Blockchain is the backbone of a new version of the internet, commonly referred to as web3 or the metaverse. This new internet will incorporate elements of the real world with the digital world, creating a blended reality. Individuals will be able to use the metaverse to create a new reality tailored just for them.
How is the blockchain related to the metaverse exactly? Users will need to have more interoperability than what exists on today’s internet. Blockchains enable individuals to move between different applications bringing the same wallet, avatar, and log-in credentials with them. This allows for scalability and the development of cross-dimensional applications that have not been possible until now.
What is the Metaverse
The metaverse is part virtual reality part augmented reality. Put another way: it’s the combination of the real world with the digital one.
The digital interactions we have now will be combined with new technologies that have the ability to create a hybrid reality. New hardware like headsets and other connected devices will allow users to experience the digital realm in new ways. Meanwhile, blockchain technology will create a new economy that will allow users to move between different realities more efficiently.
When most people think of the metaverse they think of video games. That’s not entirely wrong. Gamers tend to be early adopters of new technologies, especially if those technologies enhance their gaming experience. But gaming is only part of it. The metaverse also has practical applications like the ability to host virtual business meetings in virtual conference rooms or attend a live concert half a world away.
The metaverse is already on its way to becoming a fully integrated part of society beyond just gaming. As the COVID-19 pandemic revealed, many workers can – and prefer – to work remotely. As much as it’s a preference, there’s a business case for remote work too. Employees can move to areas with lower costs of living while large companies can reduce their office footprints in expensive cities. The metaverse will simply enhance what is already being done with collaboration tools like Zoom and Skype.
How is Blockchain Related to the Metaverse
Unlike today’s internet, the metaverse is not centrally operated. No single company will own it. Compare that to today’s internet where a small coterie of Silicon Valley companies have a monopolistic hold on key internet functions, like search and email.
The metaverse will become a more modular version of the internet. Instead of being centrally operated and walled off from competitors, applications built in the metaverse will have to be fully interoperable. This will give users the ability to pick and choose which elements of the metaverse they want to use, and how they want to use them to augment – or replace – their physical lives.
For this type of modularity to exist the metaverse needs to be decentralized. Hence this is where blockchain comes in. Blockchain is a decentralized way of organizing data and processing transactions on a distributed network of peer-to-peer computers.
Companies can build applications and platforms on top of blockchains in much the same way that developers create apps that run on things like iPhones now. The difference? Apple has monopolistic control over the iOS software that an app is built on. And the algorithm governing its App Store determines whether or not new users will be able to find it. When it comes to blockchain technology, behemoths like Apple can build new platforms on top of it but they won’t be able to own and control the blockchain.
For the metaverse to exist independent of the physical world it also needs to have a way to become integrated with the economy. Blockchain-based assets like cryptocurrencies and NFTs solve this problem. Cryptocurrencies like Bitcoin or Ethereum function as mediums of exchange – aka money – that allow people to buy or sell goods and services. These can be purely digital goods, physical items, or a combination of both. Because the metaverse is something users will be able to flow in and out of, the financial system has to adapt to become less rigid too.
NFTs, or non-fungible tokens, are the other blockchain-based asset that helps integrate the real world with the digital world. NFTs allow people to transfer ownership of digital assets between one another. Right now this is playing out with people clamoring to buy JPEGs of digital art. That’s a component of what NFTs do but it isn’t the only thing. In the very near future, NFTs could be used at scale for things like storing medical records. Blockchains provide the data security medical providers will need to transfer patient records while the metaverse will enhance existing telehealth services.
Blockchain technology will thus be the foundation of a new economy for a new hybrid world. It will allow for interoperability that does not currently exist. Meanwhile, it will eliminate the need for trusted third-party providers, like Apple and Google, to serve as the intermediaries between users and data. Virtual and augmented realities of the metaverse will be built upon this, allowing users to move themselves – and their data – between realities.
Why Blockchain is So Important for Building the Metaverse
Blockchain provides the security needed to develop a decentralized internet. Currently, each platform owner is responsible for managing their own security. This is why the internet is centrally controlled in the hands of a few companies. Apple is only responsible for Apple’s digital infrastructure as is Google responsible only for the things bearing Google’s name. The absence of a comprehensive security protocol has turned today’s internet into a series of walled gardens as a result.
While applications or wallets built on top of blockchains may be susceptible to hacks, the blockchain itself is not. At least not right now. The data stored on the blockchain is immutable meaning it is nearly impossible to change. For this reason, the blockchain is able to create trust between users rather than trusting third-party providers, like Google and Facebook. This trust forms the basis of decentralization and how peers are able to validate data on the blockchain rather than large companies.
Blockchain also not only creates an economy that can flow in between different realities, but it also creates an entirely new monetary system too. Under the existing fiat currency system, each country is responsible for managing its currency and the value of it. With so many different currencies in existence, it makes it cumbersome to engage in international business. Now imagine trying to settle payment disputes between different dimensions of reality.
In the metaverse, users can instantly pay one another in an accepted, decentralized cryptocurrency. That means an individual from Delhi could buy a digital product from someone in New York and pay for it immediately, without converting rupees into dollars or waiting for the payment to post. If you’ve ever traveled abroad and gone through the painstaking process of converting currencies, you can appreciate how extraordinary this is.
For the metaverse to work it has to be fully interoperable. This includes the monetary system. Under the current system, there are too many different monetary policies governed by different political agendas. This creates compartmentalized economies under a single reserve currency, currently the U.S. Dollar. Blockchain is important not just because it provides a new universally accepted currency, but because it automates and eliminates the need for government-sponsored monetary policy altogether.
Big Takeaway
The metaverse is the integration of the digital world with the real one. In order for that to happen it needs to be decentralized, modular, and accessible across borders and realities.
Blockchain technology provides security and interoperability while making financial transactions more efficient to process. Without this technology, the metaverse could not exist because powerful companies would still be required to serve as gatekeepers controlling how users access digital mediums and the information exchanged on them.
Digital assets on the blockchain, specifically cryptocurrencies, will change how monetary policy exists in a hybrid reality. A metaverse economy may eliminate the need for government-sponsored monetary policies altogether. The metaverse would not only change how we flow between realities but it could also impact real world international relations too.