How Is NFT Useful In The Metaverse?
The metaverse is a term that has been around as a subject of science fiction since the 1990s. Today, it has gained more interest and recognition thanks to efforts by tech giants.
The term recently attracted renewed interest after Facebook CEO Mark Zuckerberg announced that he was rebranding Facebook to Meta Platforms Inc. (Meta for short).
While not the only company focused on the concept of a metaverse, Facebook has released a video demonstrating the concept of a metaverse. So what exactly is a metaverse?
Defining the Metaverse
Think of a gaming environment where you can buy food, shop clothes, cars, ammunition, and even build communities. If you have played a game like Fortnite or Roblox, you have interacted with a version of a metaverse.
Now, the metaverse companies like Facebook and tech giants such as Microsoft want to create a more tangible virtual world that will be accessible to gamers and non-gamers.
Venture capitalist Matthew Ball, Writer of The Metaverse Primer defines the metaverse as:
“A massively scaled and interoperable network of real-time rendered 3D virtual worlds which can be experienced synchronously and persistently by an effectively unlimited number of users with an individual sense of presence and with continuity of data, such as identity, history, entitlements, objects, communications, and payments.”
The metaverse will be built upon the internet. Unlike VR games which are limited to environments within the game, the metaverse will be a physically persistent virtual environment accessible to anyone with an internet connection.
In a founder’s letter expressing what the metaverse will be and how it will work, CEO Mark Zuckerberg says of the metaverse:
“The defining quality of the metaverse will be a feeling of presence – like you are right there with another person or in another place. Feeling truly present with another person is the ultimate dream of social technology. That is why we are focused on building this.”
To make a virtual world such as the metaverse work, we will need to establish the same rules as we have in the real world. For example, how do you establish that you own a piece of property or that the car you drive on the metaverse belongs to you?
The answer lies in blockchain and NFTs.
How is NFT Useful in the Metaverse
Blockchain, NFTs, and the metaverse have one thing in common – they all use decentralized technology. This means that other decentralized technologies such as decentralized finance (DeFi), NFTs, and cryptocurrencies will have a big role to play for the metaverse.
Blockchain has so far proven itself in its ability to create immutable records. The metaverse will rely heavily on blockchain to develop a virtual world that allows users to control their digital representation using smart contracts fully.
Cryptocurrencies will also provide the digital currency to buy goods or services in the metaverse, leading us to the role of non-fungible tokens (NFTs).
NFTs have become popular in the past year to sell digital artwork. As their popularity in selling digital art grows, possibilities are also arising in the use cases of NFTs in the metaverse.
Let’s first understand this new craze that is NFTs.
NFTs are unique, indivisible, and immutable digital assets built on blockchain technology. People are using NFTs to represent ownership on the blockchain. This creates a compelling use case in the metaverse, which will consist of numerous digital assets.
NFTs create a proof of ownership system that encourages transparency in the ecosystem. A person who buys a piece of art, for example, can prove their ownership, yet the creator of that art remains in full control of their creation.
This feature of NFTs makes them an ideal link between the real world and the virtual ecosystems that the metaverse will bring.
So let’s see how these NFTs will be useful in the metaverse.
1. NFT as Visual Art
NFTs have been popular among artists to sell their digital art. For example, Mike Winkelmann, better known as Beeple, sold his artwork for $69 million, making him one of the most valuable living artists in the world. Once sold, an NFT artwork becomes the property of the new buyer.
Much like in the real world, once a buyer buys this art, it becomes less visible to the public. Since the metaverse aims to create a world similar to the one we currently live in, art museums are going to be an important part for art enthusiasts and virtual tourists to see.
Pixlr Genesis, for example, aims to create a decentralized digital museum where artists, collectors, and art enthusiasts can come together to create and share exceptional art with the universe.
The idea for Pixlr Genesis is to create an ecosystem in the metaverse where artists can network with each other and place their art in auctions for interested metaverse users to access.
The idea of art museums in the metaverse is that anyone from anywhere in the world can view NFT art, purchase, purchase, collect, or create and share their art with the rest of the metaverse.
In addition to providing access to art for art enthusiasts, NFTs in the metaverse will allow artists to create and monetize their art.
NFTs use smart contract functionalities embedded into their infrastructure. This means, for instance, an artist using an NFT smart contract can directly sell their art to a buyer. The buyer will have unique proof of ownership of that art.
Since the two parties are using smart contracts, the smart contract will automatically execute the transaction once each side fulfills its end of the bargain.
2. NFT in Gaming
Video games such as Fortnite offer options for players to buy different skins customize their clothing, weapons, and even characters. Players achieve these customizations by buying upgrades using a digital currency, which they buy with real-world currency.
Each game adopts its in-game payment system with its kind and value currency. In the metaverse, the variety of currencies will create a challenge in facilitating the interactions envisioned for a metaverse.
This means that the metaverse will need a unified digital currency that can be transferred from one game to another or from one world to another, creating a unique use case for NFTs.
NFTs fundamentally show proof of ownership of a digital asset. Therefore, if you buy an asset from Game A using an NFT, the record of ownership is traceable across any segment of the metaverse. This means that you can trade your digital assets inside the game and much more easily in the metaverse.
In addition, players of blockchain-based games on the metaverse can earn rewards, thus earning passive income for their contribution to these games.
In-game NFTs have already proven their popularity, with players scooping up in-game NFT offerings as soon as they are offered up for sale. Players who purchase these NFTs can sell or loan them to other metaverse users who would like to create their virtual worlds.
3. NFTs in Music
2021 came with the massive adoption of NFTs across diverse industries, including music. NFTs could reform the music industry in more ways than one, changing the way musicians interact with fans, record labels, and the metaverse.
Singers, musicians, bands, famous and unknown have adopted NFT technology, using it to sell their tokenized digital art, real-world, and virtual merchandise, and tracks, generating millions in revenues.
For a long time, musicians have complained about the inequalities that exist in the music industry, especially when it comes to revenue distribution. With NFTs, artists can eliminate the middleman, choosing to rely on NFT smart contracts that execute the terms of an agreement when both sides of the agreement meet the set conditions.
So, how do NFTs in music matter in the metaverse?
NFTs have broad applications in the music industry. Artists can tokenize music tracks, files, concert tickets, and more. They can attach NFTs to their digital assets and share these directly with their audiences.
The metaverse also allows musicians to play their music more often by organizing virtual concerts and events that their fans can attend. Musicians can also have more control over their music and when and how they perform.
4. NFTs for Fun and Collectability
“Disaster Girl”, an original photo of a four-year-old girl smiling in front of a burning house, sold for $473,000. This demonstrates that people are willing to fork out a lot of money to pay for fun and collectible items which mean something to them or have a pop-culture association.
For example, sports fans have bought a lot of NFT collectibles featuring video highlights and other collectibles. Movie creators like Marvel and Warner Brothers are also releasing NFT memorabilia related to their films.
Fashion brands like Gucci are also developing NFT-based accessories and clothing that metaverse users buy to reflect their status and fashion sense. This trend shows how much the metaverse will be closely linked to reality. Users want to reflect their personality and hold collect memorabilia related to their real or virtual world interactions.
5. NFTs in Real Estate
As we’ve said before, the metaverse will be a world that reflects similar rules and ways of life as our physical world. This means that we can buy and sell land as we would in the physical world. If this sounds like an outrageous idea, a user recently bought a plot of virtual land on Decentraland for a record $2.4 million worth of cryptocurrency.
Decentraland sells virtual real estate in the form of NFTs which interested buyers pay for using Decentraland’s token, MANA.
Games like Roblox allow users to build entire universes or environments of their own, capture people’s interest to develop real estate, houses, monuments, etc. However, these creations remain part of the game, not as the players’ assets.
In the metaverse, which is a decentralized world built on blockchain technology, once you own a piece of virtual land, an immutable record is created to show that you own that land.
Players in decentralized games such as Axie Infinity can play the game through NFTs where they can buy the land in the game, own that land, and the property they build on it.
Once these players have that land, they can sell it to other players or metaverse users who want a share of their real estate.
The metaverse real estate space is likely to attract investors who will develop the virtual land and create revenue streams for themselves. Virtual real estate developers can also take on virtual development companies and work with web engineers and other specialists to create shopping malls, casinos, restaurants, and other utilities in the virtual world.
6. NFTs and IP Rights
We’ve learned the ease with which duplication and counterfeiting occur with the internet, restricting the creator’s benefit from their work. As this is a problem in the physical world as well, it raises questions about how a virtual universe will prevent such issues. The answer lies in NFTs.
NFTs are based on blockchain technology, a decentralized public ledger used to create immutable records of the transaction. The decentralized nature of the blockchain means that no central body is responsible for changing, destroying, or editing this ledger without a consensus from other users on the blockchain network.
NFTs, unlike cryptocurrencies, do not have an attached value to them. What they have is unchangeable and indestructible proof of ownership of digital assets. An NFT ensures that other people in the network can view the digital asset’s ownership in the digital universe.
This means that if Person A creates a piece of digital art as an NFT, and player B copies the same art, the NFT will provide proof that Person A is the IP owner of that art. This allows participants in the virtual world to enforce copyright rules while allowing users to enforce licensed use of their IP.
The metaverse is a technology still in development with tech giants like Facebook presenting models of what it would be like.
As these companies continue to invest in building this 3D virtual universe, other innovative technologies like blockchain and NFTs will have a major role to play in the metaverse.
NFT’s are already being looked at as a critical component of the economics and social interactions within the metaverse with gaming, music, and real estate applications.
What’s you take on the role of NFTs in the metaverse?