Metaverse is money and crypto is king: why you will be on a blockchain when you jump into the virtual world

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

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

Web 3.0 will be the foundation for the metaverse. It will consist of decentralized blockchain-enabled applications that support user-owned cryptographic data and resource economics.

Blockchain? Decentralized? Cryptocurrencies? As researchers studying social media and media technology, we can explain the technology that will make the metaverse possible.

Own bits

Blockchain is a technology that permanently records transactions, typically in a decentralized, public database called a ledger. Bitcoin is the best known blockchain-based cryptocurrency. Whenever you buy bitcoin, for example, that transaction is recorded on the Bitcoin blockchain, which means the record is distributed to thousands of individual computers around the world.

This decentralized registration system is very difficult to fool or control. Public blockchains, such as Bitcoin and Ethereum, are also transparent: all transactions can be viewed by 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 run automatically when certain conditions are met. For example, you could use a smart contract on the blockchain to establish your ownership of a digital object, such as a work of art or music, that no one else can claim ownership of on the blockchain, even if they save a copy of it on their computer. . The digital objects that can be owned – currencies, securities, works of art – are cryptographic assets.

Objects such as artwork and music on a blockchain are non-fungible tokens (NFTs). Non-fungible means they are unique and non-replaceable, the opposite of 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 demonstrable instances of digital objects, including works of art such as these images shown at an exhibit in Miami Beach in November 2021.
Photo by AP / Lynne Sladky

Importantly, you might be using a smart contract that says you’re willing to sell your digital artwork for $ 1 million in ether, the Ethereum blockchain currency. When I click “Agree”, 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 either of us disputes this transaction, for example, if I said 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? Anything! To start, blockchain allows you to own digital assets in a virtual world. You don’t just own that NFT in the real world, you also own it in the virtual world.

Also, the metaverse is not created by any 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, for example from Decentraland’s virtual environments to Microsoft’s, they will want to take their belongings with them. If two virtual worlds are interoperable, the blockchain will authenticate proof of ownership of your digital assets in both virtual worlds. Essentially, as long as you are able to access your crypto wallet within a virtual world, you will be able to access your crypto stuff.

Don’t forget your wallet

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

a cartoon image of a young bearded man wearing sunglasses and a backward ball cap is projected onto a wall in a darkened auditorium
Avatars, like this depiction of El Salvador President Nayib Bukele, are cartoon-like animations that people inhabit the metaverse.
Photo by AP / Salvador Melendez

What will people do with their crypto wallets? Among other things, shop. Just as you are likely to do now on the web, you will be able to purchase traditional digital goods 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 “hold” 3D models of what you are buying, which may help you make more informed decisions.

Additionally, just like you can use your old leather wallet to carry your ID, crypto wallets will be linkable to real-world identities, which could help facilitate transactions that require legal verification, such as purchase. of a car or house in the real world. Since your ID will be linked to your wallet, you won’t have to remember the login information for all the websites and virtual worlds you visit – just link your wallet with one click and you will be logged in. Wallets associated with the ID will also be useful for controlling access to age-restricted areas in the metaverse.

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

At some point in the future, wallets may also be associated with reputation scores that determine the permissions you have to broadcast in public places and interact with people outside of your social network. If you act like a toxic troll spreading misinformation, you could damage your reputation and potentially have your sphere of influence reduced by the system. This could create an incentive for people to perform well in the metaverse, but platform developers will need to prioritize these systems.

Big deal

Finally, if the metaverse is money, companies will definitely want to play the game too. The decentralized nature of the blockchain will potentially reduce the need for gatekeepers in financial transactions, but businesses will still have plenty of opportunities to generate revenue, perhaps even more than in current economies. Companies like Meta will provide great platforms where people will work, play and come together.

The metaverse doesn’t exist yet, but that hasn’t stopped a rush to land as people and companies take over virtual real estate.

Big brands are also getting into the NFT mix, including Dolce & Gabbana, Coca-Cola, Adidas and Nike. In the future, when you purchase a physical world object from a company, you may also acquire ownership of a metaverse linked NFT.

For example, when you buy that coveted branded dress to wear in the real-world nightclub, you may also become the owner of the crypto version of the dress that your avatar can wear to the Ariana Grande virtual concert. And just like you could sell the physical suit secondhand, you could also sell the NFT version for someone else’s avatar to wear.

These are some of the many ways that metaverse business models are likely to overlap the physical world. Such examples will become more complex as augmented reality technologies come into play, further merging aspects of the metaverse and the physical world. While the actual metaverse has not yet arrived, the technological foundations such as blockchain and cryptocurrencies are constantly being developed, setting the stage for a seemingly omnipresent virtual future that will soon arrive in a “near-you verse”.

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