The roles blockchain and NFT eCommerce will play in the Metaverse
Blockchain and non-fundable tokens (NFTs) are among the “hottest” technologies of these last two years. At least 18 percent of Americans have invested in an NFT while more than 1 in 5 Brits feel that NFTS are a “good and safe investment.”
NFTs are a unique and non-interchangeable data unit stored using blockchain technology that assigns real-world value to a digital object. In the meantime, blockchain adoption is steadily growing.
76 percent of respondents on a recent Deloitte survey felt that digital assets like cryptocurrencies built on blockchain could be a strong alternative to fiat currencies and even replace them in the next decade.
However, until now, discussions around blockchain, NFTs, and crypto revolved around real-world investments and monetary transactions in the physical realm. The launch of the metaverse by Facebook (intended) changes this.
After Facebook announced its rebrand to Meta, cryptocurrencies like MANA that are meant for trading on the metaverse saw around 400% price uptick.
What does this mean in the long term? How does blockchain fit into Facebook’s plan for the metaverse, and the global metaverse in general? To answer these questions, let’s first understand the meaning of blockchain in the context of a virtual world like the metaverse.
You can define blockchain as a digital ledger that contains a growing list of records (or blocks) interconnected using cryptography techniques.
Every block on the blockchain will have a cryptographic hash or mathematical algorithm describing the previous block on the chain, a timestamp for when the block was accessed/modified, and any other transaction data.
As a result, the blockchain is immutable and is virtually impenetrable to fraud, as there is always an end-to-end record for transparency.
The security of blockchain derives from the fact that it is powered by a peer-to-peer network. This means that the computing power for a block is shared across a public network, and every node on the network has a copy of the blockchain.
While blockchain has many use cases (e.g., secure sharing of healthcare information, logistics monitoring, anti-money laundering, and music royalties), its most relevant application for the metaverse is cryptocurrency.
Cryptocurrency is a purely digital currency or a digital asset that is traded only via online systems and the transactions are authenticated using a decentralised network on the blockchain.
Like regular currency, you can use cryptocurrency or “crypto” to make purchases – but the value of crypto can vary wildly as there is no single entity or group of entities controlling/regulating its value owing to its decentralised nature.
There are several cryptocurrencies you can buy like Bitcoin, Ethereum, and MANA, which we mentioned, and Facebook has dabbled in the technology as well.
What Is Metaverse and How Is it Related to Blockchain Technology?
The metaverse is defined as a three-dimensional virtual reality space where users can interact with digital objects and with each other in an immersive surrounding. The metaverse is persistent, real-time, infinite, self-sustaining, interoperable, and decentralised.
It is easy to imagine how cryptocurrency could fit into the vision for the metaverse. Crypto is completely untethered from real-world fiat currencies, both in terms of value and physical form. This makes it a convenient mode for payment and transactions in the virtual world.
Also, by its very definition, the metaverse is decentralised in nature. No single entity should or can control the metaverse – decentralising its currency would go a long way in adhering to this philosophy.
Further, crypto (and blockchain technology in general) could be a useful anchor in a constantly evolving world.
In the metaverse, our surroundings, natural habitats, people’s appearances, objects, etc. would shift according to developer activity and ongoing customisation. The immutable nature of blockchain and crypto would introduce necessary stability.
Blockchain Use Cases in the Metaverse
The myriad applications of blockchain in the metaverse can be distilled down to the following use cases:
Immutable in-game assets
In-game assets would essentially become non-fungible tokens or NFTs that you can earn and sell. VR gameplay would then allow users to make real money that has value inside the metaverse.
Assets would remain completely undamaged even if the user quit the game, the game was deleted, or there is an adverse event in the metaverse.
As users navigate the metaverse and their identity evolves, blockchain technology can keep track – essentially acting as the equivalent of a social security number, but virtual.
Age, changes to one’s appearance, online activity history, and other unique details can be stored on the blockchain for transparency and to prevent crime in the metaverse.
Real estate in the metaverse
Like in-game assets, real estate is another key commodity in the metaverse. Defining and regulating real estate can be a challenge, given that the metaverse is infinite both in terms of space and concurrent users.
Blockchain could act as an immutable record of how real estate is created, altered, traded, and destroyed in the metaverse.
This will probably be among the first applications of blockchain in the metaverse. In August of last year, Epic Games sued Apple for charging a 30% fee for any purchase that users make through its popular game, Fortnite.
Similar issues can crop up in the metaverse as well. Creator incentivisation through cryptocurrency would ensure that there are no arbitrary or unfair rules governing the exchange.
Will Facebook’s Meta Rely on Blockchain Technology?
In his Founder’s Letter announcing the rebrand as Meta, Mark Zuckerberg stated that privacy, safety, open standards, and interoperability will be central to the metaverse.
This will require not just novel technical work — like supporting crypto and NFT projects in the community — but also new forms of governance
Apart from this, there’s no mention of Meta’s plans for blockchain technology as yet.
Notably, however, Facebook has its own digital currency called Libra, which it built back in 2019. The wallet designed to manage and use Libra was first announced as Calibra, then was rebranded as Novi, and was finally relaunched in December 2020 as Diem.
In other words, Facebook has the infrastructure in place for blockchain in the metaverse, and we can expect more concrete moves in the next few months.