performance. A similar idea is used by cloud computing-based services, which offer a basic package that is inexpensive or free to use but hides premium or add-on capabilities behind a barrier.
Sound a little silly and unrealistic? The idea of shopping in the metaverse may also have applications in the actual world. Before making a purchase, customers might try on virtual versions of clothing in the metaverse. Jensen Huang, CEO of Nvidia, frequently discusses “digital twins” of real-world locales, which have enormous potential for corporations when developing and building real estate or organizing manufacturing operations. The same might be true for those who may visit a virtual replica of their house while considering a home renovation or trying out items.
NFTs, the metaverse, and cryptocurrency
This is where cryptocurrencies and apps created on a blockchain enter the picture with the possibility of e-commerce and social engagement. Direct peer-to-peer transactions over the internet carry the promise of cost reductions down to zero and rapid settlement of money. An NFT (non-fungible token) can be used to secure ownership of items. These items can be works of art, digital collectibles, or digital replicas of real-world purchases, like a pair of trainers from Nike (NYSE: NKE), which you can wear in the metaverse.
The metaverse is now mostly the domain of the video game industry and other creative start-ups, though. It’s important to note that the instability in the cryptocurrency market during the first half of 2022 has also raised questions about the metaverse and its sustainability as a full-fledged digital economy. Nevertheless, the following four early-stage initiatives are closing the gap between cryptocurrencies and the metaverse and are worth keeping an eye on.
1. The Sandbox
Users can develop and sell digital material within the game in the user-created digital realm known as The Sandbox. The cryptocurrency used in-game is called SAND, and it is based on the Ethereum blockchain network. On a variety of cryptocurrency exchanges, these tokens may be purchased and traded. As NFTs, SAND may be used to buy virtual land, buildings, equipment, and other commodities.
2. Decentraland
Another Ethereum network-based metaverse experience is Decentraland. The native token MANA allows users to buy virtual properties and develop them for avatars, other digital accessories, games, and other activities. The Decentraland DAO (decentralized autonomous organization) governs Decentraland. Owners of MANA or virtual property in Decentraland are eligible to vote in the DAO and participate in initiatives.
3.Axie Infinity
Imagine Axie Infinity as a Pokémon franchise for the Ethereum blockchain, similar to Nintendo’s (OTC:NTDOY) Pokémon brand. Players fight against other teams while raising imaginary creatures called Axies. As a “play-to-earn” game, Axie Infinity allows players to acquire AXS tokens by participating. The tokens may be used to purchase new Axies (which are traded as NFTs), train current Axies to enhance their qualities, and purchase virtual land in the Axie Infinity realm that will soon be available. At the time of purchase, the most expensive Axie ever was purchased for $820,000 in Ethereum.
4. Cryptocurrency Baristas
The goal of the NFT initiative Crypto Baristas is to close the gap between the real world and the digital one. Those who own a Crypto Barista NFT persona have access to a metaverse where they may connect with other coffee lovers. But this isn’t simply a location to get a digital coffee. The initiative is also funding the opening of a real café named Coffee Bros. in New York City, which will collaborate with experienced Honduran coffee producers as the first partner. This project is still in its early stages, and the details of how its tokens will function have just recently been published in a white paper, but it serves as an illustration of how metaverses may also have practical uses.
Opportunities for investors and users
Some native tokens used in a metaverse have seen their prices soar in recent years, drawing a lot of investor interest. But keep in mind that purchasing cryptocurrencies and tokens created via a blockchain network is extremely risky — and not only because these are newer forms of money.
The cryptographic currencies and tokens used in the metaverse are not commercial enterprises that make money. They are actually a form of virtual money that can be used to buy things or take part in a metaverse. As a result, their valuations are very arbitrary and vulnerable to price fluctuations. Even while individual company stocks are extremely volatile, investors can evaluate them based on sales and profit measures, which crypto investors lack. Some of the 2022 cryptocurrency market’s excessive volatility can be attributed to this issue.
However, the early metaverse versions are quite promising, especially for people who are interested in taking part in them. Some cryptocurrencies provide their owners a say in DAOs or other virtual projects, providing new revenue opportunities for artists and other digital producers.
When it comes to investing in this sector, go cautiously because it is still in the growth stage and developing quickly. But in the next years, it will be interesting to watch how cryptocurrencies and the metaverse interact.
