In the past year, we’ve heard a lot of buzz around non-fungible tokens (NFTs) and the metaverse. However, many people don’t realize that the metaverse serves as a promising use case for NFTs, and very soon, NFTs and the metaverse could be intrinsically connected.
But doesn’t an NFT just refer to a token for digital art? How will NFTs help us access the metaverse? Read on to learn why NFTs are the key to the metaverse.
What are NFTs and the metaverse?
As simply as possible, NFTs are tokens that exist on the blockchain (in most cases, the Ethereum blockchain). Therefore, they can be used to prove ownership of an asset. Each NFT comes with a unique identification code and metadata that distinguishes it from other NFTs and data on the blockchain. NFTs cannot be replicated. By tokenizing real-world, tangible assets, items can be bought and sold more efficiently while minimizing the chances of fraud. NFTs contain ownership details for easy identification and transfers like Bitcoin and other cryptocurrencies.
On the other hand, the metaverse refers to the network of virtual and augmented reality. Metaverse with a capital “M” is an interconnected virtual reality that everyone can partake in – the next iteration of the internet. But instead of simply Googling a search term, you’ll be able to enter the metaverse and experience what you’re searching for in a virtual, 3D environment.
The connection between the metaverse and NFTs
Proponents of the metaverse envision a virtual reality where everyone can create their own avatar. With this unique virtual character, one can then attend sporting events and concerts, go shopping, play games, interact with others, and more. While everyone who has access to the internet will have access to the metaverse, elements of the metaverse will not be entirely free. For example, people will probably have to pay to attend a concert. Additionally, building out all the different elements of the metaverse, such as interactive games, will cost money.
How will it be possible to keep track of these purchases and transactions, and who owns what in the metaverse? How will items for sale in the metaverse be assigned value? This is where NFTs come in. While we’ve primarily seen NFTs used for trading digital art, they can theoretically be connected to anything. So, instead of using traditional money to assign value to objects in the metaverse, NFTs will be used to designate value. NFTs serve as a framework for attributing value to digital objects, as they can be used to prove that someone is the rightful owner of a specific object. For example, NFTs can help verify that someone owns a piece of real estate in the metaverse or that they have the right to attend a virtual concert. Additionally, many games in the metaverse will use NFTs as rewards.
To purchase these NFTs, people will use different cryptocurrencies. So from an investor's perspective, it might be worth investing in these cryptocurrencies now as the metaverse takes off. Cryptocurrencies will serve as the money of the metaverse, and each metaverse platform will have its own set of tokens. So, for example, if you’re looking to invest in Decentraland’s metaverse, you can do so with MANA, Decentraland's native token.
For investors, it is advisable to keep an eye on the different metaverse developments. This way, you can better assess which cryptocurrencies to buy and how to reinvest them as NFTs.
How will NFTs impact the metaverse?
Crypto industry experts believe that NFTs will serve as the fabric of the metaverse and that they're the key to the metaverse's expansion. But, exactly how will NFTs impact the metaverse? Let's take a look:
Create an open and fair economy
Interactive gaming is projected to be an essential element of the metaverse, with many metaverse platforms using a play-to-earn (P2E) model. P2E games are powered by the blockchain. They offer rewards and incentives to players based on their gaming activity and in-game achievements. Users can earn cryptocurrency (the crypto will depend on the metaverse) based on their gaming activities. They can then exchange the cryptocurrency for fiat currency, NFTs, or other assets on the exchange. This creates an open and fair economy, as players will get full ownership of their assets rather than having their assets be controlled by a game entity like most traditional video games.
Guilds will also play an essential role in creating an open and fair economy. Guilds serve as facilitating intermediaries as they purchase in-game NFT resources and lend them to players who want to use them in their virtual worlds. The play-to-earn guild then takes a small portion of the earnings. This again helps create a fairer economy, as players who don't have enough capital to partake in a game can go through a guild to get a headstart.
An extension of community, identity, and social experiences
NFTs will also help facilitate the metaverse's community, identity, and social experiences. For example, if someone holds a certain NFT, it can convey their support for a particular project. It can also convey their perspective regarding the virtual or real world.
Like-minded individuals can then band into communities to share their experiences and create content. For example, NFT avatars serve as an extension of a player's identity. One can use their avatar to curate their virtual identity and access exclusive experiences.
Property ownership: virtual real estate
Virtual lands and spaces will be another critical component of the metaverse. With NFTs, users will easily prove their ownership and develop their real estate as they see fit. Users can sell land for profit, rent it, host social events, and build shops on existing land. Decentraland is an example of the metaverse's real estate scene. Recently, it hosted a virtual fashion exhibition in collaboration with Adidas, and designs were auctioned as NFTs. Virtual real estate is also a promising environment for musicians, as they can use these virtual spaces to perform concerts and sell tickets and merchandise.
The future of the metaverse
While there’s a lot of buzz around the metaverse, it’s essential to understand that the metaverse is still in its early days of development. However, those who get involved in the metaverse early on have the chance to make significant profits.
Right now could be a good time to invest in cryptocurrencies and NFTs as they will open up a wide range of opportunities in the emerging metaverses.
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