If you are an enterprise blockchain professional, you must be having a ride of a lifetime with all the crypto, NFT, and metaverse projects emerging every day. For everyone else, no one has ever experienced this space before!
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Role of NFTs in Web3
Web3 is the concept of a decentralized, user-centric internet that aims to give users more control over their data and digital experiences. NFTs have a critical role in Web3:
- Digital Ownership: NFTs represent true digital ownership, aligning with the principles of Web3 by allowing users to have control over their digital assets, data, and online identity.
- Interoperability: NFTs can be used across various Web3 applications, ensuring that users can seamlessly utilize their digital assets and identities across different decentralized platforms.
- Smart Contracts: NFTs often utilize smart contracts, enabling automated and trustless transactions, royalties for creators, and transparent ownership history, all in line with the principles of decentralization.
- Data Privacy: Web3 aims to give users more control over their data, and NFTs can be used to manage and protect personal data through secure, blockchain-based identity solutions.
In 2022, if someone had recommended you to put some money in Bitcoin or Ethereum, you might have called it a logical statement. But, what if someone had advised you to put all your retirement funds in a digital image that virtually anyone can copy?
To the untrained eye, this might sound insane. But the people who have been following the Non Fungible Tokens space have been waiting for this moment. With more NFT marketplace airstream.
(Before we jump in, here is a primer on Blockchain, NFTs, and the Metaverse:
Blockchain: A decentralized public ledger that can store ownership and transactional information without a central administrative authority.
Non Fungible Tokens: A unit of data that sits on top of a blockchain and cannot be changed once produced. However, it can be traded to change its ownership. The data can exist in videos, audio, or images.
Metaverse: A digital, real-time, and connected simulation of the world as we know it where digital avatars replace human beings.)
Statistics about the Role of NFTs in the Metaverse
- NFT Sales: NFTs have played a significant role in the metaverse by facilitating the ownership and trade of virtual assets. In 2023, NFT sales reached billions of dollars, with digital art, virtual real estate, and collectibles being some of the most popular categories.
- Virtual Real Estate: Virtual land ownership through NFTs became a crucial aspect of the metaverse, with some virtual properties selling for millions of dollars.
- Digital Art: NFTs provided a new avenue for digital artists to monetize their work, with artists earning substantial amounts from NFT sales.
- Gaming: NFTs are integrated into various blockchain-based games, allowing players to own and trade in-game assets as NFTs. These assets can be used in different virtual worlds and games.
- Virtual Fashion: NFTs extended into the fashion industry, with virtual wearables and accessories being bought and sold as unique digital items.
Relation Between NFTs and the Metaverse
The metaverse is a virtual, interconnected universe where people can interact and engage in various activities. NFTs play a vital role in the metaverse in the following ways:
- Ownership and Interoperability: NFTs enable users to have true ownership of digital assets within the metaverse, including virtual land, avatars, items, and more. These assets can be moved and traded across different metaverse platforms.
- Digital Identity: NFTs can represent digital identity and personal data securely, allowing users to maintain consistent personas and reputations across various metaverse environments.
- Economy: NFTs underpin the virtual economy of the metaverse by allowing users to buy, sell, and trade digital assets, creating a thriving marketplace within these virtual worlds.
- Content Creation: NFTs empower creators to monetize their content, including art, music, and virtual experiences, driving innovation and creativity within the metaverse.
The NFT Marketplaces in 2023
If you have not heard about NFT until September 2023, there is a good chance that you have been living off the internet. Bored Ape Yacht Club and Wall Street Bulls have become some of the most popularly known names in the NFT community. Moreover, there is a good chance that your favourite Instagram artist is probably working on an NFT project.
Let’s clear the air out on one thing – NFTs are far from investments. They are speculative bets. But the tricky part is that the potential upside exponentially outweighs the potential downside. It is like investing in the stock of an electric car manufacturer whose CEO goes on a popular podcast and gets intoxicated, only to get an almost 8x return on the same stock in about two years (hint – we are talking about Tesla.)
Despite their speculative nature, NFTs are accumulating market capitalization at a pace even the most innovative technology companies can only dream about. The $200 million NFT market in 2020 has swollen to about $22 billion in 2022 and is projected to go higher. The question remains – what makes Non Fungible Tokens so attractive? Here are a few reasons:
- Perpetual Ownership: There might not be any other asset class offering perpetual ownership. Real estate might get curtailed by public projects and gold & precious metals depend on the commodity cycle. Whereas NFTs are backed by sophisticated blockchain app development capabilities, making it easier to maintain a public ledger optimized for perpetual security. What is yours today will remain yours till you decide otherwise.
- Early Movers’ Advantage: NFTs are in their early stages as an asset class despite the hype. While some NFTs are more popular than others, many participants in the conventional capital markets are yet to enter this space. So, there is still a lot of room for early movers to come in and stay long enough to profit with their speculations.
- Use-Cases: NFTs are helping art houses become accessible while the market of arts is itself opening up to the everyday individuals. Earlier, you might have needed some serious social capital to reach the backdoors of an artist like Eminem, Lindsay Lohan, or Shawn Mendes. But, today, if you have a few thousand dollars sitting in your account, you can virtually own a piece of their work – for as long as you want.
- Communities: Communities for NFTs are doing what salons did for stock markets. People would come together at a single point and talk about their recent bets or investments. This is where all the rumours begin. But, if you give such social systems some time, they can find the common trends that will move the future markets. Besides that, communities unlock network effects that generate incremental value for new asset classes like NFTs.
One cannot ignore the exponential growth of the NFTs and the onset of the pandemic. All of a sudden, there was a segment in the global capital markets which was young enough to have some money on the side and the risk appetite to jump into new markets. And that particular segment of young speculators, investors, and evangelists embraced NFTs bringing us where we are today.
ces now accessible to the average Joe, it would be safe to say – NFTs have become m
And Then, Metaverse Happened
After the public failure or the lack of mass adoption of projects like Google Lenses and Oculus, you might think – what gave Facebook the audacity to anchor its entire identity around the concept of the metaverse? Hint – the proof of concept had existed since 1989 when the game SimCity was released.
SimCity is a game where players can build their own cities as simulations of reality and interact with other players across the globe in real-time. If you change the definition and replace players with ‘users’ and SimCity with ‘the metaverse’ – you will still have the same output. SimCity BuildIt is one of the most popular games in the world and has had over 40 million users to date.
A closer example of the proof of this concept is Second Life. In 10 years since its launch, players have spent over $3.2 billion in building virtual families, houses, and businesses within the game. The surprising part is that the game has over 750,000 active users across the globe even today.
The pandemic has supported virtual life all the more. Electronic Arts, which publishes several other games alongside SimCity, saw its stock price almost double between 2018 and 2021.
So, Facebook just saw a trend operating at scale. It understands that for this trend to become a global phenomenon, some companies will have to provide critical infrastructure – the virtual world demands hardware and software integration along with a good understanding of the social systems. Who else can do this, other than a company that has successfully scaled three of the largest social networks of all time – Instagram, WhatsApp, and Facebook?
A Match Made in the Meta-Heaven: NFT in Metaverse
To the untrained eye, the rise of the concept of the metaverse and the exponential growth in the NFTs might look like a coincidence pumped by bored and young investors who want to try something new. But, would it still be just a trend if companies like Samsung and PricewaterhouseCoopers were spending money on buying virtual land in the metaverse? Projects like Decentraland and The Sandbox have gone beyond concept testing and have started scaling globally. Someone recently paid over $450,000 to be Snoop Dogg’s neighbour in the metaverse.
These trends showcase a similarly emerging theme – the metaverse is opening up, and more people with the capital to make it important are taking the rise of metaverse seriously. NFTs, while sounding like a distant cousin to the crypto culture, are the gateway for the integration of these people and their lives in the metaverse.
1. Virtual Real Estate
Real estate prices across the globe have been heating up way beyond one’s expectations since the 2008 financial crisis. You might have heard about the rising prices in the United States, Singapore, or UAE, but even in otherwise slow-growth economies like Turkey, annual real estate price increase has breached the threshold of 35%.
Low-interest rates are critical to this trend. But they benefit the people who already have some capital, i.e., people who were not deeply impacted by the 2008 crisis. For many young professionals, owning a home in a metropolitan city is nearly impossible for the next few years if their income stays at the same level as today.
The metaverse opens a new door of opportunity for these young professionals – seasoned investors either do not understand this new market or don’t want to take the risk. You might think that real estate and virtual real estate are not the same class. But, with more institutional capital hitting the latter, they are converging. And NFTs are central to completing this loop.
NFTs are a great example of how communities of like-minded and active investors can be built around blockchain. This way, NFTs can be used to both stamp the ownership of virtual real estate and to enhance its value with digital artifacts. Moreover, it also works as a proof of concept to see how a fast-growing virtual real estate market would behave.
2. Social Experiences
Partying, networking, or just meeting new people in the metaverse sounds exciting. But, we are yet to cross that bridge at scale. NFTs, a more personalized subset of the crypto markets, is a better channel of communication between community members, creators, and buyers & sellers.
It is difficult to imagine social experiences without the commercial infrastructure – you need a café to go on a date, you need an office building to meet new clients, or you need an entry ticket to attend an event. NFTs, with their non-fungible public records of ownership, can make it easier for businesses to enable social experiences in the metaverse. Imagine a central bank in a large economy and how it keeps track of money and ensures legitimate currency is available in the economy. The same role will be played by NFTs in the metaverse, albeit in a more decentralized and yet reliable manner.
3. Identity, Storage of Value, and Tradeable Securities
Think about a device that can work as your passport, your wallet, and a portfolio of the stocks you own. When the metaverse scales, NFTs will have the potential to play the exact role as this fictional device with a focus on your digital avatar, your metaverse wallet, and the digital art you own.
Cryptocurrencies operate at a level where they are still highly dependent on their ability to be converted into fiat currencies, but NFTs run deeper. They have both investment and engineering applications – having the potential to expand on both the ends of an underexplored spectrum.
As more people join the wagon of the metaverse, it will attain critical mass – much like a social media platform that you might not enjoy, but you cannot ignore because all your friends, family, associates, and customers are on it. So, the wise move would be to get in while the NFT and metaverse markets are still in their early stages.
If you plan to be a part of the metaverse, NFTs are the way to go. But, what if you want to have more control and want to impact this metaverse? Now that is where you will need a blockchain development service provider who can single-handedly help you with decentralized applications, tokenomics, and blockchain development. And if that is something that excites you, you might want to click here and connect with one of our experts.
See you in the metaverse!