The metaverse is a term that has gained popularity in recent months owing to media stories and technological developments. The horizons of the digital economy within the virtual environment are what powers this developing body to replicate a parallel universe.
As physical brands (1) and businesses have gotten into the race to open up their physical avenues to the virtual world to keep up with the pace of technology, the metaverse has ceased to be more than science fiction. It is moving closer to becoming a reality.
Many industries, including those focusing on design, architecture, fashion, entertainment, retail, etc., long for the metaverse. The three pillars that contribute significantly to keeping the virtual economy under control and operating are what keep the metaverse secure and true in light of current trends.
Everyone is probably familiar with these concepts, but many people are still unclear about the metaverse's potential and how it may establish economic norms in the virtual world. Before that, consider a Coldplay concert (2). Even a casual listener would like to attend one of their shows eventually.
This is just one of the many properties of the metaverse; it also holds many other properties that mankind may have only previously experienced in movies but are now actually true. The metaverse connects the world through specialized systems and technologies, allowing you to attend the concert virtually, with Coldplay performing virtually.
Facebook changed its name to Meta (3) in 2021 to reflect its transition to the metaverse, which it now views as a vitally important parallel virtual universe and a live, breathing alternate world. A location where we can create an infinite number of digital identities and characters that can play football, read anything on the Shakesphere (4) anywhere in the globe, and even perform digital work using the character.
The Three Pillars of the Metaverse Economy
The metaverse offers many opportunities, including the ability to shop, transact for goods and assets, and attend virtual concerts. Governments recognize it as a major economic game-changer.
The digital universe is poised to widen our horizons at a level of engagement and an alternate reality that has never been seen before. One of its key features is a fully developed economy that spans both the virtual and physical worlds, making it decentralized.
This highlights the fundamental link between the metaverse, NFTs, cryptocurrency, and blockchain and these digital pillars' contribution to the virtual economy. The metaverse enables content producers to display digital works of art and property responsible for charging for the content and providing confirmation of ownership.
It is important to understand that using NFTs and cryptocurrencies for transactions in the metaverse uses the same blockchain technology to store data and guarantee a secure digital environment.
Pieces of art, video game content, music, or any other type of material that may be linked to a particular token and enables artists and content producers to collaborate to monetize their work are the terms we refer to as coins. Its connection to a blockchain is a key component in guaranteeing that these unique assets are auditable, allowing buyers and sellers to keep track of them legitimately.
In short, interoperability (5), which is lacking in the metaverse, is being introduced by blockchain. The value of digital assets lies in the fact that by integrating unique code into the programming, their provenance can be guaranteed. Suppose the product is sold to another buyer. In that case, the creator will receive a portion of each transaction as payment, made possible by blockchain technology, which keeps account of all ongoing transactions.
In the real world, we use fiat money to carry out transactions for buying and selling any type of exchange model, and we also store this fiat money in banks as an asset. In the metaverse, the concept is the same, but there is an exchange of cryptocurrency for fiat money, as well as for digital wallets and DeFi with banking systems.
Speed, transparency, and security are formal characteristics of cryptocurrencies, which are requirements for the metaverse. In this hybrid environment, cryptocurrencies are regarded as a necessary medium of exchange.
Transactions like buying, selling, or purchasing a vintage NFT require cryptocurrency and decentralization, and transparency so that no single centralized authority or hub holds the power to validate desired transactions. This makes the network more democratic, accessible, and rapid.
Given that some cryptocurrencies, like Bitcoin (6), offer highly secured cryptography technology for encryption and fund protection, it is possible to guarantee that every transaction is safe by having it recorded on the public ledger using blockchain technology, where every transaction is irreversible, traceable, and secured.
Non-fungible tokens NFTs (7) are a label form of digital asset that is distinct, irreplaceable, and immutable. The metaverse provides limitless trading opportunities, which makes their connection to NFTs the natural next step.
NFTs provide unique access to specific spots in the metaverse. Virtual property deeds are one of the keys to modifying the metaverse's basic structure and modernizing traditional social networks by changing how users engage, transact, and socialize.
In the decentralized digital metaverse economy, combined three pillars would make it simple for individuals and companies to represent their tangible goods and services. In light of this, the metaverse may be made more accessible to real-world assets by offering fresh paradigms based on these three pillars.
The metaverse is to be supported by an open economy with no chance of artificial value inflation, with the blockchain ensuring transparency and immutability.
Through holding NFTs and cryptocurrencies, many people would be able to express their support for particular initiatives, enabling communities of like-minded holders to form, share experiences, and create content together.
Through NFTs, the metaverse provides options for acquiring ownership of virtual locations. These opportunities include building structures, hosting events, opening shops, and selling virtual land for a profit.
The three pillars would establish interoperability outside the metaverse with infrastructure supporting location-based participatory features and augmented reality at the time of releasing products for a brand or unique privileges for communities and followers.
Digital avatars and physical identities are linked, opening up possibilities for determining NFTs' access to the metaverse. For instance, NFT-based event tickets would only be available to the most privileged attendees or those who acquired
As the BTS for NFTs, cryptocurrency can be used to buy them with a specific cryptocurrency wallet and conduct transactions in the virtual world. The blockchain is the primary force behind these forces, recording transactions and activities in a way that suggests that each pillar depends on the others and suggests a healthy flow of the virtual economy.
The combination of NFTs, cryptocurrency, blockchain technology, and the metaverse is a turning point that can change the future and merge real, virtual, and digital assets with new economic and social experiences that will be crucial to how people interact in the future.
Regulating the horizons of the digital economy
The metaverse is predicted to be the next online avatar with various virtual economic models supported by Web3 (8) and the three metaverse pillars. These models enable constant cross-overs and interactions among the many models as they coexist in the Metaverse, despite having their roots in financial services, gaming, and social media.
While in the context of Web3, decentralized finance, DeFi (9), GameFi (10), and SocialFi (11) are frequently viewed as distinct verticals and industries due to the emergence of these three web3 subclusters at various points in time. However, as the universe develops and the idea of the metaverse matures, humanity will most likely see the integration of the metaverse experience as a horizontal digital experience and its economy.
While still in their infancy, these concepts use blockchain, NFTs, and cryptocurrencies to underpin their economic models. Most of the current implementations within DeFi, GameFi, and SocialFi are independent decentralized apps, or DApps (12).
These ideas, however, are about to change as the Metaverse becomes an integral part of everyday life. It is necessary to distinguish between the capabilities of vertical and horizontal systems. Because the GameFi applications in the metaverse are devoted to the gaming experience, most gaming communities and users visit the metaverse to play games before leaving the platform.
The same can be said for DeFi and SocialFi apps, which are viewed as verticals that provide unique experiences for users who use the platform to conduct DeFi transactions and those who want to communicate with others in Twitter (13)- or Instagram-like environments (14).
The metaverse is more of a bundle of conscious and unconscious user experiences with a scalable business model than merely a collection of applications. Conscious and unconscious experiences can be divided into vertical and horizontal categories.
Conscious vs Unconscious
Differentiating conscious and unconscious interactions between various applications in the metaverse is crucial to comprehending how they work.
Consider a customer who uses near-field communication (NFC) (15) on their phone to tap and walk past a barrier to board a train. This is a conscious experience. Compare this to a customer who uses NFC on their phone to tap and walk through a barrier to purchase a ticket for their travel.
One of the main goals of traditional fintech applications is to make it as easy and effortless as possible to conduct financial transactions. When we return to the metaverse, DeFi, GameFi, and SocialFi, the three main horizontal paradigms, will be embedded experiences when we return to the
While there will still be metaverses like the Otherside where users may play, these paradigms will also provide unconscious experiences, making them more horizontal than vertical and standing out from unconscious activities.
Value production and trade in the future will transcend national boundaries and jurisdictions, creating a unique ecosystem experience. The future of DeFi, GameFi, and SocialFi may involve embedding, but only in a well-functioning environment.
In addition to experience components, the metaverse's capacity to connect these user functions will include utilitarian and gamification elements. For instance, DeFi will require microtransactions in the metaverse to be useful.
A metaverse in which SocialFi can be used to create an ecosystem in which artists and consumers can contribute while receiving payment and recognition for their work.
Microtransactions, NFT-based financing, renting mechanisms, virtual marketplaces, micro token economies, token exchanges, and many other bells and whistles are all part of the growing virtual environment and support the metaverse economy. The goal of each component is to create a scalable economic model for the metaverse.
For instance, commerce management within the metaverse is already connected to many ecosystems, like a premium bag of NFTs shown in an art gallery. The user also lacks sufficient money, and the work is undoubtedly pricey.
The user could easily optimize their Ape (16) or Punk (17) by borrowing some USDC (18) or any other supported token to buy the art if NFT-lending has been integrated. The user interface greatly influences frictionless transactions.
The ecology could be even smoother if it had its own native NFT in place of Ape. In particular, if there are mechanisms in place that can be leveled up, these NFTs will become more valuable as users begin to spend more time in the ecosystem.
As users invest and spend more of their time and effort in upgrading the value of ecosystem assets like NFTs, land, or in-game assets, these assets will play a significant role in the DeFi aspects for leveraging the user experience.
The word "GameFi" is frequently used to describe the environment of play-to-earn platforms like Axie Infinity (19). Still, gamification is frequently regarded as an experience just as significant as GameFi. There are casual games, leaderboards, loot boxes, battle passes, and raffles for giving a gamified experience instead of elements that need to be as intense as a Fortnite-style gaming experience.
GameFi aspects boost user retention and are crucial for keeping users engaged and committed to the platform, like DeFi components that add value to economic models. GameFi's components depend on both DeFi and SocialFi to function properly.
People who want to participate in the leaderboard can borrow or hire an NFT. On a related note, leaderboards can only be useful if the SocialFi components are designed with players and creators in mind.
Through frequent collaboration with various stakeholders, including asset creators, asset holders, players, and consumers, SocialFi maintains the essence of the creator's economy in the metaverse implementation. When all parties involved in the economy are given incentives proportionate to the value-added, a sustainable model is realized.
Gamifying the experience frequently offers SocialFi connections, with players who participate and succeed steadily moving up the ecosystem's ladder in exchange for experience points. Similar to this, high-end ratings are to be given to creators whose works succeed in the ecosystem.
When they use the DeFi components of the metaverse, creators and gamers with higher social experience scores can negotiate better bargains and accelerate the growth of the ecosystem's value. While most metaverse activity takes place on-chain, the legitimacy of the metaverse economy is established through ideas like soul-bound tokens.
To provide a complete metaverse experience, we need GameFi, DeFi, and SocialFi, just as the three pillars—Blockchain, NFTs, and cryptocurrency—are the heart underlying these horizontals. The metaverse focuses on a single term, but these components have many goals crucial for making the metaverse viable and large-scale.
The only way the metaverse can scale is if these elements cooperate, such as DeFi for handling the financial elements, GameFi for handling the experiential elements, and SocialFi for handling the credibility of the economic actors.
Like how blockchain, cryptocurrencies, and NFTs are operating as the fundamental foundations of the metaverse and acting as a regulatory body for enabling users and creators to establish decentralized metaverse economies.
This is not to suggest that there won't be a metaverse focusing on particular genres. Still, there will also be mini-games, microtransactions, and ecosystem rankings. We are currently seeing various SAAS (20) platforms offer these bells and whistles to let teams concentrate on the metaverse's main goal.
A viable metaverse economy, a persistent platform, and an immersive experience for users and producers within the metaverse would all be produced by combining these factors.