Wide Eyes News from the Tube (What’s All This Stuff About the Metaverse Anyway?)

All the buzz & hype these days seems to be around the Metaverse, non-fungible tokens (NFTs), cryptocurrencies and blockchain. But what does it all mean and do I really need to know about it? Well, here’s my two cents worth on what it all means and yes you probably do need to know about it, given that you must be interested in the industry as you are reading The Bugg Report. And credits where credits are due: I read a lot of articles researching this article so I’m sure I have picked up some other people’s phrases along the way, so thanks to them for that, the sentence describing Second Life was lifted off their website and I paid a fee to Dreamstime to use the pictures that appear in the article.

The Metaverse

A metaverse is a shared, immersive virtual world in which users, via their computer, smartphone or a virtual reality (VR) headset, can interact with one another, create in-world environments containing virtual land, places and objects and have experiences similar to those in the real world, like going to concerts and live events. Metaverses have their own economies and currencies, with which users can buy, sell or trade a range of items including digital real estate, digital products including artworks and collectibles, clothing & accessories for their avatar, and tickets to attend the virtual concerts and events. This so-called Metaverse has been an ongoing development for the last 20 years, with the original metaverse being an online virtual world called Second Life launched in 2003. Second Life was a first-of-its-kind online world which had a creator-based virtual economy where users could make, buy and sell virtual goods between one another, earning tokens that could then be exchanged into real world money and deposited into a bank account.

Metaverse
Metaverse

The myriad of online digital metaverses that have launched in the last couple of years such as Decentraland, Sandbox, Axie Infinity, My Meta MMO, Bloktopia, pax, Somnium Space and many others are more like stand-alone metagalaxies, operating in total isolation from each other rather than being a part of one overarching Metaverse. We are not going to see the emergence of one overarching Metaverse any time soon, or if ever at all, as it is not in the interest of any individual company to share its metaverse or its users of a metaverse with its competitors. As with everything else in our modern world, we will end up with a few big players dominating the sector with their proprietary virtual worlds, with lots of smaller players offering their own unique boutique digital worlds around the dominating majors and new upstart game changers and disrupters with new technologies regularly upsetting the existing players’ digital apple carts. There will be a number of big winners who will come to dominate the online world of metaverses and you can be sure that Alphabet (Google & YouTube), Meta (Facebook & Instagram), Amazon, Apple and Microsoft will end up somewhere at the forefront of this, along with or in partnership with the leading online games companies with the techno know how like NVIDIA, Epic, Roblox and Unity.

Non-fungible tokens (NFTs), digital currencies and blockchain

Metaverses are individual online virtual worlds wherein people can create a digital persona or avatar for themselves and interact with other users in each virtual world. In each metaverse a user is able to spend digital currency to buy, sell or exchange a range of items including digital real estate, digital products including artworks and collectibles, clothing & accessories for their avatar, and tickets to attend virtual concerts and events. And it is inside these metaverses where non-fungible tokens (NFTs), digital currencies and blockchain technology come into play.

Ethereum
Ethereum

Non-fungible tokens (NFTs) are digital products that have their own unique or individual characteristics which can be bought, sold or traded in a metaverse, using a digital currency that is accepted within that metaverse which are managed through a decentralised digital banking system using an accounting ledger technology called blockchain. Blockchain operates just like eftpos in the metaverse world and replaces centralised banks and national currencies with a decentralised banking system that is safe, fast and inexpensive to use and provides irrevocable digital certificates of ownership and authenticity for products that exist within each metaverse. It is called blockchain because the technology consists of blocks of unique data stored in a connected chain that verifies every transaction conducted within a metaverse using the computers of all the users for transactional verification, rather than a centralised banking system.

Blockchain
Blockchain

All this business that is transacted inside each metaverse is done using a digital cryptocurrency which can be either a digital currency unique to that metaverse or can be a broader cryptocurrency used in multiple online environments such as Bitcoin or the cryptocurrency most often used in metaverses, Ethereum. Whilst the two largest cryptocurrencies are Bitcoin and Ethereum, there are hundreds of other cryptocurrencies and each metaverse uses one specific cryptocurrency to conduct all the transactions within that metaverse. Once a metaverse has been created with its chosen cryptocurrency and a blockchain-based banking system is in place, the buying, selling or trading of digital products can be conducted within that metaverse. Products with their own digital characteristics that are sold within a metaverse are often referred to as non-fungible tokens or by the acronym “NFTs”. A good way to understand what is non-fungible and what the word fungible actually means is to think of gold. Any product, like gold that can be traded as a commodity is called a fungible product — other fungible products include commodities like crude oil, company shares and country currencies like the US dollar or Euro. Pure gold in its metallic state is traded at a universal prevailing gold rate, so due to its interchangeability across all markets it is a fungible product.

However, when you make a necklace out of pure gold, the gold necklace stops being a universally tradable commodity and is now a product not just worth its weight in gold, but is now worth what someone is willing to pay for its unique properties rather than just tradable at a fixed given rate. This value-adding or value-subtracting uniqueness means the necklace is no longer universally tradeable, so it is now non-fungible. A digital product in a metaverse, which has its own unique or individual characteristics is referred to as a non-fungible token (NFT). The most common NFTs that are traded are digital collectibles and artworks, videos, in-world items such as digital clothing & accessories for avatars and even virtual real estate within a metaverse. When an NFT is sold in a metaverse, the sale of the NFT is recorded in a data block stored in the metaverse’s blockchain banking ledger which allows for NFTs to be registered to an owner and then sold or traded by the owner to a new owner as an asset in its own right. The market value for NFTs has been on a roller coaster ride in recent months and this unpredictability is likely to continue for some time into the future. If the selling prices of NFTs crash more than they boom, companies selling digital products in metaverses will start to distance their digital products away from the currently trendy name of NFTs and their products will be sold just as online digital products in their own right. In this sense, digital products that are traded in metaverses will have a growing long-term value as more people choose to spend their time in online virtual worlds enjoying experiences and owning assets that are not necessarily available or affordable to them in the real world. So, whether they are called NFTs or just called digital products in a virtual world, NFTs will be with us for now and the ever after and will be as real as any other asset left in our will when we pass away.


This article originally appeared in The Bugg Report Magazine Edition 42

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