Gateway to the metaverse economy: 5 transformative functions of NFTs

As non-fungible tokens (NFTs) enter the mainstream, they are approaching the “arrival of the times.” In this next phase, investors are rapidly discovering new use cases for NFTs that go beyond the initial enthusiasm for digital artwork and collectibles. A prime example is NFT’s seamless connection with the Metaverse industry. This is a fast-paced development that inevitably forms NFT applications and expands exponentially in the long run.

Importantly, Metaverse has high hopes for a more open and fair economy, a decentralized, blockchain-backed economy. But in essence, NFTs act as a gateway to the Metaverse, as it empowers the identities, communities, and socializations in which the Metaverse economy is built.

The first NFT was created in 2015, but it is no exaggeration to say that with the recent developments in the Metaverse industry, NFTs are now on a new path to the future. The result is a wealth of speculative opportunities for businesses, investors and entrepreneurs alike. In particular, the Metaverse relies on NFTs to perform the following five transformation functions:

Open the next frontier of the game

The gaming industry has already outpaced all other forms of entertainment spending, including amusement parks, cinemas, concerts and spectator sports. So it’s not surprising that when Mark Zuckerberg announced the Facebook name change, he designated the game as one of the main motives for the brand change.

Since games have long been associated with virtual reality (VR), consumers are already familiar with 3D avatars and world building. Today’s VR games are played primarily via standalone applications on desktops, mobile phones, or VR headsets. This provides a more immersive experience compared to traditional video games. However, Metaverse, an essentially integrated, interoperable VR space, allows players to interact with each other and play games via human-computer interaction (HCI).

A single interoperable environment opens up the next frontier of gaming, enhanced by social games, Play-to-Earn (P2E), and portable gaming assets. In particular, NFTs hold the key to unlocking all these concepts. For example, NFTs act as P2E in-game currency. Basically, the more value you add to your game, the more revenue you can earn. In addition, P2E games themselves are largely fairer and more democratic than traditional platforms. Thanks to the ownership features provided by NFTs, players have complete ownership of their assets rather than having their revenue controlled by a centralized game operator.

Promotion of creator economy

NFTs aim to virtually represent innovative or unique assets. Although not officially a currency, items created as NFTs can be sold and traded on virtual platforms. Armed with this trading power, NFTs are leading the next wave of the creator economy.

The Creator Economy is technically as old as humanity itself and is built by artists, writers and other creators beyond the physical medium. However, the term “creator economy” was only formally coined in the digital age. Today, over 50 million independent content creators, curators, and community builders are part of the US creator economy.

Because the NFT is pinned to a decentralized blockchain, each asset contains code and functionality that cannot be duplicated. In addition, assets cannot be stolen and their value is limited to the owner. The code can embed additional rights and obligations, such as sales commissions, that provide the creator with a percentage of subsequent transactions of digital assets. The key mechanisms of “smart contracts” and “copyright tracking” strengthen intellectual property and ownership and solve the major problems authors faced in the cyber era.

The Metaverse industry is a major step forward for the creator economy, providing a virtual world where content gains value and creators gain job fairness. These definitional functions are possible only because the product is associated with a secure, transparent and decentralized NFT.

Unleash a new social experience

NFTs play a leading role in enabling the communities, personal identity mechanisms, and social experiences that define the metaverse. For example, users can explore specific hobbies or buy NFT assets to show support for their projects. As a result, like-minded NFT owners can come together to form a community, share experiences, and help create relevant content.

NFT avatars are also an important concept in the Metaverse socialization system, representing not only the player’s actual self, but also the identity they envision. Users can use NFT assets to build this identity and access the new Metaverse experience.

In the metaverse, NFTs are perceived as extensions of real identities, giving each one full ownership, control, and flexibility to create virtual personas.

A bridge between the physical world and the digital world

It should be noted that the social experience of the Metaverse model can be migrated offline. NFTs effectively close the gap between the physical and digital worlds. For example, the Bored Ape Yacht Club (BAYC), a collection of primate avatars created by the founders of four pseudonyms, is invading the connection between VR and physical reality. BAYC NFT owners can participate in exclusive club and community features such as initial access to new NFT collections, NFT enhancements, and even “real” private events. In November 2021, BAYC hosted an exclusive yacht party and warehouse rave at ApeFest in Manhattan.

Building a virtual real estate market

The Metaverse industry has also brought real estate to new territories, with several “parcels” of virtual real estate space valued on the scale of millions of dollars. For example, in the browser-based Metaverse Decentraland, crypto assets were recently sold by crypto investor Tokens.com for $ 2.4 million. In addition, in December 2021, users spent $ 450,000 to become Snoopverse’s neighbor of rapper Snoop Dogg. This is an interactive world developed on the Ether-based platform Sandbox.

In effect, NFTs represent virtual parcels of land and enable transactions. Space is inherently limited to maintain the value of Meteverse’s digital real estate market. For example, Decentraland consists of 90,000 plots of land, each approximately 50 feet x 50 feet. This maintains the long-discussed concept of “digital shortage” in the context of cryptocurrencies.

A recent position paper by JPMorgan doubled the average parcel of virtual land across the four major metaverses in the six months from June to December 2021, from $ 6,000 to $ 12,000. The value of virtual land is growing as fast as physical land, but there is no rise in interest rates that slows or slows price acceleration.

Future outlook

The Metaverse industry is still in its infancy, reshaping the evolving digital behavior that is continually shaped by cryptocurrency trends. NFTs are moving in the same direction.

While the way NFTs enable ownership and virtual identities may be fairly straightforward, the Metaverse model is an interoperability with endless possibilities for consumers to get together, interact, play, earn and trade. Create a possible environment. Therefore, in the future, companies will need to move the needle of investment in NFTs from exploration to revitalization, as NFTs are the cornerstone of creating value and attracting users to the Metaverse economy.

Jonathan Teplitsky is the CEO of PipeFlareA platform aimed at helping game developers monetize their work.