Exploring the Realm of Metaverses and Digital Currencies
Exploring the Realm of Metaverses and Digital Currencies
The metaverse, cryptocurrency, and Web3 - these buzzwords in technology share a common thread for many tech enthusiasts and investors. For many, the metaverse and cryptocurrencies like Bitcoin are closely linked and will form part of Web3 - a decentralized internet ruled by individual users instead of major corporations.
Despite their distinct natures, the metaverse and cryptocurrencies, particularly Bitcoin, may heavily lean on each other as they advance.
Blockchain and its role in the metaverse and cryptocurrencies
Let's begin with a fundamental technology that underpins both the metaverse and cryptocurrencies: blockchain. Originally devised by Bitcoin creator Satoshi Nakamoto and now greatly employed by other cryptos like Ethereum, blockchain is a public digital ledger that logs transaction data. Transactions utilizing a blockchain network can be peer-to-peer, eliminating the need for intermediaries such as banks or tech companies in user interactions. This could reduce costs and expedite transaction times, among other advantages.
Digital commerce is still happening with digital equivalents of traditional fiat currencies. Blockchain and currencies linked to it were created as a digital transaction method in a digital world. Metaverses outlined by 3D virtual environments and immersive services are also considered by some to utilize blockchain technology to facilitate permissionless interactions among internet users.
The metaverse
Metaverse shopping
Today, various 3D immersive worlds exist, such as video games allowing real-time interaction between players. According to some definitions, though, these aren't part of the metaverse until they have a full-fledged digital economy.
Many of these games and services permit users to purchase digital items. For avid gamers, this is a common practice. You can purchase outfits and accessories to personalize your in-game appearance or enhance player performance. Similar to cloud computing services, free-to-use or affordable basic packages are offered with premium or additional features locked behind a paywall.
Do this concept of metaverse shopping seem pointless and incomprehensible? It could have practical implications in the real world as well. Shoppers could try a virtual version of clothes before purchasing in the metaverse. Nvidia CEO Jensen Huang often discusses "digital twins" of physical locations, which have immense potential for businesses planning property developments or manufacturing projects. Similarly, home remodels or product sampling (like furniture) could be previewed in a digital recreation of one's home.
Crypto coins and NFTs
Metaverse, crypto coins, and NFTs
With e-commerce and social interaction potential, this is where cryptocurrencies and blockchain-based applications come into play. Direct peer-to-peer web interactions propel the promise of instantaneous settlement of funds and nearly zero fees. Ownership of items can be confirmed using an NFT (non-fungible token), which could be a piece of art, a digital collectible, or a digital version of a real-world purchase, such as Nike sneakers that can also be worn in the metaverse.
For now, the metaverse is primarily the domain of the video game industry and innovative startups. It is worth noting that instability in the crypto market during the first half of 2022 has also cast doubt on the metaverse's potential as a full-fledged digital economy. Despite this, here are three early-stage projects to watch that are bridging the gap between cryptocurrencies and the metaverse.
1. The Sandbox
The Sandbox is a user-created digital world where users can create and sell digital content within the game. SAND, the in-game token, acts as a currency and is built on the Ethereum blockchain network. These tokens can be acquired and sold on various cryptocurrency exchanges. SAND can be used to buy virtual land, buildings, accessories, and other items as NFTs.
2. Decentraland
Decentraland is another Ethereum-based metaverse experience. Participants use the native token, MANA, to purchase virtual land, develop, and build games and other experiences. Decentraland is controlled by the Decentraland DAO (decentralized autonomous organization). Owners of MANA or virtual property in Decentraland have voting rights in the DAO and can participate in initiating and developing new projects.
3. Axie Infinity
Consider Axie Infinity as an Ethereum blockchain-based spin-off of Nintendo's Pokémon franchise. Players create fantasy creatures called Axies and compete against other players. Axie Infinity is a "play-to-earn" game, meaning participation can generate AXS tokens. The tokens can be used to acquire new Axies (trading as NFTs), improve existing Axie traits, and participate in the upcoming launch of virtual land within the Axie Infinity universe. The most expensive Axie ever sold was for the equivalent of $820,000 in Ethereum (at the time's market rate).
Diving into Metaverse Shares
This digitized, 3D realm could offer genuine chances for investors.##### What's Virtual Land Ownership?
The technical term for this is digital real estate which refers to virtual property.##### Investing in Market Segment ETFs
Investing in ETFs within each market sector is a fantastic approach to increase portfolio diversity--and reduce risk.##### Is Virtual Money a Good Investment?
Investing in digital currency has been a profitable game-changer for some, but the field still carries risks.## Future possibilities
Opportunities for end-users and investors
The prices of some initial tokens used within a metaverse have surged in recent times, gaining plenty of investor attention. However, remember that investing in digital currencies and tokens built on a blockchain platform is highly speculative -- and not just due to them being new technologies.
Crypto coins and tokens used in the metaverse aren't revenue-generating businesses. Instead, they serve as a kind of digital currency that can be used for transactions or interactive experiences within the metaverse. Their worth is highly subjective and can shift wildly in value. Individual company stocks can be extremely volatile too, but investors can estimate their value based on revenue and profit metrics -- something crypto investors lack.
This imbalance led to significant price volatility in the wider crypto sphere in 2022, with prices for coins and tokens soaring, then crashing within a few months. Although there's still some monetary value in cryptocurrencies related to the metaverse, the majority of the value comes from more elusive -- and harder to quantify -- advantages.
First-generation metaverse versions seem promising, especially for those enthusiastic about engaging in them. Owning certain cryptos provides the holder with a voice in a DAO or other virtual project, and digital artists and creators can find a new platform for their work.
Proceed with caution when investing in this area, as it's fast-moving and under development. But the crossover between cryptocurrencies and the metaverse is certainly worth watching in the years to come.
Kristi Waterworth has investments in Bitcoin, Decentraland, Ethereum, and The Sandbox. Our Website has investments in and recommends Bitcoin, Ethereum, Nike, and Nvidia. Our Website recommends Nintendo. Our Website has a disclosure policy.
The potential integration of blockchain technology and cryptocurrencies in the metaverse may lead to significant cost reductions and faster transaction times for users.
Given the rise in popularity of metaverse projects, investing in crypto coins and tokens linked to these platforms could offer unique opportunities for both end-users and investors.