The Metaverse and Decentralized Finance

The rapid changes in the digital landscape have seen fast evolving forms of technology come to the forefront. One of these is the Metaverse, a contact language for tech, finance, and culture to converge and collaborate around a shared vision for the future.

It may sound like nothing more than yet another new buzzword. But as with all new things, the transition to the Metaverse is a paradigm shift. The amount of time that people are spending on digital platforms is indisputable, and it is only continuing to increase.

The Metaverse offers digital users a new option: as the digital landscape continues to change the world, how can you take control and ownership?

Here is a primer on the Metaverse, how it’s grown over the years, and how it’s altering the way money exchanges hands today.

The Metaverse Before

The Metaverse as originally coined was a point in time when a user interface made up of both hardware and software blurs the lines between the physical and digital world. Imagine this in terms of augmented reality (AR) or virtual reality (VR). The original vision and definition of the Metaverse was to mix these realities together.

Today, the Metaverse has grown well beyond its original boundaries. Consider the rise of the Internet in the 1990’s and compare it to the Internet of the present. It is no longer so easy to define as it might once have been. The Metaverse faces the same challenge today. Is it a destination? A video game? AR/VR? An all-encompassing definition of the Metaverse no longer applies.

As the Metaverse changes, it is essential to remember its beginnings. Its rapid expansion is not a destination, but a process to build a system that aims to avoid the pitfalls of the Web as it is today.

The Metaverse as it originally began is now entering an era where the emergence of individual technological developments is no longer limited to the few open-source developers. It began through the creation of new virtual worlds, notably in gaming with the rise of Massively Multiplayer Online Roleplaying Games (MMORPG) and other social venues and experiences. Each of these platforms exists on a spectrum with conflicting characteristics. For instance, value transfer is bi-directional, going through digital to physical transformations, and vice versa.

People today still make a distinction between the physical and digital economy, even though in reality many companies such as Amazon exist as a hybrid of the two. The true Metaverse is quickly changing this perception in an event horizon that has never been seen before.

The Metaverse Today

The Metaverse in its simplest form is an Internet mutually owned by builders and users, coordinated by tokens and incentive structures. It is made up of peer-to-peer networks built on a foundation of trustless transactions and programmability layers that allow for an open, shared economic system in the Metaverse.

The defining characteristic of a true Metaverse is that it is a meta-economy with native currency. In this economy, value can be earned, spent, lent, borrowed, or invested in both a physical and virtual sense. Most importantly, all this goes on without the need for permission or regulation of a government or third-party platform.

The peer-to-peer incentive model is what has allowed such disruptive growth. It leverages a reduction in both time and cost when it comes to producing virtual worlds and economies. The Metaverse creates a decentralized global workforce made up of millions of creators and tech-savvy individuals. It has made collaboration opportunities possible on an unprecedented level, ranging from gaming, music, and art, just to name a few.

As a result, Metaverse-native intellectual property (IP) has begun to emerge directly from blockchains rather than existing IP being translated into what is now also called the Open Metaverse. The possibilities of how else this could change the game are endless and impossible to predict. With its organic and unpredictable technological evolution, it is causing large-scale disruption on an almost unprecedented level.

The Virtual World

A virtual world in the Open Metaverse is a computer-simulated space. In this space, it is the individual and not the corporation that shapes the narrative through exploration and world building. It is a user experience of independence and free will, though it always exists within the constructs of the virtual society it is built on.

The individuals inhabiting the virtual world can explore the environment independently from each other. However, they only have as much power as they have acquired from their participation in the localized economy. Thus, in a virtual world, people have the ability to aggregate their time, value, and resources for the community’s use.

Just as in the real world, land can be owned across virtual worlds. In the Metaverse, where true digital property rights and ownership are part and parcel of the experience, the only limit is creativity and technical capability. Buyers can use their virtual land as an event space or an advertising site the way they would with their physical property.

They can even sell it as an NFT across the various available marketplace platforms. Unlike other forms of blockchain technology such as Bitcoin which are fungible, or interchangeable and indistinguishable from each other, NFTs are “non-fungible” tokens. These tokens are unique and are used to identify a digital good as the original, or as part of a limited series of originals.

Thus, when a buyer purchases an NFT, it is not the actual underlying asset that they are purchasing. Instead, what transfers ownership is a link to that asset. The copyright in the underlying asset does not necessarily transfer along with the sale of an NFT, but instead remains with the creator or copyright owner. NFTs are just part of the currency through which trade in the Metaverse functions.

Decentralizing finance through the Metaverse

Decentralized finance, or DeFi, has proven that it has the capacity to function within individual virtual communities as an economic system. Within the infrastructure of the Metaverse, DeFi has the ability to embed itself as a core application layer that unlocks value. This means financial inclusion of creators, gamers, and digital natives alike whose wealth is not restricted within the traditional financial system.

This is referred to as MetaFi, the decentralized financial tools of the Metaverse. It includes products, services, and protocols that allow financial transactions to occur between non-fungible tokens (NFTs) and fungible tokens, all within the scope of the wider ecosystem of the Metaverse. Without the barriers of government or regulation, the possibilities of innovation through aggregation in financial services are endless. With MetaFi, a full-fledged parallel economy is created for hundreds of millions of users in the virtual space.