4 Metanomics: The Metaverse Economy

Metanomics: The Metaverse Economy

By: Kalpesh Khandare & Namita Bhatt (Symbiosis Institute of Management Studies, Pune)

How Non-Fungible Tokens Aid Societal Development in an exquisite Virtual World

A typical metaverse day could soon mirror the world we know and adore with a shared immersive virtual reality experience. We will visit shopping malls, drive across town, meet friends in cafés, and share contacts in ways that feel frighteningly authentic, thanks to considerable advances in virtual reality and 5G connectivity.

For decades, metaverses have existed in the form of multiplayer internet games. Nevertheless, we may soon reach an era of immersive experiences that are almost indistinguishable from reality, spawning new kinds of engagement for both gamers and non-gamers.

Individuals settling the land, socializing socially, transferring products, and asserting ownership rights are already seen in prototype next-generation metaverses like Decentraland and Somnium Space. A functioning economy is required in any civilization (physical or virtual). The economy is based on digital possessions such as one's metaverse home, automobile, farm, books, clothing, and furniture being authenticated in the metaverse. To prosper also requires the ability to freely travel and trade between realms with different laws and norms.

The backbone of the metaverse economy will be non-fungible tokens, which are blockchain-based records of digital ownership that allow for the authentication of possessions, property, and even identity because each NFT is protected by a cryptographic key that cannot be erased, duplicated, or destroyed. It enables metaverse communities to succeed and interact by allowing for decentralized and robust authentication of one's virtual identity and digital commodities.

The value of NFTs may lie in allowing the metaverse to grow the seeds of an actual human civilization based on open marketplaces (for products, services, and ideas), autonomous ownership, and social contracts rather than the glamour of multimillion-dollar digital art auctions.

"Initially, NFTs focused on the digital art side of things. But it'll be a lot more powerful," adds Crypto.com's COO, Eric Anziani. "In the future, it will be the tool that depicts any digital asset in virtual environments." As a result, the possibilities are endless."

Development of real estate in a brave new world

Decentraland is home to people speaking by fountains, shoppers in fashion boutiques, joggers on seaside promenades, and casino croupiers attracting customers to high-stakes poker.

These encounters occur as a result of virtual real estate development by individuals who have purchased land and constructed ecosystems that have attracted the curiosity of other Decentraland inhabitants.

The experience is far from hyper-realistic (the designers of Decentraland claim that the planet is still in the "Iron Age"). Even in these early incarnations, though, the promise is evident. People flock to intriguing areas in the metaverse, just as they do in actual societies. And, much as in Paris or Beverly Hills, fame automatically raises the value of the virtual estate.

An adjacency of land is a fundamental economic notion in Decentraland and other metaverses. Within limited geography, all metaverse parcels are contiguous at a fixed point. Scarcity is caused by the limited supply of property. Scarcity also permits property prices to rise and fall in accordance with universal supply and demand norms.

According to the Decentraland manifesto, a foundation is constructed for "a social experience with an economy powered by the existing layers of land ownership and content distribution."

The property transactions that power the metaverse are made possible by NFTs. These tokens give irrefutable ownership proof that is more secure than any land deed.

"You simply cannot spoof metaverse property rights because of the way smart contracts are written and NFTs are programmed," Anziani explains. "You are aware that you possess an asset and can establish complete ownership." You can then assert ownership rights based on the rules and circumstances of that virtual environment."

Property for sale in London, New York, or Tokyo

The ramifications of this real estate revolution are already being felt strongly. Republic Realm, a digital property investment fund, paid almost $900,000 for a plot of land in Decentraland in June. The site is being turned into a virtual mall named Metajuku, modelled after Tokyo's Harajuku area, by Republic Realm, controlled by the investment fund Republic.

It won't be long until real estate investment trusts (REITs) start sniffing out possibilities in the metaverse based on these behaviours. Property values rise and fall in tandem with the economy, expanding in Decentraland. When its developers launched their virtual world in 2017, this is precisely what they had in mind.

According to the metaverse's manifesto, "Decentraland's value proposition to application developers is that they may fully capitalize on the economic interactions between their programs and users." "The platform must facilitate the trading of three things: cash, products, and services" to enable those economic connections.

One of the first sectors to see the commercial potential of NFTs and the metaverse was fashion. Burberry designed NFT items for the Blankos Block Party video game, while Louis Vuitton released LOUIS THE GAME, its own NFT-studded video game.

Meanwhile, RTFKT – the metaverse's bespoke shoemaker – creates limited-edition NFT sneakers that can be worn in virtual worlds and have already sold for millions of dollars.

With so much momentum in the metaverse's Iron Age, the virtual world's economic model - based on NFT technology – promises enormous economies of scale.

"Only five months ago, there were 100 million crypto users worldwide." "We now have over 200 million users," adds Anziani. "We strongly believe that metaverses – the combination of virtual worlds with blockchain technology – particularly NFTs – will be the next wave to go to a billion or two billion."