2021 – the year of crypto, as it was called, involved record-breaking figures for Bitcoin (BTC) as well as the altcoin market. Trading figures exceeded expectations, and DeFi (decentralized finance) came to the fore.
During this time, we saw the metaverse take shape, which fueled the rise of the crypto world and blockchain tech in general.
A vast amount of the most established cryptocurrencies set all-time highs in two unprecedented bull runs during the mid-section of the year, and many of the altcoins followed suit. What was to come, though, was a prolonged downturn, continuing well into 2022, with billions of dollars wiped off the market.
Cryptocurrencies and the metaverse seem to be concepts that go hand-in-hand – virtual money to be spent in virtual worlds. That is but a part of the hype that is web3, the emerging third generation of the internet.
Web1 was the beginning of world-wide-web, and web2 is the recent social media era. This new version of the internet is much more experiential and engaging and facilitates transactions using the blockchain.
A Digital Universe
Virtual and augmented reality (VR/AR) allows the experience of immersive 3D environments in the metaverse, which boosts users’ productivity and enjoyment, thus creating a new realm of substantial investment opportunities.
It is clear that a potential synergy exists between the two ideas of crypto and the metaverse. Shopping, for example, quickly established itself as a key feature of both web1 and web2. There is no reason why this web3 space will be any different.
It’s becoming increasingly apparent that the emergence of the metaverse has the potential to have a significant impact on how cryptocurrencies evolve, and the ramifications this will have on society in the long run look to be immense.
One main advantage of virtual worlds is that there is a lot less friction than in the real world. To go somewhere, we can click a link or button, and our avatar appears anywhere we want it to. This cuts out the need for costly and cumbersome transport and infrastructure. Also, we don’t need to worry about issues like packing passports or taking any luggage whatsoever.
The same principles apply to cryptocurrency. Transacting in fiat currency takes a vast infrastructure of banks and regulators to act as custodians and intermediaries. Cryptocurrency, however, allows for a decentralized peer-to-peer ledger of transactions with blockchain. With reasonably accessible technology, it can replace old bloated systems.
Attracting Attention And Gaining Traction
The energy the software uses to crunch cryptography is a serious one. The metaverse also has similar drawbacks. In fact, the press loves to focus on these issues. But protocols are continuously innovating, with new technologies rigorously reducing energy use. Newer cryptocurrencies utilize more scalable and efficient technologies to allow the wave of users. The older proof-of-work chains, such as the Bitcoin, are slowly being substituted.
The concept of the metaverse grows increasingly popular every year. This goes hand in hand with the amount of time people spend online nowadays working in “virtual offices”. Playing games online also melds beautifully with the tech, alongside others uses like taking metaverse vacations. As this space develops, we will need more friction-free ways to authenticate digital proof of ownership, transfer value, and governance.
Centralization Of Crypto And The Metaverse
The metaverse will undoubtedly add significant value to the global economy in the long-term, $1 trillion by 2030, as one report measures it. Much of its value will indeed become more widely accepted because of cryptocurrency. We could see crypto becoming mainstream as more people get used to blockchain tech as a means of payment before long.
If this happens, governments and legislators will undoubtedly feel compelled to step up efforts to regulate and control the use of cryptocurrencies. Things have become more organized in recent years, but it is still something of a wild west environment.
The more the popularity of cryptocurrencies increases, the more likely that governments will try to regulate their use, probably according to things like how energy-efficient they are. For instance, networks relying on more wasteful proof-of-work algorithms could attract higher tax rates on transactions, while those using the more efficient proof-of-stake algorithms would be taxed at a lower rate.
The Road To The Adoption Of Crypto
As cryptocurrency becomes a primary medium of exchange for many people buying or selling in the metaverse, users will become increasingly uncomfortable with methods of acquiring, handling, and storing it, meaning it may also be used more frequently outside of the metaverse.
Crypto is already an excellent solution for sending money to friends and family, for example, compared with traditional methods, particularly if this involves money crossing borders. Intermediaries often charge hefty fees for something that should take seconds to complete at very little cost.
In the long run, banks and other institutions will likely facilitate crypto or blockchain-derived financial models and streamline their infrastructure if they want to remain competitive in the new age of borderless, middleman-free economies.
While some have foreseen that cryptocurrency would eventually spell the end of banking as we know it, in the future, likely, businesses would still want to secure that layer of protection and regulation that the banks and central banks currently provide to transactional networks.
It seems reasonable to assume that whoever will thrive in this new environment of digital currencies and peer-to-peer finance will have to be flexible and forward-looking in their policies when considering cryptocurrency adoption. Paypal and Mastercard are payment systems that are now fully engaging with cryptocurrencies because of their potential role in the future of how we make and receive payments.
What Comes Next?
No one truly knows what form the metaverse will actually take as the concept develops, if and when it becomes fully integrated into our lives, but cryptocurrencies are clearly a natural fit. Much of the space will surely remain decentralized, which will benefit people greatly in many respects.
Because this ground-breaking web3 technology is in its infancy, its evolutionary course is sure to be influenced by shifts we make in how we all live our lives, for better or worse. Moreover, we are choosing to spend more of our time online, and that will definitely accelerate as the digital world becomes more immersive, engaging, and entertaining. This means that crypto and the metaverse will play a more significant role in our lives, and as a result, we are sure to see them both becoming more regulated, environmentally friendly, and useful.