Decentralized Metaverses: What, Why, and How
Since 2021, everyone has been talking about metaverses — digital 3D universes where people can interact through avatars. When it comes to metaverses, we usually speak of platforms like Fortnite or Second Life. These digital worlds are centralized by nature, so the avatars and events in them are not fully controlled by their users.
As crypto enthusiasts, we understand the shortcomings of such an approach. Centralized entities can arbitrarily set rules that are not always welcomed by the community. Rather, decentralized metaverses are transparent, open, and run according to clear rules that are shared by everyone and don’t change for no reason. Avatars in such metaverses are more independent, hence users feel more freedom in their expression. Even such events as China’s crackdown on crypto can’t significantly affect what is happening in metaverses.
Let’s delve into decentralized metaverses to see what their pros and cons are and what opportunities to profit they offer.
What are metaverses, and why do people get involved?
The word “metaverse” derives from “meta” (which means “beyond”) and “verse” — a part of the word “universe”. The term was first used in 1992 in a classic novel by Neal Stephenson “Snow Crash”, referring to a digital 3D world where people could communicate through virtual avatars.
Metaverse is often dubbed as a new version of the internet. While we’re used to a 2D space in the world web, we come to 3D in metaverses.
Top dogs have started the metaverse conversation in 2021, but millions of dollars were invested in these digital 3D spaces during several past years. In October 2021, Facebook Inc. renamed to Meta and described metaverse as a “set of virtual spaces where you can create and explore with other people who aren’t in the same physical space as you.”
One large event signifying that the metaverse era is upon us was a virtual concert of Travis Scott, a rapper who attracted 21 million viewers to his show on Fortnite. That concert proved that artists can raise millions of dollars by singing on a digital stage.
The potential opportunities of metaverses are limitless, and some even think that we will spend a part of our lives going to work and being participants of the digital economy in the metaverse. And it isn’t just a platform, but a space at the intersection of the real and the digital worlds.
By 2022, we’ve got used to buying things and talking to each other on the internet. One step further was when such gaming platforms as Fortnite and Second Life built simulated environments where users could communicate via avatars and VR equipment. Today, metaverses promise even more features than that.
How do decentralized metaverses work?
Decentralized metaverses are built on permissionless blockchains, which means anyone can access them irrespective of their age, citizenship, and location. Since blockchain is run by a decentralized network of nodes, we can rest assured that no single entity can control transactions that are processed there.
Decentralized metaverses are built by teams of crypto projects, but only users define their content and what they want to do there. And in some projects, it’s easy to move this content from app to app — this means some metaverses are interoperable and make users more independent of specific platforms.
The key feature of decentralized metaverses is that all assets and activity of users are written in the blockchains, and the transactions are irreversible and can be seen by anyone. This allows users to develop their avatars in the metaverse and monetize them.
Overall, the main perk of decentralized metaverses is that they overcome both limitations of centralized metaverses controlled by corporations and the potential restrictions that can be imposed by certain governments.
How metaverses promote cryptocurrencies
Cryptocurrency is a good means of value exchange in a metaverse since it’s secure, fast, and transparent. In centralized metaverses, payments are processed through a hosting platform and traditional financial services that are non-transparent. In decentralized ones, all transactions are publicly viewable and irreversible, and barely any dispute can occur on this matter.
Each crypto metaverse has its own native token that is used as payment in it. When a given metaverse grows, so does its token since users actively buy and transact this asset. This, in turn, attracts investors who are willing to allocate their money and profit. As a result, the interest in decentralized metaverses grows, which brings in new users.
This circle promotes metaverses and cryptocurrency in general — those who engage with centralized metaverses draw their attention to decentralized ones as well, the same as to other crypto projects.
Since the tokens used in decentralized metaverses are NFTs, the demand for them and the opportunities they offer also rises — proof of authenticity and ownership can be used far beyond metaverses. With NFTs, artists get subscribers and money, and users can sell unique items. Conversely, interest in NFTs brings some enthusiasts to metaverses.
Perks of decentralized metaverses
- Thanks to the architecture of blockchain, users of a decentralized metaverse have full control over processes, their funds, and transactions. No corporation or government can intervene in anything that the metaverse users do, that’s why the inhabitants of the virtual world don’t have to worry about watchdogs and regulation.
- In a decentralized metaverse, users can enjoy fair distribution of rights and opportunities. There, you can own assets, use them to open a business or an art gallery — and no one can affect that, only other users indirectly through their feedback. Moreover, content creators are often rewarded by platforms for their efforts.
- Since restrictions in decentralized metaverses are minimal, the atmosphere here is drenched in freedom to express users’ talents. There are very few content limitations set by the platform, and legal regulators can barely affect the metaverse, so users can express themselves in any way they want.
- Decentralized metaverses offer a great opportunity for secure investments, and this is not even only about native platforms’ tokens. Many metaverses are spaces of digital land, and as interest in them grows, so do the land parcels’ prices. Given the fact that no authority can take this land away from you, investments in metaverses are protected.
- A metaverse is a digital world, but it’s driven primarily by real people — those who have the same interest in money, work, and self-expression as in the real world. As metaverses are a great place for interaction between brands, content creators, and users searching for income, many expect that there may emerge a whole new job market in metaverses.
Crypto metaverses’ drawbacks
Given that decentralized metaverses are still in their infancy, there’s a certain risk and unpredictability related to them.
- Despite the mass interest in blockchain-based metaverses has just sparked, there are already some established players present, and if you want to buy virtual land, you may need significant resources (say, a few thousand dollars in Decentraland). This raises the barrier of entry for regular users; however, you can operate in a metaverse without owning any land in it.
- These same established users can largely define the rules by which metaverse users interact with each other, thus questioning its decentralized nature.
- Since decentralized metaverses are written as smart contracts that run on the blockchain (mainly Ethereum), there’s a risk that hackers find vulnerabilities in them and threaten users’ privacy and funds.
- The blockchain’s openness and transparency also bear certain risks. Publicly visible transaction traces allow avatars to boast their history and monetize it, but in the meantime, raise considerable privacy concerns.
Decentralized metaverses popular in 2022
This is the first blockchain-based metaverse that has become popular in the crypto space even before digital 3D universes surged in general. Here, users can buy and sell virtual land and real estate, create shops, hold events and interact in various ways, play games, and so on. Buying virtual products and services is possible with the native MANA token. There is also the LAND token that is used in digital real estate and land exchange in Decentraland.
Axie Infinity is an NFT game where users breed, raise, and battle with monsters called Axies. The game was inspired by Pokemon and Tamagochi games, and it allows users to earn crypto while playing. The tokens received this way can be used to mint new characters (that exist as NFTs). Each Axie has its level of rarity and value that comes along. Since 2018, the platform has built its fan base and a thriving economy.
Cryptovoxels in a decentralized metaverse inspired by Minecraft where users can create avatars, buy land, build stores and art galleries, play games, and of course interact with other players. Since real estate and land are limited and scarce, parcels can be a good investment. And since there’s much art involved in Cryptovoxels, the metaverse may become a place where real advertisers, event managers, and artists meet to collaborate.
Metaverses propose one of the variants of how Web 3.0 apps will work. What’s more, metaverses are not just digital spaces isolated from the real world and designed for geeks — rather, they are the place where the people of the future may communicate, interact, find jobs, make art as often as in real life.
One of the decentralized metaverses’ distinctive features is that since they run on the blockchain, all transactions in them are open, immutable, and can’t be altered by any centralized entity. This protects users’ investments in digital parcels of land, allows them to track records of their activity in the metaverse, earn digital capital and monetize it, and also creates opportunities for free creative self-expression.
For those who are more interested in money rather than in the game part of crypto metaverses, digital spaces offer great investment potential. Users invest in native metaverses’ tokens (such as MANA, AXS, and SAND), land parcels, and companies that develop metaverses.
Interestingly, even in China, where the government has shown itself to be as strict as possible on crypto, there’s a huge interest in metaverses. Many investors who held stakes in various cryptocurrencies started to invest in metaverses as an escape. Such corporations as Tencent and Ali Baba are allegedly researching metaverses. It’s highly likely that when corporations embrace decentralized metaverses, they will significantly change. However, we will see how it goes.