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What are Metaverse NFTs: The Launchpad for the Digital World’s Economy?

2022-01-28 04:18:18

Non-fungible tokens (NFTs) represent a new form of cryptocurrency, unique and undefined in terms of value, and highly customizable in terms of usage. This allows them to represent virtually any kind of singular digital asset — a feature that ties in with the ever-growing Metaverse and with it the widespread adoption of virtual reality (VR) devices and other forms of innovative programming. The flexibility in design and creativity that NFTs allow is something that is currently being explored in a huge way on the Metaverse and is something that is expected to create a huge digital – but very real – economy.

metaverse nft

What Is a Metaverse NFT?

The Metaverse will allow for the creation of digital shared spaces, whole cities and even worlds, accessible purely through the wonders of modern technology. As with any world, they will be populated by individuals, all of whom will have their own clothes, vehicles, and even real estate, and all of which will be buyable through cryptocurrency, thereby creating an immense digital economy.

All of these assets, from avatars to cars, must exist in a unique, digital code that is transferable upon purchase. In addition, they must be created visually and quite often different from the last, because after all, people want to be individual. Thus, if we are talking about unique, visual, encrypted assets, then of course, we are talking about NFTs.

NFTs in the Metaverse could be:

  • The avatars users choose as their characters, including their changeable hair, jewelry, etc.,
  • the clothes they purchase in a Metaverse store,
  • the store itself,
  • the land that the store is built on,
  • the artwork in that store,
  • the car the avatar used to drive to the store,
  • the house that they drove from,
  • the roads, rivers, and mountains they passed,
  • the lamps, jacuzzies, plants, sofas, and other assets that they bought to customize their house,
  • and so many others.

Everything created, bought, and sold in the Metaverse exists as an NFT. Imagine then, how much an individual might pay for these Metaverse NFTs if it means they can become the person they’ve always wanted to be in this new universe, or simply live next to their favorite celebrity. One of the biggest uses of NFTs in the metaverse so far, has come in the form of real estate.

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Why Are NFTs Such Key Aspects of the Metaverse Economy?

The Metaverse is a truly incredible concept, combining multiple aspects of modern technology such as VR, augmented reality (AR), and interactive video to create an online universe where users can easily and seamlessly interact with one another. This universe will feature digital worlds, which persist even when a user ceases to interact with them, and within these worlds it is a near certainty that all manners of the digital economy will flourish. In video gaming, economies based on what are called “micro-transactions” proliferate already. However, until recently, there has been no secure, computerized currency to serve the needs of consumers, with gamers instead forced to use traditional methods to buy/sell digital items online. This has had disastrous effects, leaving important details accessible and vulnerable to hackers.

Real estate is one market that will undoubtedly play a role at the forefront of the emerging Metaverse economy, and it is even likely that smaller transactions will be derived from this market, including the sale of individual, virtual items in the form of NFTs. These items, and even the property itself, will necessitate the creation of tokens that can represent them in the form of unique and instantly recognizable code — NFTs. Additionally, these tokens will need to be purchased in an encrypted, transparent, and decentralized way — cryptocurrency. These necessities, as well as combating security concerns, mean that the world of crypto, and especially NFTs, will be at the forefront of the Metaverse.

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How Are Property NFTs Tied with the Metaverse?

Virtual land and digital real estate are NFTs that show plots of land or property registered in an online communal space. These land and property NFTs can be anywhere that allows for computerized creation and can be visited by a large quantity of users — online gaming platforms, avatar-based chatrooms, and shared internet workplaces are all areas where the creation of digital land/property could be useful, and in some cases almost essential. However, more than any of the previous areas listed (and perhaps because it includes them all in some form or another), the Metaverse requires the creation of digital land in a way never before seen on any digital medium.

Digitally generated street advertising NFT-min
Digitally generated street advertising NFTs (Source: Financial Times)

These land and property NFTs vary enormously. Videogame-like platforms are popping up everywhere that sell digital plots in all shapes and sizes, and even when a plot is bought it can be split up using a process called fractionalization. These plots can hold massive appeal to certain gamers, as one unnamed investor paid $450,000 to own an NFT property next to Snoop Dogg on one of these platforms, called The Sandbox. Hip-hop superstar Snoop Dogg has come out as an NFT advocate in the past, saying in a press release “I’m always on the lookout for new ways of connecting with fans and what we’ve created in The Sandbox is the future of virtual hangouts, NFT drops, and exclusive concerts.”

What Is the Market for NFTs of Digital Property in the Metaverse?

NFTs represent the best way to secure a unique asset, such as digital property, using blockchain encryption. The blockchain protects assets and helps to prevent any kind of criminal activity from being successful, such as false sales or token duplication for example. As mentioned previously, NFTs are a form of cryptocurrency. However, rather than existing in multiple instances (like with Bitcoin’s BTC, for example), they each exist in the form of a single, identifiable token. This means their value is based on the demand for the one asset they represent, and the demand for digital real estate is high. To illustrate this, here are just a few examples of how much NFT virtual plots have sold for in just the last few months:

  • The property: A group virtual land plots were sold as NFTs to in November 2021 for an astonishing $2.4 million. The land was bought on Decentraland and represented the largest acquisition of virtual land up until that time. The patch is made up of over 100 smaller plots, each measuring just over 50ft2, meaning that the total amount of virtual land sold measures around 6,000ft2. One can only speculate, but the assumption is that these individual plots will be used for some kind of development and rental/re-sale, as they are located in the Decentraland map’s popular “Fashion Street” district. Each of these developments, from shops to homes, will be represented by Metaverse NFTs — as will the digital content in their stores.
  • Axie Infinity Genesis land: Shortly after the NFT plot sell, an area of computerized NFT land was sold on the Metaverse-based pet training game Axie Infinity Genesis for 550 Ether (ETH), or $2.5 million, which again shattered all records on the platform. This sale was reported via a Tweet issued from the game’s Twitter account and has since been verified by various online NFT monitoring outlets.
  • The Republic Realm plot: Within weeks of the Infinity property purchase, another NFT virtual property was sold for $4.3 million. This time it was to Republic Realm, a company which specializes in investing in online NFT real estate and other digital assets. The plot was sold by Atari SA on The Sandbox fantasy RPG platform. At the time of its sale, it was the most expensive piece of digital property ever bought or sold on any market, anywhere.
Conceptual plots of digital land-min
Conceptual plots of digital land (source: FinExtra)

This demonstrates the massive amount of interest generated by NFTs in the Metaverse, and of course the Metaverse itself, at the moment. The titan crypto firm Grayscale has even suggested that the Metaverse will represent a $1 trillion yearly revenue opportunity, partly due to the interest shown in NFT land during the short time of its existence.

When Is the Metaverse Getting Here, and What Effect Is This Expected to Have on The NFT Market?

The Metaverse, or multiple Metaverses are expected to happen within the next couple of years. Even the term Metaverse can be slightly confusing, as it needs to be understood that there are actually two slight distinctions when people talk about the Metaverse. One refers to the Facebook/Meta driven network and the other refers simply to the widespread adoption of semi-permanent, digital spaces. These are spaces that already exist, especially in the video gaming world, where an increasing number of people already spend an ever-increasing amount of their waking time.

Many economists and market analysts expect the NFT market to explode (again) once Facebook/Meta fully launches into the digital space. This is because of the large number of practical applications offered by NFTs, as after all, NFTs have the potential to represent almost any form of unique digital item within the Metaverse. In the recent past, the NFT market has seen periods of almost complete collapse, due in part to their being more people making NFTs than buying them. It is for this reason that the NFT market has been declared dangerously volatile, with some even predicting another small collapse in the near future. However, with increased NFT usage for the gamification of the Metaverse, as well as other useful applications within it, it is only a matter of time before the NFT market rises again, and this time to stay.

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Although the NFT market has already seen its fair share of volatility, with the emergence of the Metaverse and digital real estate there is finally a clear and obvious need for its existence. Metaverse users and gamers will be looking to create a world like never before, with customizable landscapes and lives. Finally, NFTs will offer them the chance to create something completely unique, where instead of being limited by the games’ graphics, they will only be limited by their imagination and that of the NFT artists (who may one day be in the hundreds of thousands). The wants and needs of these gamers and users, from having the best car or living in the best neighborhood, will lead to demand, which in turn will lead to skyrocketing prices. Thus, the Metaverse will build an online economy through the trading of Metaverse NFTs — from land and real estate to cars and gold chains. Through the gamification of the Metaverse NFT space, there is likely to be a demand for digital commodities like never seen before. Real estate, shops, leisure facilities, luxury items, clothes, and more, all form important parts of any rapidly emerging economy, and the online economy of cryptocurrency and NFTs in the Metaverse is no different.

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