A few years ago, the idea of spending real money on virtual clothes seemed far-fetched unless you were part of the online gaming world. Recently, however, non-fungible tokens (NFTs) have come into public consciousness and been quickly adopted by independent artists able to build a community around their work.
In May 2021, Mike Winkelmann, the digital artist known as Beeple, posted a new work of digital art online. He did the same thing every day for 5,000 days, which together sold for an eye-watering $69mn (£52mn) at auction house Christie’s.
According to platform DappRadar, NFT sales volume totalled $24.9bn in 2021, compared to just $94.9mn the year before. NFTs are also starting to take hold in the world of fashion, and there is certainly demand. In September 2021, Karl Lagerfeld sold 777 NFTs priced at €77 each – they sold out in 33.77 seconds.
Luxury fashion brands are starting to invest significant time and resources into building their brand in, and monetising, the metaverse. There is an active debate as to how this technology could, should and will evolve. All of this means that the metaverse is a tremendous opportunity for most companies interested in bringing NFTs, blockchain and digital assets into the mainstream.
In this new world, verifiable ownership of digital goods and currency will be an essential component.
Behind the scenes of the metaverse will be a consumer-driven demand for secure, high-speed, high-frequency financial services with low-cost transaction fees. Data will have to be stored and served to millions – eventually billions – of people. The answer to these problems lies in the blockchain and the technology that underpins digital assets, such as bitcoin.
Some companies have already developed virtual worlds that integrate electronic cash systems and digital assets so gamers can create structures like virtual casinos and theme parks, and monetise them.
Trade in virtual goods
The end goal is to make it possible for consumers to buy and sell virtual goods from different vendors, games and universes on interoperable marketplaces. For example, someone might be able to sell their virtual plot of land in the Decentraland world and use the funds to purchase Bulgari’s latest collection.
In this virtual/augmented reality system, users will be able to move seamlessly from place to place with thousands of other people, all within the same digital universe.
In the physical world, you transact using fiat currency, which acts as a store of value and a medium of exchange for buying or selling anything you want. But how will this translate to the virtual/augmented worlds of the metaverse? One solution is the adoption of digital cash.
It is almost impossible to imagine the metaverse, much like the real world, operating without electronic cash. In a world where speed, transparency, and security are fundamental, electronic cash systems that enable high-frequency, low-cost micro-transactions, which are supported by immutable public ledgers (where every transaction is recorded, visible, permanent, secure and traceable), will become a necessity.
The metaverse will require transactions to be completed on an on-demand basis, which is something that blockchain and digital assets can enable. For a truly virtual reality environment to work and function as advertised, there will need to be transactions that occur on a secure and almost instantaneous basis.