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Facebook stunned the world last October when it changed its name to “Meta.” With the name change, the social media giant that has helped shape the internet for the last two decades appeared to have made the decision to ride on the hype of the Metaverse boom that almost hijacked the cryptocurrency’s recent bull run.
And Meta wasn’t the only one. Microsoft announced it would adapt its signature software products into its own enterprise version of the Metaverse shortly thereafter, as hundreds of crypto projects embraced the new buzzword, adding related words like NFTs, AR, and VR to their messages. By the end of 2021, real estate sales in the Metaverse exceeded $500 million. For entrepreneurs less familiar with the concept, yes, that means people have spent millions of real dollars on clubs, nightclubs, and stadiums that only exist virtually.
Another lesser known fact? Most companies developing products around the Metaverse – a more immersive internet with virtual and augmented reality – use blockchain as the main component. Metaverse developers are integrating key crypto industry features such as NFTs (non-fungible tokens) and utility tokens to power their ecosystems.
See also: The New Wave of Web 3.0 Metaverse Innovations
To a certain extent, the intertwining of crypto and metaverse makes perfect sense. If you create a virtual space where people can experience real events with other real people, e.g. B. live music shows and even wedding proposals, you need a digital-native currency to power the economy of this world. On the other hand, association with and reliance on crypto made such startups vulnerable to the dramatic volatility of the crypto industry.
As such, they were equally affected by the crash that sent the crypto industry into a bear market in May, catalyzed by Terra (LUNA)’s collapse from $120 to 2 cents – a 99.9 percent correction – the shockwaves through the market sent . The Metaverse sub-sector of the broader crypto industry was likely hit harder than the DeFi (decentralized finance) industry of which LUNA seemed almost integral.
Just as the value of real, tangible real estate has skyrocketed by almost 19 percent over the past year, the average price per plot of virtual land across the six major Ethereum Metaverse projects has fallen by 85 percent in August. The agreed reason for the price drop could be falling interest. Still, there’s a macro-level trend to be aware of: In the short term, it’s reasonable to predict that Metaverse land prices won’t recover for months, if not years. Only the next bull run pushes the hype around again.
Both Metaverse and DeFi can be viewed as two very different brainchild of Bitcoin, the very first cryptocurrency and application of blockchain technology. But everyone will do very differently in this bear market. Unlike the NFTs that formed the backbone of the blockchain metaverse industry, much of which has been shown to be a scam, institutional demand for DeFi exposure remains strong.
Related: How NFTs could transform real estate
In June, JP Morgan Chase’s blockchain unit announced plans to inject trillions of dollars in tokenized assets into DeFi, and also initiated “Project Guardian,” which is testing institutional-compatible DeFi via liquidity pools composed of tokenized deposits and bonds. A month earlier, Wall Street giant Jane Street inked a loan deal with BlockTower Capital to borrow $25 million with plans to scale it to $50 million.
But why do institutions retain an interest in DeFi while Metaverse projects and NFTs stall? Certainly there are many scams in DeFi as well.
It all goes back to usability in the real world. While partying in a virtual world with an NFT avatar might sound like fun, people have proven that they prefer the real, tangible world to any Metaverse experience. The demand isn’t there yet, which could be because Metaverse projects need to build a better bridge between the real and virtual worlds. Until people choose to spend time in Decentraland, they’ll head to New York City and party in Brooklyn — especially now that pandemic-era restrictions are gone.
Conversely, DeFi platforms offer investors opportunities to spend the returns they earn by staking physical commodities. Take EQIFi, a regulated DeFi platform backed by EQIBank. The platform provides users with various financial services, including an earnings aggregator, loans, and deposits. Earlier in August, EQIFi partnered with crypto-to-retail bridge Shopping.io, which allows EQX token holders to spend tokens they’ve spent on physical goods at top retailers like Amazon and Walmart.
Related: 4 Ways DeFi Can Generate Passive Income
With that in mind, DeFi is starting to find ways to fulfill Bitcoin’s original promise of empowering the little guy to make money through decentralized protocols. It also catches on by letting the money be spent in key places.
As DeFi continues to open up access to and expand traditional investment vehicles, cross-chain launchpads like Synapse Network, which jump-starts the company with customizable offerings ranging from anti-bot solutions to tokenomic models, will help them scale. In turn, the rate at which DeFi will mature as an industry and transform everything we know about finance will accelerate.
That’s not to say the Metaverse won’t be resurrected, or that blockchain won’t play a significant role. As big players like Meta and Microsoft actively pursue their visions, it’s almost inevitable that smaller innovators will re-enter the game. The metaverse as a use case of blockchain and NFTs is much younger than the more traditional financial applications. In the Bitcoin family, as in most families, the older child paves the way for the other siblings.
See Also: The Blockchain Is Everywhere: How To Understand It
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