The intersection of the metaverse and blockchain. Why these are more than buzzwords.

Over the past few years, the words ‘blockchain,’ ‘cryptocurrency,’ ‘NFTs,’ and ‘metaverse’ have become as present as spring pollen, and for many people, as mysterious and irritating. Tech evangelists promise boundless wealth and opportunity in these spaces… platforms… or assets (what are these things?). Yet, like flying cars and virtual reality, exciting promises seem easy to make and hard to deliver. So, what is the promise of these industries, are they viable, and if so, what should you do about it?

Innovative spaces and developments have always been met with practical trepidation. We’ve seen enough ‘flash in the pan’ developments and innovations rise and fall to temper runaway notions of overnight success or sustainability. Theranos, Google Glasses, Moviepass come to mind, and recent months have seen wild turbulence in the crypto and NFT markets. Furthermore, new products and options initially come across with awkwardness and a sense of weirdness or ‘ickiness.’ Society is certainly normalized to dating apps now, but in the early 2000s, online dating was perceived as dangerous and shameful. Add in all the scams, lies, and misinformation of the era, and it absolutely makes sense that the average investor is dubious of this entire space.

We remember advice like “don’t get in cars with strangers” and “don’t put your credit card number on the internet.” But today, over 93 million people use Uber, and in 2021, 2.14 billion people around the world shopped online (and predominantly, they did that with credit cards). When new spaces are developed, they may begin with semi-lawlessness, exploitation, and/or misrepresentation, before transitioning into tools, platforms, and resources that are irremovable from our way of life and economy.

Blockchain. Cryptocurrency. NFTs. Metaverse.

They will follow the same trajectory.

From unclear origins and with unclear functions, these are the core components of what is called “web 3.0” (the emergent de-centralized, more open internet), poised to be an economic juggernaut. There have been scams, deceptions, and ‘flashes in the pan’ in the infant stages of this space, but as we’ve seen, that is typical in an emerging sector. As technological and material thresholds are crossed over, the scale of what’s possible here will become more apparent and undeniable.

In the same way, you don’t need to understand the mechanics of how your wi-fi works, you don’t need to understand the mechanics of these terms; but you do need to understand what they are, how they work together, and how they are different:

  • BLOCKCHAIN. A blockchain is a digital ledger that records transactions on a distributed network. It has no innate value but instead functions as the conduit for transactions. The name comes from how the ledger operates, wherein "blocks" of data are linked together. The distributed aspect means that transactions are logged across geographies, sites, and institutions simultaneously, greatly reducing the chances of fraud while increasing operational efficiency. Think of it as a google doc edited in real-time with all parties seeing the changes. Privacy exists in the blockchain, don’t worry - it’s just complicated.
  • CRYPTOCURRENCY. The term applies to any digital currency based on a distributed ledger. The blockchain secures the currency, meaning it cannot be counterfeited or faked. These currencies are often decentralized (as well as distributed), meaning that the currency is not tied to a central authority, like a government. There are many different types of cryptocurrencies with many different use cases. In addition, certain currencies limit how many coins can exist, while others have a cap on how many new tokens can be released each year. Understanding this aspect is critical, as cryptocurrencies derive value based on outstanding supply and market demand.
  • NFTs (Non-fungible tokens). NFTs are virtual tokens added to the blockchain which record an item’s creation and ownership. (Similar to how chipping a pet distinguishes the pet’s identity and who it belongs to.) All types of information and data can be rendered into an NFT, from 2D images, 3D models and worlds, works of music, and can even represent real-world items like artwork or real estate. Remember, an NFT is not the item itself but is more akin to a receipt for the item that may grant the holder certain perks.
  • METAVERSE. A virtual space where users can socialize, play, work, and shop. We’ve seen versions of a metaverse in science fiction novels like Neal Stephenson's Snow Crash, and films like The Matrix and Ready Player One. In these stories, there is one all-consuming metaverse, but that truly is science fiction, as each company in the space (Meta, RecRoom, & Roblox, to name a few) is creating its own siloed world. The industry is still nascent, so it will be a while before we know what form the Metaverse will take.

How do these four buzzwords fit together if at all? NFTs use blockchain technology to store and protect the data included in the NFT. Cryptocurrency is also enabled by blockchain. Interestingly, most NFTs are purchased in cryptocurrency, but they don’t need to be. The Metaverse will rely heavily on the financial mechanisms of blockchain and NFTs to power sales and ensure creators are fairly compensated for their works.

We can’t know yet how these innovations will affect the average person. Currently, a handful of factors hold back this space from being the ‘promised land’ it’s being hailed as. Internet speed, blockchain capacity, supporting infrastructure, and hardware requirements are a few of the technical hurdles to be overcome. Safety protocols and governance need to be developed for safety. And of course, more content is needed to inflate this space to its full potential.

As these issues are addressed and resolved, look for the next gold rush to ignite. When it happens, it will happen fast. Keep an eye on this developing sector, educate yourself on it, and be ready to jump in as the possibilities become (virtual) reality.

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