The metaverse and cryptocurrency seem to be concepts that go hand in hand – virtual worlds and virtual money to spend there.
Both are an integral part of what is nowadays hyped as “web3” – the third generation of the internet, after web1 – the worldwide web, and web2 – social media. The idea is that this version of the web will be more experiential and engaging, using virtual and augmented reality (VR/AR) to create immersive 3D environments.
Metaverse and cryptocurrency are separate concepts and can happily exist without each other – as we saw with Bitcoin, which is useful in both the real world and the virtual world. And many visions of the metaverse — including from Mark Zuckerberg alone — relate tangentially to crypto and blockchain.
However, it is clear that there is a potential synergy between the two ideas. People like to spend money and shopping has quickly become an important feature of web1 and web2, so there’s no reason why web3 should be any different! It is also becoming increasingly clear that while no one knows exactly what form the metaverse will take, it has the potential to have a significant impact on how cryptocurrency evolves and what impact it may have on society.
Virtual world, real value
One of the great advantages of the virtual world is that there is much less friction than in the real world. When we want to go somewhere, we just click a link or press a button, and we (or at least our avatar) are there. No expensive and cumbersome transport infrastructure, no packing passports or suitcases.
The same goes for cryptocurrencies. Transactions in traditional currencies (known as “fiat” to crypto enthusiasts – because its value is supposedly based on a government decision) require an extensive infrastructure of banks and regulators to act as custodians, intermediaries and clearing houses. Cryptocurrency transactions, on the other hand, usually only require software that runs on standard computers.
Of course, we must not forget that the energy used by this software to grind the cryptography, which makes the currencies work, consumes a lot of energy. But the protocols are constantly being refined and new technologies are being developed with the aim of reducing energy consumption. For example, new proof-of-stake cryptocurrencies would be much less damaging to the environment than older proof-of-work currencies like Bitcoin.
As the Metaverse becomes more popular and we spend more and more of our lives online – we work in virtual offices, play games with our friends or even take Metaverse vacations – we will need smooth ways to pay for the virtual goods and services. We may want to spend it on virtual real estate – if we want to own our own piece of digital land to entertain friends or start a business!
In fact, the metaverse could add significant value to the global economy – to the tune of $1.5 trillion by 2030. And much of that value could be realized in cryptocurrency. This could mean that cryptocurrency is really entering the mainstream as more and more of us get used to using them as a means of payment.
If this happens, governments and lawmakers will no doubt feel the need to step up their efforts to regulate and to some extent control cryptocurrencies. While it has gotten better in recent years — with a growing number of countries starting to adopt regulatory frameworks around digital currencies — it’s still a “wild west” environment. This means there is little protection for buyers or businesses that rely on coins such as Bitcoin, Litecoin or Dogecoin to do business and little recourse for consumers if they fall victim to the sheer number of scams.
As this becomes more popular, governments can also choose to regulate cryptocurrencies based on their energy efficiency or pollution. For example, networks that rely on more expensive proof-of-work algorithms can attract higher tax rates on transactions, while networks that use the more efficient proof-of-stake algorithms can be taxed at a higher rate.
The road to adoption
As cryptocurrency becomes the primary medium of exchange for people buying and selling in the metaverse, users will become more and more comfortable with the methods of acquisition, manipulation and storage. This means that it will also be used more often outside the metaverse – for example to send money to friends and family – especially when it comes to money crossing national borders, which often comes at a high cost with traditional currencies (if it does). . not even possible at all).
This, in turn, will mean that existing banks and other financial institutions are likely to step up their efforts to facilitate financial models derived from cryptocurrency or blockchain. To remain competitive in the age of financial systems without borders or intermediaries, they will have to rationalize their own infrastructure. While some – such as the head of the IMF – have predicted that cryptocurrency could eventually spell the end of banking as we know it, in the short term it is likely that businesses in particular will still want to cling to the layer of protection. and regulations bringing banks and central banks to transaction networks. But it seems likely to me that those who thrive in this new environment of digital currencies and peer-to-peer financing will be those who are flexible and forward-looking with their own policies around cryptocurrency adoption. Pay Pal and MasterCard are examples of payment systems that are now fully engaged in cryptocurrency, especially Bitcoin – and both said this is because it is clear that it will play an important role in the future of payments.
What happens next?
It is certainly true that no one – not even like Mark Zuckerberg – knows what form the metaverse will actually take, when (and if) it will fully integrate into our lives. But based on past experience, we can say with certainty that businesses will use it to make money and consumers will use it to spend!
When it comes to establishing the currency of the virtual world, cryptocurrencies are clearly a natural choice – and because this revolutionary technology is also still in its infancy, its evolution is likely to be influenced by changes in the way we live our lives. . lives. For better or for worse, more and more of us are choosing to spend more time online, and this will only accelerate as the online world becomes more immersive, entertaining and engaging. It also means that cryptocurrency will play a bigger role in our lives. As a result, we will likely see it become more regulated, more environmentally friendly and more useful.
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