When crypto meets the metaverse: the new NFT economy
When crypto meets the metaverse: the new NFT economy
Metaverses

When crypto meets the metaverse: the new NFT economy

By Alessandra Bonifacio - 31 Oct 2022

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The reason why the metaverse has taken off, especially in the past two years, is definitely related to the explosion of the NFT market and the latest bull run in the crypto sector.

This has given the metaverse the opportunity to expand rapidly, creating a real economy around it.

What is the metaverse and what is its relationship to crypto?

The metaverse is still something that many do not agree on in terms of meaning and definition, but the first characteristics are beginning to emerge.

They are three-dimensional spaces where users move freely using avatars to play, create, work and even make business deals.

Virtual spaces can be created by users themselves who make them available to other users.

Crypto, and sometimes fiat currencies, can be used.

Underlying virtual spaces are compatible technical standards, protocols, interoperability, digital ownership, blockchain technology, and laws governing their use.

Virtual real estate: can you invest in the metaverse?

The answer is yes: land in the metaverse is the new way to invest in the digital world, especially with crypto.

The research firm specializing in blockchain, Chainalysis, reported that virtual real estate prices grew 879% between September 2019 and March 2022. This was the period when Bitcoin yielded less than half, 362% (after the most recent collapse, as of 1 July 2022, it dropped to +98%).  

According to Chainalysis’ report, buying via crypto or cryptocurrency a virtual space in the metaverse accesses some immediate benefits and others visible in the future.

By buying land in the metaverse, you can take advantage of video content, images, in-game single-player or multiplayer activities, and events.

What the metaverse will be able to offer is partly something imaginable even on future scenarios: the spaces purchased in the metaverse can certainly be rented and augmented reality tools, such as VR viewers, could be added. 

Today, however, the majority of projects are in virtual reality with few links to the real world.

As far as the real estate sector of the metaverse is concerned, we are beginning to see differences related to the pricing field. According to Chainalysis, it all stems from the platform that binds to the metaverse: real estate on the Ethereum blockchain expects much higher prices than other crypto such as Solana. 

The reason would stem from the fact that most Ethereum-based metaverses have recently integrated with Polygon, Ethereum’s sidechain competitor to Solana in both cost and speed performance.

One report noted:

“Since the metaverse is such a nascent space, the long-term value of blockchain-based virtual real estate depends on a number of external factors.”

“While most of these factors are difficult to predict, we believe a couple of them may be,” the report says, “the possibility of AR/VR systems being more interoperable or proprietary and by the ‘pace of adoption of new information technologies.” 

Microsoft, Meta, Google and other technology companies are implementing frameworks to form experiences in the metaverse but it is unknown whether the metaverse realities will be unique systems or integrated with one another. 

Is it possible to buy NFTs and/or crypto related to the metaverse?

Most existing metaverses, such as Decentraland and The Sandbox, have their own tokens that power the virtual world economy. 

These tokens can be purchased on the major centralized exchanges (CEX) where they are supported, or traded to other cryptocurrencies using decentralized exchanges (DEX).

In addition, each asset within the metaverse is represented by an NFT. Each digital asset can be purchased on the metaverse’s dedicated marketplace, if any, or on the secondary market by referring to platforms, such as OpenSea, Magic Eden, etc., where they are listed. 

How does the purchase of NFTs for the metaverse with crypto take place?

In order to be able to proceed with one or more transactions, it is necessary to synchronize the wallet: in this way, the platform will be able to verify the presence of the necessary amount of crypto to be able to purchase.

The most popular wallets are those of Coinbase, MetaMask, Phantom and Trust Wallet.

NFTs in the metaverse

Since these are blockchain-based realities, it is inevitable that NFTs will find various applications within the metaverse. Indeed, each value here is represented by a token, and users have the ability to buy, trade, use and/or showcase their NFTs, sharing them with the community.

What is a wallet

A wallet is a virtual wallet within which to deposit, send and receive digital currency, such as Bitcoin, Dash, Ethereum, etc.

There are several types. The most popular are hardware ones that enjoy extreme security, such as Ledger; browser extensions, which are very simple and intuitive to use, such as MetaMask. And finally desktop ones, such as Exodus, or in-app format for smartphones.  

How to open a wallet on MetaMask to buy NFTs

MetaMask is the most popular free wallet for buying NFTs: it is multi-chain in that it supports different blockchains, such as Ethereum, Polygon, Fantom and BNB Chain. It also allows interaction with almost all dApps. Its popularity is mainly due to its ease of use, since it is a browser extension.

To open it, you will need to open the MetaMask site and follow a few steps: simply add the extension to Chrome and then create a password and a seed phrase, a secret backup phrase. 

When the wallet is set up, one can deposit a sufficient amount of crypto, usually Ether (ETH) to then purchase NFTs.

It also supports on-ramp for automatic fiat-crypto currency conversion using third-party services offered by Coinbase Pay, Wyre, Transak, and MoonPay.

Only after authorizing the connection between the wallet and the marketplace will it be possible to buy NFTs via MetaMask, based on prices set by the seller or by bidding via auction.

Once you have chosen the NFT to buy, you must click on “Make offer” or “Buy now” to proceed to the checkout stage. 

MetaMask will then request a transaction signature to finalize the exchange.

At this point, the ownership of the token will be uniquely linked to the address with which the transaction was finalized. All assets held will be publicly viewable by accessing the “scans” of the relevant blockchain.

Alessandra Bonifacio

Graduated in modern literature, she is interested in communication and digital humanities after taking part in a research project in collaboration with Stanford University and in a summer school in digital marketing at the IE Business School.

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