What connects the Metaverse and the Crypto?

  • May 23, 2022
  • Jennifer Moore

There is a strong coupling between the Metaverse and the crypto. And it makes sense, virtual money to spend in the virtual world. Both of these concepts also form an integral part of web 3.0. What is driving this elevated vision of the internet is the narrative that the internet will be more experiential and engaging when virtual and augmented reality (AR/VR) components are built into it. This should give rise to immersive 3D environments.

Metaverse and Crypto

Metaverse and cryptocurrency are disparate concepts and may contentedly flourish without any overlap. Most visions of the metaverse – including Mark Zuckerberg’s – only sparingly utilize crypto. However, there is this undeniable potential synergy that connects the two. The package gets particularly attractive when integrated. One reason for this is people are quick to love an environment wherein they get to flaunt themselves and spend money – most digital experiments would testify to this. And the metaverse is fitted with machinery that enables them to do just that with added entertainment parts. 

Also Read: Setting up Your Own Crypto Exchange, the Smart Way

Virtual-Real Intersect

As more people get introduced to the metaverse and more and more of their lives are spent online – working in virtual offices, playing games, interacting with our friends, or even opting for metaverse vacations – there will arise a need for friction-free ways to pay for virtual experiences. People may want to spend it on virtual real estate given they wish to own their own plot of digital land on which to invite friends or grow a business!

In fact, it is expected that the metaverse would add significant value to the global economy – to the order of $1.5 trillion by 2030. And a large part of that value may be realized in cryptocurrency. This means that cryptocurrency is going mainstream as an increasing number of us accept them and learn to use them as a means of payment.

Should this happen, then governments and monetary policymakers will certainly realize the need to upgrade,  regulate, and, to some extent, control cryptocurrencies. Things have indeed become more streamlined in recent years. However, with a growing number of countries bringing in regulatory frameworks to contain digital currency, it’s still somewhat in the “obscure” area. This implies that there is slim protection for buyers or businesses that depend on cryptos like Bitcoin, Litecoin, or Dogecoin to operate their business and little recourse for consumers if they fall victim to scams that rob enterprises by some millions.

As it gains popularity, governments may also be selective in regulating cryptocurrencies by measuring their energy efficiency or the degree of pollution they create. For instance, networks that are based on more energy-expensive proof-of-work algorithms would attract higher tax rates on transactions, as opposed to those that use the more efficient proof-of-stake algorithms. 

Also Read: Metaverse, DAOs, and NFTs Unlock New-Age Tourism at Historical Sites

Becoming the Chief Medium of Exchange

As cryptocurrency turns into the main medium of exchange, as it will be for people transacting in the Metaverse, its users will become progressively more at ease with methods of purchasing, spending, and storing it. This could hold for its more frequent use even outside of the metaverse, for remitting money to friends and family from overseas. Remittance in sovereign currency, across national borders, incurs heavy fees.

This implies that banks and other financial institutions have high chances of stepping up their efforts to incorporate cryptocurrency or blockchain-derived financial models within their existing operational framework. To remain competitive in times of borderless, middleman-free financial systems, banks and other financial institutions will need to accommodate crypto in their own infrastructure. 

Finally

Monetary authorities – such as the head of the IMF – have predicted that cryptocurrency may eventually bring an end to banking as we know it today. However, chances are that most businesses will still seek out the layer of protection and regulation that central banks offer to transactional networks. But most will agree that those businesses which sustain in this virtual currency-integrated space will exhibit flexibility and are forward-looking with their own policies with respect to cryptocurrency adoption. 

Paypal and Mastercard are glaring examples of payment systems that fully support transactions in cryptocurrency, Bitcoin in particular. Both have made it clear that it will play an important role in the future of payment solutions.

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