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As non-fungible tokens (NFTs) enter the mainstream, they are nearing “come of age”. In this next phase, investors are quickly discovering new use cases for NFTs that go beyond the initial frenzy of digital artwork and collectibles. A prime example is the seamless connection of NFTs with the metaverse industry, a rapid development that will inevitably shape NFT adoption and increase adoption exponentially over the long term.
Significantly, metaverses hold promise for a more open and fair economy — one that is decentralized and powered by the blockchain. But essentially, NFTs will serve as a gateway to a metaverse, as they strengthen the identity, community, and socialization on which the metaverse economy is built.
While the first NFT was minted in 2015, it is safe to say that recent developments in the metaverse industry are now setting NFTs on a new path forward. This results in a wealth of speculative opportunities for companies, investors and entrepreneurs alike. In particular, the metaverse relies on NFTs to fulfill the five following transformative functions.
Open up the next gaming frontier
The gaming industry already outperforms every other form of entertainment spending, including amusement parks, cinemas, concerts and sporting events with live spectators. So it shouldn’t be too surprising that when Mark Zuckerberg announced Facebook’s name change, he cited gaming as one of the top motivators behind the rebrand.
Gaming has long been associated with virtual reality (VR), so consumers are already familiar with 3D avatars and world building. VR gaming today is largely done through standalone applications on a desktop, mobile phone, or VR headset. This offers a more immersive experience compared to traditional video games. But in a metaverse that is essentially a unified and interoperable VR space, players can interact with each other and play games through human-computer interaction (HCI).
The only interoperable environment opens the next frontier in gaming, augmented by social gaming, play-to-earn (P2E) and portable gaming resources. Remarkably, NFTs are the keys to unlocking all of these concepts. For example, NFTs serve as in-game currency for P2E. Basically, the more value you add to the game, the more you earn. In addition, the P2E game itself is largely impartial and more democratized than traditional platforms. Thanks to the ownership features that NFTs offer, players fully own their assets rather than revenue being controlled by a centralized gaming operator.
Fostering the creator economy
NFTs are intended to represent virtual innovative or unique assets. Although not formally a currency, items minted as NFTs can be sold and traded on virtual platforms. Armed with this transactional power, NFTs are ushering in the next wave of the creator economy.
The creator economy is technically as old as humanity itself, built by artists, writers, and other creators across physical mediums. However, the term “creator economy” was only officially coined in the digital age. Today, over 50 million independent content creators, curators, and community builders are part of the creator economy in the United States.
With NFTs tied to the decentralized blockchain, each asset contains codes and characteristics that cannot be replicated. In addition, the asset cannot be stolen and its value is reserved solely for the owner. The code may embed additional rights and obligations, such as B. Resale fees, which grant the creator a percentage of all subsequent transactions of the digital asset. The key mechanisms of “smart contracts” and “copyright prosecution” enhance IP rights and ownership, solving major problems creators have faced in the cyber age.
The Metaverse industry is a major step forward for the creator economy as it provides a virtual world where content can grow in value and creators can earn capital for their work. These defining characteristics are only possible because the product is tied to secure, transparent and decentralized NFTs.
Opening up new social experiences
NFTs will play a leading role in enabling communities, personal identity mechanisms, and social experiences that will define the Metaverse. For example, users could pursue a specific hobby or show their support for a project by purchasing NFT assets. As a result, like-minded NFT owners can come together to form communities, share their experiences, and collaborate on creating relevant content.
NFT avatars are also a critical concept in a metaverse’s socialization system, representing not only a player’s actual selves, but also an identity they envision. Users could use NFT assets to build that identity and gain access to new experiences in a metaverse.
In a metaverse, NFTs can be perceived as extensions of our real-world identities, each granting us complete ownership, control, and flexibility in creating our virtual personalities.
Bridging the gap between the physical and digital world
It must be noted that the social experiences of the Metaverse model can also be transmitted offline, with NFTs effectively bridging the gap between the physical and digital worlds. For example, the Bored Ape Yacht Club (BAYC), a conglomerate of primate avatars created by four pseudonymous founders, is making strides in merging VR and physical reality. BAYC NFTs owners get access to exclusive clubs and community features such as: B. First access to new NFT collections, NFT improvements and even “real” private events. In November 2021, BAYC hosted an exclusive yacht party and warehouse rave at ApeFest in Manhattan.
Construction of the virtual real estate market
The Metaverse industry is also taking real estate into a new sphere, with some “packages” of virtual real estate spaces being valued at millions of dollars. For example, in browser-based Metaverse Decentraland, a virtual land asset recently sold by crypto investor Tokens.com for $2.4 million. Additionally, in December 2021, a user spent $450,000 to become a neighbor of rapper Snoop Dogg’s Snoopverse, an interactive world he is developing in the Ether-based platform Sandbox.
In fact, NFTs represent the virtual property and allow transactions to be carried out. To preserve the value of meteverse’s digital real estate market, space is inherently limited. For example, Decentraland is made up of 90,000 land parcels, each roughly 50 feet by 50 feet. This perpetuates “digital scarcity,” a concept that has long been debated in relation to cryptocurrency.
A recent position paper from JPMorgan found that the average chunk of virtual land in the four major metaverses doubled in the six months from June to December 2021, shooting from $6,000 to $12,000. Virtual land appreciates in value just as fast as physical land, but there are no interest rate hikes to dampen or slow price increases.
looking ahead
The Metaverse industry is still in its infancy and is continually being shaped by cryptocurrency trends and then reshaping evolving digital behavior. NFTs are on a similar path.
While it may be fairly simple how NFTs enable ownership and virtual identity, the Metaverse model creates an interoperable environment with seemingly endless opportunities for consumers to gather, socialize, play, earn, and transact business. Therefore, looking ahead, companies need to shift the needle of their NFT investments from exploration to activation, as NFTs are the lynchpin for value creation and user engagement in the Metaverse economy.
Jonathan Teplitsky is the CEO of PipeFlare, a platform aimed at helping game developers monetize their work.
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