- Prototype next-generation metaverses such as Decentraland and Somnium Space already show the beginnings of true society, with individuals settling land, interacting socially, exchanging goods and asserting ownership rights. Any society (physical or virtual) needs a functional economy. And in the metaverse, the economy depends on authentication of digital properties, such as one’s metaverse home, car, farm, books, clothing and furniture. To flourish, it also needs the ability to travel and trade freely between realms that might have different laws and rules.
- Non-fungible tokens – records of digital ownership stored in the blockchain – will be the linchpin of the metaverse economy, by enabling authentication of possessions, property and even identity. Since each NFT is secured by a cryptographic key that cannot be deleted, copied or destroyed, it enables the robust, decentralised verification – of one’s virtual identity and digital possessions – necessary for metaverse society to succeed and interact with other metaverse societies.
Beyond the hype of multi-million dollar digital art sales, the significance of NFTs may lie in enabling the beginnings of something resembling genuine human society, based on free markets (for goods, services and ideas), independent ownership and social contracts, to flourish in the metaverse.
“NFTs really started initially with the digital art side. But it's going to be a lot more powerful,” says Eric Anziani, COO of Crypto.com. “It will be the tool that represents any digital type of assets in virtual worlds going forward. So the applications are tremendous.”
- A key economic concept of Decentraland and other metaverses is adjacency of land. All metaverse parcels are contiguous to others at a fixed location – within a finite geography. This creates scarcity due to the limited amount of property supply. And scarcity enables property value to rise and fall, based on universal laws of supply and demand.
- Already, the implications of this real estate revolution are being felt in emphatic fashion. In June, digital property investment fund Republic Realm bought a parcel of land in Decentraland for more than US$900,000. Republic Realm, owned by investment fund Republic, is turning the plot into a virtual mall called Metajuku, modelled after the Harajuku district in Tokyo.
- Fashion is one of the earliest sectors to grasp the economic potential of NFTs and the metaverse. Luxury house Burberry created NFT accessories for the Blankos Block Party video game, while Louis Vuitton launched its own NFT-studded video game, LOUIS THE GAME.
- Meanwhile, RTFKT – bespoke shoemaker to the metaverse – designs limited edition NFT sneakers that can be worn in virtual worlds and has already posted millions of dollars in sales.
- “Even five months ago, we were at 100 million crypto users globally. Now, we're more than 200 million users,” Anziani says. “We have a strong belief that the next wave to get to a billion or two billion is going to happen through metaverses – the integration of virtual worlds with blockchain tech – in particular NFTs.”