28Crypto Meets the Metaverse

Crypto Weekly

Crypto Meets the Metaverse

Crypto Weekly

There is no longer a distinction between science fiction and the Metaverse. Technological advancements usually do not come as a surprise. Many modern technologies, including the internet, smartphones, and the cloud, had their origins in science fiction. With the arrival of the "next big thing" of the digital age, everyday life may change forever. We call it "the Metaverse."

Virtual reality, augmented reality, and the internet are combined into the Metaverse. Although no one knows exactly what the Metaverse will look like, its basic characteristics are well established - it combines both physical and virtual worlds, has a fully functioning economy, and allows users to travel between its different "places" while keeping their purchased goods and avatars. Like a virtual theme park with no limitations to size or creativity, users will be able to travel effortlessly from one location to another within the same virtual world.

Why is the Metaverse Important?

A collective virtual experience may bring new opportunities to creators, gamers, and artists in the same way that non-fungible tokens have reshaped and invented the creator economy even if the Metaverse fails to achieve the epic vision many have for it.

Described as a successor to the Internet, the Metaverse could become a trillion-dollar industry. It's a destination for entertainment, commerce, and for some, even a place of employment. Blockchains and decentralized applications are used to build it.

Matthew Ball believes that the Metaverse will become "the gateway to most digital experiences, a component of every physical experience, and the next great labor platform." It will be a driving force behind a new generation of companies, similar to how the Internet created new companies. In an interesting twist, the rise of digital platforms could lead to the fall of incumbent industry leaders.

Consider Facebook

Facebook announced in June that it would be working on "bringing the Metaverse to life." Instagram's Vishal Shah will lead the project along with Vivek Sharma and Jason Rubin from Facebook Gaming. Zuckerberg discussed his ambitions for the Metaverse in an interview with The Verge. During his talk, he introduced the concept of virtual workspaces, which he called "infinity offices." Working in VR, he argues, allows for increased multitasking, and meeting in a virtual, metaverse-like environment can be more effective and productive. Facebook CEO Mark Zuckerberg says he already prefers to hold his meetings in VR if possible since Zoom calls have obvious limitations.

According to Zuckerberg, Facebook plans to invest heavily in this area. Currently, it owns Oculus, the maker of the popular Quest VR headset. According to Zuckerberg, VR technology will be capable of enabling metaverses "within the next decade."

Tech giants stepping into the Metaverse include Google and Microsoft

Although no single person or company can control the Metaverse, the usual suspects of the tech world have already staked their claim. Facebook has joined Google, Microsoft, Samsung, and Sony in the XR Association, a group of technology companies working on the evolution of "experiential reality."

Games have pioneered many aspects of metaverse technology and could continue to do so. The concept of in-game economies has been popular in video games for years, where players can buy and sell items with no real value outside the game itself. Fortnite is the most recent example, but Grand Theft Auto V is a longer-standing example. Although released almost seven years ago, the game grossed over a billion dollars in profit in 2020, thanks to a large, active online community.

In the Metaverse, these in-game economies are unified under one cohesive virtual experience. Metaverse is not based on objective standards, as is the case in video games. It will be more like the way we treat the Internet than some sort of virtual roleplaying game.

What role does crypto play in the Metaverse?

The Metaverse is driven by the need to deliver permissionless identities, financial services, and high-speed exchanges. It will be necessary to store and serve data to millions, if not billions, of users. Cryptocurrencies provide a solution to these problems. Virtual worlds such as Decentraland and The Sandbox, which incorporate cryptocurrencies, allow gamers to create virtual casinos and theme parks, which can be monetized. Decentraland's currency is known as MANA, and it can be purchased on exchanges like Coinbase. Decentraland even has casinos where you can gamble in MANA, with dealers paid in MANA to show up for work. Metaverse NFTs will also play a crucial role in allowing people to own their characters, game items, and even virtual land. A virtual estate consisting of 259 parcels in Decentraland recently sold for over $900,000, making it the largest sale so far.

Interoperable marketplaces will eventually allow the purchase and sale of virtual goods from different games and universes. In Decentraland, a person could sell their virtual plot of land and use the money to buy Fortnite skins. NFTs could be the only legal tender used in the Metaverse, with all virtual objects and intangible items expressing themselves in cryptocurrency.

"Players are truly blown away by the amount of money they spend on digital assets. These digital assets are worth hundreds of thousands and probably millions," said Arthur Madrid, CEO of The Sandbox. "Building a NFT economy will add another layer to that existing marketplace."

The Metaverse's growth is inextricably linked to the role cryptocurrencies play. No one can predict what the final form of the Metaverse will look like, but the impact of cryptocurrencies is certain. As we monitor the advancements in technologies like virtual reality, and how current industry leaders like Facebook are getting involved, blockchain technology and the cryptocurrency sector will also play an important role in shaping the Metaverse's future.

Robert Stone

Editor

Crypto Weekly

How About a Bear-Market Merge to Affect Ethereum?

During the past couple of weeks, crypto has seen some of its most turbulent times. Terra's stablecoin ecosystem collapsed spectacularly, wiping out over $40 billion in value and causing ripple effects across decentralized finance (DeFi). The price of Ether (ETH) has fallen to levels we have not seen since 2021 as the broader cryptocurrency and equity markets plunge into bear market territory.

This comes on top of a controversy that has recently engulfed one of the largest nonfungible token collections, placing its creator at the center of a racist online cult.

However, all is not lost in the cryptosphere. Markets are falling, and reputations are plummeting, but Ethereum's community is still hard at work preparing for the Merge, the transition to a proof-of-stake (PoS) network. Vitalik Buterin said at a Shanghai event last week that it may finally be ready by August, despite signs that the Merge upgrade would be delayed yet again through the summer. In addition to improving Ethereum security and decreasing energy consumption, the PoS Merge should also make the network more efficient and improve fees. Yet the recent market downturn raises an important question - will a bear market blunt the upgrade?

Ethereum's tokenomics are altered slightly by PoS, but the Ether's price - like that of most other cryptocurrencies - reflects general market sentiment. It has been predicted that the Merge will boost the price of Ethereum's token to sky-high levels, perhaps even surpassing the price of Bitcoin (BTC). This bear market seems poised to last through to August. Though little has changed in the Merge, in light of Ethereum's current down market, the upcoming Merge will have significant implications for its community and investors.

Crypto in a Bear Market

Despite crypto's recent market downturn, prices shouldn't be the sole focus, and it's not too difficult to predict what sour market conditions could mean for the industry at large.

The less money flowing into crypto (and other speculative asset classes, one would presume), the fewer people will invest in crypto for short-term gains. Furthermore, many investors and developers who entered the crypto market at the height of crypto's bull market are likely to flee in search of greener, more stable pastures.

In the coming months or years, many people who find jobs in crypto are likely to work for companies like Coinbase (COIN) rather than riskier DeFi bets and newer blockchains. The startups that survive will do so on the strength of their talent and technology rather than their ability to attract crypto-crazed valuations and short-term mercenary capital.

However, there's a possibility that scammy NFT projects and Ponzi-like DeFi protocols will continue to attract investors looking to

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make a quick buck - especially when the stock market can't be relied upon for high returns. Even though there will be some degeneracy mixed in with everything else, it's hard to imagine big-name investors investing hundreds of millions of dollars in unproven experiments like Terra anytime soon.

Dot-com Case Study

Despite all the bad news, the cryptocurrency space has been extremely positive in several ways for the past two years. We've probably seen some risky but solid investments get funding that would have been dismissed in more conservative times because VCs are willing to fund anything and everything "crypto." Furthermore, a boom in these sectors has introduced a much broader audience to crypto despite the wider market downturn that has crushed the NFT and DeFi markets. This period in crypto could be compared to the dot-com boom and bust of the early millennium, if unoriginally. Although many companies funded before the bubble burst ultimately failed, the initial boom still paved the way for much of what came afterward.

Silicon Valley sage Ben Thompson wrote in one of his newsletters in 2021:

During the early days of the internet, websites proliferated like wildfire, as did dreams of what the technology might be capable of. This mania resulted in the dot-com bubble, which sparked massive investments in telecom infrastructure. The companies that made these investments went bankrupt, but the foundation for widespread high-speed connectivity had been laid. Those who were funded alongside shallower bets like Pets. com, as well as future technology titans like Google (GOOG), Amazon (AMZN), and eBay (EBAY), went into heads-down mode after the dot-com bubble burst. Companies like these would not have succeeded without the infrastructure funded during the internet era's initial ill-fated funding craze.

Looking ahead to the Ethereum merger

We are currently working on the Ethereum merger. Rain or shine, the merger is likely to happen. If developers are to be believed, it will still have lasting effects on the network even if the price of Ether doesn't increase much. The Merge of the Ethereum mainnet may take place in August after two successful forks of the Ethereum mainnet, one on May 12 and another on May 20.

The shadow fork is Ethereum's test run to transition to proof-of-stake, as you may recall from previous issues of this newsletter. To determine when the network is ready for an upgrade, developers must complete shadow forks on the mainnet, which simulate the PoS transition under the most intense, realworld conditions. The forks went smoothly despite a few very minor hiccups.

In recent weeks, Twitter discourse in the Ethereum developer community has been aware of wider market conditions, but the news that the Merge is near completion has been pretty positive. Ethereum's price may not reflect this level of excitement to come to the Merge, but these past few weeks have reminded us that prices are one of the least interesting aspects of this space.