Metaverse is money and crypto is king – why you’ll be on a blockchain when you jump into the virtual world

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You might think the metaverse will be a collection of interconnected virtual spaces – the World Wide Web, but accessible through virtual reality. That’s largely correct, but there’s also a fundamental but slightly more cryptic side to the metaverse that will set it apart from today’s internet: blockchain.

In the beginning, Web 1.0 was the information superhighway of connected computers and servers that you could search, explore and inhabit, usually through a centralized company’s platform – for example, AOL, Yahoo, Microsoft and Google. At the turn of the millennium, Web 2.0 was characterized by social networking sites, blogs, and the monetization of user data for advertising purposes by the centralized gatekeepers of “free” social media platforms, including Facebook, SnapChat, Twitter and TikTok.

Web 3.0 will be the basis of the metaverse. It will consist of decentralized blockchain-enabled applications that support an economy of user-owned crypto assets and data.

blockchain? Decentralized? Crypto-assets? As researchers who study social media and media technology, we can explain the technology that will make the metaverse possible.

own bits

Blockchain is a technology that continuously records transactions, usually in a decentralized, public database called a ledger. Bitcoin is the best-known blockchain-based cryptocurrency. Every time you buy bitcoin, for example, that transaction is recorded on the bitcoin blockchain, meaning the record is distributed to thousands of individual computers around the world.

This decentralized registration system is very difficult to cheat or control. Public blockchains, like Bitcoin and Ethereum, are also transparent – ​​all transactions are available to anyone on the internet, unlike traditional bank books.

Ethereum is a blockchain like Bitcoin, but Ethereum is also programmable through smart contracts, which are basically blockchain-based software routines that run automatically when certain conditions are met. For example, you can use a smart contract on the blockchain to establish your ownership of a digital object, such as art or music, that no one else can claim ownership of on the blockchain – even if he saves a copy on his computer. Digital objects that can be owned – currencies, securities, works of art – are crypto assets.

Items such as artwork and music on a blockchain are non-fungible tokens (NFTs). Non-fungible means they are unique and cannot be replaced, unlike fungible items like currency – any dollar has the same value as any other dollar and can be exchanged for any other dollar .

Non-fungible tokens (NFTs) use blockchain cryptography to create unique instances of digital items, including works of art like these images featured at an exhibit in Miami Beach in November 2021.
AP Photo/Lynne Sladky

Importantly, you can use a smart contract indicating that you are ready to sell your digital artwork for US$1 million in Ether, the currency of the Ethereum blockchain. When I click “accept”, the artwork and ether automatically transfer ownership between us on the blockchain. There’s no need for a third-party bank or escrow, and if one of us were to dispute this transaction – for example, if you claimed that I only paid $999,000 – the other could easily point to the public folder in the distributed ledger.

What does this blockchain crypto-asset stuff have to do with the metaverse? All! For starters, blockchain allows you to own digital assets in a virtual world. You will not only own this NFT in the real world, you will also own it in the virtual world.

Also, the metaverse is not built by any particular group or company. Different groups will build different virtual worlds, and in the future these worlds will be interoperable – forming the metaverse. As people move between virtual worlds — say, Decentraland’s virtual environments to Microsoft’s — they’ll want to bring their stuff with them. If two virtual worlds are interoperable, the blockchain will authenticate the proof of ownership of your digital assets in both virtual worlds. Essentially, as long as you can access your crypto wallet in a virtual world, you will be able to access your crypto assets.

Don’t forget your wallet

So what will you keep in your crypto wallet? You will obviously want to transport cryptocurrencies into the metaverse. Your crypto wallet will also contain your Metaverse-only digital assets, such as your avatars, avatar clothing, avatar animations, virtual decorations, and weapons.

a cartoon image of a bearded young man wearing sunglasses and a backwards cap is projected onto a wall in a darkened auditorium
Avatars, like this depiction of Salvadoran President Nayib Bukele, are cartoon-like animations that people inhabit in the metaverse.
AP Photo/Salvador Melendez

What will people do with their crypto wallets? Among other things, shop. Just as you probably do on the web today, you’ll be able to buy traditional digital goods like music, movies, games, and apps. You’ll also be able to purchase physical world items in the Metaverse, and you’ll be able to see and “keep” 3D models of what you’re buying, which could help you make more informed decisions.

Additionally, just as you can use your old leather wallet to carry your ID, crypto wallets will be able to be linked to real identities, which could facilitate transactions that require legal verification, such as the purchase of a real car or house. Since your ID will be linked to your wallet, you won’t need to remember login details for all the websites and virtual worlds you visit – just connect your wallet with one click and you’re logged in. Wallets associated with the ID will also be useful for controlling access to age-restricted areas in the metaverse.

Your crypto wallet could also be linked to your contact list, allowing you to bring your social network information from one virtual world to another. “Join me for a pool party in FILL IN THE BLANK-world!”

At some point in the future, wallets may also be associated with reputation scores that determine what permissions you have to stream in public places and interact with people outside of your social network. If you act like a toxic troll spreading misinformation, you risk damaging your reputation and having your sphere of influence reduced by the system. This might make people behave well in the metaverse, but platform developers will have to prioritize these systems.

Big deal

Finally, if the metaverse is money, then companies will definitely want to play too. The decentralized nature of blockchain will potentially reduce the need for gatekeepers in financial transactions, but businesses will still have plenty of opportunities to generate revenue, perhaps even more than in current economies. Companies like Meta will provide great platforms where people will work, play and congregate.

The Metaverse doesn’t exist yet, but that hasn’t stopped a land rush as people and businesses take over virtual real estate.

Major brands also enter the NFT mix, including Dolce & Gabbana, Coca-Cola, Adidas and Nike. In the future, when you buy an item in the physical world from a company, you can also become the owner of a linked NFT in the metaverse.

For example, when you buy that coveted designer outfit to wear to the real-world dance club, you can also own the crypto version of the outfit that your avatar can wear to Ariana Grande’s virtual concert. And just like you could sell the used physical outfit, you could also sell the NFT version for someone else’s avatar to wear.

These are just a few of the many ways the business models of the Metaverse will likely overlap with the physical world. Such examples will become more complex as augmented reality technologies increasingly come into play, further merging aspects of the metaverse and the physical world. While the metaverse itself isn’t here yet, technology foundations like blockchain and crypto assets are under constant development, paving the way for a seemingly ubiquitous virtual future that’s coming soon in a ‘verse’ near home. you.

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