Decentralized Economy — the Role of Blockchain in the Metaverse

The idea of the metaverse — a virtual world with all the opportunities of a real one — was first outlined by Neal Stephenson in his science fiction novel “Snow Crash” back in 1992. In the early nineties, the idea remained just a fantasy but with the advent of blockchain technology it has found a role for itself in very specific projects that have already drawn in millions of people around the world.

Cryptocurrencies and NFTs have made it possible to build a fully functioning economy inside the virtual world where you can buy and sell any virtual assets. A lucky few have already managed to make a lot of money by closing deals to sell virtual real estate, digital art objects, and so on. Unsurprisingly, many experts are expressing a great interest in this niche and insist that the blockchain and metaverses can revolutionize the digital space and the Internet as we know it.

What is the metaverse and how does it relate to blockchain?

In the modern context, the term “metaverse” refers to a virtual space created within the new Internet using 3D technologies. This concept is directly related to such technologies as blockchain, augmented and mixed reality, NFT, and many other advances of recent years. In the metaverse, the user is immersed in a virtual space where they can do everything they do in real life, such as visit exciting locations, meet people, buy works of art, or sell real estate. Experts agree that creating a blockchain-based metaverse can open up an amazing virtual world which will change the way everyone involved interacts.

So what does blockchain have to do with the concept of the metaverse? Today, many blockchain-based platforms use so-called non-fungible tokens and cryptocurrency, providing an ecosystem for creating, owning, and monetizing decentralized digital assets. Without blockchain, the metaverse concept is incomplete due to the various shortcomings of centralized data storage. The fact that blockchain can function globally, being a digital source operating on the principle of decentralization, fundamentally distinguishes the metaverse from the capacities of the traditional internet, which of course takes the form of websites and applications. The blockchain-based metaverse provides access to any digital space without the interference of a centralized institution.

If you want to gain more detailed insight into the metaverse, our tech wizards have prepared an explanatory video that covers the key fundamentals of the sophisticated trend. This comprehensive overview will help you better understand how the metaverse works, what technologies it relies on, and what business opportunities you can take advantage of.

Why blockchain is the key technology for the metaverse

Even though there is still no single concept of the metaverse and the idea itself is only partially implemented in projects such as the metaverse Facebook Horizon and Google Blocks, the key operational principles of the ecosystem have already been developed.

Any metaverse has two main components: hardware and software. The hardware component includes all types of controllers, allowing the users to interact comfortably with virtual or augmented reality. In the case of software, we’re talking about a digital environment with content available to the user.

Many in the industry have come to agree that software should be based on blockchain technology which represents a secure decentralized database where independent nodes can interact in a single, dynamically updated network. It becomes quite obvious that blockchain technology can meet the requirements of the metaverse, once you look at its most important characteristics. We list them below:

• Security. The fact that the metaverse stores data measured in exabytes raises the question of safe storage, transmission, and synchronization. In this sense, blockchain technology is very relevant in the context of decentralization of storages and data processing nodes.
• Trust. Blockchain implies the presence of tokens — secure storage devices capable of transmitting the likes of virtual content, personal, data and authorization keys in encrypted form. In this regard, the metaverse blockchain increases the users’ trust in the ecosystem due to the fact that confidential information will not be available to third parties.
• Decentralization. To ensure the full functioning of the metaverse, all participants must see the same virtual world. A decentralized ecosystem based on blockchain technology allows thousands of independent nodes to synchronize.
• Smart contracts. These make it possible to effectively regulate economic, legal, social, and other relations between ecosystem participants within the metaverse. In addition, smart contacts allow you to develop and implement the basic rules for the operation of the metaverse.
• Interoperability. Blockchain facilitates the joint interoperability and functioning of different systems and interfaces without restriction. This is especially relevant when it comes to NFT valuation and turnover.
• Money relations. Cryptocurrency, being an integral part of the blockchain, can act as a properly working analog of traditional money; and via the metaverse crypto it is an effective way to perform mutual settlements.

It is obvious that centralized ecosystems carry a lot of risks in terms of the creation and functioning of the virtual world. These can be hacks, malware, and even centralized decision-making regarding the functioning of the metaverse. Blockchain technology, however, minimizes these risks and makes it possible to build a stable virtual ecosystem.

Overview of blockchain use cases in the metaverse

In developing and operating the metaverse, blockchain can be applied in a variety of ways. Below are the main examples of how this technology is used.

In-game assets

Many blockchain experts are saying that games will soon become the area where the concept of ​​the metaverse really gets going. They predict that virtual assets used by the players will be presented in the form of non-fungible metaverse tokens and that in due course the gameplay will enable players to earn real money that can be used as means of payment within a specific ecosystem.

For players, the introduction of blockchain technology into the games means that even if the user comes out of the game, deletes it, or falls victim to some adverse life event, their assets will stay safe.

A vast amount of capital is being invested in this area, with developers of advanced technologies busy exploring this niche. The best example of a breakthrough development is the game “The Sandbox” which takes the form of a virtual world with an integrated Ethereum-based cryptocurrency. Interestingly, some of the real world’s most popular brands are already present in the Sandbox metaverse ecosystem.

One of the most popular current metaverse NFT games is “Axie Infinity”, which has over a million active participants. A special feature of this game is that the players are rewarded with an internal currency which serves to motivate new participants to join.

Most major figures, including the founder of Facebook (now Meta) Mark Zuckerberg, are convinced that the metaverse will be actively used by investors, developers, and usual users in the coming years. We can safely predict an imminent boom in the popularity of this concept.

Virtual currencies

Settlements are one of the most obvious uses of blockchain technology within the metaverse. The day when customers shop in virtual stores is not far off. Since consumption is increasing steadily and offline trading is increasingly giving way to online stores, we can be sure that cryptocurrency will soon find its application in a decentralized ecosystem.

One of the metaverse examples of the use of virtual currencies in the metaverse is MANA which is used to buy virtual property in the game “Decentraland”. Million-dollar deals are already being closed within this metaverse — and this is just the beginning. In the future, users will be able to buy virtual analogs of everything that can be purchased in the real world. This technology will not be limited only to games: the dynamically developing niche of DeFi may well become a testing ground for virtual lending, borrowing, investing, and trading within the metaverse. Thus the scope of cryptocurrency appears theoretically unlimited.

NFTs

According to many experts, non-fungible tokens will take up a key role in the metaverse. Acting as proof of ownership of digital assets, these tokens will be involved in digital art trading, where they are already regularly used. Moreover, NFTs have an enormous potential to be integrated into any metaverse crypto projects related to the purchase of any game assets, avatars and so on. In addition, if this area continues to develop, non-fungible tokens will soon be used as proof of ownership of real estate.

In a broad sense, an NFT is an access key to specific areas of the metaverse (in other words, the right to control a certain part of the virtual environment). Besides this, metaverse NFT games will eventually use tokens as a reward (instead of fungible tokens). Meanwhile, non-fungible tokens will be used to assign value to specific digital assets: this is very important, as almost any digital asset can be cloned an unlimited number of times, and only a certificate of ownership built into a digital object can confirm the right of the legal owner.

Self-identity authentication

In the metaverse, self-identity authentication is accomplished in the same way as the assignment of a social security number. All data about a specific user such as age, activity, appearance, and other characteristics are stored in the blockchain. This ensures maximum transparency and prevents illegal activities in the metaverse.

In addition, self-identity authentication eliminates the possibility that someone will commit illegal actions under a false name within the virtual ecosystem.

Real estate

Real estate is one of the main digital assets in the metaverse. The chief concerns here are how to assess a virtual real estate object, and how to regulate this market if the metaverse actually represents an infinite digital space. This is where the metaverse blockchain can be used as a kind of registry that records all actions performed with virtual real estate assets, such as creation, change, purchase, sale, or disposal.

To sum up, it’s clear that even though the metaverse and the blockchain have been developing as independent concepts, the potential of both will be fully realized only when they are integrated. The concepts have their complementary functions, which will eventually have a synergetic effect: people will notice something fundamentally new, which in turn will help change the perception of virtual reality and crypto metaverse.

Do you actually need blockchain for building the metaverse?

Yes. Blockchain is an integral part of the metaverse, because the technology enables users to protect their digital assets in virtual reality. This point is underlined by real blockchain projects such as “Axie Infinity” and “The Sandbox”. Both involve the metaverse. Users can create and sell digital assets in the form of NFTs, as well as benefit from the domestic economy using the metaverse crypto.

Experts agree that it is impossible to realize the idea of ​​a fully-fledged virtual ecosystem without blockchain technology. This is because, as we have described, users need to be able to securely own and sell their digital property by moving assets between the platforms without permission from a centralized authority. For example, the virtual real estate in the game “The Sandbox” can be successfully sold outside the metaverse (on the corresponding exchanges). Experts say that not being able to move digital assets outside a specific ecosystem significantly reduces their value.

This is why these days the blockchain is an indispensable technology allowing you to identify with precision any virtual object without involving a centralized institution. The ability of every participant in the ecosystem to identify a digital asset and track its ownership within the logic of decentralization is the key to building a fully evolved metaverse.

The metaverse cannot exist without a domestic economy. This helps explain why the integration of the metaverse crypto is inevitable. Blockchain ensures the transparency and economic effectiveness of this metaverse market. When creating virtual reality, it is extremely important to use reliable algorithms for replacing real assets with digital ones. In this respect, the metaverse blockchain is almost the only technical solution that could currently provide the proper level of trust in economic transactions within the metaverse.

Beyond this, blockchain allows different ecosystems to be combined — which further underlines how this technology is indispensable when it comes to introducing the metaverse concept.

Top 5 blockchain and crypto projects in the metaverse

Right now many developers are applying the concept of the metaverse to real blockchain projects. Here are the top 5 blockchain ecosystems.

The Sandbox

This NFT game is extremely popular at the moment. It was originally created as a regular mobile app, but over time it has evolved into a complex Ethereum-based metaverse with its own SAND token. Users create an avatar that connects to an e-wallet for managing non-fungible tokens, an internal currency (SAND), and a range of other assets too. The game has an integrated “play-and-earn” model aimed at further stimulating the domestic economy.

Decentraland

This is a 3D metaverse where users can create avatars, buy and equip the land plots, organize various events and create digital content. The domestic economy of Decentraland operates on the blockchain which enables digital identification and confirmation of in-game assets ownership. The main digital asset in the game is virtual real estate (LAND). Moreover, the metaverse has a native ERC-20 cryptocurrency token (MANA) which is used as an internal means of mutual settlement between the players.

Star Atlas

The metaverse “Star Atlas” is one of the latest releases built on the basis of the multiplayer gaming products using DeFi and metaverse blockchain technologies. The players of “Star Atlas” can purchase digital assets such as land, spaceships, equipment, and crew. The POLIS monetary system which forms the basis of the in-game economy has also been introduced. Given the many innovations used in the development of this game, experts believe that Star Atlas has serious potential.

Enjin

Enjin is a unique implementation of the metaverse concept. It not only operates on the blockchain but also offers opportunities for developing software and SDK for the easy creation of NFT. It involves a secure Ethereum-based NFT development platform. The system also ensures digital assets are highly liquid by converting Enjin NFT into ENJ metaverse tokens. What’s more, as ENJ tokens are scarce, they retain their value and digital collectability.

Bloktopia

Bloktopia is a metaverse example built on top of the Polygon blockchain where you can learn, earn money, play games, and create — all in virtual reality. Bloktopia has an integrated play-to-earn game implemented through the internal metaverse token BLOK and in addition provides advertising opportunities for Adblok. It also allows you to sell real estate via Reblok, and gives you the chance to create your own gaming immersive environments and enjoy various games within the metaverse.

Metaverse and Web 3.0: are they the same?

Another important concept related to blockchain and the metaverse is Web 3.0. The words metaverse and Web 3.0 have started to be used interchangeably. However, even though they both focus on developing a better, future internet, these are two different concepts.

The metaverse focuses on how users will experience the internet of the future while Web 3.0 is centered on who will own and control it. Its major goal is to solve the shortcomings of Web 2.0 like data breaches and data privacy issues. Web 3.0 will leverage blockchain to enable decentralization and let users own and control their data.

The concept of Web 3.0 is still under development, yet we already see some of its elements like non-fungible tokens, which leverage blockchain to help people monetize their skills in new ways, and play-to-earn games that help people earn revenue while playing.

While some argue that Web 3.0 is a major building block for the metaverse, it is only one component of a greater sum.

Conclusion

There are many differing visions for the metaverse concept, yet almost all experts agree that it is a niche with a great deal of promise. Investors can potentially make very good money on it. Blockchain is clearly a necessary technology for the main elements of the metaverse, which include digital proof of ownership, money transfer, governance, accessibility, and interoperability. The principal challenge is to choose a project that users will like and that will attract new participants, thereby increasing its capitalization and the value of digital assets affiliated with a particular metaverse.

There are many ways to earn money in the metaverse, from buying and selling collections of metaverse NFTs to creating virtual property. Feel free to contact us right now — and we’ll give you in-depth expert advice on the investment prospects in this intriguing market.