Tuesday, February 27, 2024

How can Blockchain tech support the Metaverse economy?

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The Metaverse has been a long-held dream of many futurists since the 1950s. Only recently have we made some real progress toward making this a reality.

Technology has come a long way, and we now have enough processing power to run a completely digital world – and, moving forward, a fully functioning digital ecosystem.

The Metaverse is the first and most significant step in this direction. Since Meta announced its focus on building a fully functional metaverse, there has been a lot of buzz around it. The debate around the Metaverse becoming the future has begun.

But first, let’s understand the Metaverse and how it aids digital reality.

The Digital World

There are multiple ways to project an alternate reality – the most popular ones include AR (Augmented Reality) and VR (Virtual Reality).

AR is when you project digital entities onto the real world – for example, Apple’s new camera AR feature allows you to project 3D digital structures onto a physical surface like a table or the floor via the phone’s camera.

Conversely, VR is when you project yourself into a completely digital space created artificially by another entity, where you can interact with digital objects and other digital identities.

Digital avatar shopping in the metaverse
Shopping in the Metaverse – CNET

But what can you actually do in a Metaverse?

Life in the digital world

We can experience the digital world (or a metaverse) through external sensory devices such as AR/VR goggles and gloves. While the digital world can be very different from the real world, digital spaces that mimic the real world also exist.

In the Metaverse, people can customize and create their avatars, allowing them to freely express themselves. You can also socialize with individuals from anywhere in the world, all in one place – the Metaverse brings a sense of realism to regular chatroom discussions.

Life in the Metaverse can offer a wide range of opportunities for gaming, commerce, and even content creation – which is not limited to blogs, photos, and videos but also creating digital objects and animations!

Let’s look at a few examples of current functioning metaverses to give you an idea of the potential of this new digital economy:

A man using devices to experience the 3D virtual world

Second Life: In this Metaverse, you can create your avatar and interact with other users, attend live events and performances, explore virtual environments, and participate in a robust economy where you can buy, sell, and trade virtual goods.

Roblox: In this Metaverse, you can create your games, play games created by other users, and participate in social activities like chats, groups, and events.

Decentraland: In this Metaverse, you can buy and manage virtual real estate, create and publish your content, and participate in games and other interactive experiences.

Digital cracks

When we project our entire personality online, we risk the privacy and security of our personal data, as virtual identities and assets may be vulnerable to hacking and theft.

The Metaverse has also started providing the ability to trade digital items and make monetary transactions. While this may seem relatively straightforward, it is required to ensure that digital goods are authenticated, digital money is secure, and digital identities are unique. This can prove to be challenging.

Biggest hurdles the Metaverse has to overcome

The current state of virtual reality technology is far from perfect, with glitchy 3D spaces and unreliable connections. While the technology is promising, many roadblocks still need to be solved for the Metaverse. But new technologies are emerging that can help support the Metaverse and make it a success.

Blockchain is one of these new technologies that have the potential to revolutionize the way people interact with the Metaverse economy.

Blockchain to the Rescue

Blockchain and the Metaverse

To fully experience the Metaverse, one must immerse oneself into the digital space and interact with digital entities. But doing so can open you up to sharing private data and leading to vulnerable privacy hacks – something that we have already seen with Meta (now, Facebook).

The most critical support structure for making the Metaverse more secure is its incorporation of blockchain technology!

But how exactly does blockchain technology help the Metaverse become a better world?

One of the key benefits of blockchain technology is that it provides a secure and decentralized way to manage identities. As we know, users with digital representations of themselves need to have a secure and transparent way to manage their identities. Blockchain-based identity solutions allow users to control their data and privacy, reducing the risk of identity theft or misuse.

Furthermore, users can have other digital assets apart from their own avatars in the Metaverse – such as apparel, accessories, in-game items, and even real estate! (yes, that’s a thing!) These assets are valuable and can have real-world value. Blockchain technology provides a safe and decentralized way to manage these assets, allowing users to transfer, trade, and sell them without intermediaries.

Since transfer and trading become secure on the blockchain, we can take a step further and introduce monetary transactions as well! This is essentially trading digital assets for digital currency – and the blockchain enables the Metaverse to handle transactions, making it possible for users to purchase items in the Metaverse for real money.

How today’s Metaverse uses Blockchain Tech

Example of the Metaverse use case - brainstorming session

If you’ve been following our journey so far, you must have figured out some very interesting use cases for the Metaverse in your lives – here’s how major metaverse players are taking things forward today with the help of blockchain technology:

Decentraland: Decentraland is a virtual blockchain-powered world where users can create, experience, and monetize content and applications. In Decentraland, users own virtual real estate, and they can buy, sell, and trade this real estate in a decentralized and secure manner. Decentraland uses the Ethereum blockchain to manage its virtual world, providing a secure and transparent way to manage digital assets and transactions.

The Sandbox: The Sandbox is a virtual gaming platform where players can create, share, and monetize their gaming experiences. The Sandbox uses blockchain technology to provide a secure and transparent way to manage the ownership and transfer of digital assets, such as in-game items, collectibles, and virtual real estate. Using blockchain technology, The Sandbox provides a secure, trustworthy way for players to monetize their gaming experiences.

Axie Infinity: Axie Infinity is a blockchain-based gaming platform that allows players to collect, breed, and battle creatures called Axies. Axies are unique, rare, and valuable, and they can be traded and sold in a decentralized and secure manner. Axie Infinity uses the Ethereum blockchain to manage its virtual world, providing a secure and transparent way to manage digital assets and transactions.

Blockchain technology has the potential to revolutionize the way people interact with the metaverse economy. By providing a secure layer of transparency, blockchain technology can offer a secure platform for users to transact with one another.

What is the future of the Metaverse?

A man in 3D goggles floating into the future of the metaverse

Blockchain technology has solved some major issues to make the Metaverse a relatively safe digital escapade. However, many more factors need to be considered to assess its success.

The most important factor is today’s technical limitations of internet speeds and unreliable connections. While 5G is in its early stage, we can look towards a promising future where internet connections become faster and cheaper – without which the Metaverse cannot sustain.

Another essential factor determining the success and sustainability of the metaverse is the extent of users on it keeping it active and alive. While this may not seem necessary, there is a term for this behavior – ‘Network Effect’ – which means that the platform is only as valuable as the number of people on it.

For example, people use Instagram for the creators and content present on it. This is why a clone of Instagram, cannot sustain itself – it does not have the valuable content or creators on it that made Instagram famous in the first place.

If you’re still not convinced of the network effect, here are a few large-scale metaverses that fell because they were unable to leverage this network effect

  • Blue Mars: This virtual world promised to bring real-world cities and environments to the Metaverse but could not generate enough revenue or user engagement to sustain itself.
  • Entropia Universe: Despite being one of the first metaverses to launch, Entropia Universe struggled to retain a large user base and generate revenue from its virtual economy.
  • There.com: This Metaverse failed to attract a large enough user base and was sold to a company that was shut eventually.

The future of the Metaverse is highly speculative and dependent on several factors, including technological advancements, social acceptance, and economic conditions. There are many forms that this can take

  • a massive multiplayer online game
  • a virtual reality social network
  • an AI-powered virtual economy

It is also possible that the Metaverse could eventually become a decentralized and autonomous system governed by a decentralized community of users. Overall, the future of the Metaverse is uncertain, but it has the potential to dramatically change the way we interact with technology and with each other.

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