How Metaverse Will Change Cryptocurrencies
How Metaverse Will Change Cryptocurrencies
The metaverse and cryptocurrencies seem to be complementary concepts - virtual worlds and virtual currencies in which to spend.
Both make up what is now much-hyped "web3" - the third generation of the Internet after web1 - the World Wide Web and web2 - social media. The idea is that this version of the internet will be more experiential and engaging, involving virtual and augmented reality (VR/AR) to create immersive 3D environments.
Metaverse and cryptocurrencies are separate concepts that can exist independently of each other - as we have seen with Bitcoin, it has utility in both the real and virtual worlds. Many visions of the Metaverse - including Mark Zuckerberg's only tangent involve crypto and blockchain.
However, it is clear that there is a potential synergy between the two ideas. People love to spend money, and shopping has quickly become a key feature of web1 and web2, so there's no reason for web3 to be any different! It’s also becoming increasingly clear that while no one is entirely sure what form the metaverse will ultimately take, it has the potential to have a major impact on how cryptocurrencies develop, and the impact it will ultimately have on society.
virtual world, real value
One of the great advantages of virtual worlds is that there is far less friction than the real world. If we want to go somewhere, we just click a link or press a button and we (or at least our avatars) are there. No need for expensive and cumbersome transport infrastructure or passports, and no need to pack luggage.
The same goes for cryptocurrencies. Transactions in traditional currencies (called "fiat money" by crypto enthusiasts - because its value should be based on government fiat) requires a vast infrastructure of banks and regulators to act as custodians, intermediaries, and clearinghouses. Trading in cryptocurrencies, on the other hand, usually only requires software running on a standard computer.
Of course, we shouldn't gloss over the fact that the energy this software uses to crack the cryptography that makes money work consumes a lot of energy. But the protocol is constantly being refined, and new technologies are being developed to reduce energy use. For example, newer proof-of-stake cryptocurrencies are said to be far less damaging to the environment than older proof-of-work currencies like bitcoin.
As virtual worlds become more popular and we spend more of our lives online - working in virtual offices, playing games with friends, or even going on vacation in virtual worlds - we will need frictionless ways to pay for virtual goods and services. Maybe we'll want to spend it on virtual real estate - if we want to own a piece of digital land of our own to entertain friends or build a business!
In fact, the Metaverse could add significant value to the global economy - $1.5 trillion by 2030. Much of this value can be realized through cryptocurrencies. This could mean that cryptocurrencies really go mainstream as more of us get used to using them as a means of payment.
If that happens, governments and lawmakers will no doubt feel the need to step up their efforts to regulate and to some extent control cryptocurrencies. Although things have become more organized in recent years - more and more countries are beginning to introduce regulatory frameworks around digital currencies - it is still a "Wild West" environment. This means there is little protection for buyers or businesses that rely on coins like Bitcoin, Litecoin or Dogecoin for their business, and consumers have little recourse if they fall victim to a plethora of scams.
As cryptocurrencies become more popular, governments can also choose to regulate cryptocurrencies based on energy efficiency or pollution levels. For example, networks that rely on more wasteful proof-of-work algorithms may attract higher tax rates on transactions, while those using more efficient proof-of-stake algorithms may be taxed at lower rates.
As cryptocurrency becomes the primary medium of exchange for people to buy and sell in the virtual world, its users will become more accustomed to the methods of acquiring, processing and storing it. This means it will also be used more frequently outside the metaverse - for example, for sending money to friends and family - especially if this involves money that crosses borders, and traditional currencies often incur high fees (if it is even possible).
This, in turn, will mean that banks and other existing financial institutions may step up their efforts to facilitate cryptocurrency or blockchain-derived financial models. To remain competitive in the age of a borderless, intermediary-free financial system, they need to streamline their infrastructure. While some - like the head of the International Monetary Fund - have foreseen that cryptocurrencies could ultimately mean the end of banking as we know it, in the short term it is likely that businesses in particular will still want to stick with banks and central banks Protection and regulation brought to the trading network. But it seems to me that those who thrive in the new environment of digital currencies and peer-to-peer finance may be those with flexible and forward-looking policies around cryptocurrency adoption. Paypal and Mastercard are examples of payment systems that are now in full contact with cryptocurrencies, especially Bitcoin - both said this is because it is clear that it will play a major role in payments in the future.
Make no mistake, no one — not even someone like Mark Zuckerberg — knows what form the metaverse will actually take, and when (and if) it will fully integrate into our lives. But from past experience, we can be sure that merchants will use it to make money, and consumers will use it to consume!
When it comes to building currencies for virtual worlds, cryptocurrencies are clearly a match made in heaven — and since this breakthrough technology is still in its infancy, its evolution will likely be influenced by changes in the way we live our lives. For better or worse, more and more of us are choosing to spend more time online, and as the online world becomes more immersive, entertaining and engaging, that's only going to accelerate. It also means that cryptocurrencies will play a bigger role in our lives. So we may see it become more regulated, greener and useful.
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