The metaverse is money and crypto is king – why you’ll be on a blockchain when you roam the virtual world

You might think that the metaverse will be a collection of interconnected virtual spaces – the World Wide Web but accessible through virtual reality. That’s largely correct, but there’s also a fundamental but slightly more cryptic side to the metaverse that will set it apart from today’s internet: blockchain.

In the beginning, Web 1.0 was the information superhighway of connected computers and servers that you could search, explore, and use, usually through the platform of a centralized company, for example AOL, Yahoo, Microsoft and Google. At the turn of the millennium, Web 2.0 was characterized by social networking sites, blogs, and the monetization of user data for advertising by the central gatekeepers of “free” social media platforms, including Facebook, SnapChat, Twitter and TikTok.

Web 3.0 will be the foundation of the metaverse. It will consist of decentralized blockchain-enabled applications that will support an economy of user-owned crypto assets and data.

Blockchain? Decentralized? Crypto-assets? Like researchers who study social media and media technology, we can explain the technology that will make the metaverse possible.

Own bits

Blockchain is a technology that continuously records transactions, usually in a decentralized, public database called a general ledger. Bitcoin is the most well-known blockchain-based cryptocurrency. Every time you buy bitcoin, for example, that transaction is recorded in the Bitcoin blockchain, which means that the recording is distributed to thousands of individual computers across the world.

This decentralized registration system is very difficult to cheat or control. Public blockchains, like Bitcoin and Ethereum, are also transparent – all transactions are accessible to anyone on the internet, unlike traditional bank books.

Ethereum is a blockchain like Bitcoin, but Ethereum is also programmable via smart contracts, which are essentially blockchain-based software routines that automatically run when a condition is met. For example, you can use a smart contract on the blockchain to establish your ownership of a digital object, such as a work of art or music, of which no one else can claim ownership on the blockchain – even if he saves a copy on his computer. Digital objects that can be owned – currencies, securities, works of art – are crypto assets.

Items like artwork and music on a blockchain are non-fungible tokens (NFTs). Non-fungible means they are unique and non-replaceable, unlike fungible items like currency – any dollar is worth the same and can be exchanged for any other dollar.

Non-fungible tokens (NFTs) use blockchain cryptography to create unique instances of digital items, including artwork like these images shown at an exhibit in Miami Beach in November 2021.
AP Photo / Lynne Sladky

Most importantly, you can use a smart contract indicating that you are ready to sell your digital artwork for US $ 1 million in ether, the currency of the Ethereum blockchain. When I click ‘okay’, the artwork and the Aether automatically transfer ownership between us on the blockchain. There is no need for a bank or third party escrow, and if one of us disputes this transaction – for example, if you claimed I only paid $ 999,000 – the other could easily point to the public record in the distributed ledger.

What does this blockchain crypto-asset stuff have to do with the metaverse? All! For starters, blockchain allows you to own digital goods in a virtual world. You will not only own this NFT in the real world, you will also own it in the virtual world.

In addition, the metaverse is not built by any particular group or company. Different groups will build different virtual worlds, and in the future these worlds will be interoperable – forming the metaverse. As people move between virtual worlds – say from Decentralandvirtual environments Microsoft‘s – they will want to bring their stuff with them. If two virtual worlds are interoperable, the blockchain will authenticate the proof of ownership of your digital goods in the two virtual worlds. Essentially, as long as you are able to access your crypto wallet in a virtual world, you will be able to access your cryptographic data.

Don’t forget your wallet

So what will you keep in your crypto wallet? You will obviously want to transport cryptocurrencies into the metaverse. Your crypto wallet will also contain your metaverse-only digital assets, such as your avatars, avatar clothing, avatar animations, virtual decorations and weapons.

a cartoon image of a young bearded man wearing sunglasses and a cap upside down is projected on a wall in a dark auditorium
Avatars, like this portrayal of Salvadoran President Nayib Bukele, are cartoon-like animations that people inhabit in the Metaverse.
AP Photo / Salvador Melendez

What are people going to do with their crypto wallets? Among other things, go shopping. Just as you probably do on the web now, you will be able to purchase traditional digital products like music, movies, games, and apps. You will also be able to purchase physical world items in the Metaverse, and you will be able to view and “keep” 3D models of what you are purchasing, which could help you make more informed decisions.

Additionally, just as you can use your old leather wallet to carry your ID, crypto wallets will be linked to real identities, which could facilitate transactions that require forensic verification, such as purchasing a car or a real house. Since your ID will be linked to your wallet, you won’t need to remember login details for all the websites and virtual worlds you visit – just connect your wallet with one click and you’re signed in. The wallets associated with the ID will also be useful for controlling access to areas with age restrictions in the metaverse.

Your crypto wallet could also be linked to your contact list, which would allow you to transfer your social network information from one virtual world to another. “Join me for a poolside party in the FILL IN THE BLANK world! ”

At some point in the future, wallets could also have reputation scores that determine what permissions you have to stream in public places and interact with people outside of your social network. If you act like a toxic troll spreading disinformation, you can damage your reputation and potentially have your sphere of influence reduced by the system. This could make people behave well in the Metaverse, but platform developers will have to prioritize these systems.

Big deal

Finally, if the metaverse is money, then companies will definitely want to play it, too. The decentralized nature of the blockchain will potentially reduce the need for controllers in financial transactions, but businesses will still have many opportunities to generate revenue, perhaps even more than in current economies. Companies like Meta will provide great platforms where people job, player and to gather.

The metaverse doesn’t exist yet, but that hasn’t stopped a land rush as people and businesses take hold of virtual real estate.

Major brands are also entering the NFT mix, including Dolce & Gabbana, Coca Cola, Adidas and Nike. In the future, when you purchase a physical world item from a business, you may also become the owner of a Linked NFT in the Metaverse.

For example, when you purchase that coveted branded outfit to wear at the real world dance club, you can also own the crypto version of the outfit that your avatar can wear to the Ariana Grande virtual concert. And just like you can sell the second-hand physical outfit, you can also sell the NFT version for someone else’s avatar to wear.

These are just a few of the many ways that the Metaverse’s business models are likely to overlap with the physical world. Such examples will become more complex as augmented reality technologies increasingly come into play, further merging aspects of the metaverse and the physical world. While the actual metaverse is not yet here, technological foundations such as blockchain and crypto assets are steadily being developed, paving the way for a seemingly ubiquitous virtual future that will soon arrive in a ‘near-to-you-home’.

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